Severfield Rowen losses hit £10m on Cheesegrater

Aaron Morby 11 years ago
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Britain’s biggest steelmaker is facing a £20m hole in its books following a sweeping review of 71 contracts across the country.

Severfield Rowen has unearthed eight problem jobs, including the Cheesgrater where it expects to lose £10m.

Three other unnamed contracts, rumoured to include the Blackfriars Bridge and Emirates cable car jobs in London, will also cost £2.9m in overruns.

A further five contracts are subject to significant cost variations, which have still to be agreed with clients, with the board making an anticipated writedown of £7.3m.

Executive chairman John Dodds said the firm was being supported by its banks and was looking at a £50m equity fund raising issue, which would need the backing of its shareholders.

“I am also greatly encouraged by the strong and visible support we have received from our leading shareholders and the constructive discussions we continue to have with our lenders around the longer term financing of the group,” he added.

“We believe that the group can return operating margins to between 5% and 6% over time and I am confident that the longer term fundamentals of the Group remain strong.”

Since August 2012 when problems first started to surface, Severfield Rowen has tightened up its construction estimating procedures.

The contract review also identified a need for stronger contracting processes and discipline where it found it was wanting in risk assessment on more complex contracts.

Dodds said the implementation of these improvements will be undertaken as quickly as possible.

Cheesegrater contract

122 Leadenhall Street

The Review established that the technical challenges of the site works are significantly greater than first estimated. As a result it will require longer timescales and greater resources to complete. A comprehensive reassessment of the works to complete, along with a detailed review of all other forecast costs still to be incurred has change an expected profit on the overall life of the contract into a loss.
Severfield Rowen will make an incremental charge to the profit and loss account of £9.9m for the 12 months to end of December 2012.

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