Severfield-Rowen will raise £48m through a rights issue after issuing downbeat financial results today.
The steel contractor reported an operating loss of £18.2m in contrast to last year’s profit of £14.2m, with revenue also down to £256.6m from £267.8m.
A major factor was the overrun on the contract to build the Leadenhall Street ‘Cheesegrater’ skyscraper in London.
The group reported that the technical challenges of working on the site were “significantly greater than originally estimated” and would require “longer timescales” and “greater resources” to complete.
Severfield-Rowen now expects to make a loss of £9.9m on the contract. Eight other contracts have also contributed to the expected losses.
It announced a £20.1 million hit to its profits, including the cost overrun on the Cheesegrater due to “significantly greater” technical challenges than originally estimated earlier this month.
The fully underwritten rights issue will raise £45m after expenses and will see existing shareholders’ stake diluted by 70 per cent.
Executive chairman John Dodds said: “Today’s rights issue puts Severfield-Rowen on to a sound financial footing. The events that led to the rights issue related to an unacceptable level of performance on a small number of contracts. Positive action is in hand to address these issues and improve performance.”
He added: “With the balance sheet strengthened, we are confident that the group will move forward positively from here to achieve its long-term growth objectives, both in the UK and India.”