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Tuesday, March 16, 1999 Published at 09:33 GMT

Business: The Company File

Tarmac to split in two

Tarnac: Wants to establish "new corporate identity"

Tarmac announced it is demerging its construction services arm as a separately listed company after revealing lower than expected pre-tax profits of £131.4m.

This move will leave its core heavy building materials business with the Tarmac name, and it is hoped the decision will help raise new equity.

The company aims to establish a "new corporate identity in due course", which should include the private finance unit.

Tarmac Group's existing net debt will be allocated between its two new sectors, it said. It is intended that New Construction Services (NSC) will have a minimal net interest charge, excluding interest on non-recourse debt.

[ image: Tarmac will demerge later this year]
Tarmac will demerge later this year
The Boards of both NSC and New Tarmac (NT) are "expected to adopt progressive dividend policies, based on the long-term sustainable earnings of each group", it said.

It explained that preliminary discussions have been held with Tarmac's present banks and new facilities for NT and NCS will be in place when shareholder documents are published.

But neither section is expected to raise any new equity as part of the demerger process.

Several appointments have already been made for New Tarmac (NT), the heavy building materials company.

They include Sir John Banham as Non-Executive Chairman, Roy Harrison as Chief Executive and Chris Bunker as Finance Director.

Housebuilding "encouraging"

At NSC, the demerged construction services company, Sir Neville Simms will be taking the posts of Chairman and Chief Executive. Roger Brook will be Non-Executive Deputy Chairman.

Tarmac said shareholders can expect to receive documents on the demerger during the second quarter of this year, with the split going ahead about two months later.

Tarmac was originally also a housebuilder, but swapped assets with Wimpey in order to concentrate on the construction market.

The housebuilding market is currently consolidating, but is pulling in healthy profits for some companies.

Bovis Homes announced a sharp increase in profits this week, and said the current year had got off to an "encouraging start".

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