Renew Holdings will close division in the north of England blaming poor returns and lack of profit in the public sector
Renew will incur an exceptional charge in the second half of its 2011 financial year, of up to £3.5m, for redundancy and restructuring costs as it has decided to exit the public sector in the north of England.
The firm issued a statement today, which said: “The board has concluded that its presence in the non-specialist and discretionary public spending building markets is unable to provide acceptable and sustainable returns at an appropriate balance between risk and opportunity.
“Renew’s building activities in these markets are in the north of England and the group intends to withdraw from building in these regions when its existing contracted commitments are complete.”
The restructuring will reduce 2012 revenues by around £60m but there will be no impact on profits.
After the restructure, Renew’s specialist building activity will be based entirely in the South.
The firm said: “Contract selectivity will remain the guiding principle with our focus being on the robust new build social housing, high quality residential and retail markets.
“Our business in these sectors is well secured with good forward visibility.”
Despite the negative news, Renew confirmed that interim results for the half year ended 31 March 2011 will be in line with analysts’ expectations, before the effects of the redundancy costs.
After the restructuring, the composition of the group’s revenues will change.
Specialist engineering will account for over 60% of revenues, compared to 44% in 2010 and 85% of activity will be in non-discretionary regulated markets in energy (including nuclear), environmental and rail. Over 80% of 2012 group operating profits will come from specialist engineering.
Renew’s interim results for the six months ending 31 March 2011 will be announced on 24 May 2011.