Losses at Downing Construction have deepened despite the contractor more than doubling its revenue.
Provisions for remediating cladding and fire safety issues on completed jobs were the largest items blamed for the downturn.
Newly released results for the year to 31 March 2024 show the firm made a pre-tax loss of £5.8m, compared with a £3.5m loss in its previous financial year.
Its 2023 loss was originally stated as being just £963,800, but with the new set of results the firm also revised its previously issued accounts.
Company directors said Downing Construction faced “significant challenges” on a 324-bed student accommodation scheme called the Meadows in Edinburgh, leading to cost overruns of £2.4m.
Explaining the move to revise its 2023 results rather than add this to the 2024 figures, they said: “Significant challenges had been faced on site over the course of the contract, causing delay and disruption to the programmed schedule and ultimately leading to substantial cost overruns.
“At the time of finalising the accounts for the year ended 31 March 2023, costs that subsequently crystallised in the current year but which, on balance, could have reasonably been foreseen at that time had been under-forecast, due to inaccurate judgements.”
Turnover grew from £44.5m to £107.2m in the period, due mainly to its work at Square Gardens, a build-to-rent tower scheme in Manchester city centre where Downing’s development arm is the client.
Downing joint chief executive Sally O’Brien said in a statement with the accounts that the Building Safety Act was a “key issue” for the company.
Provisions were made of £13.2m for “potential contract obligations on completed projects, the majority of which relate to cladding and fire safety issues”.
This was up from £8.4m in 2023, which O’Brien said followed negotiations with other parties.
She added: “As well as historic obligations, the Building Safety Act presents a new set of responsibilities and systems regarding planning, design and communication for new contracts. The group has invested heavily in training and knowledge awareness across its team members.”
Staff costs were up by £1.1m at the company, which employed an average of 39 construction workers in the period.
The Liverpool-headquartered company last made a pre-tax profit in the year to 31 March 2021, when it posted a £703,200 profit from an £83.4m turnover.
In 2022 it was hit by an £8.5m pre-tax loss as it set aside £18.5m for a claim by developer Unite Students for damages made against it and its subsidiary, George Downing Construction, which was settled out of court.
Its 2023 results showed it was attempting to recoup money from the insurers of collapsed subcontractor European Sheeting Ltd over the issue.
The new accounts show it is due to pay the last instalment of £650,000 for the legal claim on 31 March 2025. They do not state whether it was successful in its bid to recoup the cash from the subcontractor.
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Ian Weinfass