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Troubled job set to cost Gleeson £5m

Contractor faces huge losses as Buxton cement works job runs over time and budget

GLEESON has warned the City that a troubled job to build a new cement works for Tarmac in Derbyshire will cost it at least £5 million this year after running over budget and time.

The contractor first admitted it would be facing losses on the project at Buxton when it published its year-end results last October.

But in a profits warning to the Stock Exchange last week, the company said: 'It would be prudent to make an additional provision for loss of £5 million.'

Gleeson's interim results are due out on Tuesday. The firm is carrying out the work in joint venture with Danish contractor Monberg & Thorsen under a deal originally valued at £33 million.

But the cost has shot up and group managing director David Eyre conceded it was by more than £5 million. He declined to comment on exact figures but added: 'We are not being paid for the work we are doing, and what we are owed is a significant amount of money.'

Analyst David Taylor at house broker Teather & Greenwood admitted: 'The scale of the £5 million does come as a surprise.'

The broker is predicting year-end profits of £15.5 million. Last year profits slumped 20 per cent to £15.1 million.

Mr Eyre said original estimates for the job had increased because of the complexity of the work involved and late arrival of materials, meaning the scheme, due to finish this May, will not be completed until September.

Gleeson has vowed to 'pursue with extreme vigour' the money it is owed, but the issue is complicated by the fact that Monberg & Thorsen is also its client.

Mr Eyre said: 'Our relationship with Monberg & Thorsen is cordial and hopefully we will sit down and negotiate the payments. Going to court is a last resort but the first priority is to get the work finished.'

Gleeson was originally contracted to carry out civil engineering, steel and mechanical work but has renegotiated its contract to carry out civils work only.