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Job cuts to follow as North Midland legal battles turn profits into loss

Nottinghamshire contractor North Midland Construction has announced a significant “reorganisation” of its building subsidiary after contract delays and legal claims saw the division post a £1.94 million loss.

The division saw its revenue fall by 3 per cent to £11 million after its major contract because “seriously delayed” and the company now expects “a claim for losses incurred”. 

“In addition unforeseen operational problems on two further projects which have now been completed, have resulted in losses of £0.91 million,” it added.

The company said a reorganisation was underway which could “result in a significant overhead reduction and improved performance”.

The news came as the group announced its half year results for the six months to 30 June 2011 revealling a 35.6 per cent fall in pre-tax profits, before these additional costs, to £1.31m.

Overall revenue was up 17.2 per cent at £91.3m and the impact of the building divisions losses were partially offset by a successful appeal against the firm’s cover pricing fine, handed down by the Office of Fair Trading.

Nomenca, NMC’s mechanical & electrical subsidiary, was boosted by increasing AMP5 programme spending, with revenue increasing by 63.0 per cent to £29.31 million. 

Profitability also increased, up 95.7 per cent to £0.46 million and, with current workload for the second half of the year standing at £27 million, the forecast for this year is due to be achieved. 

Revenue within the civil engineering division remained static at £22.9 million, with profitability declining by 4.1 per cent to £0.76 million. 

The highways division increased both revenue and profit by 21.7 per cent and 78.7 per cent respectively.  Year end forecasts will be achieved and the current workload for the second half of the year is £10 million.

Revenue in the utilities division increased by 5.5 per cent to £20.3 million, but profit declined by 33.7 per cent to £0.60 million due to margin pressure on the existing frameworks. 

The company blamed price increases in both materials and fuel for the decline.

Chairman and chief executive Robert Moyle said:  “With the exception of the building subsidiary, the remains of the group continues to trade profitably, despite the difficult economic conditions and it is all credit to our staff who play a vital part in this success.

 “NMB is facing the biggest challenge though, but we are confident that once the re-organisation has taken place the business will move forward.”

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