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Rok to cut jobs in face of credit crunch

Maintenance and building services group Rok has been severely hit by the credit crunch with 50 projects across all geographic regions suffering and more than £150million worth of work deferred or cancelled.

In response the group is looking to cut its workforce by 15 per cent as part of £20mill cost savings and will speed up efforts to refocus on planned and response maintenance contracts.

The group's share price was halved following the announcement on Wednesday as it fell 52.5 per cent to 32.5 pence.

Despite the gloom around its building projects the company said its maintenance business – which includes plumbing and heating - was still performing strongly and it was still recruiting tradespeople.

An interim management statement said: “Whilst the Group's maintenance activities continue to trade well, since the beginning of October there has been a significant deterioration in expected revenues for the last quarter in our contracting, small building works and social housing operations from both private and public sector clients.

“Committed projects totalling in excess of £150million have been cancelled or deferred as customers have been unable or unwilling to access cash linked to the current banking sector crisis.  £74mill of this activity would have been expected to fall into 2008.

“Some 50 projects across all geographic regions have been impacted with some £30mill in general construction, £15mill in social housing refurbishment, £17mill in private housing and £12mill in social housing new build.

“In addition the Group is also turning away a significant amount of business where customers are unable to provide concrete evidence of their ability to pay or where we consider the margins to be unviable.”

Impact on revenues

The group says it will experience a drop in revenues of £120mill from its previous expectations with profits down by around £12mill for 2008.

Over the past 12 months Rok has been trying to refocus the business towards repairs, refurbishment and response maintenance. That is now being speeded up and the company believes this will offer opportunities for further growth when the market improves.

Positive forecasts for maintenance work including plumbing and heating

The company said: “Rok's response maintenance operation is performing well and we continue to attract new business, increase market share and recruit trades people to support the growth of this operation.

“Insurance repairs and response maintenance have proved extremely resilient to the downturn and this is one of the major areas of the Group's business plan going forward.

“Further endorsement to the Group's expertise and excellence was given by the award in October of the five year framework agreement by BAA. The Group expects to confirm another substantial long term contract renewal in the near future.”