The hopes for its recovery lie in house prices and mortgage rate cuts since the end of November.Housing starts have been weak for the past six months, running at levels about 15 per cent lower than a year earlier. DIANE COYLE Economics Correspondent The weak state of the housing market has been reflected in recent figures on new housing starts and mortgage borrowing. Tarmac first announced its decision to reshape itself completely last August with the stated intention of concentrating on its non-housing operations.. Mr Dwyer said: "Despite dull markets in 1995, it is the view of Wimpey that 1996 should offer better trading conditions, and house sales in the early weeks of 1996 support this view."The deal between two of the UK's biggest construction companies underlines the problems afflicting an industry that has seen an unprecedented number of large companies warning on profits, putting operations up for sale and withdrawing completely from the market. The group will be better balanced and the cash- generative qualities of the construction and minerals businesses will lead to a more predictable and reliable earnings stream".Wimpey is being seen as the party taking on the greater risk, adding Tarmac's roughly 6,000 houses to the 7,600 it completed itself last year. Wimpey becomes the clear leader in the fragmented UK housing industry following the swap, with about 10 per cent of the market.Defending the logic of the deal for Tarmac, Mr Simms said: "The asset swap gives Tarmac a strong financial base and solid asset backing from which to move forward. He said that would mean cost savings of between pounds 15m and pounds 20m in the first full year of ownership of Wimpey's construction and minerals operations.He added: "In a single move, Tarmac has achieved the divestment of its housing business and the immediate reinvestment into its chosen area of focus."He denied one criticism of the deal, which suggests that Tarmac is pulling out of housing at the bottom of the market, missing out on the upturn to which Wimpey has doubled its exposure.
Tarmac would only say that the numbers would run into the hundreds. About 4,000 jobs will be transferred from Wimpey to Tarmac as part of the swap, with about 2,000 going the other way.More than half a million construction jobs have been lost since the industry entered the recession in 1990 and with cutbacks in the Government's road- building programme this year and still stagnant new housebuilding the slump is thought unlikely to end soon.Neville Simms, chief executive of Tarmac, promised investors that the deal would not dilute earnings per share. Industry sources believe more than 500 jobs will be eliminated, part of the 20,000 redundancies predicted by the Building Employers Federation for 1996.Joe Dwyer, chairman of Wimpey, said he expected to make between 100 and 200 staff redundant in a phased programme over the next 18 months. Even before the contract write-off, underlying profits of pounds 95m will be below analysts' expectations of between pounds 96m and pounds 103m.Although neither company was specific about job losses, both stressed the importance of cost reductions to the overall success of the swap. That deal sees Wimpey taking a huge gamble on recovery in the UK housing market, swapping its own construction and quarrying businesses for Tarmac's housing arm.Confirmation of the deal's fine print sent Tarmac's shares 2.5p higher to 120.5p as analysts reflected on the group's improved geographic spread and its bullish cost-cutting projections.
Wimpey slipped 5p to 135p in heavy trading, as the market focused on a promised collapse in its profits last year from pounds 45.1m to pounds 15.5m and a bigger exposure to the troubled housebuilding market.Tarmac's profits for 1995 will also be worse than expected at pounds 65m compared with 1994's pounds 107.2m, mainly thanks to a pounds 30m provision against a disputed power station contract. The US Air Force's claim to have destroyed 90 mobile Scud launchers in Iraq's western desert was discounted in a US government report. Instead, Israel is investing in Arrow anti-missile missiles, which will start to be deployed in 1998.A more immediate missile threat is that posed by Katyusha rockets fired by Hizbollah guerrillas in south Lebanon into northern Israel. Despite their crudity, they can bring the whole of northern Galilee to a halt.
Israeli officials say they are developing with the US a system using laser beams to destroy short-range missiles.On Tuesday it successfully detected and destroyed a rocket in mid-air in a test at White Sands, New Mexico.The project, called Nautilus, is still in its early development stage and uses bulky components. A fire control discovers a missile in flight and a "laser-cannon" explodes it before it can hit its target. The Israeli press reported the aim is to combine the weapon parts into a portable system.. TOM STEVENSON City Editor Tarmac and Wimpey dealt the beleaguered construction industry a double blow yesterday as the UK's leading builders warned of hundreds of job losses over the next two years and said profits had slumped in 1995 after a worse-than-expected final quarter.News of the cutbacks accompanied confirmation from the two companies of the dramatic pounds 600m asset swap they first announced last November.
The US-manned Patriot anti-missile system turned out to be ineffective. He was arrested soon after the first salvo of Iraqi Scud missiles hit Israel on 18 February, 1991. He attributes his capture to a mistake he made in telephoning his Iraqi controller from his home.The 39 Scuds that hit Israel, each with a 250kg warhead, did limited damage and inflicted few casualties but they were enough to force most Israelis into air-raid shelters.It would have been much worse if Iraq had used gas warheads, in which case Israel would probably have responded with a nuclear weapon.For the past five years, Israel has been looking for an antidote to missile attack. He said: `We have a shared destiny.' After two minutes I left the room.''Mr Subi was not the most competent of spies.
