Severfield-Rowen considers £50m equity fundraising

The company’s chairman also said he was “encouraged” by many of the conclusions of a review of its contracts.

Last month, Severfield-Rowen axed its chief executive, warned over profits and banking covenants and launched a review of contracts after overshooting its budget on a major skyscraper.

Tom Haughey, who had been CEO since July 2007, quit the Thirsk-based group with immediate effect. Chairman John Dodds became executive chairman while it searches for a permanent replacement.

In a statement, the company said today: “The group has engaged in positive discussions with a number of its major shareholders representing in aggregate, 56.1 per cent of the group’s issued share capital. As a result of these discussions, all of these shareholders have indicated that they are supportive of a potential equity fundraising by the group of up to £50m. Any such fundraising would be subject to shareholder approval.”

The board’s review addressed 70 of the group’s contracts representing around 90 per cent of the contracts by value, with a particular focus on the larger and more complex projects.

In a statement, the company said: “The financial outcome of the review will result in a charge to the profit and loss account of £20.1m in the 12 months ended December 31 2012. A proportion of the related cashflows occurred within the 12 month period ended December 31 2012, with a further £8m of cash outflow anticipated in 2013. Trading conditions are difficult as previously stated. However, the order book remains strong at £209m, as announced on January 23 2013, and the re-organisation of the group’s largest businesses into Severfield-Watson Structures is continuing in line with plan. More than half of the anticipated overhead savings of £2m, previously announced on November 5 2012, have now been realised and the programme will be largely complete by June 30 2013.”

The performance of the Indian joint venture was in line with the board’s expectations during 2012.

John Dodds, the company’s executive chairman, said: “Despite the disappointment of the financial impact on the group from the findings of this review, I am encouraged by many of the conclusions drawn from it and by the actions we will be taking to improve our business. This is a good business which remains well supported by its customers. It is important to note that, following our rigorous review process the vast majority of the group’s contracts are progressing satisfactorily, with both Atlas Ward and Fisher Engineering performing particularly well.

“I am also greatly encouraged by the strong and visible support we have received from our leading shareholders and the constructive discussions we continue to have with our lenders around the longer term financing of the group. We believe that the group can return operating margins to between five per cent and six per cent over time and I am confident that the longer term fundamentals of the group remain strong.”