Rok has issued another profit warning after finding “serious failings in the financial controls” of its Plumbing, Heating & Electrical (PHE) business.
The construction group, headed by Garvis Snook (pictured), has also suspended its finance director Ashley Martin with immediate effect.
It is the second profit warning the firm has announced this year, after indicating in April that the harsh winter would affect its returns due to a work backlog.
Rok had restructured its PHE business and terminated several underperforming contracts earlier this year, but decided to appoint consultants BDO to conduct an independent review.
In a statement, Rok said that BDO has since reported back, and “stated that there have been serious failings in the financial controls of the PHE business.
“As a consequence of the problems, the PHE business has significantly underperformed relative to expectations and will not make a contribution to Group profit this year.
“The Board therefore anticipates that this will have a material adverse impact on Group profit for the year to 31 December 2010 and that overall underlying pre tax profit for the year will be significantly below market expectations.”
Martin's day-to-day duties as finance director have passed to David Miller, who was chief financial officer of Amey between 1998 and 2002.
Rok also announced plans to “to streamline the cost base of its Maintenance and Improvements division”, which includes PHE.
The statement concluded: “The results for the six months to 30 June 2010 will be in line with previous guidance before 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.
“Rok's fundamentals are strong - a solid order book, good momentum in the Social Housing and Construction divisions and very good cash generation leading to materially lower debt. With a significantly lower fixed cost base and having addressed the underperforming operations, the Board is looking ahead with confidence.”
Rok will be releasing its interim results on 17 August 2010.
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