21st Feb 2014 08:11
LONDON (Alliance News) - North Midland Construction PLC said Friday that it expects to report an operating loss of around GBP6 million for the full-year, due to issues over the uncertainty of completion costs and outturn claim values on two major contracts.
The civil engineering and building contractor said that following the warning in its interim management statement in November last year, the firm has conducted further reviews of the status of these contracts and now warns that it expects to report an operating loss of around GBP6 million for the full-year.
In a trading statement for the year to December 31 2013, during which North Midland challenging conditions have prevailed throughout the construction industry, the firm said uncertainty over the completion costs and outturn claim values on two major problematical contracts within its building and civil engineering division have hit the firm. The unfavourable settlement of other older projects where reduced payment had to be accepted, as there was a significant risk of client commercial failure, has also put pressure on the firms' balance sheet.
The firm notes that the operating loss also widened on its highways division incurring bad debts on a major project.
Following the latest review, the firm has reorganised its building and civil engineering division, which it says has "severely" reduced its risk profile. The firm said cash flow in the division was maintained, despite the incurred loss, ending the year GBP4.8 million in credit, significantly ahead of expectations, said North Midland. "The underlying trading position in the last quarter was profitable, as previously forecast, but has been seriously impacted upon by the revised positions taken upon the aforementioned contracts," said the firm.
Its water business, NMCNomenca and Nomenca, performed very well and both the utilities and highways divisions delivered in line with expectations, said the company.
Looking ahead, the construction firm is more confident, buoyed by a strong opening order level 2014 and signs that market conditions are improving in some areas. "This, coupled with the re-organisation and re-profiling of the building and civil engineering division, where improved performance has already been experienced, will deliver a return to growth this year" said the company.
Shares in North Midland Construction were trading down 20.38% at 105.1 pence per share, the second biggest faller on the London market.
By Alice Attwood; [email protected]; @AliceAtAlliance
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