Deputy City Editor
Automotive engineer T&N surprised the City with a £140m exceptional charge to cover potential asbestosis claims, three months after it put its liability at £100m. It also warned that the annual cost of meeting claims would be higher than forecast.
The continuing asbestos millstone, together with the promise of a 45 per cent cut in this year's dividend, took the shine off an otherwise strong trading performance and the shares, which have fallen by 40 per cent since late last year, lost another 2.5p to close at 157.5p.
The exceptional charge slashed pre-tax profits from £70.3m to £10.7m in 1994. Thanks to unrelieved advanced corporation tax, the company also faced a tax bill twice pre-tax profits, leading to a loss per share of 3.2p (8.6p profit).
Analysts said the company, formerly Turner & Newall, a leading asbestos producer, failed to dispell fears of a rights issue to fund the acquisition of Kolbenschmidt, a German motor components producer over which it has an option.
Colin Hope, chairman, finally caved into demands from the City that the dividend, which had been uncovered by earnings for three years, was unsustainable given the open-ended potential injury claims. The running yield of 8.5 per cent before the announcement underlined scepticism about the pay-out.
Having more or less promised no cut in 1994's payment, last year's dividend was maintained at 10.85p. This year it will be pegged at 6p.
T&N's new engineering businesses saw turnover rise 16 per cent to £1.94bn and trading profit gain 47 per cent to £180m. Group margins rose from 7.4 per cent to 9.3 per cent. Mr Hope said demand from vehicle manufacturers remained exceptionally strong and T&N was "well placed to ride the peak of asbestos litigation".