NG Bailey hit a record turnover of £600m but made a pre-tax loss of over £10m.
Contractor NG Bailey announced a record turnover of £600m for the year to 27 February 2009 – an increase of 14.3% compared to the previous year. However, the firm made a pre-tax loss of £10.8m, down from a profit of £8m the previous year.
Chief executive Mark Andrews put the loss down to a mix of stock market decline, payments to top-up the pension deficit and a write-down of goodwill on acquisitions.
“The turmoil in the stock markets has had a direct impact on our investment portfolio. Although we took a prudent approach to adjusting and reprofiling our investments in line with what was happening in the markets, it was impossible to safeguard the value of the entire portfolio,” said Andrews.
The stock market also affected the value of the company’s pension scheme, taking it from a £6.3m surplus to a deficit of £20.9m. NG Bailey made a provision to top up the scheme at a cost of £5.8m, and has already mirrored this commitment in the 2009/10 financial year by topping it up by a further £4.6m.
“These factors, along with a goodwill write-down in terms of our recently acquired ICT businesses are the reasons for the loss,” said Andrews. “The write-down saw us readdress the value of these businesses, which like many firms operating in technology markets, have been sharply affected by the instability of the financial services sector.”
NG Bailey reported a very strong performance from contracting arm Bailey Building Services, particularly in the North and South. A number of adverse contracts in the education sector caused setbacks in Scotland.
Bailey Rail, ceiling contractor Bailey Johnson and Bailey Off-site all delivered significant turnarounds compared to the previous year and made a positive contribution to performance. Bailey Rail tripled turnover and Bailey Off-Site doubled sales.
Telecoms arm Bailey Teswaine suffered from adverse trading conditions linked to the financial services sector and Bailey Maintenance was hit when a number of contracts proved impossible to deliver within the tendered cost structure, eroding margin.
Andrews expects turnover to drop some 20% in the year ahead and will be preparing the business accordingly. “With that level of reduction, we can’t avoid redundancies,” he said. “The last thing we want to do is let people go but a 20% volume reduction will have an impact on staffing levels.”
Despite the turmoil ahead, Andrews believes the company is better placed than most. “We are in a strong position to face the current market uncertainties and as a privately-owned company we remain extremely well financed, which in difficult times, gives our clients and partners reassurance.”
Andrews said that the downturn will force NG Bailey to tender for contracts that in previous years would have been too small to be of interest. This will have a knock-on effect for small and medium sized contractors.
NG Bailey’s balance sheet remains strong and the company remains confident that its long-term strategy of ‘For Life in Buildings’ – taking an integrated, ‘whole-life’ approach to buildings - is the right one, and one that will set it apart from its competitors in what is a fiercely competitive marketplace.
“Our strategy has never been as important,” said Andrews. “It brings together a combination of building services, system integration and building performance expertise that in turn allows us to deliver improvements to the overall environmental performance of a building, and therefore its long-term asset value, as well as impact, for the better, the cost of running that building over its life span.
“This approach takes into account the increasing cost of energy and environmental responsibility, which makes our role more critical in managing the cost and determining the performance of buildings at a specification level.”
NG Bailey enters the 2009/10 year with work secured running at 70% and, despite the current climate, is optimistic for the year ahead.
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