Dog contracts drive NMC down to £6m operating loss

Back in November the company put out a warning that uncertainty over the completion costs and likely claims success on the two contracts would hit its annual results. It has since done more assessment work on the likely result and has today prepared its shareholders for bad news when final results are filed.

“As a result of further reviews of the status of these contracts and the unfavourable settlement of other old projects where reduced payment had to be accepted, as there was a significant risk of client commercial failure, the group expects to report an operating loss of circa £6 million,” the board said in a trading update. “The highways division also incurred bad debts on a major project, which are reflected in the overall result.”

It continued: “Challenging conditions in the construction industry predominated during the year, with the consequent impact on margins and profitability. “

However, on the positive side, a return to growth is promised for 2014. The problematical building & civil engineering division has now been re-organised and the risk profile severely reduced. In spite of the loss incurred, cash flow was maintained and the year-end total was £4.8m in credit, which is significantly ahead of expectations.

The water business (NMCNomenca and Nomenca) continue to perform well, the board said, and both the utilities and highways divisions performed in line with expectations in 2013.

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