Brace of London schemes sees firm’s profit tumble 70%
Mace’s pre-tax profit has fallen by £25.5m, down from £36.2m last time, to just £10.7m in 2016.
The fall is being blamed on its work at Land Securities’ £2.2bn mixed-use scheme called Nova in London’s Victoria district and a 46-storey PRS tower called Highpoint in Elephant and Castle, Building has learned.
Phase one of Nova – which includes 480,000 sq ft of office space across two buildings and 170 apartments – finished in April, over six months late. In May, Land Secs said the scheme was late and over budget with the developer blaming the “complexities of construction – together with competition for labour in a busy sector”.
Mace was main contractor on the scheme and two years ago was forced to replace the concrete contractor after PC Harrington Contractors went into administration.
But there was some better news for the firm as it said it was approaching its £2bn turnover target four years earlier than planned, according to a snapshot of the company’s results.
The firm reported that group revenue had risen to £1.97bn in the year to December 2016, up from £1.73bn for the previous year.
Mace also reported that its bidding pipeline at the end of 2016 stood at £4.5bn and it had a £2.35bn pipeline of work that it was confident would be converted into firm contracts.
The group’s cash balance at the end of last year stood at £117m, 4.9% lower than at the end of 2015.
Current projects for the firm include Heathrow’s third runway, Northern & Shell’s redevelopement of Westferry Printworks in London’s Docklands, while it is carrying out work to build Tottenham Hotspur’s new stadium in north London ahead of that scheme being completed in time for the start of the 2018/19 Premier League season.
Mace is also understood to have bagged the construction manager job on developer Sellar’s 26-storey Shard Place at London Bridge and is one of fuve in the running for the London School of Economics’ £140m new education centre in London’s Holborn district.
Stephen Pycroft (pictured), chairman at Mace, said: “Such unprecedented growth brings with it certain challenges in terms of delivery, not to mention the impact of the industry-wide issues we predicted in last year’s annual report and additional issues such as high risk projects, incomplete designs and a reliance on the performance of our construction partners.
“2016 has taught us some very valuable lessons and as a result, we have put in place additional measures to prevent these problems happening again.”
Commenting on the UK’s vote in favour of Brexit, Pycroft added: “In the short term this decision had minimal impact, but looking ahead to the longer term the pipeline has unsurprisingly become more uncertain. It is likely that as the UK’s future relationship with the EU becomes clearer, the pipeline will also increase in clarity.”
Mark Reynolds, chief executive at Mace, added: “After a number of years of tremendous growth, it is fair to say that 2016 was a mixed 12 months for Mace. Whilst our turnover grew to £1.97bn our profits fell to £10.7m which is below our 2020 target.
“This was due to a small number of challenging construction projects which were secured at the end of the recession.
“There are many lessons to be learnt and I would like to thank all of my colleagues for their commitment to delivering outstanding buildings in what are sometimes very difficult circumstances.”
Meanwhile, Dennis Hone, finance director at Mace, has criticised the government’s interventions into apprenticeships and training.
Hone said the firm was now required to pay both the CITB Levy and the Apprenticeship Levy, which amounts to a charge of over £2m for the firm.
“In our view there should be some rationalisation and integration of these two schemes to simplify them and reduce what could be thought of as a tax on jobs,” he added.