Bad debt write-off sends Birse to 13.2m pounds loss

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The Independent Online
BIRSE GROUP, the Humberside construction company, dived to a pre-tax loss of pounds 13.2m for the year to 30 April, chiefly as the result of writing off pounds 8.5m of a bad debt.

The loss, which follows a pounds 10m profit the previous year, was achieved on turnover up 13 per cent at pounds 356m. The company lost pounds 12m on a contract to build a hotel and leisure complex for Quietwaters, which went into receivership.

Peter Birse, founder chairman, said the write-off turned what would have been a creditable operating profit in harsh market conditions into a loss. 'All appropriate steps have been taken to ensure that such a situation does not recur,' he added.

As a result the company is forgoing a final dividend. The share price remained stable after the chairman indicated he was interested in making a further sizeable purchase of shares.

The balance sheet has been damaged by the losses, a decision to stop capitalising interest and a property revaluation. Net asset value fell almost 50 per cent to pounds 27.3m from pounds 50.1m.

A more cautious approach to accepting business, and depressed market conditions, probably accounted for a reduced contract order book of pounds 268m against pounds 280m a year earlier, analysts said.

Andrew Melrose at Nomura Securities said that Birse's underlying performance was relatively good if the exceptional losses were excluded. 'I don't think that this sector is going to come back quickly, but I believe that basically Birse is a good contractor with high-quality management and a good mix of work.'