Shepherd puts faith in green energy to fuel further growth

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THE SHEPHERD Group has invested more than £6m in a new production facility in York, as it meets the challenges caused by the eurozone crisis “head-on” by securing work linked to green
energy systems.

The family-owned business is carrying out work in connection with the National Renewable Energy Centre (Narec), after achieving growth in turnover and underlying profit in the year to June 30 2012.

Turnover rose by nearly 10 per cent to £672m, while underlying operating profits increased by four per cent to £25m.

While group profit before tax fell by 12 per cent to £27.6m, a company spokesman said that the previous year’s profit had been boosted by a large one-off pension credit.

This had been due to the implementation of pension risk reducing initiatives, the spokesman added.

“The increase in the underlying profit is the number which cheers us, because it is a demonstration of our sustained growth,’’ the spokesman added.

The spokesman said the group had shown resilience against a background of prolonged global economic uncertainty.

Net cash at the year end was £89m, compared with £47m the year before.

The spokesman added: “The group’s sound sales and profit performance, together with its robust cash generative capability and strong balance sheet, have enabled a restructuring of the group’s banking facilities at the end of the financial year.

“A £50m funding package has been secured. This facility strengthens the group’s financial position and demonstrates significant confidence from the banks in the potential of the group. It provides the group with additional flexibility and capacity for growth.”

Each of the group’s divisions – Shepherd Group Built Environment, Shepherd Group Engineering and Portakabin Group – increased their turnover.

The spokesman added: “Shepherd Group is a global business operating across a wide range of specialist engineering, manufacturing and built environment markets, and that broad base is our strength.

“Clearly, both the credit-constrained UK market, and the backdrop of eurozone sovereign debt worries, present challenges, but they are challenges we are meeting head on. We are working hard to maintain our differentiation, and continuing to deliver steady and sustainable financial progress.

“We are working harder and thinking smarter to provide services for clients; from delivering world-class facilities for the testing of offshore renewable technologies for Narec in Blyth, Northumberland, to state-of-the-art handling and storage systems at the world’s largest paint plant in India.

The spokesman continued: “Of course, markets are challenging and clients are, understandably, demanding ever-higher quality of products and services – our aim is to more than meet their expectations.

“We are investing in our people and our products. Portakabin’s recent investment of more than £6m in a new state-of-the-art production facility at its international headquarters in York, means that the manufacturing centre is now the most advanced of its kind in Europe.”

Alan Fletcher, the group chairman, said: “Strong management aligned with quality products and services have ensured that the group continues to
make steady progress against a very challenging market backdrop.”

The Portakabin hire division recorded a small increase in turnover.

The European operation achieved an overall increase in turnover and higher profit in each business area – France, Belgium and the Netherlands.

The spokesman said: “These European business units now represent a consistent and significant contributor to profit, due in part to the strategic decision to focus primarily on the hire businesses in Belgium and Holland.”

Despite the challenging market conditions, Shepherd Construction and Shepherd Engineering Services (SES) also achieved growth in turnover.

Shepherd Built Environment’s performance was boosted
by a contract to work on a project at Drax Power Station, near
Selby.

The spokesman added: “Shepherd businesses have a track record of delivering complex technical projects.

“Work linked to renewables is an area which enables us to
demonstrate our technical authority, specialist skills and innovation.”

“Shepherd Group’s designers worked closely with the Drax team to develop integrated technical services that will create world-leading biomass facilities, and support Drax’s intention to become a lower carbon generator.”

Drax, which is led by chief executive Dorothy Thompson, recently raised £180m through a share placing, which sets the company on the road to becoming one of the largest renewable power plants in Europe.

Drax will use the cash to help it switch from burning coal, which is a huge pollutant, to burning biomass, which is far more environmentally friendly.

greg.wright@ypn.co.uk