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Covid woes and subbie failure push Buckingham towards £11m loss

19 Dec 22 In the year it went employee-owned, Buckingham Group Contracting made a pre-tax loss of nearly £11m.

Buckingham Group Contracting built the new Riverside stand at Craven Cottage, home of Fulham FC
Buckingham Group Contracting built the new Riverside stand at Craven Cottage, home of Fulham FC

In the year to 31st December 2021, Buckingham Group Contracting saw turnover rise 14% to a new high of £665m, up from £584.5m in 2020 and £485.7m in 2019.

But whereas it made a pre-tax profit of around £10m and £8m in 2019 and 2020, in 2021 this slipped to a pre-tax loss of £10.7m.

On the plus side, it still had zero gearing and £77m cash in the bank at year-end.

The loss was attributed to a deficit of £14.2m on a single significant stadium contract – reportedly the new Riverside stand at Fulham Football Club's Craven Cottage ground – of which more than half of the loss was down to “the very significant cost impact caused by the financial failure of a major and critical subcontractor”. This supplier ultimately entered voluntary liquidation in February 2022.

Buckingham also struggled in 2021 with Year Two of the covid pandemic. The annual report states: “Whilst the company’s site procedures had been very successfully and safely adapted through 2020 to manage the covid challenge, the third lockdown period that followed soon after similar restrictions in November and December 2020, had a more severe impact on resource availability.

“This was not just while the lockdowns were in place, but also after the lifting of restrictions and the broadened vaccination programme, when levels of UK construction activity jumped. Material supplies tightened further and there was a marked deterioration in the ability of our specialist subcontractors to secure internal trades such as mechanical and electrical fitters, and partition wall and cladding operatives. These activities have historically relied to an extent on mobile specialist workforces that operate across the UK.

“The pandemic also triggered a reduction in the available workforce, with ONS evidence suggesting that many European based construction workers did not return to the UK after the 2020 Christmas break. Furthermore, travelling crews were particularly vulnerable to transmission of the more virulent ‘Kent variant’ strain of covid in early 2021, and the ‘Omicrom variant’ later in the year.

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In parallel, material supply was also significantly disrupted throughout 2021, with supply shortages leading to sharp price increases and delayed delivery for many products through the year.”

Chairman Mike Kempley said: ‘’When we reflect upon 2021, the most significant single event for the company was the execution of a well-planned transition to employee ownership. [See Buckingham Group sold to employee trust.]

While this form of share transfer facilitated a seamless transition for our key stakeholders, the carefully planned change marked a significant watershed in the evolving ownership of Buckingham.

‘’The £665m of sales in 2021 represents a new record high for the company with 14% annual growth from 2020. Measured over the past three years, the annualised growth is 9.5%, at the upper end of the board’s medium-term target. This increase in sales, set to be repeated in 2022, before exceeding £700m turnover in 2023, provides further evidence of the strength and depth of Buckingham. The determination of our staff and managers, combined with the diverse range of operations and our repeat business customers, have underpinned this continued organic growth. From the inception of the business, this has been achieved without any mergers or acquisitions.

Highlighting strong underlying profit performance, the board can report a pre-adjusted 1.8% profit margin in 2021 that reflects excellent delivery and positive commercial outcomes across all, except one, of Buckingham’s primary operating sectors. However, a combination of covid-19 cost impacts across the business and a significant exceptional loss in 2021 on one large stadium contract, regrettably depressed overall performance. Alongside considerable client change, the failure of a major subcontractor in February 2022 was a significant factor in the commercial performance of this one major project, which was priced and planned pre-pandemic.”

He concluded: “There is no denying that we are disappointed in the 2021 result which is only the second annual pre-tax loss in the past 22 years of trading, producing a net loss of £7.6m after tax. However, putting this in perspective, the unexpected and uncharacteristic loss follows five consecutive years of positive trading results, that collectively yielded a pre-tax profit of £57m.’’

The one-off expenditure for the transition to EOT ownership amounted to £1.0m in 2021 including “for a celebration staff bonus payment”.

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