Engineering firm plunges into the red after taking £14.5m project hit
A Hull-based engineering group has reported annual pre-tax losses of £9.4m in a year where it was “seriously impacted” by a materials handling project which suffered time and cost overruns which cost the business £14.5m.
Spencer Engineering Group has this week posted its annual accounts for the year ended March 31 2018. Its turnover dropped to £75m from £112m in the previous year. The firm reported pre-taxes losses of £9.8m, a slump from the pre-tax profits of £5.6m it reported in 2017 .
The firm said: “Results for the year were seriously impacted by a significant materials handling project with a non-related client. During the year ended March 31 2018 the turnover delivered on this project was £12.2m (2017: £49.4m) however time and cost overruns led to this generating a loss of £14.5m during the year year ended March 31 2018 (2017: profit £3.1m) after incurring liquidated damages of £4.5m and providing costs to complete in the year ended March 31 2018. Practical completion was achieved on the project on the 26 September 2018.”
While the group did not state which project caused the issues, it is understood to be a £65m scheme to design and build facilities for the handling, storage and rail-loading of wood pellets at the Port of Tyne.
Spencer Group added that it entered the next financial year with £108m contracts in hand and a pipeline of £367m. The business operates across the infrastructure, distribution and energy markets.
Directors at the firm have since issued the following statement: “The loss recorded in our latest accounts relates entirely to a single project, which incurred significant losses due to shortcomings in commercial controls. We have completed a thorough analysis of the root causes of these issues and we have taken rigorous corrective action to avoid any repetition.
“Excluding the impact of the loss-making project, all other activities would have produced a pre-tax profit of £4.3m in the year.
“The company is continuing to trade profitably and is delivering margins in line with the sectors we operate within. We have a very strong pipeline of profitable work and we continue to enjoy high levels of repeat business from our blue chip client base.”
