24th Apr 2015 15:02
LONDON (Alliance News) - Mountfield Group PLC Friday said it has completed its strategic review following the downturn in its performance during 2014, and said it will shut one of the divisions in its Mountfield Building Group Ltd subsidiary.
The company also said that Chief Executive Graham Read has resigned, with Andy Collins, current chief executive of one of its subsidiaries, being promoted to take over his role.
The construction support and property services business began the strategic review in December after a poor performance in 2014, with the intention of returning it to more satisfactory level of profitability in a short period of time.
The main conclusion of the review was that the company's Mountfield Building Group division was loss-making in 2014 because it had moved away from its original core business of construction work contracted directly with clients.
"The review team, having reviewed the business infrastructure have decided that Mountfield Building Group should close down the division that concentrated on large, high-risk builders works packages where work was undertaken on a lump-sum, fixed-price basis," it said in a statement.
"The two remaining divisions, in which Mountfield Building has worked directly with the client, have proven to be profit making and in addition to continuing to undertake them Mountfield Building will integrate into its business those projects which the board considers of a low risk nature," the company added.
Mountfield said the subsidiary also had "excessive" costs due to the nature of work it was taking on, but said the review has highlighted cost-saving opportunities, including a reduction in headcount and office space over the next two to three months, which will lead to annual savings of around GBP400,000.
"The board expects that the significant changes that are currently being made and that will continue to be implemented, will deliver shareholder value in 2015," said Mountfield. "As a result of the recent unprofitability of Mountfield Building, the board expects that the group will report, at best, a break-even performance in 2014 and a return to profitability in 2015."
The company's other division, Connaught Access Flooring, continues to "trade well" and is experiencing a "strong order book," it added.
In addition, Mountfield said it has agreed with holders of its loan notes that were issued to outgoing Read and his wife, to cancel the notes which has resulted in GBP3 million of company debt being written off.
"This will put the group in a far stronger position going forward and give it a much cleaner balance sheet that will help it achieve its ambition of building a sustainable, diversified construction business," it said.
Mountfield shares were up 6.9% at 1.87 pence per share on Friday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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