Contractor says cost of restructuring energy business will double

Contractor Carillion is likely to take a 拢20m hit after it put the whole of its 4,500-strong energy services division on redundancy notice last week.

In a trading update to the City today, Carillion said the restructuring cost related to its 拢298m acquisition of Eaga, now called Carillion Energy Services, will double from 拢20m to 拢40m because of last week鈥檚 decision to downsize its solar photo-voltaic business.

Carillion鈥檚 decision, revealed by 黑洞社区 last week, is a direct response to the government鈥檚 decision to cut the feed-in tariff rate from 43p to 21p at the start of November.

In its trading update Carillion said integration of the Eaga business was running 鈥渨ell ahead of our expectations鈥� and it expected the acquisition to drive both revenue and profit in the 2011 results. However, it said it was now proposing to 鈥渄ownsize our solar photo voltaic operations鈥� and to extend the restructuring of CES to deliver a substantial further improvement in overall operational efficiency.鈥�

It said that cost savings will increase from 拢15m a year to 拢25m a year by the end of 2013, but that the one-off cost of the restructuring 鈥渋s expected to increase to 拢40m, which includes a provision of up to 拢10m in respect of downsizing our solar photovoltaic operations.鈥�

This compares with an original prediction of 拢20m in restructuring costs for the business.

Otherwise it said it was continuing to deliver 鈥渟trong profit and earnings growth鈥� despite 鈥渃hallenging鈥� market conditions, and was on track to downsize its UK construction business as predicted, while expanding its work in the Middle East.

It said: 鈥淲e remain well positioned to achieve our target to deliver substantial growth in UK support services from 2012 onwards and 鈥� to double our revenues in the Middle East and in Canada, in each case to around 拢1bn over three to five years.鈥�

Topics