Allen Yurko, the embattled chief executive of Invensys, finally heeded calls to quit yesterday as the troubled engineering company announced a further 2,500 job cuts and its fourth profits warning in less than a year.
Rick Haythornthwaite, the former chief executive of the cement maker Blue Circle Industries, will take over from Mr Yurko in October. Mr Yurko will stay through a handover period and retire at the end of January. Analysts said the move paved the way for radical restructuring at the controls and automation group, including the possibility of a rescue rights issue.
James Stettler, an analyst at Dresdner Kleinwort Wasserstein, said: "Mr Yurko's lost credibility among investors who are sick of the way things have gone... A lot were waiting for him to depart before they consider buying the stock. They don't trust him."
Mr Yurko, who has been chief executive of Invensys and Siebe – one of its predecessor companies – for eight years, will receive no payoff. Under an amendment to his contract this year, however, the 49-year-old is entitled to transfer his pension to a cash lump sum if he leaves after turning 50. His birthday is in September. It means he can take a payout of £3.8m within two years of retiring or £300,000 a year for life.
Invensys yesterday abandoned the guidance on the current year it issued less than two months ago, when it had forecast a weak first half followed by an improved six months, producing a flat year overall.
Mr Yurko said: "I expected a mild recession in the US but what we are now seeing is the worst downturn in industrial production since the 1970s, which is spreading to the Far East and Europe."
Invensys said yesterday that operating profit for the first half would be 30 per cent down on its previous expectations of £400m for continuing businesses before exceptional items. The news sent its shares plunging, closing down 15 per cent at 86.75p. The company added it was too early to give any guidance for the second half.
Mr Yurko has been under massive shareholder pressure as a result of a series of disappointments from Invensys but he maintained that he was voluntarily stepping down.
"I looked at the depth and breadth of this downturn and a realised a fresh approach was needed." He said the company must now consider options he had ruled out. "Things I have considered sacrosanct might now come into play."
Mr Yurko masterminded Siebe's merger with its weaker rival BTR in 1999, which has been followed by a series of restructuring charges and some 20,000 lay-offs. Added to this were profit warnings, starting with a catastrophic earnings alert in September last year which wiped a third off its market value and cost 3,000 jobs.
A further 2,000 redundancies accompanied a profits warning in March this year, while 3,500 lay-offs came with an earnings downgrade at the end of May. Yesterday Invensys said that 2,500 more cuts were needed. Also in May came the shelving of a £4bn plan to spin off the power systems business.
Lord Marshall, chairman, said the options for the company, including power systems, would be examined by Mr Haythornthwaite when he joins. He said the Invensys board had not considered a rights issue but could "never rule anything out". The company is weighed down by £3.2bn of debt. Mr Yurko said its banking facilities provided £4bn, which he said was "adequate headroom".
Mr Haythornthwaite, who yesterday bought 100,000 Invensys shares at a knock-down price of 84p, led Blue Circle during a feisty though unsuccessful defence against French predator Lafarge last year. He was credited with restructuring Blue Circle to keep investors on his side and achieved a good price for the company.Reuse content