Carillion plan to axe 900 jobs accompanies profits warning

Click to follow
The Independent Online

Carillion, the construction group, issued a profits warning yesterday, saying that it would take exceptional charges of £34m as it cut back its mechanical and electrical engineering unit, Crown House Engineering (CHE).

Carillion, the construction group, issued a profits warning yesterday, saying that it would take exceptional charges of £34m as it cut back its mechanical and electrical engineering unit, Crown House Engineering (CHE).

The group, which has been touted as a takeover target in recent days, said the revamp would lead to the loss of about 900 jobs out of the unit's total of 2,700. The bulk of the cuts will fall on CHE's 500 agency staff, who are employed on a contract-by-contract basis.

Chris Girling, Carillion group finance director, said the company had replaced three members of CHE's senior management team after discovering "£25m of undue optimism" on CHE's order books.

The company said: "Growth in the CHE business has to date not been sufficiently controlled... Following a thorough financial review, a number of CHE contracts have been identified on which it is believed that losses may now be incurred." The projects were not identified.

Shares in Carillion, which hit a year-high of 128.5p on Monday on the bid speculation, sank 9p yesterday to close at 119.5p.

Mr Girling, who joined Carillion in November shortly after it was demerged from Tarmac, said an exceptional charge of £25m would be booked against the contracts. In addition, a further exceptional charge of £9m would be incurred in the second half to cover restructuring costs.

Before the upheaval, CHE represented about 10 per cent of Carillion's overall business, which last year posted operating profits of £41.3m on turnover of £1.8bn. Wolverhampton-based CHE has operations throughout the UK. Mr Girling had no comment on weekend reports that Skanska, the Swedish construction firm, was eyeing three UK firms for a possible bid; Carillion, together with rivals AMEC and Balfour Beatty.

Comments