Boss optimistic in outlook as varied contracts fortify sector
PERTHSHIRE-BASED civil engineer I&H Brown expects a 30 per cent jump in turnover this year as the recovery continues, but has warned of skill shortages in the industry.
The family-owned group has reported a threefold rise in operating profit for the year to August 2014 to £1.2 million on turnover up from £31.5m to £34.2m.
Pre-tax profit of £1.18m lagged the previous year’s £5.9m, but that previous figure was due to a £5.4m gain in 2012-13 from the sale of two farms near Kirkcaldy for Diageo’s new £46m bonded warehouse complex.
Most of the group’s turnover was in plant hire, civil engineering and waste disposal, with just under £1m coming from farming on its extensive landholdings.
Writing in the latest accounts the directors say they are “satisfied with the results of the period and are focused on ensuring the civil engineering division maintains profitability”.
Chief executive Scott Brown commented: “Turnover was not as high as we had hoped but nevertheless it was a profitable year and we are predicting turnover in the current year to be approximately £45m.
“That is a significant jump and I think it’s a sign the industry is picking up but also that we are seeing a lot of work coming to us from south of the border, both infrastructure work and in the energy sector.”
The English operation, launched in 2007, has landed the group’s biggest recent order, a £7m contract from Leeds council to carry out early work on its major Kirkstall Forge development.
That is closely followed by the £6m project to build a hydroelectric scheme at Cia Aig, near Lochaber, for the German utility organisation RWD.
The group’s civil engineering work is split fairly evenly between infrastructure and renewable energy projects, which have helped cushion the sector from the downturn, Mr Brown said.
Despite fewer windfarms being planned, there was still “quite a large pipeline of projects coming through”, he added.
I&H Brown’s proposed windfarm on its own land at North Calliacher in Perthshire is currently awaiting a Reporter’s decision after being rejected by Perth & Kinross Council. Mr Brown said he was confident of approval, but the group had yet to find a buyer for the site.
The firm sold its original Calliacher windfarm to SSE in 2010, banking a £5m profit, but is not looking to originate any new developments in the sector.
The group’s workforce rose by 10 to 159 during the year, but Mr Brown said skills were a key issue.
“A lot of firms are busier, a few people have drifted away from the industry, and we are probably seeing fewer people coming out of colleges than used to be the case in terms of civil engineering,” he said.
“There is a challenge there that we haven’t seen for a few years.”
Property development has yet to contribute, but the group says several major sites acquired before the crash are finally moving into the planning phase of business.
Fife Council’s draft development plan has doubled the housing allocation on a Dunfermline site owned by I&H Brown to 2,000 units, and Mr Brown said he now expected to see a deal done and a housebuilder on site during 2015.
A further 900 housing plots have been zoned on a site at Kelty, while the group is in joint venture with A&J Stephen to develop a site at Luncarty near Perth for an initial 300 homes.
The group’s Berkshire property business Breckenridge Estates continues to trade profitably with two further properties being added to the portfolio.
Mr Brown said the group had a neutral cash position, with its £2.3m of bank debt offset by cash.
The group’s shareholder funds rose from £37.2m to £38.7m last year, and an unchanged dividend of £519,840 was paid to family shareholders.
The highest-paid director, assumed to be Mr Brown received, £186,020, down from £217,756.