Restructure Proposals
Carillion PLC
15 August 2000
CARILLION PLC
CROWN HOUSE ENGINEERING
The Board of Carillion plc has today announced major strategic and management
changes in its mechanical and electrical engineering business, Crown House
Engineering (CHE), to rectify poor financial performance.
Carillion has just completed the implementation of new group-wide risk
management processes. As a result of this, and following a thorough financial
review, a number of CHE contracts have been identified on which it is believed
that losses may now be incurred. In line with the Groups more prudent approach
to financial management, an exceptional operating charge of £25 million will
be taken in the first half of this year against these contracts. As most of
these contracts are well advanced, there should not be any significant cash
impact.
Growth in the CHE business has to date not been sufficiently controlled. This
has led to disappointing financial performance, despite CHEs very strong
market position. The Board has therefore decided to restructure the business
to focus it on larger contracts for key customers and its successful Voice and
Data communications business. These changes are expected to reduce its annual
turnover by approximately one third to around £150m.
To manage these strategic changes and implement robust controls, the CHE
senior management team has been replaced with the appointment of a new Finance
Director, Commercial Director and Operations Director, who join the new
Managing Director appointed following demerger.
The restructuring will commence immediately and, as a result, an exceptional
cost of approximately £9m will be incurred in the second half of this year;
the resulting cash outflow will occur progressively over the next twelve
months.
Commenting on these measures, Carillion Chairman, Sir Neville Simms said: It
is extremely disappointing to be making this announcement at a time when the
Group is otherwise performing well and in line with our expectations, and as
we increasingly see the benefits coming through from our strategy of
increasing the proportion our earnings from the growth segments of Private
Finance, Infrastructure Management and Services. This, coupled with a highly
selective approach to traditional construction activities, means we have
already substantially reduced the Groups risk profile.
The Board is committed to ensuring the delivery of its strategy and to its
policy of more prudent financial management and transparency. The measures it
has announced today fully recognise the difficulties identified in Crown House
Engineering and put the business on course to deliver the performance we
expect from it.
For further information please contact:
Sir Neville Simms, Chairman, Carillion plc 01902 316332
Chris Girling, Finance Director 0207 4932471
John Denning, Head of Group Corporate Affairs and Communications 0207 493 2471
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