SHARES in construction firm Galliford Try have tumbled after the firm issued a profit warning.
The firm said it would undertake a strategic review that will reduce the size of the construction business to focus on its key strengths.
The process is expected to result in reduced profitability in the current year, as part of the assessment of operational progress and contracts.
The single largest element in the firm’s one-off costs relates to the Queensferry Crossing joint venture, after an estimate for final costs on the £1.4billion project was increased.
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It is anticipated that the outcome of the assessment will reduce the group’s full-year profit before tax by between £30 million and £40m.
Analysts had expected £156m for the full year, but this could now be reduced to as low as £116m.
Shares in the company were down 20.5 per cent at 576.5p at close. Further details of the plans are set to be released alongside a trading update on May 21.
It comes just a few weeks after chief executive Peter Truscott left and was replaced by former finance chief Graham Prothero.
Analysts at Peel Hunt cut their rating on the stock, due to “continued uncertainty” over performance, size and future of the construction business with the possibility of further disappointments on large contracts included.
The firm saw losses in its construction arm widen by 11% in the first half of the current financial year as it was forced to write down further costs in relation to the construction of the Aberdeen Western Peripheral Route in February.
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Galliford Try said it “anticipates that this review will result in reduced profitability in the current year reflecting a reassessment of positions in legacy and some current contracts and the effect of some recent adverse settlements, as well as the costs of the restructure”.
“The single largest element relates to the Queensferry Crossing joint venture, which has recently increased its estimated final costs on the project.”
It added: “The majority of our construction businesses continue to perform well, and these adjustments are not expected to have a significant impact on the group’s previous guidance on average net debt for the year. The board anticipates finalising its conclusions in the next few weeks and will share the detail of the review of the construction business along with a further update on group trading in its scheduled statement.”
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