Ladbroke recovery ends with 10p slide: Caution prevails despite dividend cut and detailed results

THE RECENT sharp recovery in Ladbroke's shares was checked yesterday, even though the company bowed to City expectations by cutting the dividend and ushering in an era of glasnost with a detailed display of its annual results.

Cautious views by analysts on recovery prospects for the hotels, betting and DIY retailer clipped 10p off the shares, which had risen 25 per cent so far this year, to 199p. Profit forecasts for 1994 were lowered by several broking houses by about pounds 20m to pounds 150m before tax.

Ladbroke's trading performance for 1993 was fairly well anticipated, but the City was slightly stunned by an 82 per cent profit slump at Texas Homecare and a pounds 55.4m blanket of exceptional write-offs.

'They have got rid of every exceptional item you could think of. But they have done themselves a lot of favour with their openness,' Peter Hillier, an analyst at BZW, said.

John Jackson, Ladbroke's chairman, said the 'unusually long release had been done deliberately . . . and is probably the most important published by the company'.

Peter George, who took over from Cyril Stein as chief executive 67 days ago, added: 'There has been a lot of talk of 'black holes'. I wanted to make sure there aren't any.'

Operating profits in 1993 were pounds 237.5m, against the previous year's pounds 226.7m, which themselves were heavily eroded by a pounds 119m property provision.

After exceptionals and interest charges, which rose from pounds 107.5m to pounds 120m, the pre-tax result was pounds 62.1m, compared with pounds 5.2m.

Unlike in 1992, however, the company is no longer prepared to pay dividends that are uncovered by earnings per share.

A reduction in the final dividend from 6.23p to 1.08p reduces the total by 46 per cent to 6p - the first cut since Ladbroke was floated in 1967.

Even so, the payout is barely covered by earnings per share of 7.13p, excluding exceptional items. Mr George said: 'The dividend cut provides the basis for growth in the future.'

The biggest headache for Ladbroke in 1993 was Texas Homecare, which was hit by fierce competition and the failure to meet bonus-rewarding volume sales targets agreed with its suppliers. Its profits dropped from pounds 43.6m to pounds 7.8m, and incurred a pounds 10.7m loss after exceptional items.

Profits from hotels, largely comprising the Hilton chain, eased from pounds 119.5m to pounds 117.7m. While the UK and US started to recover, Japan and Europe were depressed.

Betting and gaming performed best, improving returns from pounds 68m to pounds 86.1m. The division benefited from an increase in the average betting stake from pounds 4.42 to pounds 4.47 and the introduction of evening racing.

Property, which Ladbroke remains committed to withdraw from, yielded a slightly higher profit of pounds 41.4m ( pounds 40.3m).

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