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Troubled Carillion to breach banking covenants amid another profit warning

Carillion-vansShares in Carillion were temporarily suspended this morning after the troubled construction group warned it expects to breach its financial covenants by the end of December and that full-year profits will be “materially lower” than current expectations.

The contractor has been trying to reduce costs and collect cash on contracts since taking an £845 million writedown on the value of construction contracts in July and appointed accountants EY to carry out a review of its operations.

However in a further profit warning today Carillion noted debts have spiralled as a result of payment delays and the impact of recent disposals, with full-year debt forecast to rise to between £875m and £925m for the full year.

Carillion said: “In its interim results on 29 September 2017, Carillion confirmed that it was forecast to be in compliance with its financial covenants as at 31 December 2017.

“As then indicated, compliance with its financial covenants was dependent on achieving its underlying forecasts, which assume that the normal pattern of receipts and payments continue alongside the completion of a number of PPP disposals and settlement receipts on contracts.

“The Group now expects that a combination of delays to certain PPP disposals, a slippage in the commencement date of a significant project in the Middle East and lower than expected margin improvements across a small number of UK Support Services contracts will lead to profits for the year to 31 December 2017 being materially lower than current market expectations.

“Given the impact of delays in receipts and disposals, the Group now expects full year average net borrowing in 2017 to be between £875m and £925m.

“Based on its latest forecasts, reflecting the items mentioned above, the Board now expects a covenant breach as at 31 December 2017.

“Following discussions with its principal lenders and with their support, the Board has concluded that it is necessary to amend the relevant agreements to defer the test date for both its financial covenants from 31 December 2017 to 30 April 2018 by which time it expects to be implementing its recapitalisation plan.”

Wates chief executive Andrew Davies is set to take over at Carillion as its new chief executive from April.

Interim chief executive, Keith Cochrane, said: “Whilst we continue to target cash collections, reduce costs, execute disposals and focus on delivering for our customers, it is clear that significant challenges remain and more needs to be done to reduce net debt and rebuild the balance sheet.

“Constructive dialogue is continuing with our financial stakeholders, and I am grateful for their support.

“I remain focused on addressing this issue before my successor, Andrew Davies, takes up the role on 2 April 2018.”

Kier wins £34.5m Clydebank hospital deal as group results remain upbeat

Golden Jubilee 1Kier Construction Scotland is to deliver the £34.5 million Golden Jubilee National Hospital in Clydebank as its parent group prepares to unveil a new trading update in line with current expectations.

The contractor has been awarded the role of Principal Supply Chain Partner to develop a new elective care facility at the hospital, as part of Frameworks Scotland 2.

The building work, at this early stage valued at £34.5m over two phases, involves building a dedicated cataract surgery unit as well as an additional orthopaedic and elective surgical care facility.

The award follows a Scottish Government announcement for expansion of the Golden Jubilee and five new elective treatment centres to be built across the country to carry out procedures like hip, knees and cataracts, in order to reduce patient waiting times and enhance patient experience.

The Golden Jubilee is a national resource for NHS Scotland; home of regional and national heart and lung services, a centre of excellence in orthopaedics, a major diagnostic centre and one of the largest cataract providers in the UK.

Kier Construction Scotland is expected to start on site early next year and their programme of work will be complete by 2021. The announcement follows a number of recent healthcare contract wins for Kier Construction Scotland, including work with NHS Grampian at Aberdeen Royal Infirmary, NHS Highland at Raigmore Hospital in Inverness and NHS Greater Glasgow and Clyde at Royal Alexandra Hospital in Paisley and Inverclyde Royal Hospital.

Brian McQuade, managing director for Kier Construction Scotland, said: “This is another major win for Kier Construction Scotland and illustrates our strength in delivering healthcare projects throughout Scotland.  These new facilities will provide improved healthcare services within the Golden Jubilee National Hospital and well as giving the local economy a boost as we will be creating local jobs and learning opportunities for local suppliers.”

June Rogers, director of operations at the Golden Jubilee Hospital, added: “It’s great to see the plans for these new facilities take a step forward and reach this exciting stage with our partners. Our expansion will provide a number of community benefits such as additional jobs, learning opportunities and environmental projects.

