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ML Holdings warns of 'a lost cause' and announces cash call

ML HOLDINGS, the aerospace and electronics group, issued a profits warning yesterday and said it would be making substantial write-offs to cover redundancies and falling property and stock values.

The company also announced a two-for-one rights issue to raise pounds 14.3m and appointed two new non-executive directors.

Howard Grant, the recently appointed chief executive, warned that the current financial year, ending in March, was 'a lost cause at ML'.

The company lost pounds 1.5m in the first six months of the year and after a difficult second half the full- year result will be 'unsatisfactory'. Write-offs of up to pounds 6.5m will mean a pre-tax loss for the second year running. ML lost pounds 2.24m last year.

ML, which recently won a contract to supply 113 training aircraft to the US Air Force, has made 260 staff - 18 per cent of the workforce - redundant so far this year. Mr Grant said that would mean savings of up to pounds 2m a year but did not expect any benefit from the cuts until next year.

The rights issue, which is pitched at 15p a share compared with an unchanged share price of 18p, will reduce gearing to 50 per cent. The directors are taking up their entitlements in full.

ML had said it was planning to reduce its borrowings via a programme of disposals but it had become clear that in current market conditions any proceeds would be unacceptable.

Shareholders were warned that failing to approve the rights issue at an extraordinary meeting next month would result in the company breaching its financial covenants.

They were also told that, after a passed interim dividend, there would be no final payout.