Vital link for Trafalgar

DIRECTORS of Trafalgar House might think it somewhat ironic that Hongkong Land now controls their company.

What has been described as probably the worst property crash since the war in Britain - and almost as bad a situation in the United States - has seen Trafalgar write off GBP138 million (about HK$1.6 billion) in 1992, with more to come this year.

Once the third largest engineering firm in the world, it is now known as the ''once great Trafalgar House''.

History has turned on the company. Hongkong Land, which controls Trafalgar House through its 25 per cent holding, was once in a similar position.

The 1982-83 Hongkong property crash left Land $19 billion in debt, forcing it to sell off almost everything it had in order to survive. The ''then great'' Trafalgar House helped out, buying 50 per cent of Land's wholly-owned Gammon Construction.

Land directors and Trafalgar board members have come together again. This time, though, it is a permanent marriage. Simon Keswick is now chairman of both companies and there are three other Jardine men on Trafalgar's board.

Mr Keswick, say Jardine insiders, has given himself two years to turn his latest acquisition around. But, far from shaking up Trafalgar's business three month's after winning control, he is letting its existing plans run their course.

The strategy is simply: reduce exposure to property markets in Britain and US; sell off the hotels, including The Ritz; build up the cruise business; and keep it strong in its worldwide engineering business.

Where the Jardine influence will really make a difference is engineering. This is because Trafalgar expects most of the growth in this division to come from Asia, where it is already using Jardine group contacts and ground knowledge to boost its presence.

''Operationally, the benefits of the 25 per cent investment in Trafalgar by the Jardine Group are having their effects in Southeast Asia,'' said John Fletcher, Trafalgar House director in charge of corporate development worldwide.

Mr Fletcher expects the group's turnover in this part of the world to double to US$2 billion in the next two years.

Last year, Trafalgar saw its engineering and construction businesses turn over about US$5 billion (about HK$15.5 billion). But growth in Britain and the US, as well as the Middle East and South America, is expected to be minimal, so Asia is expected to play and increasingly important role for the group.

''We decided to open [a Hongkong] office with a board director to improve our penetration of the market with a more focused presence,'' Mr Fletcher said.

He added that the Jardine link-up was also certainly a factor in its establishing an Asian base in April.

Trafalgar is planning to expand the office in September. ''It is already clear that there have been significant benefits to having this approach,'' he said.

''Jardine is being very supportive. From a business development position, it is a strong healthy relationship. We are learning what they are about and they are learning what we are about. We are finding everyday areas where we can help them, and vice versa,'' he said.

India is an example where Jardine has benefited from Trafalgar House, which has three companies there. Jardine Fleming, which is breaking into India and trying to develop its business there, has benefited from Trafalgar's contacts and knowledge.

Trafalgar is benefiting from Jardine's Asian joint venture with British Steel, gaining contacts and market research in the steel industry for its engineering subsidiaries.

Also, Trafalgar is using Jardine Davies in the Philippines for advice Trafalgar on positioning in that market. Trafalgar has no office and little experience in the Philippines.

Mr Fletcher, who is in charge of the group's business development worldwide, points to the fact that he spends most of his time in this part of the world as a reflection of the region's importance.

''What we see is an ability to do more large projects in the region. Before Jardine took a stake in the company, we were not able to get the same quality of relationship on a local basis,'' he said.

''The thrust into the region will be technology-led. We will be doing more construction, but that area will not a be a dominant factor in our growth,'' he said.

Trafalgar is working on a number of large construction projects in the region, including a power plant in China; Kuala Lumpur's new $24-billion airport; and the $6.6-billion Tsing Ma bridge, connecting Lantau Island with the mainland, and the only accessroute to the new airport at Chek Lap Kok.

The establishment of a regional base also means that the company can develop a better working relationship with local financial institutions and, therefore, get funding for large projects more easily.

Trafalgar is also on the receiving end of a realisation in Britain of the importance of government support for exporting companies. The government has, in the last 12 months, been backing British companies in foreign markets, with ministerial visits having the greatest effect.

Particular attention has been paid to China, where chairman of the Board of Trade Michael Heseltine and Trade Minister Richard Needham have both led delegations.

''China is a very important market for us, long term. We have an office in Beijing, and about 10 projects going on in China,'' said Mr Fletcher.