Ruberoid back in profit: Tarmac subsidiary stems losses before pounds 70m flotation

RUBEROID, the bituminous waterproofing group that Tarmac is hoping to float off for about pounds 70m, is forecasting pre- tax profits of pounds 7m this year, compared with a pounds 13.3m loss in 1992 and a pounds 6.7m loss in the previous year.

Ruberoid's recent results, depressed by the construction recession, have also been hit by heavy redundancy and reorganisation costs, totalling pounds 10.2m over the past three years. Two factories have been closed and the workforce reduced from 3,500 to 1,800, yielding cost savings of pounds 8.5m a year. Manufacturing operating profits are expected to increase by 50 per cent in 1993.

Other exceptional losses totalling pounds 11.2m on several big roofing contracts were incurred over the period, the latest at the Sellafield nuclear facility and at Birmingham airport.

In the first half of this year, Ruberoid returned to pre-tax profits of pounds 2.7m. Results are being helped by the absence of interest charges on debt owed to Tarmac, which came to pounds 6.1m in 1992. The construction group is to use the float proceeds to recover the loans. 'The businesses are coming to the market clean; our history is behind us,' Ian McPherson, chief executive, said.

In view of Tarmac's pounds 70m flotation target, the issue, sponsored by Robert Fleming, seems likely to be priced at 14 times Ruberoid's 1993 earnings, which is a discount to

the building materials sector.

Tarmac bought Ruberoid in 1988 for pounds 141m, but disposals reduced the net cost to pounds 80m. In 1989 Ruberoid made peak pre-tax profits of pounds 21m.

The company is the market leader in bituminous roofing felts in the UK, Ireland and Belgium, and has a 60 per cent share in the UK market for roofing asphalt.

Dividend policy will be to follow the trend in earnings, with dividends covered twice. This implies an initial notional yield of 4.4 per cent.

The pricing of the issue, which will be placed firm with institutions subject to a 35 per cent clawback for an offer to the public, will be announced on Thursday. Applications are due on 18 November and dealings should begin on 25 November.