Tolent confident despite drop in half-year profits

Aug 21 2008 by Iain Laing, The Journal

BUILDER Tolent has posted a dramatic drop in profits but remains relatively confident as it wins a series of large contracts for offices and public buildings.

The Gateshead company, which has 650 staff nationwide, reported a 28% drop in first half profits yesterday to £1.1m, despite a rise in revenues from £76m to £85m.

The fall was due to the loss of a £750,000 payment for a contract completed in Sheffield after its client business went into administration. The company put aside £950,000 to cover the debt owed by the housebuilding consortium and made an accounting adjustment.

This was not an isolated incident and turnover was 18% down on the second half of 2007 as order conversion slowed and a number of projects were deferred or cancelled, the company said.

But Tolent is performing better than many of its rivals.

The company, which has 300 staff in its Tyneside and Teesside offices and the other half in Leeds, Manchester and London, is working on a number of high profile contracts in this region including the new Newcastle library, the replacement for Wellbar House and the Haymarket hub in the city.

Tolent said it had a secured workload of £100m, including a number of larger contracts that would contribute to revenue into 2009. “This, together with the new orders which we hope to secure in the next few months, will give us the stability to trade through this difficult period for the construction industry and economy in general,” it said in a statement.

Chairman and chief executive John Wood said that there were more large orders on the way. “We know we are going to be down for the year. We were originally budgeting for £200m of work this year but now that is down to £160m,” he said. “That’s just the way it is in the industry just now. People are very nervous about committing themselves or lending money.

“It is true that forward orders are slightly down this year but we are very close to winning two very significant orders.”

The company’s shares tumbled by a third inside 48 hours in June after the business reported tough trading and warned that two bad debts would hit its half-year results.

Michael Parkinson, director of research at Brewin Dolphin in Newcastle, has downgraded his pre-tax profit forecasts for Tolent’s full year performance. For 2008, he has cut from £5.6m to just £3m, and for 2009, from £5.8m down to £3.4m.