TARMAC CHIEF EXECUTIVE Sir Neville Simms will receive a £667,000 pay off for loss of office under plans to demerge the group's construction arm.
The £25M reorganisation, announced on Tuesday, will create two new quoted companies. Tarmac plc will own the heavy materials business. The construction services business will be renamed Carillion and floated on the stock market.
The move is designed to realise the full value of the two businesses, maximise performance and prepare for future market consolidation, Tarmac claims.
Simms will resign from Tarmac to chair Carillion. He will receive the equivalent of a year's salary as compensation, quoted at £667,000 including an annual bonus in last year's annual report.
Carillion's creation is a bid to distance the construction business from the image of low-margin general contracting by stressing its Private Finance Initiative and service sector credentials. The name is derived from carillon, a set of bells for playing tunes.
The move is seen as paving the way for a merger between Carillion and another contracting business, although Simms said no discussions were taking place.
'We've been constantly baiting the traps to encourage further consolidation. We're always open to consolidation, but it takes two to tango,' he said.
Figures released on Tuesday show that construction orders worth £443M were received during the first four months of the year and the company expects to book PFI orders worth £830M during the remainder of the year.
Carillion's turnover in 1998 would have been £1886.1M (£1,796M in 1997), making an operating profit of £43M (£30.6M). The Private Finance Unit turned over £13.4M last year and chalked up a loss of £800,000. Operating margins were 0.4% in 1996, improving to 1.7% in 1997 and 2.3% last year.
Carillion will concentrate on negotiated work rather than competitive tendering - six major clients account for 43% of its construction order book. The company hopes to capitalise on the forecast £20bn of Government PFI contracts expected to come up for grabs by 2002.
Tarmac's Georgian headquarters building, Hilton Hall, Essington, has been put on the market with a £2M asking price.