Steetley buy boosts Redland figures: Earnings per share fall by a fifth

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The Independent Online
THE acquisition of Steetley added pounds 50m to operating profits at Redland, the brick and roofing group, helping it to increase pre-tax profits by 19 per cent to pounds 221.5m in the year to December.

But a tax charge rise, largely caused by depressed British profits, and an increase in the number of shares to finance the purchase hit earnings per share. They fell by a fifth to 23.7p leaving the dividend, maintained at 25p via a 16.75p final, uncovered.

The City was concerned that the tax charge will continue to increase for the next two years, despite the changes to advance corporation tax announced in the Budget. Redland's shares, which have climbed almost 40p in the last two weeks, closed 21p lower at 467p.

Steetley's overall contribution was about pounds 55m, after allowing for pounds 18m interest on its pounds 295m debt and pounds 20m ACT. That included pounds 25m of cost-savings, largely achieved by combining the two companies' bricks factories, slicing pounds 5m from overhead costs and refinancing the debt. Gerald Corbett, Redland's finance director, said cost- savings were now running at an annual rate of pounds 36m.

He said the group had used pounds 44m of the pounds 69m provisions established after the deal. A further pounds 14m of rationalisation costs, up from pounds 10m the previous year, were incurred on the US and UK roof-tiles businesses and Genstar, the US aggregates operation.

The group is confident that Germany, where profits rose by a third to pounds 114.5m, will show a further improvement this year, with increased demand in the east compensating for a possible decline in the west. Housing permits in Germany rose by 11 per cent in the second half of 1992.

In Britain, profits rose 11 per cent to pounds 37.9m because of the Steetley contribution. The brick business almost trebled profits to pounds 35.3m, but without Steetley would have made a loss.

Mr Corbett said that brick stocks were reduced by 42 million to 150 million - just over three months' sales - and have dropped a further 40 million following an extended shutdown over Christmas.

Redland believes prospects in Britain were more encouraging, although the improvement in the housing market since the beginning of the year has yet to feed through into increased demand. The US, however, was 'recovering quite well'.

Sterling's devaluation should add about pounds 30m to profits this year, and analysts expect them to increase to about pounds 240m. But the tax charge is likely to rise to about 31 per cent, compared with 28 per cent last time, which means earnings will fall to about 21.5p, rising to 25p the following year.