George Blunden, the chief executive who took over last month after a 1991 loss of pounds 23.5m led to the departure of his predecessor, said the results would be a 'very positive piece of clearing the stables. I am very sympathetic to the shareholders. It is the second bad news in six months but my intention is to see it is the last.'
The City took a more pessimistic view, questioning whether the group would survive in its present form. The shares were slashed to a level that is under a third of the expected book value after the new losses of 220p a share.
Heavy losses in leasing subsidiaries and poor discount house results have shrunk group capital and forced Union to cut back its core operations in the money markets.
The Bank of England keeps a close watch on the discount houses, and has been kept informed of the group's progress. The Bank uses the houses in its management of interest rates, as intermediaries between itself and the clearing banks.
The whole discount market has been under pressure for the past couple of years, but Union has been the worst-hit.
Mr Blunden made no promises about a final dividend, saying it would be reviewed in the light of second-half results and future prospects. He said the dropping of the interim dividend was not forced on Union. It was 'prudent' to take a more realistic look at the year-end.
He announced the sale of assets of Herald Financial Services, a specialist medical leasing company, to Schroder leasing for pounds 18.2m in cash, which will reduce borrowings. This brings the total from similar sales to pounds 43m.
Mr Blunden said investment in a new computer system was being written off and further provisions are being made against Sabre, another leasing subsidiary. Costs in the discount house are being reduced, becuse the size of its business has shrunk. The group is also considering staff reductions.
Mr Blunden said Union would concentrate on its money market trading, gilt-edged and equity market making, futures broking and asset management.
After rationalisation and cost reduction Union should be in position to return to profit, he said.Reuse content