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Problem contracts prove expensive as profits fail to match surge in turnover

Finance

SIR ROBERT McAlpine's parent company, Newarthill, has been hit by a £6 million loss on the Scottish National Stadium at Hampden Park and problems on the Croydon Tramlink PFI project.

Newarthill's directors said the two 'abnormally expensive contracts' meant a36 per cent increase in group turnover to £655 million during the year was not matched by increases in construction profit.

The contracts contributed to a fall in pre-tax profits at Newarthill to £7.2 million forthe year ending October 31, compared with £11.3 million last time.

The contracting division recorded an operating loss of £1.99 million compared with a £1.4 million profit last time.

Newarthill's loss at Hampden Park 'Fieldof Dreams' stadium was a result of the final payment for the project remaining unpaid.

The firm said this had not been anticipated from a Millennium project that did not overrun its construction budget.

On the Croydon Tramlink PFI venture, Sir Robert McAlpine found the commissioning phase proved to be more complex than originally envisaged, leading to expensive delays.

But Newarthill said that, overall, its share of concession companies involved in PFI was moving into profit as construction phases end and they begin to earn revenue.

PFI contracts in the construction phaseaccount for most of the group's large interest payable of over £6 million.