Pochin in talks to sell concrete business

Pochin, the diverse Cheshire-based property and construction business, is in advanced discussions that may lead to the sale of its loss-making concrete pumping business.

The news was delivered within Pochin's preliminary results for the past year, published to the London Stock Exchange on Friday afternoon.

Richard Fildes, chairman, said low occupier demand in the development market and "retrenchment of publicly funded infrastructure projects" were having a deflationary impact on the industry, bringing with them "prevailing moods of anxiety and pessimism".

Fildes went on: "It is in this context that the decision was taken during the year to dispose of the group's concrete pumping subsidiary.

"It has been loss making for many years, and although acknowledgement should be given to the efforts in recent times to bear down on costs and to the successfully increased levels of plant utilisation, the economic conditions described above do not permit its continuation as a core group activity. This gives rise to considerable uncertainty for the 118 employees engaged in this activity and great thanks are due to them for their commitment during the year to improve the division's performance in increasingly competitive market conditions. It is therefore re-assuring to be able to report that discussions with a prospective purchaser of the concrete pumping corporate entity have reached an advanced stage.

"For this reason, the results for the division have been treated as a discontinued activity in the accounts, and best estimates of the costs of the proposed disposal have been provided for in the balance sheet at the year end. As a result, the 2010 results have been re-presented."

John Edwards, finance director, said the talks were close to heads of terms being issued with three bidders and he hoped to see one party enter exclusive negotiations by the close of business on Friday 7 October. Edwards said a deadline had been set to dispose of the concrete division by 30 November.

Stripping out the concrete business Pochin produced a pre-tax profit of £700,000 (2010 re-presented: £13.7m loss) in the year to June. However, the concrete business showed a pre-tax loss of £4.8m in 2011 (2010: £2.9m loss).

Group turnover was down by 10% to £59.3m (2010 re-presented: £65.7m). Turnover in the construction division fell by 32% to £41.6m (2010: £61.0m), however there is a firm order book of £53.0m. The property development division sold a supermarket site in Birkenhead and had a turnover of £14.7m (2010: £1.2m). The number of people employed by Pochin fell during the year from 308 to 262.

Filde continued: "In the North West, commercial rental values are weak and falling in some areas, notably in retail property. Flagging occupier demand lies behind this trend, and it continues to result in low levels of privately funded development activity. Few schemes can be appraised as profit making, and fewer still can be undertaken speculatively as a result of bank funding being, understandably, available only on the strictest criteria."

He added: "It is of some comfort to be able to report that the principal liabilities, namely those which arose from the group's involvement in the two large refurbished Liverpool office properties [Exchange Flags, a joint venture with UK Land & Property], and in an office scheme at [also with UK Land & Property] Heald Green, Manchester, have now been settled and accounted for as at the year end."

Debts to Anglo Irish Bank and Bank of Ireland in the UKLP joint venture had been on the parent group's balance sheet as guarantor for a period after breaching loan-to-value ratios but have now moved back into the special purpose vehicles for both sites following cash payments by Pochin to the Irish banks.

Filde concluded: "A more streamlined group will be able to focus on the core activities of property development and investment and construction, without the distraction of legacy issues and loss making entities. The strong reputation and capabilities of these two businesses will allow the group to leverage opportunities from existing and new clients, with the intention of seeking out further opportunities for growth in other parts of the UK through existing client relationships. The restructured group will allow it to be more flexible, responsive and better able to capitalise on opportunities as the market recovers."

No final dividend will be paid.

Shares in Pochin were unchanged on Friday at 37p.

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