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Carllion hit by £90m extra Mowlem losses

NEWS - Dublin tunnel and Exeter schools treble anticipated £45 million write-down

CARILLION'S losses on two problem contracts acquired during the firm's £313 million buyout of Mowlem are set to treble to £135 million.

The company, which had set aside £45 million for provisional losses before the acquisition, shocked the City this week by announcing an extra £90 million in write-downs.

Mowlem's Dublin Port Tunnel and Exeter Schools PFI deal ? both heavily over budget and behind schedule ? are responsible for the delays (see right).

Carillion's share price fell more than 3 per cent on Tuesday as investors reacted to the news.

A Carillion spokesman said: 'These were things we could not anticipate until we owned the business. The situation deteriorated between due diligence and acquisition. These are the expected outcomes following a fair value assessment of the assets. These figures should be a line in the sand, although you can never say never.' Carillion has also written off an extra £30 million in costs on businesses closed down by Mowlem in 2005. But the sale of Mowlem businesses including UK rail track products manufacturer Edgar Allen and US construction business Charter has reaped £40 million.

Laing O'Rourke is also understood to be in talks over buying Australian rail business Barclay Mowlem.

Carillion said the expected proceeds from business disposals will 'largely' offset the cost of the increased losses.

Cost savings from the merger will reach £15 million a year by the end of 2006 ? £5 million more than expected ? and £23 million the following year.