Switch from housing boosts Asda

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The Independent Online
SWITCHING out of housing helped Asda Property, Manny Davidson's company, boost profits by more than a third to pounds 6m last year, from pounds 4.4m previously, writes Gail Counsell.

The pounds 36m sale of the bulk of its tenanted residential portfolio to Bradford Property Trust accounted for more than half Asda's pounds 70m of total sales of trading property in 1992.

But the continuing depression in the property market led to a 12.5 per cent fall in property values, wiping more than pounds 16m off the value of Asda's portfolio and causing net assets to drop by 22p to 90p a share.

Asda, which traditionally had a mixed portfolio, used to make trading profits from its residential stock by selling tenanted property as it fell vacant.

But, faced with a rising interest bill, the highly geared company decided last year to dispose of the bulk of its residential holdings and re-invest in higher-yielding property.

As a result residential property now accounts for only pounds 14m of its pounds 122m property portfolio. The bulk, about pounds 80m, consists of commercial property held for investment.

The move helped cut net debt from pounds 117m to pounds 67m and reduced gearing by more than a third.

Last year the rent roll of about pounds 11m failed to cover administrative expenses of pounds 2.2m and financing charges of pounds 10.7m, although trading profits of pounds 7.9m more than made up the difference.

The final dividend of 1.5p makes a total of 2.1p (2p). The shares rose 2p to 72p.