Sir Robert McAlpine plunged to a nine-figure loss after it struggled to adapt to the economic climate and was forced to devalue a number of substantial jobs, its accounts show.
The contractor, also known as SRM, tabled a £104.6m pre-tax loss for the year to 31 October 2023, which it blamed on the “challenging economic environment within the UK construction industry”. In the previous year, it made a £9.3m pre-tax profit.
In particular, SRM cited high inflation, supply chain shortages and the “energy price shock” as the main culprits. The challenging environment forced SRM to devalue four major contracts, it said.
“The company had four contracts where the financial position was reassessed in the year and write-downs made.” the accounts state.
“The underlying causes were in the main due to the performance of our supply chain partners and the delivery of legacy projects in sectors which no longer fit our strategic direction.”
SRM’s margin dropped to -12.5 per cent, compared with 0.4 per cent the year before. Turnover also dipped below the £1bn threshold for the first time since 2019/20, at £880.6m, having been £1.1bn last year.
New chief executive Neil Martin admitted that 2023 was “a challenging financial year”, but said the firm had “already seen a positive shift in performance during the first half of 2024”.
Martin, who suddenly replaced long-time CEO Paul Hamer earlier this year, said: “We have entered the year focusing on client value, operational excellence and a process of derisking the company by targeting quality work-winning opportunities for long-term clients in our core sectors.”
SRM attributed the decline in turnover to its business selection “tighten[ing] in line with [last year’s] strategic review”.
The review “reaffirmed [SRM’s] focus on key client relationships, risk management, profitability and culture, with a clear focus on those sectors of the market where it has both competitive advantage and a proven record of profitable delivery”, the accounts state.
In an interview with Construction News last year, SRM chief financial officer Leighton More said adapting and streamlining the firm following the review would save around £20m a year.
This year’s accounts reveal that SRM spent £7.8m on implementing the review’s recommendations.
SRM also put aside more money to deal with remediation and high-cost contracts, in the form of £25.9m worth of provisions, compared with £19.9m last year. Most of the increase came in remedial provisions, which SRM expects will be incurred on remedial works on completed contracts.
That increased by nearly 50 per cent – coming in at £13.2m, after totalling £8.9m in the previous year.
The firm also set aside £12.7m to deal with “losses expected to be incurred through to completion of certain contracts”. This compares with £11m in the previous accounts.
Meanwhile, SRM is currently assessing the “potential financial implications” of the fire that broke out at its £750m Station Hill redevelopment in Reading last November.
Two people were dramatically rescued by crane from a roof at the site when the fire caught. The blaze caused project delays, according to SRM.
“The potential financial implications of this incident on the project’s final outcome are currently under evaluation,” it said.
