At the AGM we reported that we expected to make a loss in the first half due to re-structuring and other one-off costs, principally relating to the UK operation.
This first half loss is now likely to be greater than then expected as a result of write-downs in UAE project income due to negotiations to reduce fee levels, which have, in part, been retrospective in their implementation. In addition a large scale Middle East project is to be re-tendered even though a Letter of Intent had been received against which we were holding a large UK staff contingent.
Further action to reduce UK costs through staff reductions and lowering of the direct cost of employing staff is in hand. This will cost £500,000 spread over the current year and should deliver annualised cost savings of £1,000,000.
We have seen and anticipate a marked decline in direct UK project commissions continuing beyond initial planning stages. This is reflected in the April 2009 issue of the Experian Spring report which forecasts UK Commercial Construction Output to fall by 15% this year and a further fall of 12% in 2010 and remaining negative in 2011.
On a brighter note our progress in Russia continues to improve with further commissions on a large scale project in Moscow which raises the construction area to over 5,000,000 square feet.
Our cash balance at the half year stood at £1,200,000 in addition to which we have unused facilities of £1,000,000. There will be pressure on this position in the second half as the Company’s income profile changes to one of larger projects in different jurisdictions where payment cycles are longer than traditionally in the UK.
Management believe that the group is sufficiently robust and should achieve an overall profit for the year but at a lower level than previously expected.
Aukett Fitzroy Robinson – 020 7636 8033
Nicholas Thompson, Chief Executive Officer
Duncan Harper, Group Finance Director
FinnCap – 020 7600 1658
Adventis Financial PR – 020 7034 4759 / 4758