Tarmac faces pounds 120m write-off

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TARMAC, the construction group, will be forced to write off as much as pounds 120m against property developments after a devastating secret report by the accountants Coopers & Lybrand.

The Tarmac board is also likely to make further provisions against the group's land bank and its US operations. As a result, Tarmac is likely to make a pounds 150m to pounds 200m loss this year.

Neville Simms, the new group chief executive now in full control as chairman Sir Eric Pountain gradually steps down, brought in Coopers to carry out the probe rather than use the existing auditors, KPMG Peat Marwick. On Friday, following the report, Tarmac announced the sudden exit of Tony Collins, chief executive of the now-dismantled property division.

The 100-page, report prepared by Euan McEwan, a top property specialist at Coopers, details a savage drop in the likely value of Tarmac's speculative developments. Most of these are held in joint ventures, which had previously enabled the group to keep the associated borrowings off the balance sheet.

Mr Simms, who received the report after Tarmac revealed just a pounds 15m loss at the half-year stage, is set to improve City credibility by disclosing Tarmac's problems fully when he presents his first set of full-year results in March.

Although the write-offs will reduce shareholders' funds, cash from disposals will prevent gearing rising much above 40 per cent. Tarmac is also likely to maintain its dividend.

Tarmac is thought to have spent, or be committed to spending, pounds 300m - most of it borrowed. Coopers' report suggests the property division's assets are now worth just pounds 100m, forcing the huge write-off on top of much smaller provisions in earlier years.

Mr McEwan moved into Tarmac's old property headquarters near Charing Cross station in London when most of the staff were fired two weeks ago.

The building itself is one of Tarmac's disaster areas. It is in a magnificent row of Georgian townhouses that Tarmac refurbished but which now stand empty. This venture is thought to have cost more than pounds 30m.

Most of Tarmac's speculative properties are large landmark sites. They include Fort Dunlop in Birmingham, an 87-acre development jointly owned with the Richardson brothers, the West Midlands developers.

In Swindon, Tarmac is a partner in the proposed development of disused railway marshalling yards, which include listed buildings designed by Brunel.