The Investment Column: Rocky times at Redland

If anyone ever wanted a living definition of the word "embattled" they should look no further than Robert Napier, chief executive of Redland.

In five years at the head of the once-great aggregates and roof tiles, he has had to face a barrage of negative sentiment.

Yesterday, however, looked like being the coup de grace.

It was not that the City had not been braced for bad news.

RMC has been warning about a downturn there for some time, reiterating its view last week. But Redland's 13 per cent decline in underlying profits before exceptionals to pounds 71m for the half year to June was much lower than the lowest forecasts.

Even worse was the news that the slowing roofing market in Germany, which Redland dominates with a 40 per cent share, is going to fall further next year and the group may have to trim prices to maintain its position, sparking fears of a price war.

The problem for Redland is the feeling that management has done too little, too late to turn the group around in the wake of the disastrous pounds 1bn deal to buy Steetley in 1992. The group was dragged kicking and screaming into cutting its dividend by a third in March 1995.

With no rise in the payment since, and cover looking thin, that now looks to have been too timid and the company was having to deny wild rumours yesterday that another cut was in the air. But it is at Germany that most of the analysts' ire was being directed yesterday.

It has been clear for some time that the building boom from German reunification would eventually turn to bust.

Yet it has only been in the past year that Redland has really moved to get to grips with Braas, the majority-owned German roof tiles which has been the backbone of the group over nearly 10 years.

Even though the latest cost saving moves announced yesterday are expected to bring the total to be realised by 1999 close to pounds 60m, Redland is not in full command of its destiny, given that the new Redland Braas Building remains only 57 per cent-owned.

The only thing likely to save Mr Napier now is the absence of any credible replacements willing to put their head in Redland's noose.

If profits make pounds 200m this year, the shares, down 61.5p at 220p, stand on a forward price/earnings ratio of 11. With the dividend again in doubt, the only hope for holders is a bid. Otherwise avoid.