“Once we get approval to proceed, our new facilities will make a huge difference to thousands more patients in the future. It will allow us to deliver more effective healthcare services by continuing to deliver a world-class standard of safe and effective care that the patients of Scotland deserve.”

Tradesmen inspecting workKier Construction, part of Kier Group, is one of five principal supply chain partners on the Framework Scotland 2, a national procurement programme for healthcare new build and refurbishment projects. Kier is also one of five principal supply chain partners on the NHS’ £600m Health Facilities Scotland framework for Capital Development in Scotland.

Ahead of today’s Annual General Meeting, Kier Group has also announced that it remains on course to deliver double digit profit growth in the current year and achieve its Vision 2020 targets.

The Property division is “performing well”, delivering a return on capital (ROCE) in excess of 20% on an increasing capital base, and securing a development pipeline remaining in excess of £1.4 billion.

The mixed tenure and private housebuilding businesses continue to make good progress as private sales and pricing remain strong and demand for mixed tenure housing continues.

The performance of the Construction division is underpinned by the regional building business and is delivering margins in line with the Board’s expectations. The current order book represents more than 95% of the division’s targeted revenue for this financial year.

The Services division continues to deliver with consistent margins and has a current order book representing more than 95% of its targeted revenue for this financial year.

Following its acquisition, the McNicholas business is performing well and good progress is being made with its integration.

CITB to quit direct training delivery under radical new strategy

Sarah Beale

Sarah Beale

The Construction Industry Training Board (CITB) is to end the delivery of direct training and step back from operating its National Construction College site in Inchinnan as part of a “bold new strategy” for its future offer.

The announcement, which follows calls to reform from across the sector, will see the skills body “exit direct delivery of training through the National Construction College and cease services such as administering the card schemes”.

Proposals also include moving head office functions currently based in Bircham Newton, Norfolk and London to a new site in the Peterborough area and outsourcing all back office operations including IT, human resources and estates.

CITB chief executive Sarah Beale said its Vision 2020: The Future CITB strategy will help the organisation “become simpler, more streamlined” and become the “strategic, forward-looking and agile skills body that the industry is seeking”.

The CITB has made the announcement of massively reducing its activities within weeks of completing its triennial review of the organisation’s right to continue to collect a statutory construction levy from employers.

Although construction employers and trade associations voted for the levy to continue there was heavy criticism of how the CITB currently operates.

As a result, CITB said its new three-year strategy will see the organisation become a “commissioner of outcomes that delivers the industry’s core priorities”. The Future CITB will use Levy money to ensure a “sustainable training and development market, only intervening to provide a service where it is unavailable on the market, or not to the quality level that is sought”.

Sarah Beale said: “Construction needs to modernise and CITB is no exception. We accept the challenges laid down by industry and Government and we will deliver a future-fit training body by adapting and updating our business model.

“Some really tough decisions could be made under these proposals but I’m confident in our commitment to becoming a more representative, accountable and reliable ‘levy in, skills out’ organisation. We now have a clearly defined path, and we see a bright future for a modern, engaged CITB. We look forward to working with our industry and government to build a better Britain.”

In Scotland, the CITB said it would step back from operating its NCC site in Inchinnan under the proposals. However, the plan is to continue training at the site until a buyer is found. At that point, the CITB revealed, a new provider would take over construction training so that there is a “seamless” transition.

CITB will also maintain its support for the Modern Apprenticeship programme in Scotland.

Plans include a move for the CITB’s current head office in Norfolk, with Peterborough a likely new base. There will be small offices in London, Scotland and Wales to help deliver sector partnerships. CITB said around two-thirds of the workforce will “remain mobile” in order to be closer to customers.

The plans also include outsourcing of internal corporate support functions and customer operations by the end of 2018.

Sarah Beale added: “I understand this strategy will bring about big changes to employees at CITB and we will be supporting our colleagues as much as possible throughout this process. These are tough calls to make, but needed if we are to meet the future demands and make the greatest impact to construction.  We have worked hard to develop robust, well thought-out plans which meet our industry’s needs whilst building a solid foundation for CITB’s future. The proposals outlined today will be phased in over the next three years, and with our customers always in mind it’s business as usual.”

