April 23, 2013 2:00 pm

Job cuts and more Imtech writedowns

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Dutch infrastructure company Imtech announced €70m in new write-offs and 1,300 job cuts as it continues to wrestle with the discovery in February of deceptive bookkeeping at its German branch.

The company said it will postpone until July the release of its 2012 annual results, earlier delayed until late April, and is considering legal action against former management at the German arm. Imtech reported €5.1bn in revenue in 2011 but says those results will need to be revised as well.

Imtech is seeking to root out irregularities at the German division that came to light in February, after a developer for whom the company was supposed to build a €600m theme park in Poland turned out to have no financing.

Gerard van der Aast, who took over as chief executive in February, called the first quarter “turbulent and difficult”. He said that the company had further postponed the 2012 figures in order to complete forensic investigations, prioritising “caution over speed”.

Mr van der Aast had earlier acknowledged that the German division, which had been the company’s star performer over the past four years, had made earnings appear better by failing to book losses. Instead it tried to push those costs on to other contracts in the hope they would eventually be paid.

In a trading update for the first quarter, Imtech raised the estimated write-off at the German division from the €150m announced in February to €220m. The write-off in Poland will remain at the €150m level announced previously.

The company said its order book had remained steady at €6.4bn since the revelations and that no clients had cancelled contracts. Imtech’s divisions in the UK, Scandinavia, Spain and Turkey, as well as its marine branch, were described as having good or reasonable quarters.

Imtech has announced a rights issue of €500m later this year to cut its debt but has not made a timetable public. The company said a bridging facility of €500m which it secured from banks in March was sufficient to prevent liquidity problems.

Mr van der Aast said the company will cut 550 employees in Germany and reduce its sponsorships of sports teams and other associations there. The German division had subsidised lavish advertising campaigns, including the naming of the Imtech Arena football stadium in Hamburg, where its regional headquarters is based.

A further 550 employees will be cut in the Netherlands, where Mr van der Aast said Imtech had so far failed to reorganise sufficiently for the shrinking commercial real estate industry. Another 200 job cuts will be spread across the organisation, with a total of €80m in reorganisation costs for the lay-offs in 2013.

Mr van der Aast refused to say whether he thought the company’s central headquarters in the Netherlands had knowledge of the widespread irregularities in Germany. Longtime chief executive René van der Bruggen was forced to retire early in February when the problems were revealed.

He also refused to speculate on whether the company’s accountant KPMG had erred in signing off on earlier annual reports.

Investors have been waiting to see whether the company’s new management takes sufficient provisions for the losses that are uncovered in Germany and reorganises aggressively enough to prevent future problems.

Teun Teeuwisse, an analyst at ABN Amro who published a timely report in October pointing to contradictions in the company’s accounting, wrote in a note that today’s moves had not changed his “sell” recommendation on the stock.

“Today’s trading update broadly confirmed what we had expected: delayed reporting and more write-offs,” Mr Teeuwisse wrote. “Without 2012 results, the update lacks the crucial balance sheet information.”

The company will discuss the revised 2012 annual figures and the results of its investigations at its general shareholders’ meeting on June 28.

Shares in Imtech were down 6.6 per cent at €8.28 in midday trading on the Amsterdam exchange, against a 1.2 per cent rise in the AEX index.

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