EVER since Hongkong Land Holdings launched its daring dawn raid on Trafalgar House in October 1992, picking up a 14.9 per cent stake in the company, it has been trying to find ways of turning what was one of Britain's most prestigious companies into one that at least can make some money. Almost exactly three years later, owning 26 per cent of the stock, and packing the boardroom with current and former directors of the Jardine Matheson empire, including former taipan Nigel Rich, the company has still failed to lift Trafalgar out of the doldrums. Instead, it appears to be holed and taking water. A rumoured sale of Trafalgar by Hongkong Land led to hasty selling in London. The rumours were scotched when the British firm said Hongkong Land had confirmed it would remain a long-term investor, but the real news was hardly reassuring - no dividends on ordinary shares and no payments on cumulative preference shares. It is the stature of Trafalgar that makes its demise so ignominious. It was once touted as one of the great post-war entrepreneurial success stories. It began with trifling investments in the swanky London residential area of Kensington by its founders, Nigel Broakes and Eric Parker - both of whom are now knights of the realm. Forty years later, the small-time property developers were running the world's fourth largest international contract engineering business, held massive property interests and were the proud owners of globally recognised names such as the Ritz Hotel and the Cunard cruise liner Queen Elizabeth 2. At that time they were mighty. Then came the fall. There were strategic errors, a blistering recession, a highly unfortunate rights issue, questions from regulators over its accounting methods and increasing disquiet over the management techniques of its founders. For many in the City, the final ignominy came when so-called fly-boy Far East financiers - Henry and Simon Keswick - arrived in town with a bucketful of cash and a yearning to topple Broakes and Parker from their throne. When Hongkong Land first revealed its interest, Trafalgar's London-based institutional shareholders saw the deal as one which would wow the sceptics and inject the company with a much needed boost of financial and management muscle. In Hong Kong, it was suspected that Hongkong Land was building a convenient British bolt hole to which it would be able to turn if post-1997 scenarios looked unfavourable. However, yesterday's profit warning showed that neither side predicted the problems that Trafalgar had in store, and vindicated the ultra bears, who had always regarded the company has a no-hoper. In its report to the London Stock Exchange yesterday, Trafalgar warned shareholders to expect 'very significantly worse' results in its second-half profits, due to be released in December. It said the worst of these would come mainly from its construction and engineering divisions. Yet analysts note that even in 1992, it was the state of Trafalgar's core construction and engineering operations that were proving to be a drain on the group. At that time, the company was also suffering from loose management control and overvaluation of its property portfolio, a state of affairs with which most companies found themselves coming to grips after the sudden and sharp downturn of the British property market. Combined with the length and the depth of the recession, it was clear that the company had to readjust itself to market realities. However, even then analysts comments were not overly bearish. Hongkong Land came from a good pedigree, it was argued, and could turn the business around and release the much sought-after value the company undoubtedly contained. Furthermore, through its John Brown construction arm and the 50 per cent Gammon joint venture it holds with Jardine Pacific, Trafalgar was regularly counted among the top three construction and engineering companies in the world. As soon as they had mastered control of the company, the men from Hongkong Land set about trying to transform the company. It immediately wrote down the companies property portfolios and participated in a GBP204.5 million (about HK$2.48 billion) rights issue. It also booted out some of the sloppy management on the board, which had come under the cosh of Britain's Financial Reporting Review Panel. The panel had ordered the company to conduct a GBP138 million write-down on assets after it disagreed strongly with Trafalgar's accounting of advanced corporation tax and the values of its property holdings. Worse was yet to come, the slowdown in the construction and engineering divisions continued and showed no sign of lifting. Following the company's GBP204.5 million rights issue, Trafalgar has called on its shareholders to fork out a further GBP425 million, and has made provisions and write-downs so far which cumulatively total almost GBP500 million. After each rights issue, the company indicated it would be the last. Each time the company broke that promise and the shares slipped further southwards. By the time of the convertible preference share issue in January last year, Trafalgar had gone to the market three times in just over two years. Its attempt to generate cash through acquisition has also failed. The strenuous defence put up by regional electricity company, Northern Electric, to Trafalgar's GBP1.2 billion bid has served to incur further exceptional costs of GBP12 million. Now, the company has embarked on a process of navel-gazing, rooting out non-core businesses and peripheral operations, including divestment entirely from its hotel businesses. Further rationalisation and re-evaluation of assets, such as long-term construction and engineering contracts, are promised. But the City is sceptical. Shares in Trafalgar hardly moved yesterday as its trading statement only served to confirm what was known. In Hong Kong, analysts' major concern was that a deterioration in Trafalgar's business and share price could force Hongkong Land into making some sort of provision and would drive down its share price. Crosby Securities analyst Anna Chong expected Hongkong Land to report a negative growth in full-year profit because of the losses from Trafalgar, despite a steady income growth in its Hong Kong operation. In the City, analysts are now waiting for evidence of further disposals as a means of generating cash. This week the shares hit a new low of 17 pence, patience in the City has run out and insiders say that Trafalgar's board is not even talking about further acquisitions or another cash call. They would be laughed out of town.