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UPDATE 1-Severfield-Rowen CEO quits over cost overruns
January 23, 2013 / 9:52 AM / 5 years ago

UPDATE 1-Severfield-Rowen CEO quits over cost overruns

* Says UK performance hit by cost overruns at project

* Says in talks with lenders about covenant compliance

* Shares fall 44 percent to their lowest in a decade

Jan 23 (Reuters) - Structural steelwork maker Severfield-Rowen Plc said Chief Executive Tom Haughey resigned after cost overruns at one of its projects in London further hit its performance in the United Kingdom, sending its shares down as much as 44 percent to their lowest in a decade.

Severfield-Rowen, which had net debt of 30 million pounds ($47.60 million) as of Dec. 31, is in talks with lenders regarding compliance of covenants as well as other stakeholders with a view to placing the company on “sound financial foundations”, it said in a statement.

The North Yorkshire-based company, which is working on steel fabrication at a London skyscraper called 122 Leadenhall, declined to comment beyond the statement when contacted.

The company said in the statement it was reviewing its contract base due to cost overruns at 122 Leadenhall, also known as the “Cheesegrater” for its distinctive shape.

“Given the management’s comments in this update, there is clearly considerable uncertainty over the group’s FY12 results ... and clearly this also makes for tough negotiations with the group’s stakeholders,” Jefferies analyst Andy Douglas said in a note.

Severfield-Rowen, whose chairman John Dodds would become executive chairman until a chief executive was appointed, has had to cope with lower construction demand, cost overruns, pricing pressures and delayed settlement of contracts.

The company warned in June that its full-year profit might be below market expectations due to cost overruns on two projects. In November it forecast 2012 pretax profit would fall to 1 million pounds from 10.1 million pounds in 2011.

Jefferies analyst Douglas said there was a strong likelihood of the company reporting an operating loss given Wednesday’s statement did not have a profit forecast.

Shares in the company were down 33 percent at 80 pence on the London Stock Exchange at 0911 GMT on Wednesday. They fell to 66.79 pence earlier in the day.

They shed 41 percent of their value in 2012.

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