Simon Engineering falls on warning of loss in Florida

Click to follow
The Independent Online
SHARES in Simon Engineering fell 20p to 119p yesterday after the company warned that it had lost pounds 5m on a contract to rebuild a paper mill in Florida. Analysts warned that the final dividend, to be announced next month, was now likely to be cut altogether.

Brian Kemp, chief executive, said: 'These things happen occasionally with big contracts and it's just life that this should happen at the end of a bad year.'

Last week, Simon tabled a claim with Stone Corporation, the mill's owner, for 'substantially in excess of pounds 5m' to cover extra work. The loss assumes no payment.

The company said the project had been bigger and more complex than contracts normally undertaken by Simon. The job involved converting a virgin wood pulp mill so that it could use recycled paper.

Sandy Morris, an analyst at NatWest Markets, reduced his forecast on the announcement from pounds 12m pre-tax profits to pounds 7m and is assuming that the final dividend will be passed.

Mr Kemp agreed that it would be imprudent to pay an uncovered dividend for a second year running. Even if Simon makes pounds 7m for 1992, earnings of 3.8p will be lower than the 5p interim payout already announced.

Ian Lowe of Smith New Court reduced his pounds 12m estimate to pounds 6m on the basis that Simon had already booked some profits in 1991. Mr Kemp said it was usual practice to take the bulk of a project's profit at the end of a contract but agreed that some had already been taken.

Simon, which recently announced the sale of most of its environmental division, made profits of pounds 18.3m in 1991 and pounds 36.5m in 1990 when hopes for its 'green' activities took the share price above 400p.

Comments