Rok dives into the red

The group recorded half-year losses of 3.8m in the six months to June 30 and said shortcomings in financial and operational controls at the division represented a "regrettable chapter" in the company's history.

Rok warned in April that profitability at the plumbing, heating and electrical business (PHE) had been hit by a number of underperforming contracts.

It carried out a restructuring and terminated the troublesome contracts before calling in accountancy firm BDO to conduct an independent review.

Rok, which last week announced the suspension of chief financial officer Ashley Martin, said BDO found serious failings in financial controls at PHE.

The Exeter-based company has insisted the problems at PHE were isolated and added today that its overall order book of 435m reflected good momentum in its social housing and construction divisions.

It added that revenues visibility in its maintenance and improvements business, which now houses the PHE operation, was good.

Group revenues for the half-year fell to 308.1m from 364.5m, while operating profit was down to 4.5m from 8.9m before taking into account the 6.8m impact of restructuring the PHE business.

After Mr Martin's suspension, day-to-day duties were handed to David Miller, former financial officer with public services provider Amey.

As well as today's disappointing results, Rok reduced the shareholders' dividend to 0.5p a share, from 0.75p a share.

However, the London-listed stock rose 19 per cent today as Rok said it hoped to increase its market share in social housing and while full year figures will be "flat" it expects an upward turn in trading in the second half of 2010.

Rok's difficulties have emerged at the same time as a financial crisis at rival social housing firm Connaught.

The repair and maintenance specialist, which is also based in Exeter, has been in turmoil since its June warning that Government spending cuts could blow a 200m hole in revenues over this year and next. It is thought to be working on a debt-for-equity swap with lenders.