Shares in Viridian fell sharply after it said it was cutting 250 jobs at its struggling Sx3 subsidiary and warned that pre-tax profits would fall short of market forecasts by about 10 per cent.
Difficulties at Sx3 mean Viridian expects to report pre-tax profits of around £67.5 million sterling (€109.5 million) for the year to March 31st compared with a consensus forecast of £75 million. Earnings per share are expected to be at the lower end of analysts' expectations which vary from 46p to 51p. In London, the news dragged the group's shares down by more than 12 per cent to 451p at the close.
As well as difficult trading conditions, particularly in its public-sector division, Sx3 suffers from a cost base which was increased substantially to match a sales forecast which was over-optimistic, said Viridian.
As a result, the division expects to report an operating loss of £5-£6 million sterling. It will also incur a restructuring charge of around £3 million related to measures being taken to cut costs by more than £10 million on an annualised basis. These include job cuts of around 20 per cent, which will reduce Sx3's workforce of 1,200 in Britain and Northern Ireland by 250. The firm has already closed its training business and its Dublin office, with the loss of around six jobs, and restructured the business into four new profit centres.
In addition to the losses sustained by Sx3, the group will incur exceptional write-downs of around £26 million for the goodwill arising from two acquisitions made by Sx3 in 2000. Viridian also said it was staying in close touch with its troubled joint-venture partner in Nevada, the troubled telecoms group Energis. "Until the uncertainty with regard to Energis is resolved, we are not considering any steps in respect of the carrying value of Nevada in the group's balance sheet," Viridan said. The position will be reviewed when it announces results in May.
In yesterday's statement, Viridian also said the construction programme for its generating plant at Huntstown near Dublin was proceeding on time and budget. The plant recently achieved full load in open-cycle mode ahead of schedule.
