Mowlem has issued a profit warning after an internal review found that its return on work in hand would be 拢15m less than it had expected for the 2004 financial year.

The news comes as Barclay Mowlem, the group鈥檚 Australian business, was hit by 拢12m in costs after poor trading in the Australian market.

The internal review of the contractor鈥檚 large projects, which was carried out by auditor KPMG, was ordered by John Gains, Mowlem chief executive.

Gains ordered the review before handing over his responsibilities as chief executive next year.

Gains said: 鈥淕iven the prevailing climate within the industry and the fact that I have decided to hand over to Simon Vivian at the end of this financial year, I wanted to ensure that we had taken a prudent view of Mowlem鈥檚 current position.鈥�

The review has found that the group鈥檚 profits for the full year 2004 will be at 鈥渢he lower end of expectations鈥�. A Mowlem spokesperson would not reveal what contracts these were.

Mowlem reiterated that it faces 拢8m of one-off costs from its support services business because it terminated two loss-making contracts.

Underlying trading at the construction division is expected to be ahead of expectations but support services is likely to be below.

Mowlem shares slid 5% or 10.5p to 182.5p on the news.