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Sir Robert McAlpine construction profit falls by a third

Sir Robert McAlpine saw construction profits drop by more than a third in 2012 but is predicting a boost in turnover in 2013 after winning a string of high-profile commercial projects.

Posting results to the year ended 31 October 2012, the Olympics contractor reported group revenue including joint ventures of £769 million, down from £845m a year earlier, while turnover excluding JVs dropped to £732m from £788m.

Group pre-tax profit was £20.5m compared with £20.1m in 2011, with the firm’s public private partnerships performing well.

Cash and short-term deposits declined but remained strong at £267m, from £301m in 2011, with net assets of £190m.

But the contracting segment saw turnover fall to £687m from £742.8m, as operating profit dropped 35 per cent to £12.3m from £19.1m in 2011.

Sir Robert McAlpine also reported £2.2m of writedowns in its property developments, which led to a loss for that division.

The company said: “In a difficult market the company continued its strategy of pursuing work where margins adequately reflected the inherent risks of the project and where our skills and experience can differentiate us from our competitors.

“The result of this approach is another successful year and continued confidence in the future operations of the company.”

The family-owned firm is expecting a rise in contracting turnover in 2013 after picking up major contracts in London and the South-east, and added that “this improvement [is] expected to continue beyond 2013 with our order book also increasing”.

The contractor last year beat Lend Lease to the £550m Bloomberg HQ and pipped Balfour Beatty and Laing O’Rourke to the £650m US Embassy scheme.

It added: “Although the UK construction market remains challenging, our strong balance sheet, stable and significant cash balances combined with negligible borrowing (other than in our non-recourse PPP SPVs) continue to leave the group in an excellent position to exploit profitable opportunities as they arise.”

Average employees numbers were up from 1,956 to 1,963, while McAlpine said the average payment period for its supply chain was 31 days.

The company’s work on the Olympic Park came to an end last year, after it completed Project Orbit in June 2012, but continued to provide facilities management during London 2012.

It remains focused on commercial, residential, leisure, education and infrastructure, and cited notable contracts including Emirates Arena and Sir Chris Hoy Velodrome ahead of the 2014 Glasgow Commonwealth Games, along with Exeter and York Universities and Knightsbridge Hotel in London.

McAlpine said it continues to work on a number of large-scale construction management contracts, including Quadrant 3 for the Crown Estates and the new Bloomberg HQ.

Other ventures include winning a £180m City of Glasgow College new campus project, along with a $283m Bermuda Hospital PPP.

Property developments and investments “remained subdued”, while a number of properties incurred £2.2m of writedowns to bring them in line with current market valuations.

The group had £131m of borrowings, including £127m of debt in PPP special purpose vehicles.

The firm donated £805k to charity and £250k to the Conservative Party, flat on last year.

Breakdown (accounts under parent company Newarthill Ltd)

  • Contracting saw £687m of turnover, down from £742.8m, with operating profit of £12.3m, down from £19.1m.
  • Property revenue was down from £8.6m to £5.1m, but the firm cut its losses from £5m to £2.4m. Property JVs revenue was flat at £4.5m, with a £0.1m loss, down from an £0.9m loss.
  • PPP concessions revenue was up from £37m to £40m, with profits slightly higher at £12.8m. PPP JVs revenue dropped from £52m to £32.3m, with profit up from £10.3m to £14m.
  • UK revenue was £694.7m, down from £771.9m, with £26.3m operating profit compared with £29.7m. JV revenue was £33.2m (2011: £53m) and £14.2m profit (2011: £12.5m).
  • US and Carribbean revenue more than doubled from £16.9m to £37.7m, but losses edged up from £3.2m to £3.6m.
  • Europe and Asia JVs’ revenue was flat at £3.5m with a slight loss of £86,000.

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