黑洞社区

Contractor May Gurney remains on track to produce profits in excess of 拢25m this year, its finance director has insisted, despite a profit warning last week that saw the departure of the firm鈥檚 boss and prompted a share price collapse of nearly 50%.

Speaking to 黑洞社区, May Gurney finance director Mark Hazlewood said the problems revealed in an update to the City last week were 鈥渞ing-fenced and contained鈥� and that the firm remained on track to provide a strong set of results for the financial year, with profits in excess of 拢25m.

In the statement to the City on 6 September, the firm announced the departure of chief executive Phllip Fellowes-Prynne with immediate effect and warned that it would 鈥渟ignificantly under-perform its original expectations for the current year鈥�.

Hazlewood denied reports that Fellowes-Prynne (pictured) had been forced out by the board, insisting that he left by 鈥渕utual agreement鈥�, but admitted that his interim replacement, Willie MacDiarmid, who has been a non-executive director for three months, would likely be appointed on a permanent basis.

鈥淚 don鈥檛 think I鈥檓 letting any secret out to say Willie is keen to be considered and that鈥檚 how we would like to see it work,鈥� he said.

Shares in May Gurney fell more than 40% on the news of the profit warning to just over 130p, wiping almost 拢66m off the value of the company. The share price was down to 114p - a fall of 48% - by close the following day (7 September). On early trading this morning the price had edged up to 119p - still down 46% on its level prior to the announcement.

Hazelwood said the collapse in the share price was 鈥渧ery disappointing鈥�, but said people had 鈥渞ead too much into the announcement鈥�. 鈥淚t鈥檚 no surprise that when a company issues a profit warning the price tends to go down rather than up, but the size of the drop is very disappointing,鈥� he said.

鈥淲e expect and hope it will start to claw its way back to a more representative value for the business in due course,鈥� he added.

In the statement the firm said had 鈥渙n-going difficulties鈥� within its Scottish Utilities business as Scotia Gas Networks looked to use more in house labour and reduce its outsourcing. Hazlewood said this would hit around 拢20m of revenues. 鈥淲e don鈥檛 see that disappearing totally, but we do see the vast majority shrinking away,鈥� he said.

Hazlewood said the firm was now targeting more gas replacement work in England in order to help make up the revenue loss, but admitted the fall in Scottish work would lead to job losses, though it was 鈥渢oo early to say how many鈥�.

The firm said it was also experiencing 鈥渟ignificant exiting costs鈥� as it ran down its Facilities Services division and had set-aside a 拢10m one-off charge to cover the costs, which Hazlewood said was aimed at ensuring that any future liabilities were paid off 鈥渙nce and for all鈥�. He said there were no plans to restructure any other part of the business or sell off any divisions.

The firm said it was also facing some serious operational issues within two long-term MaGos waste and recycling contracts, after failing to meet targeted margins, which Hazlewood said was due to 鈥渋t just taking us a longer time to get things up and running and operational then we expected鈥�.

In its results to the year ending 31 March 2012, the firm reported a pre-tax profit of 拢28.4m - up 17% on the previous year - with revenue up 22% to 拢695.3m

Last week the firm said it the underlying performance of the rest of the business was 鈥渟ound鈥� and it had an order book of 拢1.5bn, with 拢86m of new work and 拢50m of contract extensions won since 31 March.

Hazlewood insisted the firm had a cash strong position, despite recently extending payment terms from 45 days to 60 days for materials suppliers on its contracts. He said the move was aimed at aligning the payment terms of the firm鈥檚 clients with those if its customers.

鈥淲e had developed a habit over the years of paying out to a client before we鈥檇 been paid by our customers, which was not a terribly grown up way to run a big business. So now we are trying to align our payment terms with those that we receive from our customers,鈥� he said.

鈥淲e鈥檝e got a good strong cash position and we鈥檝e got plenty of headroom in our facilities with the banks,鈥� he added.