Fifteen rail division depots will close and 100 redundancies are expected as interim rail revenue falls £50m
Carillion is axing 300 jobs from its rail business and closing a swathe of depots after revenues in that division dropped £50m in the first half of the year.
The job losses represent around 15% of the 2000 strong workforce in the rail business. Two hundred of the jobs will be absorbed into other parts of Carillion’s business but at least 100 will result in redundancies. Fifteen of the rail division’s depots will also be closed.
Finance director Chris Girling said the redundancies were not directly related to the news last month that Network Rail had banned the contractor bidding for new rail projects until its safety performance improves.
However, Carillion is also set to appoint a new health and safety director in an effort to improve its record in this area. “The issues (with Network Rail) were localised over a four week period and we’ve made personnel changes. But across the company as a whole our safety record is very good,” Girling explained. He added that the firm was in constant dialogue with Network Rail and hoped the ban would be lifted in “a matter or months, not years.”
The news came at Carillion posted a 23% rise in pre-tax profit to £27.4m for the first six months to 30th June 2006. This was dented was exceptional cots of £13m. The costs included £5.7m for restructuring Mowlem, and Girling said he expected this to rise to £15m for the full year.
Carillion bought rival Mowlem in February for £313m. Following the acquisition Carillion had to make £135m of writedowns on the troubled business.
The remaining £7.3m was from the decreasing value of assets. The restructuring of the rail business is expected to generate costs of £3m in the second half of the year.
Carillion also revealed today that it had sold a number of stakes in PPP investmentswhich were expected to raise £46m.
A number of changes to the board were also announced. Finance director Chris Girling retired from Carillion in order to focus on non-executive directorships.
Don Kenny, the managing director responsible for six Carillion businesses, has been appointed as an executive director and Steve Mogford was appointed as a non-executive director. Mogford has been a main board director of BAE Systems for over six years and is currently the chief operating officer responsible for programmes.
Chairman Philip Rogerson was positive despite the news from the rail business. “With a large order book and positive outlook in the group's key markets, the board expects Carillion to make further progress in the second half of 2006 and slightly exceed our original expectations in the full year."