Contractor announces plan to cut some operations, with combined turnover of £50m, after declaring £73m loss

Mowlem chief executive Simon Vivian this week said the company would be closing down some of its loss-making construction businesses, which have a combined turnover of about £50m.

He said that the businesses, which he declined to name, were “small operations that are not successful”. They will be sold on if possible but most likely closed.

The closures follow 200 job losses within the construction services division in May.

Vivian revealed the plan on Wednesday when the company announced a pre-tax loss of £73.4m for the six months to 30 June 2005.

The board did not recommend an interim dividend. Vivian said the company could not confirm that a dividend would be paid out after the year-end in December, and would “leave the question open”.

The market was prepared for the poor results following a series of profit warnings. The latest of these came last week when the firm said it would take a £70m hit on problem contracts after it revised the way that it recognised profit and valued contracts on the balance sheet.

Mowlem appointed Ernst & Young to advise on the contract review, and one of the standardised ways of reporting was to not book any job until 20% had been completed.

Turnover for the six months rose 11% to £1.05bn, and the firm’s order book stood at £2.3bn.

Vivian said it had been a difficult time for the group internally and that the board had appreciated the need for a consistent accounting policy. But, he added: “It is behind us and we have a full agenda now.”

After the results were announced, analysts said the company was now a lot more transparent. Howard Seymour, analyst at Bridgewell Securities, said he was still forecasting a pre-tax profit of £7-£8m for Mowlem’s full year. Alastair Stewart, analyst at Dresdner Kleinwort Wasserstein, also said his full-year forecasts, which predicted a return to profitability, remained unchanged.

Mowlem’s shares remained unchanged on Wednesday at 157p.

Building revealed last week (23 September) that Mowlem had called in the restructuring team from financial consultant NM Rothschild to explore options for the company.