May Gurney mulls closing school building division

The company said that the division, which represents 7% of group turnover, had ‘proved disappointing’ in the past year. Considered a non-core business, its future is under review, with closure a stated option.

This division offers new build, refurbishment and maintenance work to local authorities, mainly in the education sector. Current projects include the refurbishment and expansion of St Lawrence Academy in Scunthorpe, for example.

May Gurney has already spent £2.9m on redundancies since May 2011 but says it is now ready for what expects to be an increase in outsourcing of public sector services in the next three years.

In a pre-close trading update to shareholders this morning, the company said that results for the year ending 31 March 2012 would be in line with expectations – "representing year-on-year growth, whilst addressing some operational challenges during the period under review".

The company said that the second half had seen higher than expected revenues from its local authority highways maintenance business and a good performance from its long-term utility  services contracts in repair and maintenance (R&M) and mechanical & electrical (M&E). However, newly-won environmental services contracts are taking longer to reach their expected margins and some under-performing projects in Scotland have been discontinued.

The order book stands at £1.5bn, with potential contract extensions of a further £1bn.

Chief executive Philip Fellowes-Prynne said: "May Gurney has delivered a solid performance in a difficult trading environment. The company has continued to grow and to generate cash, with over 100% cash conversion of EBITA. We have won £400m of new work and secured our entry into the fleet and passenger services market through the successful acquisition and integration of TransLinc.

 “We remain focused on bidding for new work at margins that maintain our quality of earnings.

“We expect the coming financial year to be one of consolidation for May Gurney, as we focus on driving margins on our newly-won environmental services contracts and bedding-in our internal reorganisation to ensure that it achieves planned efficiencies.”

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