East Midlands to sack 700 in return to electric roots

EAST MIDLANDS Electricity is to cut 700 jobs in a restructuring drive that is forcing it to make write-downs of pounds 80m. It is also reining back its previous strategy of expansion outside the electricity business.

The decision follows the unexpected retirement last month of John Harris, former chairman. Mr Harris was regarded as the architect of East Midlands' ambitious and widely criticised diversification.

Nigel Rudd, who took over as non-executive chairman, is cutting East Midlands' electrical contracting operations outside its electricity franchise area. This will result in the loss of 700 jobs over the next few months and an asset write-down of pounds 47m.

The pounds 19m assets of East Midlands' retail business are being written down to zero. The retail operation, Homepower, is a joint venture with Yorkshire Electricity. But a spokesman for Yorkshire said that East Midlands' move had to be seen in the context of an overall realignment at the company. Yorkshire Electricity had no intention of following suit.

East Midlands said it was also taking a more conservative accounting approach to the Ambassador home security business, resulting in a reduction in assets of pounds 14m. But Bob Davies, finance director, said it was not in shareholders' interests to abandon completely either the security or retail operations.

Mr Davies said that there would be a one-off cash outflow of pounds 30m as a result of the changes. 'This action basically says that we are refocused. The focus is on cash generation in the business and on maximising shareholder value.'

The City welcomed the restructuring plans, with East Midlands shares rising by 19.5p to close at 567p. Bill Dale, electricity analyst at SG Warburg, said: 'This is a scathing indictment of the previous management, both in strategy and accounting policies.' Others said that the East Midlands move would raise questions about the retailing activities of some other regional electricity companies.

East Midlands was regarded as by far the most aggressive regional electricity company. At one stage Mr Harris was interested in becoming involved in the coal industry but the idea was abandoned. Almost all the regional electricity companies have looked outside their core businesses, which are tightly regulated, to increase earnings.

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