Renew takes £3.5m hit in retreat from general building market

The move is part of a strategy to increase its focus on more profitable specialist engineering work.

In a trading statement to the stock  exchange this morning (14 March) the company explained: “The board has concluded that its presence in the non-specialist and discretionary public spending building markets is unable to provide acceptable and sustainable returns at an appropriate balance between risk and opportunity. Renew's building activities in these markets are in the North of England and the group intends to withdraw from building in these regions when its existing contracted commitments are complete.”

All contracts will be completed by September, except the £44m Kirklees Waterfront Campus project, which is proceeding well, the company said, and is planned to complete in July 2012. Renew's Specialist Building activity will now be based in the south.

The company also said that results for the first half of the year to 31 March are expected to be satisfactory and that for the full year it would meet market expectations,  prior to the impact of the exceptional redundancy and restructuring costs.

The £3.5m charge will be taken in the second half of the 2011 financial year. The restructuring will reduce 2012 building revenue by approximately £60m with no impact on group profits, the company said.

The company said: “Contract selectivity will remain the guiding principle with our focus being on the robust new build Social Housing, High Quality Residential and Retail markets. Our business in these sectors is well secured with good forward visibility.

“The board remains committed to its established strategy of moving the balance of the group's activities to Specialist Engineering. In Specialist Engineering, the market and forward order books remain stable. The integration of Amco, acquired at the end of February 2011, is progressing in line with expectations.

“The balance of activity in the  group will be transformed in 2012 when the board anticipates that Specialist Engineering will account for over 60% of revenue (2010: 44%) with 85% of activity being in non-discretionary regulated markets in Energy (including Nuclear), Environmental and Rail. Over 80% of 2012 group operating profits before central costs are expected to be realised from Specialist Engineering.”

Renew's interim results for the six months ended 31 March 2011 will be announced on Tuesday 24 May 2011.

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