Scunthorpe contractor refocuses after turnover falls 42% to £71m

Last month the 15 academies framework contractors were invited to a meeting in Whitehall. Once there, they were told that the framework might get busier than expected, because the government was trialling it as a fast-track procurement route for schools to replace the scrapped £55bn Building Schools for the Future programme, writes Andrew Hankinson.

No doubt eyes around the table lit up. The lucky companies include Balfour Beatty, Carillion, Kier, Sir Robert McAlpine, Willmott Dixon - and Clugston, a Scunthorpe firm that is by far the smallest of the bunch.

You may know Clugston.

It appeared on Channel 4’s Undercover Boss last year, when chief executive Stephen Martin went incognito on the firm’s construction sites. A follow-up show was filmed last month, to find out how things had gone since the first programme.

So how had it gone? Not great. Like many construction firms, Clugston’s turnover has fallen off a cliff. Its construction division had a turnover of £123m in the year to 31 January 2009. In the year to 30 January 2010, it had dropped 42% to £71m.

“If you look at other companies, their turnover dropped the same didn’t it?” asks Steve Radcliffe, the 55-year-old managing director of the construction division (pictured). “And we came off the back of a record year, but the year before we were at about £90m. If a £20m or £30m contract moves from one year to another, that has a fairly significant impact on our turnover.”

Although the firm found £295,000 of profit from construction in the year to January 2010, Radcliffe says profit will be “much more difficult this year”. He predicts that turnover will be £60-£70m, which means 35 of its 200 employees will be made redundant over the next month.

“We’ve picked up half a dozen jobs in the last couple of months worth around £12m in total,” says Radcliffe. “The largest out of that lot is £4m - two years ago we’d have been expecting some bigger contracts. We were preferred bidder on a college in Scunthorpe worth £35m, but that fell through owing to the ending of the Learning and Skills Council programme.

“Instead, we’re doing well in energy-from-waste contracts. We did a £30m scheme in Sheffield with French process contractor CNIM in 2006. Now we’re preferred bidder for five more,
all between £30m and £40m. None have happened this year, but we’re fairly confident one will happen in the early part of next year.”

Then there’s that academies framework, which suddenly looks like providing a lot more bounty. No doubt the government’s decision has disappointed Skanska and Laing O’Rourke, neither of which is on the list. Yet neither firm has approached Clugston looking for a back-door route on to the framework, according to Radcliffe.

“I don’t see why we would contemplate that,” he says.

“We were delighted to get on it and we think there is a place for an established regional contractor in any framework. We’d like to think there was something coming from it.

“It’s my understanding that we’re waiting to find out if 75 academies will be approved for funding. There will be a fair old tussle to see who gets them and all the big boys will be looking for them. If we can get one that will be terrific, but if not we’ll take whatever is on there.”

Clugston in numbers

£1.5m pre-tax profit for year to January 2010
£5.3m cash in bank at end of January 2010
20 jobs on site
72 - the age of owner John Clugston
£170m order book in waste sector. It has already completed a Sheffield scheme for CNIM