Rok has issued a profits warning, caused by a number of underperforming contracts and poor internal financial controls in its plumbing, heating and electrical business.
As a result, it has suspended finance director Ashley Martin, the firm said today.
The firm tasked independent consultants BDO to review the contracts and the financial controls of the business, which resulted in a number of contracts being terminated and business being restructured.
The division will not be profitable this year and as a result Rok expects to miss the market’s profit estimates in a material way.
Because of the lack of controls, finance director Ashley Martin has been suspended with immediate effect and his day to day duties passed to David Miller, a specialist interim chief financial officer, who was chief financial officer of Amey Plc between 1998 and 2002.
Trading within the firm’s construction and social housing businesses is still said to be strong and these divisions, with good order books, should be well positioned to perform well during the remainder of the year, the company said.
Despite this, the statement added: “The results for the six months to 30 June 2010 will be in line with previous guidancebefore one-off restructuring costs.
“The group’s cash flow generation profile has strengthened during the first half of 2010 and the Board expects this will lead to a material reduction in net debt by the end of this financial year. In consequence, the Group continues to have adequate headroom on its banking facilities, and the Board is confident in the Group being able to meet its covenants.”
The firm’s share price has crashed in early trading, falling by 43 per cent to 16.5 pence, valuing it at just £29m. Less than six months ago the shares were 44 pence.
The announcement is similar to that from Connaught just two months ago, which also reported problems with a number of contracts and which subsequently lost its chief executive and finance director.
Connaught is currently negotiating with its bankers, in an attempt to stay in business.