Shake-up as Cala closes on bank deal amid £266m loss

Published on Friday 18 September 2009 21:34

CALA, the Scottish housebuilder, is close to completing a major bank rescue deal that will underpin its future after running up a £266 million pre-tax loss for the year.

Geoff Ball, the Edinburgh-based company's founder and long-serving executive chairman, will retire and Alan Brown will step up from managing director of Cala Homes to become chief executive.

Ball, 66, admitted yesterday that the company had faced "the most difficult conditions the industry has encountered since Cala began housebuilding some 30 years ago".

He said some "difficult decisions" had been forced on the company in the past year, including 154 redundancies, representing a third of the workforce.

Professor Ian Percy, the senior independent director, is appointed interim chairman. Group managing director Alan Downie will retire.

The company has filed overdue accounts for 2007-8 showing a 26.5m trading loss before exceptional costs of 239.6m. After write-down provisions of 102.6m on land and work in progress, and 136.1m of goodwill, the loss before tax was 266.1m. The accounts were withheld until negotiations with the Bank of Scotland reached completion.

Auditor PricewaterhouseCoopers noted that the group's ability to continue as a going concern depended on the new banking terms being agreed.

Cala is forecasting another loss in the year to June 2009 on turnover of 180m. It sold 678 houses, against 718 the previous year. It expects to break even in the current year before returning to profitability in 2011. Ball said: "The challenges arising from the fall in house sales and prices have had a significant impact on the entire housebuilding sector, but especially on Cala because of the historically high level of debt carried on our balance sheet."

The company is close to completing new equity and debt arrangements with its bank to support the business until 2013. Like many other housebuilders, Cala breached its banking covenants but the company had been operating within its cash facilities.

"We have had to take some very difficult decisions about the business and, regretfully, we have had to make a number of good people redundant," said Ball, adding that some had been with the firm for over 20 years.

"While we are confident about the revival of the housing market, there's still some way to go. The management team will continue to manage prudently and will be working hard to trade profitably and to be ready for whatever the market demands."

He said there were signs of an improvement in the market, but raised concerns about a possible shortage of skills when the upturn comes.

Ball established the company in 1974 and in 1999 he led a management buy-out to take it off the stock market, vowing never to return. He has been chief executive since 1975 and executive chairman for 19 years.

He has been working part-time for the past two years and delayed his retirement until the financial restructuring was complete.

His successor has been with the company since 1986 after training as a chartered quantity surveyor with Ideal Homes. He was appointed to the executive board in 1995 and the group board two years later.