Construction union Unite describe the move as a “hammer blow” for the industry which will put a large number of jobs at risk of redundancy or outsourcing.

Unite national officer for construction, Jerry Swain, said: “These plans are a hammer blow for the construction industry and for the workers at the CITB.

“Thousands of construction workers owe their careers and their livelihoods to the unique training they have received at Bircham Newton.

“There are grave doubts if any private provider could or would provide the same level of training at the same cost, which is currently provided at this unique facility.

“It appears that the ‘reforms’ being proposed by the CITB are all about increasing profits for individuals and companies and not what is in the best interests of the construction industry.

“Construction is already facing a skills crisis and it is quite impossible to see how the CITB’s decision to end its role in providing training is not going to simply make a bad situation worse.

“The government must step in to ensure that these vitally important tutors and training facilities are not lost and that training is not downgraded.”

Unite regional co-ordinating officer, Mark Robinson, added: “These proposals essentially would slash trash and privatise the CITB.

“The likelihood of finding a training provider willing and capable to take on the National Construction College function of the Bircham Newton site and other NCC sites across the country is difficult to ascertain and puts hundreds of jobs at serious risk.

“Unite believes it is totally unnecessary to go to this level of change. For the CITB not to provide their own training on behalf of industry leaves the market wide open for less capable and reputable organisations to drive down the quality and standards that the industry expects.

“Unite will be seeking the views of its members to see what action can be taken to defend the hundreds of jobs not only in West Norfolk but throughout the country.”

Growth in construction and infrastructure workloads but skills shortages continue to bite

construction-materials stockWorkloads in the UK construction and infrastructure sectors continued to rise moderately in the third quarter of 2017 but skills shortages are once again impacting the industry, according to the Royal Institute for Chartered Surveyors (RICS).

Around 22% more respondents to the latest RICS UK Construction and Infrastructure Market Survey reported a rise in workloads during Q3 2017, with a steady pace of growth.

However, while activity remains steady, comments left by respondents continue to highlight Brexit-related uncertainties as weighing on investment decisions and the lack of sufficiently skilled workers also remains an obstacle for many businesses.

Having eased throughout 2016, the intensification of labour shortages is biting once more in the quarter with 62% of contributors citing this as an impediment to growth. This contrasts with an average of 40% when data collection first began in 2012. Within this, respondents to the survey are still seeing a lack of quantity surveyors (64%) as well as other professionals (52%). 44% are also seeing a shortage of workers within specific trades.

Despite government efforts to bolster the workforce and the prominence of apprentices, through an apprenticeship levy introduced earlier this spring, only 42% of respondents feel that government-funded programmes are moderately effective, with one-third unsure.  The quality of the talent pipeline is insufficient as well – less than half (45%) of employers who currently hire apprentices view them as a long-term solution to their hiring needs.

Breaking the rise in workloads and activity down to a sector level, growth is strongest in the private housing sector, while remaining broadly stable elsewhere. Meanwhile, the public non-housing sector continues to underperform all others.  In infrastructure, 21% more contributors reported a rise rather than a fall in workloads. Nationally, respondents expect the rail and energy sub-sectors to post the most significant increases in construction output over the coming 12 months.

Despite uncertainties, a net balance of 45% of respondents expect headline activity to continue to rise rather than fall over the year ahead. Nevertheless, this is down from the four quarters immediately preceding the EU referendum, which averaged 62%, reflecting a somewhat less optimistic outlook. Meanwhile, 30% more contributors expect employment to rise rather than fall (broadly unchanged from Q2).

While a shortage of workers is hampering activity and profit margins, financial constraints are still reported to pose the most significant challenge, although the share of contributors expressing this view has come down to 69% (from 79% in Q2). Access to bank finance and credit remains by far the most frequently cited issue, followed by cash flow and liquidity. This likely reflects a more cautious stance by banks given cyclical market conditions and Brexit considerations.

Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of only +12% of respondents expecting a rise in margins over the coming year. This is likely to have impacted tender pricing as well, with 62% and 56% more respondents in the building and civil engineering areas, respectively, envisaging greater price pressures.

