The building materials arm will retain the Tarmac brand but the construction business will be renamed. Sir Neville Simms is to be chairman and chief executive of the construction arm, but there is no place for construction services group executive director Les Atkinson. He is working on the demerger plans, but will retire once the split takes place.
Industry sources said that Atkinson, a former BP man, rarely appeared at ease within the industry, although Sir Neville said his corporate experience was invaluable during the demerger talks. Construction services chief executive Brian Pellard will also retire, but building chief John Sharples and civils chief Roger Robinson will be directors of the demerged contractor.
The long-expected decision to divide the firm comes after the breakdown of merger talks with Aggregate Industries late last year. Institutional shareholders have been exerting pressure on Tarmac to offload its weaker construction arm in order to release shareholder value.
Reporting a 14.1% rise in group pre-tax profit to £131.4m for 1998, Sir Neville denied speculation that transferring liabilities from the construction to the materials side would cause problems. He said: "The construction business is audited like any other construction business and there is nothing that we know about that you don't know about. The construction business is engaged in hundreds of projects and we are content they're under control." He added that the bonds and guarantees to be left with the materials side were at usual levels for any contracting business.
The construction services arm made a £41.7m operating profit on £1.89bn turnover. Sir Neville also said there were no plans to shrink the business when it is demerged.
However, he said some element of the firm's professional services arm would be sold, although Tarmac will retain its Schal construction management business.
Sir Neville also said he expects the contracting business to bid for projects, despite the reduction in the strength of its balance sheet after the demerger.
Even a project such as its £250m GCHQ private finance initiative scheme would still be within its range, albeit with a joint venture partner, he said.
Consultants are to be employed to brand the construction business. After the demerger, Sir Neville hopes to grow the business, possibly through deals with UK contractors.
Analysts are still sceptical about the liabilities to be left with the materials arm. But one said: Sir Neville will fight tooth and nail to get a good deal in the demerger for the construction arm, which could make it an interesting punt."
