View from City Road: Odd numbers at Lilley
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Your support makes all the difference.PRICE Waterhouse set to work yesterday, clearing up the mess left behind at Lilley, by clarifying the parlous state of the construction group's finances. Property write-offs and other provisions have wiped out pounds 60m of assets, leaving Lilley with net liabilities of pounds 13m.
These numbers look distinctly odd beside Lilley's announcement four months ago of an 18 per cent rise in interim profits as part of an attempt to quash 'unfounded market concern about the group's position'. Not for the first time, a construction company's published results have borne little relation to subsequent reality. Sir Lewis Robertson, the company doctor whose patient died on him, justifies the discrepancy by saying the value of the group's property investments depended entirely on whether or not Lilley continued to trade.
He blames the group's collapse on the 'London rules' that require members of a banking syndicate to act in unison. Hill Samuel and Clydesdale Bank were not prepared to support all aspects of a rescue package, so Lilley was forced to call in the receivers.
Price Waterhouse has been appointed receiver to most of the group's profitable construction companies, from which Lilley has stripped cash to fund its development activites. The parent's demise has rendered this inter-company debt worthless.
Price Waterhouse's Iain Bennet wants to make sure he is going to get paid before completing the group's pounds 100m of contracts. Lilley had planned 100 redundancies and many more must now be expected among the 2,400 employees. The only bright spot is that Mr Bennet has been rung constantly by potential purchasers of the Glasgow-based company's well-known businesses, which include MDW and Eden Construction.
Lilley's collapse is likely to cause problems for its joint venture partners on the property side. Its largest scheme is an industrial development at Egham, Surrey, but it has further interests in the South-east at Ilford and Guildford, and in Scotland.
Sir Lewis criticised Bob Rankin, Lilley's chief executive until October, for pursuing too long the move into property. This looks somewhat churlish from someone who has been chairman for six years and who was involved in Mr Rankin's appointment.
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