Shepherd Group calls recovery 'fragile' as it reports loss

The Shepherd Group, the industrial, construction and property firm, said gross turnover fell by two per cent to 701m, while operating profit before exceptional items fell by 23 per cent to 23.6m during the year.

The York-based company said its results were significantly affected by recession-related exceptional costs, including a charge of 12.4m after a withdrawal of bank funding from the Trinity Walk retail scheme in Wakefield. Work at the site resumed this month after Shepherd Construction – a group division – helped to develop a new consortium to complete the project, which the group said "should show a favourable return in future results".

A writedown in commercial property values led to an exceptional cost of 7.8m, while the group spent 4.9m on reorganisation costs to match overheads with reduced workloads, which included 240 redundancies across the group. The group employs around 3,300 people in total.

Earnings before interest, taxes, depreciation, amortization and exceptional items were 45.3m, helped by strong performance in the Portakabin, Portasilo Bulk Handling and SES businesses. The results cover the year ending June 30 2009. The previous year the group reported a pre-tax profit of 22.9m.

Group chairman Alan Fletcher said: "In the face of such challenging market conditions, the business continues to generate cash and the balance sheet is exceptionally strong, particularly in comparison with competitors. Debt is a modest 14.7 per cent of shareholders' funds and the group is operating well within bank facilities, which were recently renewed on favourable terms in the present climate."

He added: "The group's 2009 earnings of 45.3m is, I believe, a good level in the current recession. For comparison, the 2007 figure of 53.4m, the highest in the group's history, was recorded in much more favourable conditions.

"The outlook remains uncertain, with signs of recovery remaining sporadic and fragile. Current and anticipated order intake in the industrial and construction and engineering divisions is lower than it was 12 months ago. This has necessitated some unavoidable redundancies across most businesses and short time working in the industrial division. However, the group's strong resources and focused management teams leave it well placed to take advantage of the opportunities which will arise when more normal conditions return."

Frederick Shepherd founded the group in York in 1890. Today, it is owned by more than 30 members of the family, including Patrick Shepherd, the deputy chairman, and Mark Shepherd, who are both on the board.