Senior economist Jeffrey Matsu, said: “While activity in the sector has moderated, growth and growth expectations remain in positive territory. Uncertainties due to Brexit continue to weigh on companies’ investment and hiring decisions, and banks appear to be adopting a more cautious stance to providing finance. Meanwhile, challenges related to an inadequate supply of skilled labour are as pronounced as ever.”

‘New Chapter’ architects call for independent governance review into RIAS

RIASA group of Scottish architects who accused the Royal Incorporation of Architects in Scotland (RIAS) of being a “secretive and autocratic” organisation have rejected attempts by the professional body to address their concerns.

The group, calling itself ‘A New Chapter’, had written to RIAS president Stewart Henderson to reveal their concerns at what they see as “a lack of effectiveness, poor governance and insufficient financial accountability in Scottish architecture’s professional body”.

In his response, Henderson insisted that work was being carried out to improve the structure and management of the body and defended separate internal RIAS reviews of salaries, probity and management practices.

The 150-strong ‘A New Chapter’ group, which includes leading figures Malcolm Fraser, Charlie Hussey, Chris Platt, Helen Lucas, Jude Barber and Paul Stallan, has now hit back at the RIAS for failing to address the “key failures” raised of the need to open-up the organisation.

The new letter stated: “We have consistently stated that the inquiry into the finance, governance, salaries and other matters of concern must be independent: one senior independent lead, with a clear brief, reporting to the trustees on RIAS Council – the legally responsible corporate entity.

“Instead you have created a maze with three enquiries and other separate legal entities, all reporting to your ‘Governance Group’.

“This ‘Governance Group’, consisting of you and a small number of past-presidents appointed by you, therefore leads and controls the process.”

According to the group, the consequences which fall from this include:

“1. This web of appointments, and duplication of enquiries, is a profligate expenditure of our resources.

“2. It produces a tangled landscape of overlapping advice, with the additional possibility of matters falling ‘between two stools’.

“3. This internal Governance Group control the remit and message, with you as chair acting as briefing agent, editor and judge.

“4. Most significantly, as members, we do not hold you and your Governance Group as being independent: indeed, as it is quite possible that the results of the Reviews are critical of the actions of you and these past-presidents, you and they have a clear conflict of interest and can in no way represent the interests of members or requirements of charity law and the perception will be that the ‘legal reasons’ you state for non-disclosure are simply self-interest.”

Fresh proposals lodged for former Dundee College campus

VOX DundeeRevised plans to transform a former Dundee College campus into flats and apartments have been lodged with the city council.

Keppie Design and Whiteburn Projects, which had previously gained planning permission to covert the 1970s building in 2015, have now drawn up new plans to include 111 rental flats and 24 serviced apartments together with a café, laundry, cinema, gym and co-working spaces.

Covering an area of 2.26 acres, Vox Dundee will retain and enhance the existing structure through the sensitive removal of elements which inhibit development in order to provide a sustainable future for the crumbling college building.

The west wing of the development would comprise solely residential apartments while the east wing would be made up of a mix of residential and serviced accommodation.

VOX Dundee 2Moves to transform the building, which closed its doors for the final time six years ago, have been in the pipeline since 2014.

Whiteburn Projects was previously granted planning permission to convert the building into 110 one and two-bedroom flats.

The £15 million project was given the green light, but in summer last year factors including the UK voting to leave the European Union led the investment pool to conclude that putting money into property in Dundee was regarded as having a higher-risk profile and the funds were no longer available.

VOX Dundee 3In a statement Keppie wrote: “This model supports Scottish Government’s active pursuit of a private rental sector that provides good quality homes with a high standard of management. The Vox model is fundamentally sustainable: in Britain we continue to swallow green belt and expand our suburbs, in search of bigger homes, bigger gardens and ‘idealised’ communities.

“Meanwhile many of our city centres have declined. It is not enough to tell people that city living is more sustainable. To encourage people to recolonise our urban centres we need to make our cities ‘liveable’. Vox provides a prototype for development that we believe could contribute to a sustainable future for our cities.”

Cruden and Hart look to the future with new HQ and new image

Steven Simpson, managing director of Cruden Homes (East) Ltd (left) and Colin Macdonald, managing director of Hart Builders

Steven Simpson, managing director of Cruden Homes (East) Ltd (left) and Colin Macdonald, managing director of Hart Builders

Cruden Homes East and sister company Hart Builders have rebranded and relocated from their former head offices as part of the Cruden Group’s continuing growth strategy.

