BRITAIN’S biggest structural steel firm could call on shareholders to approve £50m of fund raising after a contract to build a London skyscraper turned into a multi-millon pounds loss.
Following the announcement, Tom Haughey was ousted as head of the firm and Severfield’s shares lost a third of their value.
Yesterday, it emerged the company is braced for a £10m hit on the work after overshooting its budget.
The inquiry looked at all of the firm’s major works and found eight problem contracts, leading to a warning of a £20m loss in last year’s accounts.
On The Cheesegrater contract it emerged that the technical challenges of the site works were significantly greater than first estimated, meaning it would take more time and manpower than planned.
The review also identified a need for the firm to tighten its construction estimating procedures.
Executive chairman John Dodds said Severfield was being supported by its banks and was looking at an equity fund raising issue, which would need the backing of its shareholders.
Severfield, which employs about 600 workers in the North-East, gained an international reputation after it helped to build London’s Shard, Europe’s tallest building, as well as the main London Olympics stadium, velodrome and Arcelor Mittal Orbit viewing platform. It also played a part in Arsenal FC’s Emirates Stadium, Wimbledon’s retractable Centre Court roof and Heathrow’s Terminal Five and Terminal Two developments.
In a statement, the company said that trading conditions were difficult, however, the order book remained strong at £209m, and the re-organisation of the group’s largest businesses has helped to cut costs.
Mr Dodds said: “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.”