Trafalgar in pounds 400m call: Warning of more provisions as group launches third rights in three years

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The Independent Online
TRAFALGAR HOUSE, the hotels to engineering conglomerate, yesterday announced its third rights issue in less than three years and warned that it will have to make further 'substantial provisions' on its assets.

It intends to raise up to pounds 400m through a rights issue of convertible preference shares, details of which will be announced with its full-year results on 14 December. That will be just 10 months after the group raised pounds 204.5m through a one-for- two rights issue, which it said would strengthen its balance sheet and prevent it having to sell assets at low prices.

In July 1991 it raised pounds 320m to finance the ill-starred takeover of Davy Corporation.

The group has carried out a review of its business, including an independent valuation of its assets, which is likely to lead to significant write-downs on top of the pounds 100m provision against its property portfolio announced in February.

As well as the property portfolio, the valuation has also covered hotels, including the Ritz, offices occupied by the group and the Emerald rig acquired as part of the Davy takeover. But it would not comment on how large the write-offs were likely to be.

The group said that previous valuations of the property portfolio - currently in the books at pounds 350m - had assumed a faster timetable for development and sales. The pounds 130m valuation of the hotels - including pounds 85m, or pounds 650,000 a room, for the Ritz - had also assumed that they could be sold as trophy buildings. But no buyer had been found and they would be retained at a more realistic valuation.

The group also confirmed that Allan Gormly, who took over as chief executive last year from Sir Nigel Broackes, Trafalgar's founder, and Sir Eric Parker, its chief executive, is to leave next August. He will be succeeded by Nigel Rich, managing director of Jardine Matheson Holdings.

That will increase the number of Jardine men on the Trafalgar board to six, including the finance director. Hongkong Land, Jardine's property company, has built up a 25.3 per cent stake following a tender offer last year. It intends to take up its rights entitlement.

The rights issue, which will be used to invest in the engineering and construction business and the Cunard cruise fleet, will be underwritten by Robert Fleming and Swiss Bank Corporation. Mr Keswick said that the decision to have a preference issue was taken 'because most shareholders want to be confident, if they are putting money in, that there will be an income flow'.

He highlighted the group's warning that, although it will pay a 3.25p dividend on its ordinary shares for the year to September, 'future dividend policy will be reviewed in the light of cash flow and earnings'.

Trafalgar also warned that losses for last year would be above the pounds 50m to pounds 70m analysts expect. Its shares dropped 11.5p to 85p.

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