Analysts give mixed response to news that Carillion chairman may become a non-executive director.
Sir Neville Simms has hinted that he will step down as chairman of Carillion, the soon-to-be demerged construction arm of Tarmac, in 2001.

In a series of meetings with analysts, Sir Neville intimated that he plans to become a non-executive director once a chief executive of Carillion is appointed in 2001.

One analyst said: “He has told various people that he is not interested in returning to where he was 10 years ago, when he was in charge of Tarmac’s construction business.

“He seems to be saying he sees this as a temporary position, which I took to mean he is planning to become a non-executive director in 2001.” A source close to the company said: “What everyone is assuming is probably quite correct. But Sir Neville does not want to say he is leaving in advance.” News of the likely departure of Sir Neville, who is 54, met with a mixed reaction. “He must be confident that, within the next two years, he can get a good profit profile and good management in place,” said Howard Seymour of ABN Amro.

But another analyst said: “The fact is that the market is not prepared to trust Carillion with Neville. Frankly, Tarmac would have saved a lot of money if it had kicked Simms out a while ago and sold off the construction business.” In the meetings, Sir Neville also outlined ambitious targets for 2001, including operating profit of £70m; Tarmac Construction’s operating profit for last year was £43m.

Sir Neville said he would bridge the gap through better margins and by increasing Carillion’s role in the private finance initiative and facilities management. He also outlined plans to put a stop to the policy of withholding subcontractor payments at the year end to boost figures.

“On the one side, that is positive, but it might mean their cash profile will be lower,” said ABN Amro’s Seymour.

Most investment advisers are holding fire on advising institutions whether to buy or sell Carillion until the shares are listed on 30 July. Some are increasingly concerned that Carillion has yet to appoint a finance director, even though the demerger becomes effective in less than a month.

One theory – vigorously denied by Tarmac – is that the continued lack of top-level management is a come-on to potential suitors. “It would save whoever bought it the trouble of sacking the top management,” said one analyst.

Further concerns over Carillion’s profitability have been raised because of an exceptional item that emerged in the contractor’s listing particulars. Tarmac Construction, as was, wrote off a £30.4m loss made by its M&E division, Crown House, in 1997, despite booking it as profit for a number of years.