May Gurney fell from profit to loss in the in the half year to the end of September, the firm told investors today.
The contractor posted a £13.6 million pre-tax profit from April to September 2011 but this turned to a £4.6m loss a year later.
May Gurney took a £10m charge for closing its facility services business, a move it announced in June, with a provision for £8m of the charge appearing in these accounts.
May Gurney wrote off £2.9m because Scotia Gas Networks planned to cut the amount of work it outsourced. The firm said in September that it was consulting with 250 staff whose jobs were put at risk by the change, but hoped to redeploy them to other contracts.
Group turnover rose from £324.7m in the six months to 30 September 2011 to £338.9m a year later for continuing operations. The turnover increase for the same time was a smaller £2.5m, when parts of the business that shut during the accounting period were included, taking it to £353.5m.
The firm said the performance of two of its MaGOS kerbside recycling contracts had been “poor” and it had failed to reach its margin targets on those deals. It had not made provision for future losses in this set of half-year accounts but would review it at the year end.
May Gurney added that it was “taking stringent actions to drive operational efficiencies and profitability, and are in very close dialogue with our clients to bring these contracts back into line” on the two deals, which make up 4 per cent of turnover from April to September 2012.
Problems with the MaGOS contracts, provisions for reduced outsourcing by Scotia Gas Networks and poor summer weather meant May Gurney’s operating margin fell from 4.5 per cent in the six months to 30 September 2011 to 3.7 per cent the same period of 2012.
Public sector work made up 58 per cent of group revenues from April to September 2012, down from 62 percent in the same part of 2011. Work for the regulated sector, such as utilities, contributed 42 per cent to turnover up from 38 per cent in 2011.