The new homes and building divisions were formerly located in Juniper Green in Edinburgh and Macmerry in East Lothian respectively but are now both centrally based in Cruden House at the South Gyle Business Park.

There are currently 65 staff in the new office, all benefitting from parking spaces and a well positioned location which provides easy access to the city by road, rail and tram, while the Edinburgh bypass, M8 and M9 motorways are minutes away.

Additional staff benefits include three brand new recreational areas for eating or breaks with each fully equipped and interior designed with feature furniture and lighting. Specifically designed high level desks have been installed in key locations for reviewing architectural plans.

There are also several breakout areas for informal meetings, a range of sleek meeting rooms with the latest AV facilities and a fully equipped gym.

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Various interiors of Cruden House at 36 South Gyle Crescent, Edinburgh

Steven Simpson, managing director of Cruden Homes (East) Ltd, said: “These are very exciting times for us. Cruden Group has just recorded its 18th consecutive year of profitable trading with another annual increase in turnover, profit and home sales. Both Cruden Homes and Hart Builders continue to make a significant contribution to these results and this relocation puts us in an ideal position to maximize our continued growth and manage the expansion of our operations.

“Going forward, we benefit from a sound financial base and have a number of exciting projects at various stages of the planning process. With the quality and commitment of our people, this move gives us a strong footing to further develop our reputation and continue our growth in the east of Scotland.”

Colin Macdonald, managing director of Hart Builders, added: “Being centrally based at South Gyle provides us with easy access to other Group companies, which in turn is already providing significant economies of scale that strengthen our operating capacity, enhance synergy and stand us in good stead for the Group’s 75th anniversary in 2018 and beyond.”

In addition to the move to Cruden House, a new look for all Cruden Group divisions has been unveiled ahead of the firm’s 75th anniversary next year. The new brand identity has been styled to both highlight Cruden Homes and Hart Builders’ individuality while at the same time, a cohesive approach to the design emphasises each division’s Group connection.

The new address and contact details for both Cruden Homes East and Hart Builders are as follows: Cruden House, South Gyle Business Park, 36 South Gyle Crescent, Edinburgh, EH12 9EB.  Tel: 0131 285 6600.

Union calls for Interserve talks after 200 job losses announced

interserveInterserve is preparing to cut around 200 jobs across its UK operations as part of a wider cost-saving drive, according to reports.

Shares in the construction and services firm fell 38% last month after it warned operating profits in the second half would be around half that reported a year ago amid “further deterioration” in UK construction and support services.

The Interserve Board had admitted to “a realistic prospect” of the group breaching its financial covenants with lending banks.

The Construction Enquirer has now reported that letters were sent out last week to workers whose jobs are now at risk.

Jobs under threat are believed to be management and back office roles.

An Interserve spokesperson told Construction Enquirer: “Since October this year, we have been reviewing our business strategy and performance to create a stronger platform for Interserve’s future profitable growth.

“In the short term, we are reducing the overall costs within the business, and this will unfortunately have a direct impact on some of our people with possible job losses.”

The UK’s largest construction union Unite has called for employers at Interserve to meet with the union and discuss the company’s future.

Unite national office for construction, Bernard McAulay, said: “It is vitally important that Interserve sits down with Unite and explains fully what is going on at the company and what the plans are for the future.

“There are many Unite members currently employed with Interserve in construction roles who are becoming increasingly concerned about the uncertainty which is currently surrounding the company.

“It is not acceptable for Interserve to hold Unite at arms-length and to deny us a seat at the table when workers’ jobs are under threat.”

“Workers need reassurance that there are not going to be further job losses in the short to medium term.”

Civic Engineers awarded £1.8m contract to help deliver Glasgow ‘Avenues’ project

An illustration of what Argyle St could look like – credit Urban Movement

An illustration of what Argyle St could look like – credit Urban Movement

Civil and structural engineering firm Civic Engineers have been awarded the £1.8 million contract to help deliver the transformative ‘Avenues’ project for Glasgow City Council.

