Sinking Trafalgar jettisons family jewels

Selling the Ritz is a low-water mark for a once-great firm, writes Tom Stevenson

There can be no better symbol of the depths to which Trafalgar House has fallen than the sale of the Ritz last week. Once one of Britain's leading conglomerates, only the direst of financial straits could have forced the disposal of such a uniquely prestigious trophy asset. Trafs is seriously on its uppers.

The disposal, to the secretive Barclay brothers, who also own the Howard Hotel, the European newspaper and a string of other high-profile investments, was hardly the anniversary present Nigel Rich would have chosen a year after he took up the chief executive's position at Trafalgar, even if the price he achieved was by any measure a full one.

It has been a stormy 12 months since he was installed by his former bosses, the Keswick brothers of Hong Kong's Jardine Matheson trading empire, which, through its Hong Kong Land subsidiary, owns a quarter of Trafalgar's shares.

During that time, Trafalgar has had to negotiate the PR gaffe of the century, when its Cunard subsidiary foolishly sent its flagship cruiser, the QE2, on a voyage to the Caribbean only half fitted out.

It has seen its bid for Northern Electric kicked into touch by the electricity regulator, Professor Stephen Littlechild, and lost almost two-thirds of its value on the stock market.

At 29.5p, the shares are just 2p above their lowest level since 1974, which was reached last week. The epitome of the 1980s boom share, they rose almost sevenfold during that decade under the flamboyant guidance of Sir Nigel Broackes. In the space of five years they have lost it all again and then a bit more.

Trafalgar is now valued at only a little over pounds 300m. That is about the same as Hazlewood Foods, half as much as MFI, a fifth the market value of Next. Any further fall and Trafalgar will drop out of the FT-SE Mid 250 index and into the SmallCap segment of the market.

What has gone wrong is easier to describe than to put right. Rapid expansion in the good years has left the company with a hotch-potch of assets in a range of industries whose only shared feature is lack of prospects - heavy-power engineering, construction, housebuilding and property.

Internal controls have been, by the frank admission of Mr Rich, totally inadequate for a company of Trafalgar's size and complexity. Trading is poor and cash flow worse.

Following the disposal of the Ritz hotel, attention now turns to what else Trafalgar can sell to reduce its debts of about pounds 250m. Although those debts are not massive in the context of its net assets, which stood at pounds 641m in March, there are serious doubts about the valuation of many of Trafalgar's assets in its balance sheet.

Serious write-downs of value when figures for the year to September are announced just before Christmas could wipe out much of the notional worth that underpins those borrowings, making gearing more of a worry than it appears now.

Speculation surrounds the fate of the Cunard line, which is underperforming its peers dramatically.

In the first six months of last year, when Trafalgar declared an unexpectedly large pounds 48m loss, shipping chipped in pounds 7m of red ink even before exceptional charges to do with the QE2's Christmas fiasco.

Comments from Mr Rich over the summer that it could be several years before the line produces a decent return suggest that a large write-off of its book value is likely in December. If Trafalgar still needs to raise money by disposing of assets it is, like the Ritz, an obvious "name" to put on the market.

The next two months will be crucial ones - for Trafalgar, for the reputation of Nigel Rich and for the Keswicks, who have made no secret of the fact that the company represented a European base for their empire following the takeover of Hong Kong by the Chinese in 1997.

Three years after they first boarded Trafalgar, they have poured more into the company in exchange for a 26 per cent holding than the whole company is now worth. As much as the financial loss, the investment represents a huge loss of face.

Talk to analysts about Trafalgar and the frustration is tangible. The company has always been short on information, a fault it is trying to rectify, but forecasting its profits is no easier now than before because so much hinges on the scale of the write-offs to come.

To make matters worse, with sales of almost pounds 4bn, the slightest movement in operating margin can generate a huge swing in profit (or loss). The City will be looking for an uncharacteristic openness about prospects and strategy when it next meets the company. The latest edition of the Earnings Guide shows a wide range of forecasts for the year just finished stretching from a profit of pounds 40m to a loss of pounds 75m.

When things are going as badly as they are at Trafalgar House it is amazing how easily you can chuck away the value of one of the world's great hotels.

Suggested Topics
Sport
Thiago Silva pulls Arjen Robben back to concede a penalty
world cup 2014Brazil 0 Netherlands 3: More misery for hosts as Dutch take third place
Sport
Robin van Persie hands his third-place medal to a supporter
Van Persie gives bronze medal to eccentric fan moments after being handed it by Blatter
News
Ian Thorpe had Rio 2016 in his sights
people
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
News
scienceScientists have developed a material so dark you can't see it...
News
Monkey business: Serkis is the king of the non-human character performance
peopleFirst Gollum, then King Kong - now the actor is swinging through trees in Dawn of the Planet of the Apes
Arts and Entertainment
Blackman: Landscape of children’s literature does not reflect the cultural diversity of young people
booksMalorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
News
Soft power: Matthew Barzun
peopleThe US Ambassador to London, Matthew Barzun, holds 'jeans and beer' gigs at his official residence. He says it's all part of the job
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
Gavin Maxwell in Sandaig with one of his pet otters
peopleWas the otter man the wildlife champion he appeared to be?
News
Rowsell says: 'Wearing wigs is a way of looking normal. I pick a style and colour and stick to it because I don't want to keep wearing different styles'
peopleThe World Champion cyclist Joanna Rowsell on breaking her collarbone, shattering her teeth - and dealing with alopecia
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

Otter man Gavin Maxwell's bitter legacy

The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

Joanna Rowsell: 'I wear my wig to look normal'

The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

Bill Granger's quick and delicious marinades

Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

Anyone but Argentina – why Brazilians don’t love their neighbours any more

The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

The Open 2014

Time again to ask that major question - can Lee Westwood win at last?