Profits warning from UK builders Mowlam

British construction group Mowlem warned on profits today for the second time in as many months and said its finance chief was quitting.

Mowlem said in a trading statement that it expected to make losses before interest and tax of about £7.5m (€10.9m) in the year to December 31.

The firm said in December that full-year profits would be at the low end of hopes after saying it would take a £15m (€21.7m) hit due to shortfalls in its construction services division.

Analysts had previously expected profits of between £27m (€39.1m) and £30m (€43.5m).

Mowlem said group finance director Gerald Brown “will leave Mowlem at a time yet to be determined”.

The firm said it had found a replacement and intended to make an announcement in the near future, but declined to give further details.

Mowlem, which is involved in a number of markets including Government Private Finance Initiative (PFI) projects and rail work, said in December that it had reviewed all its major contracts in the light of difficult second-half trading.

In September, it said it was taking action to overcome problems at its building arm in New South Wales, which had cost it £12m (€17.4m).

Mowlem said today that the ongoing review had identified further matters that would affect its profits in 2004.

It said it had found “a number of historic accounting issues” in its Mowlem Technical Services mechanical and electrical businesses, including monies owed to the business that it was unlikely to recover. The causes of the problems dated back to 2001, it said.

Mowlem said the issues would not affect the group’s cash position or its main banking facilities, but added that they could cause “technical breaches under certain of its bonding facilities”.

“The board does not consider this to be material and expects the matter to be resolved shortly,” the statement said.

Mowlem added that it appeared that freight volumes on the Alice Springs-to-Darwin railway, which it built and part-owns, were not growing as fast as expected. Revenues were lower than forecast and extra capital would be needed, which would cost Mowlem up to 10 million Australian dollars.

Chief executive Simon Vivian, who replaced Sir John Gains at the start of the year, said he had had to take “some very tough decisions in respect of balance sheet issues across the business”.

He added: “I am confident we will be able to deliver improved performance and a good result in 2005.”

Last month, UK rail infrastructure operator Network Rail (NR) suspended Mowlem from doing rail renewal work after faults with new track that it had installed led to the temporary closure of the London-Scotland West Coast Main Line. An NR investigation into the cause of the incident is continuing.

Mowlem, based in Isleworth in Middlesex, has UK regional offices in Bath, Bracknell, Bromborough on Merseyside, Leeds and elsewhere.

The group’s shares fell 5%, or 11.75p to 205p, by lunchtime today.