May Gurney’s pre-tax profits plummeted in the year to 31 March 2013 just before it was taken over by Kier, according to its last accounts.
The firm fell from a £21m pre-tax profit in 2012 to a £51.1m loss a year later, which was driven by a £46.5m provision for future losses on several kerbside recycling contracts.
May Gurney had said it had trouble with “underperforming” May Gurney Optimised Solutions rubbish collection deals in its interim results in December 2012 but it did not think a provision was necessary at the time and instead took actions to improve their profitability.
That followed a profit warning in September 2012, which led to then chief executive Philip Fellowes-Prynne leaving the company by mutual consent.
The latest figures, filed at Companies House for the year to 31 March 2013, said that “while progress has been made” the MaGOS contracts as a whole made “a significant loss for the year ended 31 March 2013”.
The board believed they would “remain loss-making over the life of the contract” and made a £46.5m provision accordingly.
May Gurney made a £9.4m pre-tax profit on continuing operations – down by more than £20m compared with the equivalent figure for 2012.
It said the decline was down to poor performance of two MaGOS contracts and a short-term downturn in rail.
The £9.4m profit was wiped out by the estimated £10m cost of closing its facilities services business – a move announced in March 2012 – and by a £50.5m charge for exceptional items and amortisation, which included the £46.5m MaGOS provision plus £4.2m set aside for one-off unrecoverable work in progress.
May Gurney’s loss after tax was £37.8m, lower than the pre-tax figure, due to a £13.3m tax reduction to take account of the loss and a deferred tax credit.
The firm’s turnover fell slightly to £610.7m in 2013 compared with £620.3m a year earlier.
May Gurney was taken over by Kier in July 2013 in a deal worth £221m and its name changed to Kier MG Ltd.
A spokeswoman for Kier said the company could not comment ahead of its group interim financial results on Thursday.