Problem contracts cause more losses at nmcn

Grant Prior 3 years ago

Civils contractor nmcn is now expecting to make a pre-tax loss of £16.5m this year following a review of contract performance.

The firm announced in October that losses were likely to be between £13.5m and £15m this year.

But that has now been revised upwards to the new £16.5m figure. 

Nmcn said: “An investigation has verified, subject to audit, that these include £5.3m of prior year contract adjustments pre-tax, to five contracts within the Water business, relating to errors which should have been identified and corrected at the reporting date and information affecting estimates which should have been available.

“Profit before tax for the year ended 31 December 2019 will therefore be restated to £2.1m from £7.4m. 

“Consequently, loss before tax for the current year is expected to be about £11.2m, including £1.2m for the final settlement of the last remaining legacy contract.

“The majority of the net cash flows associated with the forecast loss have already been incurred and the loss to be reported will have limited further impact on the Group’s current cash position.”

The contractor said that “a number of difficult contracts are being brought to a conclusion.”

It added: “This, together with Covid-19 and the AMP project cycle have made for an extremely challenging year.

“Some £20m of secured orders originally scheduled to be completed this financial year have slipped into 2021, due to the effects of coronavirus. This revenue is now reflected within the 2021 budgets.”

Loss making jobs were mainly in the water division but highways was also in the red “due to two poorly performing contracts which are now complete and the final settlements are being pursued.”

Things were better at the telecoms division bu building “has been significantly impacted by Covid-19, with consequent delays, and this has resulted in the division being loss-making this year.”

Nmcn is hoping to have a medium term debt package in place by February.

It added: “In the meantime, the group has taken significant steps to improve debt collection and to operate within its current overdraft facilities of £15m, albeit there has been regrettably some creditor stretch in recent weeks.”

A hunt for a new chief executive after John Homer stepped down in September is due to conclude in the first quarter of next year.

Nmcn has a secured order book of £200m with visibility on a further £100m of framework orders.

Ian Elliott, Acting Chairman, said: “2020 has unquestionably been a difficult year for the Group, with the combination of the Covid-19 constraints, the AMP transition and the consequences of prior year contract adjustments.

“However, I would like to acknowledge the fortitude of everyone within the Group in rising to the challenges we have faced.

We will enter 2021 with many issues already addressed, with an encouraging order book, a strengthened management team and with the optimism of a return to profitability.”

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