By Andrew Goodrick-Clarke Financial Editor
British Leyland, now the most important investment in the portfolio of Lord Ryder’s National Enterprise Board, has declared a net 1974-75 loss of £123.5m. Through the NEB, the Government holds some 95 per cent of the company’s share capital. However, there are still around 100,000 small shareholders who decided to retain an investment’ in the state-controlled motor manufacturer.
Yesterday’s figures are stark evidence of how serious the position became for the company which, having gone to the Government for financial support about a year ago, finally went into state-control in mid- August. The huge net loss reflects more than doubled interest charges of £38m during the 12 months to the end of September, and exceptional charges arising from closures and redundancies and provisions of nearly £60m. But the fact that unit sales during the year fell from 1,020,000 to 845,000, a drop of just over 17 per cent, shows how badly the, company’s trading performance deteriorated.
This reflects the international recession in the motor industry and British Leyland’s inability to meet even reduced demand due to labour disputes and management miscalculations about the market. The outcome was that disregarding exceptional losses, British Leyland lost £90 for every vehicle it produced. Broken down, the, trading loss also shows that trading on cars resulted in losses of £109m. But that this was partly offset by profits from the truck and bus business of £27m and profits from non-automotive operations of £6m.
The exceptional losses of nearly £60m relate largely to closures of manufacturing operations in Australia, Spain and, more recently in the Italian Innocenti business. The Australian closure resulted in a provision of £15.7m in 1973/4, but, despite having sold one factory, British Leyland is making further provisions in Australia, this time of £5.7m. Spanish provisions were originally put at £29m arising from the closure of the Authi business, but following some disposals there, the provision has now been reduced to £19m.
Finally, the company faces the Innocenti situation which while still unresolved is going to be costly. Hence, a provision, considered prudent of £34m to cover closure costs in Italy. Included in this total £60m for closures is the cost of making some 16,000 people redundant. The redundancy bill is thought to amount to some £10m.
The net interest charge of £38m, compared with just over £17m in the previous year reflects the cost of carrying the huge overdraft facilities necessary when the company ran into critical liquidity problems’ last year and went to the Government for aid. The Governments response was to provide guarantees for British Leyland’s short-term borrowings up to £100m.
By the time the Government took over control of the company and injected its first tranche of public money through a £200m rights issue, the company had already spent £89m of its overdraft facility and used that much of the £200m to redeem short-term borrowings.