Jobs to go as Renew closes northern business

The group yesterday said it is closing the Leeds and Wigan office of its Allenbuild construction business, with about 60 job losses at each site.

The Leeds-based group said the business was “unable to provide sustainable and acceptable returns at an appropriate balance between risk and opportunity”.

Allenbuild, which works on mid-sized projects such as the new Kirklees College campus, will instead focus on work in the Midlands and the South, building social housing, retail developments and millionaires’ mansions in London.

About 100 of the jobs are due to go by the end of July, and the remaining 20 will go once Renew has completed the Kirklees project.

“In recent times it’s been impossible to secure work at any sort of margins at all,” said finance director John Samuel. “It’s become extremely competitive and it’s a consequence of the reductions in spend in certain public sector areas.

“If we didn’t take this action now this business would be losing material amounts of money going forward because of not having an order book.

“For some time this region has been under the cosh with the impact of the recession but it has just come to a point where the order book has become exhausted.”

Renew said the redundancies, restructuring and closures will cost it £3.5m exceptional charges. While it will wipe £60m from 2012 revenues, the closures will have no impact on profits.

Shares in the group shed 2.4 per cent to close at 61.5p.

Mr Samuel said the future focus of its construction arm ties in with the group’s aim of only being in specialist sectors.

“It’s higher margin, better growth and businesses that are in the main working with more robust and non-discretionary spend areas,” he said.

The closure is in line with Renew’s increasing focus on specialist engineering. As a result, this will account for more than 60 per cent of revenues, compared with 44 per cent in 2010. It sees 85 per cent of its engineering revenues being in non-discretionary markets of energy, environmental and rail. It expects more than 80 per cent of 2012 operating profits to come from this work.

Renew yesterday said it expects its half-year results for the six months to the end of March to be “satisfactory”.

Renew last month bought Amco Group Holdings for £19.8m from private equity house Endless to boost its profits and broaden its expertise.

The purchase accelerated Renew’s shift away from construction towards higher-margin specialist engineering.

Renew paid £19.8m in cash up front for the business, and will pay another £7.1m deferred sum which will not require more cash. The deal, formally a reverse takeover, needed shareholder approval. Yesterday Renew said Amco’s integration is “progressing in line with expectations”.

Barnsley-based Amco is expected to have earned revenues of £75m in 2010, and has a £100m-plus order book.

It has clients including Network Rail, E.ON, National Grid and Scottish & Southern Energy. Rail work makes up about 52 per cent of its sales, with most projects “non-discretionary”. Its work includes repairing tunnels and shafts, refurbishing stations and installing electrical plant gear.

Amco’s energy and engineering work involves a number of framework contracts, and includes maintenance at power stations such as Ferrybridge in West Yorkshire.

Amco’s 700 staff grew Renew’s workforce to about 2,100. Its work does not overlap with Renew’s existing operations.

Renew secured a £15m debt facility from HSBC for the deal.

The sale also marked a successful exit for Leeds-based Endless, which backed a £9.4m management buyout of the business, along with drilling and property companies, from Amco Corporation in 2008.

Sector dealt another blow

Renew’s closure of its northern construction division is the latest blow to the embattled sector after a number of high-profile business failures.

Rok, the self-styled “nation’s local builder”, was plunged into administration in November after failing to meet its financial obligations.

Construction and support services group Connaught also fell into administration in September after failing to secure funding to pay £220m of debt.

Ampleforth-based piling specialist Nattrass Construction went into administration last week after a fall in revenues and a rise in outgoings.