Steetley stimulus lifts Redland in first half

THE acquisition of Steetley added pounds 15m to Redland's operating profits, helping it to a 12 per cent increase in the first half of the year.

Redland said the cost-savings are now running at more than pounds 30m on an annualised basis. Gerland Corbett, finance director, said there should be more to come both in UK bricks and French aggregates.

Gobitta, the French aggregates business, had been the 'major disappointment' and had been in a far worse position than expected. For example, it had pounds 45m of leases for office and other equipment, which meant the total debt was larger than expected.

In total, Redland has cut 800 of Steetley's 10,000 employees and a further 200 will lose their jobs by the year-end. Further losses in France are likely next year. The major changes have been in the UK, where 11 brick plants have been permanently closed, saving pounds 10.8m, and the two groups' aggregates businesses have been merged, saving pounds 7.4m.

Redland has written down the value of Steetley's Spanish aggregates business, its US brick interests and Gobitta, but it also revalued some aggregates and clay reserves. Rationalisation provisions will be about pounds 60m, which means the net effect will be to cut Steetley's net assets, shown as pounds 330m at the beginning of the year, by about pounds 30m.

The group's pre-tax profits rose from pounds 78.8m to pounds 88.5m. The figures also benefited from the sale of land for waste disposal sites, which brought in pounds 7m compared with pounds 4m the previous year.

At the operating level, profits were pounds 15.4m higher at pounds 95.2m while net interest payable rose from pounds 1m to pounds 6.7m, largely because it took on pounds 307m of Steetley's debt. This was largely bank borrowings and has now been refinanced, saving pounds 5.5m.

Earnings per shares fell from 13.6p to pounds 11.6p, reflecting dilution from the pounds 260m rights issue last April.

But the group has backtracked on the dividend promise made with the acquisition. Then, it said that the full year dividend would be increased. Now, it says that 'adverse conditions' mean it will be maintained at 25p. The interim was held at 8.25p.

Analysts are split over whether it will cut the dividend in 1993. Andrew Melrose at Nomura, who is expecting pounds 195m profits this year and next - giving 23p of earnings in 1993 - believes the group may be forced to cut to 16p. But Mark Stockdale of Warburg Securities, who expects pounds 210m profit this year, thinks it may be held.

Redland's shares fell 19p to 343p.