RCR Tomlinson must be in a bad way as it battles to sought a problem contract that could cause material financial pain.
On July 31 it sought a suspension until today, August 8 to allow time to get more details but non were forthcoming yesterday and the company said CEO and major shareholder, Paul Dalgleish is leaving the engineering company.
On top of this the suspension has now been extended until the end of August at the company’s request – indicating management and the board having trouble sorting out the true extent of the problem contract and the damage it will do to the company’s finances.
The contractor told the ASX on Tuesday in asking for an extension of the suspension, that that Dr Dalgleish was stepping down after 10 years in the role and will be replaced for the time being by non-executive director Bruce James.
Mr James has a contracting background and had been a chief executive at the old Transfield Services, now known as Broadspectrum.
The update said the cost overruns revealed last week related to a single project which was nearing completion.
“The board is treating this matter with utmost seriousness and approaching its investigation as a matter of priority,” it said.
The probe was being undertaken by a group of board members and senior executives.
“The company continues to conduct business as usual at all of its other projects.”
The stock last traded at $2.80 before the suspension was sought on July 31.
It has not provided any detail of the unidentified project’s losses, except to say they were expected to have a “material negative impact” on fiscal 2018 earnings.
Citigroup warned late last month that RCR’s commissioning process for the Sun Metals solar farm in Townsville had taken longer than expected, estimating costs could blow out by $7 million. RCR designed and built the solar farm, which will supply power to Sun Metals’ nearby zinc refinery.
RCR had net cash of $85 million at December 31, after raising $90 million from investors. It made a $9.7 million net profit in the first half of 2017-18 from record revenue of $940 million.
The company has been extendeding its contracting work from mining into infrastructure and renewable energy, including construction of solar farms.