Part of the Enabling Infrastructure Integrated Public Realm (EIIPR) commission, the transformation of the ‘Avenues’ seeks to dramatically improve the quality of the city centre environment, putting people at its heart.

Focusing on seven key city-centre thoroughfares; Argyle St west, Argyle St east, St Enoch’s Square, the Underline (a pedestrian and cycle route linking Great Western Rd with the city centre), Sauchiehall Precinct, Cathedral St and North Hanover St, the aim is to improve connectivity, introduce sustainable green infrastructure through attractive streetscapes and enhancing biodiversity, protect space for cyclists and pedestrians, improve the way public transport is accommodated and transform the perceptions of the city for all those who live, work and visit.

The project is supported by the £1.13 billion Glasgow City Region City Deal, which has funding of £115m for Glasgow city centre projects.

Civic Engineers have been appointed to lead the multidisciplinary design team who will take the project from concept design and public consultation through to developed design stage. The company, which has studios in Glasgow, Manchester, Leeds and London employs over 80 people and has extensive experience of delivering award winning public realm projects, which have been proven to help transform areas.

They will be working with design practice Urban Movement and the Social Value Consultancy who will focus on being able to measure and demonstrate the social, economic, health and environmental benefits of the introduction of the scheme.

The project gets underway in November starting with Argyle St and it is planned to complete in 2022.

Founding director of Civic Engineers, Stephen O’Malley, said: “The ‘Avenues’ project is an ambitious, forward thinking initiative which will transform the streetscapes of the city centre and how those who live, work and visit Glasgow experience them. We are proud to have been appointed to lead the team delivering the project. Our considerable experience, working alongside companies such as Urban Movement and Social Value Consultancy, means we have the experience to deliver public realm improvements that bring real economic, social and environmental benefits and ultimately help to deliver a healthier city centre for Glasgow.”

Councillor Kenny McLean, city convener for neighbourhoods, housing and public realm at Glasgow City Council, said: “This project will play a key role in our plans for the further development of Glasgow city centre.  The ‘Avenues’ will become an attractive feature for everyone who uses the area, whether for work, study, shopping, eating and dining, clubbing and theatre-going, or as a resident, and we look forward to working with partner organisations to deliver this project which will change the face of the city centre for the better.”

The EIIPR commission is commonly referred to as the ‘Avenues’ project due to its aspiration for both green infrastructure and avenues of trees in Glasgow city centre.

Councillors defer decision on Leith housing development

How the homes will look from Ocean Terminal

How the homes will look from Ocean Terminal

A decision on a major housing-led mixed-use scheme proposed for Leith’s Waterfront Plaza has been deferred by councillors.

Amended plans for the 388-dwelling scheme by CALA Homes (East) included 97 affordable homes and 29 commercial units suitable for a range of local services and small businesses.

Located on disused land opposite Ocean Terminal, the revised proposals saw the number of homes reduced from 425 to enabled the developer to further reduce the height of the apartment block directly adjacent to properties on Commercial Street in response to local concerns.

Planning officials had recommended refusal on the basis that the scheme is contrary to the Local Development Plan, which advocates a commercial led development and not housing.

Members of the City of Edinburgh Council’s development management sub-committee decided to defer a decision on the revised plans pending a public hearing of interested parties, which is expected to take place in a month’s time.

An aerial view of the proposed development

An aerial view of the proposed development

Ahead of the committee, Lord Provost Frank Ross called for “common sense to prevail” and urged “these houses to be built, not only to provide much needed homes but a boost to Ocean Terminal.”

CALA had argued that the development would “deliver much needed housing on the site to regenerate this neglected area of Leith”.

Craig Lynes, Land Director at CALA Homes (East), said: “We are very pleased that the Committee recognised the importance and complexity of this site and the opportunity to deliver new homes along with considered commercial opportunities.

“Not only will Waterfront Plaza provide a welcome boost to housing supply across a wide segment of the local market, but by incorporating traditional colony-style homes, townhouses and flats with large public spaces, it will create a welcoming and entirely appropriate neighbourhood.”

CALA’s proposals received widespread backing from across community, housing and business leaders, including from the Leith Trust, Leith Chamber of Commerce, Ocean Terminal and Port of Leith Housing Association.