British shipmaker and repairer Cammell Laird has been struck a heavy blow by the termination of a key cruise ship contract, which it said on Monday would have a "significant impact" on year results.
The company also said Chief Executive John Stafford
had resigned, to be replaced for now by Finance Director Jon Schofield
, one of several management changes made "to ensure the optimum development and focus of our expanded international operations."
Since the dispute which has led to this result, with Costa Crociere regarding a high-value cruise ship conversion, began in November, Cammell Laird’s shares have fallen dramatically from a year high of 147 pence to the current level of 13 ¾ pence. Cammell Laird posted a first-half pre-tax loss of 3.5 million pounds ($5.11 million) on turnover of 52.7 million -- down from 61.7 million -- and said it had been a difficult time for the company, primarily due to the Costa Classica dispute. In the same period, last year Cammell Laird posted operating profits of 8.2 million and pre-tax profit of 7.7 million pounds.
The company said, given its disappointing financial performance, it would not pay an interim dividend. Last year, it paid a dividend of 0.25 pence at the half-year stage. Last week, Cammell Laird announced the loss of the crucial 51 million pounds contract for conversion of the Costa Classica. The ship's Italian owner Costa Crociere -- a unit of U.S. group Carnival Corp
-- recalled the vessel halfway
through its journey to Cammell Laird's shipyard in November.
Since then, Cammell Laird has held a number of talks with the company it an attempt to settle the dispute.
Schofield told Reuters that
450 jobs had been lost at the yard in Birkenhead as a direct result of the dispute. But he saw no further job losses from the retained workforce of over 600 as a result of the termination.
But the contract termination will lead to other heavy losses for the company. The terms of the contract provided for payment by Costa Crociere on completion of the ship. The delay, 12 months into the contract, will leave Cameell Laird carrying substantial costs.
Cammell Laird said
it had secured some replacement work for its yard, but that there was little time to rectify the shortfall in the third quarter. It said substantial year capacity had been reserved for the project's completion, company overheads had been increased to support the contract and disruption costs would impact the second half.
The dispute would also result in higher levels of borrowing. At January 25, Cammell Laird had overdrafts totaling 29.7 million pounds. "We have secured new orders for the Birkenhead yard, but there has been a delay because we weren't expecting to have to fill any gaps," Schofield said, adding that this would affect activity levels.
Cammell Laird added that a "major review and rationalziation of our cost base" would result in an additional one-off expenditure in the second half. The benefits of the rationalization would flow through in the next financial year.
Cammell Laird said
it had instructed lawyers to file for dissolution of the Costa Classica contract on the grounds that Costa Crociere were
in breach, and said although it was prepared to meet with the company to seek and amicable settlement, it would pursue a remedy through arbitration if necessary. – (Reuters)