Carillion is to axe 300 jobs from its rail business and close a swath of depots after revenues in that division dropped £50m in the first half of the year.
The job losses represent about 15% of the 2000-strong workforce in the rail business. About 200 of the staff affected will be transferred to other parts of Carillion’s business, but there will be at least 100 forced redundancies. Fifteen of the rail division’s depots will also be closed.
Chris Girling, finance director, said the redundancies were not directly related to the news last month that Network Rail had banned the contractor from bidding for rail projects until its safety performance improved.
However, Carillion is also set to appoint a health and safety director in an effort to improve its record in this area. Girling said: “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.”
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 as Carillion posted a 23% rise in pre-tax profit to £27m for the six months to 30 June 2006. This was dented by exceptional costs of £13m. These included £5.7m for restructuring Mowlem. Girling said he expected this to rise to £15m for the full year.
Carillion bought Mowlem in February for £313m. Following the acquisition, Carillion had to make £135m of writedowns on the troubled business.
The remaining £7.3m of exceptional costs reflected 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 has also revealed that it had sold a number of stakes in PPP investments, which were expected to raise £46m.
In addition, the contractor has made a number of changes to the board. These include Girling’s announcement that he will retire at the end of the financial year.