Contract delays see Clugston turnover drop

Group turnover was 86.7m in the year ending January 2010, down from the historic high of 141.7m in 2009. Pre-tax profit was 1.5m, down from 2.7m.

In his report, chairman John Clugston warned of challenging times ahead. He said: "It is our view that the medium-term economic climate will remain difficult with a double-dip recession remaining a distinct possibility.

"However, we will persist with our strategy of supporting our three core businesses by seeking opportunities which offer them long-term sustainable futures."

The group's three divisions – construction, logistics and property development – all contributed profits to the group, said chief executive Stephen Martin.

In the construction division, which makes up 70 per cent of the group's business, Clugston suffered as clients decided to delay or cancel projects.

Mr Martin said: "The construction world is very tough. It is a difficult environment at present, particularly if you are UK based as we are. There are lots of government spending cuts or even just fear of cuts.

"The private sector is not picking up the slack as of yet and I think construction is going to remain extremely tough for at least the next couple of years."

Earlier this year, the group lost a 40m contract to renovate a Scunthorpe college to public sector spending cuts.

The chief executive said it would be some time before momentum picks up in the private sector.

"There is a lot of uncertainty out there," he added. "People are naturally worrying about what is happening in the economy. Even the Bank of England admitted its growth figures were far too optimistic. I think they still are overly optimistic."

Clugston axed 144 jobs last year, or 21 per cent of its workforce. It employed 517 people at year end and continues to invest in training, said the company.

The group has recently agreed a plan with the pension scheme trustees to address a 4.6m deficit in its pension fund.

The report also revealed that cash balances stood at 5.29m. The group has a banking facility but no gearing, which puts it in a good position, said Mr Martin.

"We have the advantage of being a family business," he added. "We make decisions for the long-term future. If you are on the stock exchange, shareholders would be pushing us to spend that cash in the bank."

Mr Martin said: "We are being prudent and very cautious on cash management at the moment and have no immediate plans for acquisitions.

"We get presented with things all the time. We have looked at some businesses but we found them to be overvalued. We were very close to acquiring a business (that was eventually] acquired by Balfour Beatty."

Looking ahead, he said: "Overall we are optimistic. We have been successful in securing a number of contracts over the last six months.

"We have got onto a number of frameworks and are also preferred bidder on a number of very large energy-to-waste schemes. It's our biggest market in construction.

"We have three businesses which are very important to the group and we have a tremendous health and safety record which is helpful for us in securing new contracts."

Despite the difficult economic environment, he said there are opportunities for Clugston in the sustainability market.

Mr Clugston, the chairman, said the group would not be paying a final dividend to shareholders. Interim dividends of 5p per share were paid to shareholders in December 2009 and March 2010.

He and his immediate family are the biggest shareholders in the group, with 45 per cent. Other family members and companies hold the remaining shares.

What the boss did next

A FOLLOW-UP documentary to last year's Undercover Boss will be screened on September 2.

The original TV programme showed Stephen Martin swap his chief executive's suit and shiny shoes for overalls and steel toecap boots to pass himself off as an employee at his firm.

It followed his progress as he gained a different perspective on the company. The new programme, to be shown at 9pm on Channel 4, asks what he learned and what changes he has made at Clugston.

John Clugston, the chairman, said the original programme "was successful in showcasing the high quality and professionalism of all Clugston employees".