Lloyds Banking Group has injected a further £117.7 million of capital into metals-to-property entrepreneur Sir David Murray’s business empire to help reduce the debt pile.

This capital injection was revealed yesterday with news of a tumble in underlying profits at Murray International Holdings (MIH), and a huge exceptional write-off of £59m arising from Sir David's sale last year of 85% of Rangers Football Club to businessman Craig Whyte for £1.

Sir David highlighted the "extensive and continuing support" of Bank of Scotland owner Lloyds for MIH, which includes the oil and gas industry-focused Premier Hytemp unit in its metals division, and owns property firms PPG and Murray Estates as well as call-centre company Response.

Lloyds hiked its stake in MIH from 12% to 30% in 2010 with a capital injection of £150m. Sir David and members of his close family will, in spite of the latest huge capital injection, retain 70% of the MIH voting equity because Lloyds is subscribing this time entirely for non-voting shares.
MIH yesterday revealed its operating profit before exceptionals tumbled in the year to June 30, 2011, to £11.4m – little more than half of the £21.1m recorded in the prior 12 months.

Turnover dropped by 15% to £394.6m. MIH said this reflected a combination of the impact of recession on the group businesses and lower property sales.

Sir David said: "Given the depth of recession and absence of any sustained economic recovery, these results are very creditable."

Net debt at June 30, 2011, was £636m, down about  £80m from the end-June 2010 figure. 

A spokesman for MIH noted this net debt figure was before the latest recapitalisation, through Lloyds’ subscription for £117.7m of "additional share capital and share premium". MIH said that the injection from Lloyds had reduced debt “by a similar amount” to the £117.7m subscribed.

The spokesman also pointed out the £636m net debt figure preceded MIH’s sale of the Plumtree Court property in London. One source estimated yesterday that MIH's current net debt figure was around £470m.

It is understood Lloyds will in time be able to sell its £117.7m of new non-voting shares in MIH to Sir David or to other investors.

MIH, which employs more than 2000 of its 2700-strong workforce in Scotland, said its profit before interest, tax and exceptionals came to £14.9m in the year to June 2011, down £6.7m on the corresponding figure for the prior 12 months.

It did not give a figure for pre-tax profits, after interest payments on debt. MIH finance director Mike McGill said last April, based on the position after nine months of the accounting year to last June, that the group should be back in the black during that financial period at the pre-tax profit level, excluding exceptionals.

The MIH spokesman noted the latest Rangers-related write-off followed two previous exceptional charges arising from the football club stake, with Sir David's group taking respective hits of £23.2m and £34.2m in 2006 and 2008.

Sir David said: "It was envisaged at the time of the original (2010) restructuring that a further debt-to-equity conversion would be required to secure the platform for the group’s overall debt reduction and divisional strategies.

"This restructuring highlights the extensive and continuing support provided by Lloyds as both lender and shareholder. This partnership approach is truly appreciated and will hopefully bring greater dividends in the future."

Sir David said MIH's medium to-long-term strategy "remains geared towards asset realisation and reduction, particularly in relation to property".

He added: "A return to (economic) growth is undoubtedly going to take longer than all would have predicted or wished. The financial restructuring and measures introduced over recent years will enable us, however, to weather the economic issues until improvements materialise."

Rangers fell into administration in February under Mr Whyte's ownership. Sir David said he hoped there would be "a successful conclusion" to this process.