Trafalgar dives to pounds 347m loss: Conglomerate announces pounds 404m rights issue to balance write-downs across the board

Click to follow
TRAFALGAR House yesterday slashed the value of everything from its Ritz hotel to the Cunard shipping line as part of a pounds 436m restructuring designed to get the group into shape for the recovery.

The provisions and write-downs, pounds 397.3m of which were charged against profits, pushed the group into a pounds 347.2m loss for the year to September, dwarfing the pounds 11.2m loss reported last year. That, together with a warning that next year's dividend would be cut to a maximum of 1p, from 3.25p last time, sent the shares down 10p to 77.5p.

The group also revealed details of the pounds 404m rights issue of convertible preference shares, which was needed to restore the value of its balance sheet. The issue brings the total raised by the group to pounds 920.5m in less than three years. But losses and provisions - totalling more than pounds 650m in the past four years - mean that even after the rights issue, Trafalgar will be left with net assets of just pounds 685m.

About a quarter of the provisions relate to the valuation of the group's properties - both those it occupies and those held for investment - and its hotels and shipping fleet. The value of its hotels, which include the Stafford and Dukes hotels in London as well as the Ritz, has been cut by pounds 51.5m to pounds 72.6m. That has reduced the value of the Ritz from pounds 85m to about pounds 48m, equivalent to pounds 250,000 a room. A further pounds 16m was provided against the Cunard shipping fleet, part of which is likely to be sold. The QEII, however, will be retained and refurbished as part of a pounds 40m improvement programme for the fleet.

The Ritz was for sale, but has been taken off the market because there were no satisfactory offers. The other two hotels are, however, likely to be disposed of.

A further pounds 103.9m was written off its housing land and residential developments. It has cut the value of its interest in a site near Paddington basin, where a joint development with British Rail is planned, to nothing.

Included in the pounds 397.3m is pounds 1.3m of compensation to three directors - John Ansdell, finance director, Dermot McDermott, shipping director, and David Calverley, property director - who left during the year. Last year the group paid pounds 1.3m to Sir Nigel Broackes, founder and chairman, and Sir Eric Parker, chief executive, bringing the total payoffs to former directors to pounds 3.2m in the past two years.

The boardroom changes and the large write-offs reflect the influence of Hongkong Land, the property arm of the Jardine Matheson group, which took a 25 per cent stake in Trafalgar last year.

Simon Keswick, a Jardine director who became chairman in May, said: 'Obviously when you get a new shareholder, it seeks to try to exert an influence on a company which has gone badly wrong.' But he denied the write-offs were a 'kitchen sink' exercise, designed to flatter future results.

'The company is now properly capitalised, with a net worth of about pounds 700m. All the non-performing assets are backed by equity rather than debt, and the values of the company's assets are prudent.'

Allan Gormly, chief executive - who will be replaced by Nigel Rich, managing director of Jardine Matheson Holdings, next year - said the group intended to concentrate on winning large infrastructure projects. This which would require a substantial capital base because of the need for financial guarantees.

(Photograph omitted)