黑洞社区

The boss of Wates Group has hailed the firm鈥檚 鈥渧ery solid set of results鈥� for 2012 as he warned that other contractors鈥� lack of cash is this year鈥檚 single biggest industry challenge.

The family-owned group鈥檚 pre-tax profit in 2012 was 拢25.7m, a 36% fall compared with the 拢40.1m achieved in 2011.

However, Wates said the underlying profit figures were more healthy than this given 鈥渢wo relatively unusual鈥� events: restructuring costs last year of 拢4.9m and the relatively high 拢7.2m profit on sale of investments achieved in 2011.

Group turnover meanwhile rose by 7% last year to 拢1.2bn giving the group a pre-tax profit margin of 2.2% last year compared with 3.6% in 2011.

Wates construction - which includes Living Space, interiors and retail - saw a 48% drop in pre-tax profit from 拢38.2m to 拢19.8m during the period.

That included the 拢4.9m restructuring costs because Wates merged its retail and commercial fit out divisions with the loss of 283 jobs.

Cost savings over the year amounted to 拢18.5m.

Construction turnover rose slightly during the period to 拢1.1bn.

Overall, Wates Group鈥檚 net assets increased over the year to 拢70m from 拢64m while net cash fell slightly to 拢121m.

In an interview with 黑洞社区, Wates chairman and chief executive Paul Drechsler said he was pleased by the figures given the very difficult trading conditions in 2012.

鈥淥ur margins are at the upper quartile of the industry and we have probably one of the strongest balance sheets in the industry,鈥� he said. 鈥淭hat鈥檚 about the financial strength in our business given that we鈥檙e fourth generation family-owned and the mission of the company is to pass on a better company to the next generation.鈥�

Drechsler said there had been a continuing 鈥渟trong鈥� focus on the balance sheet and the group鈥檚 cash division.

He said: 鈥淎t the heart of our strategy is long-term sustainability. We鈥檙e going through the most challenging and longest recession for quite some time.

鈥淩evenue growth is important but what鈥檚 really important is the margin.鈥�

Drechsler said he expected group revenue to fall over 2013 to between 拢1bn and 拢1.1bn.

鈥淚鈥檇 be very happy with a revenue fall in this market although in 2014, I think we can already see we鈥檒l have a return to growth.鈥�

Turning to the wider industry, he said that the worsening cash position of major contractors was the 鈥渘umber one issue of 2013鈥�.

He added: 鈥淢y fear for 2013 is that there will be a significant failure which will affect others.

鈥淚t needs鈥�responsible business leaders who understand there is a level of margin which is acceptable to stakeholders and shareholders and a level which is very high risk.鈥