Mowlem prepares a further payout cut

JOHN MOWLEM, the construction group, is set to slash its final dividend for the second year in succession following a two-thirds cut in its interim payment.

The group has recommended a 2p interim dividend, down from 5.65p the year before. A cut had been expected to balance the interim and final payments after last year's total was halved to 10.5p. But the extent of the interim reduction has led analysts to expect that the final dividend will also be cut, from 4.85p to 2p.

Mowlem had hoped last year's cut would have left the dividend at a level from which growth would be possible. But Brian Watkins, finance director, said: 'The severity and duration of the recession means that prudence has to be important.'

The cut came as the group revealed a pounds 9.9m pre-tax loss in the first half of the year, compared with a pounds 4.5m profit last time. That meant the full pounds 2.1m cost of the dividend had to be transferred from reserves. The loss per share was 9.2p (4.7p earnings last time).

Part of the loss was due to a pounds 3m provision following the collapse into administration of Canary Wharf, the London Docklands development, where Mowlem was a management contractor. John Marshall, managing director, said the amount was set after taking legal advice.

Mr Marshall will become sole managing director at the beginning of October following the departure of Clive Beck, brother of the chairman, Sir Philip.

The group made an operating loss of pounds 1.9m, compared with an pounds 8.9m profit last time. The loss was caused by London City Airport, where there was a pounds 2.5m deficit. Last year, the loss was charged against provisions that have now been used up. Earlier this month, the group said it would consider selling a stake in the airport and that discussions with 'half a dozen or more' buyers were in progress.

The airport's loss in the second half is expected to be lower than in the first, although it is unlikely to go into the black until 1994.

Net interest costs rose from pounds 1.9m to pounds 5m, partly because of a seasonal rise in borrowings. Debt at the year-end is expected to be similar to last year's pounds 59.9m, although this will largely be achieved because of dollars 30m ( pounds 18m) proceeds from the disposal of a US scaffolding business and pounds 23m from property sales.

Mowlem's shares closed 2p higher at 61p.