Shares dive as telecoms giant plans to axe 400 jobs
February 22, 2002
Struggling telecoms group Energis saw its value plummet by 70 per cent yesterday as it announced plans to axe jobs, pull out of Europe and warned of breaching its banking covenants.
The former stock market darling, which was spun out of National Grid in 1997, is to axe 400 of its around 2,300 UK staff and try to sell its loss-making overseas businesses, which employ 1,400.
If it fails to find buyers, it will close the ventures.
In the UK, where its main sites are in Reading, Leeds and London, it is seeking to centralise and simplify support processes and cut overheads in order to slash costs by £25 million.
Energis, which has debts of £1.2 billion, also warned that it does not expect to be able to comply with certain existing financial covenants in its loan agreement and met banks today to make proposals to amend these covenants.
The news follows a shock profits warning last month - the third in six months - when it said earnings would fall short of expectations and that it could be at risk of breaching its financial covenants.
Shares in the group, which was dumped from the prestigious Footsie index in September, slid 57 per cent after that warning, and have been falling since.
Shares in the firm, which at one point was worth more than £12 billion, slumped to 4p. It is now valued at £70 million - £160 million less than on Wednesay.
Energis is reviewing a range of options to secure a "more appropriate long term financing structure", and said this could include restructuring its bonds.
National Grid, which owns around 36 per cent of the firm, warned that Energis should not assume it could rely on it for additional financial support.
Energis's chief executive David Wickham, who took over the helm in August following the shock resignation of Michael Grabiner, said: "The proposals we have announced today are radical."
He said Energis will focus its business on its core operations in the UK, which he said had a "strong market position".
"We are working hard to establish an appropriate funding structure for Energis plc," he added.