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SCEE flags job losses in restructure

Southern Cross Electrical Engineering workers at a Rio Tinto site.

SCEE has announced redundancies, a boardroom shake-up and a restructure of its business as it looks to cut costs amid a slowing resources sector.

The electrical engineering contractor announced this morning “a number of positions” would be made redundant, which would cost $1 million but result in annual savings of $3-$4 million.

Directors John Cooper, Dr Jack Hamilton and Peter Forbes have resigned from the board with SCEE citing a difference of opinion regarding the future strategic direction of the company.

Long-serving executive Simon Buchhorn will be appointed a new non-executive director and independent non-executive director Professor Derek Parkin has been appointed chairman.

“The board believes that, as a consequence of these changes in composition, it is better-ized and more economic for the market in which SCEE is currently operating with a skillset suitable for these conditions,” the company said in a statement.

“However the board recognises that a greater proportion of independent representation on the board is desirable and is looking to address this in the foreseeable future.”

The company said it would resume its search for a new chief executive following the departure of Simon High. Chief financial officer Chris Douglass would continue as interim chief executive for the time being.

SCEE will close its Rockhampton office and downsize its Brisbane office. It would also review its WA properties in a bid to save at least $400,000 a year.

It would sell and/or writedown the value of surplus plant, equipment and systems, which would result in a pre-tax loss of $3.5 million this financial year.

Other general and administrative overheads had been reviewed with cost savings identified.

SCEE flagged a potential $17m writedown of goodwill on its balance sheet from previous acquisitions.

The company would seek to be debt-free by the end of the year.

SCEE said it was not in a position to quantify the full financial impact of its restructuring and could not provide definitive full-year earnings guidance.

“A further update will be provided in due course,” it said.

The contractor said it expected to return to profitable trading in the final quarter of 2015 although it did not expect to be trading profitably over the whole of the second half.

“The cash balance at year end is forecast to be over $40 million, although this is subject to working capital requirements from projects in progress at the time,” the company said.

SCEE said its order book stood at $108 million at the end of March.

Tendering activity remained high but market conditions continued to be challenging as a result of highly competitive tendering, lower margins and commercially-focused clients.

However the company reiterated its previously-stated strategy of targeting growth organically and through acquisition.

“Increasing revenue from operational maintenance and sustaining capital programs remains a core strategic target,” SCEE said.

“With the volume of available work in the domestic resources construction sector expected to remain low in the near to medium term, management has been evaluating the entry into other potential revenue streams, both geographical and in other adjacent or complementary sectors.”

SCEE shares were steady at 28 cents at the close after emerging from a trading halt this morning.