Forrest admits to under-costing jobs as refinancing talks continue

Forrest has admitted it made “a series of incorrect pre-construction estimates” on some of its projects as it continues to pursue a refinancing deal to secure its long-term future.

In a statement to Place North West, the company’s chief financial officer Keith Reid said: “We have been working with FRP Advisory in an advisory capacity over the past few weeks to explore options for the business. Our main priority is to find a solution that works best for our customers, employees and suppliers, and we are doing all that we can to secure the long-term future of the business.

“We have faced a number of challenges across our construction division. The projects started prior to the March 2017 refinance have experienced significant time and cost overruns due to liquidity and operational challenges prior to refinance.

“In recent months, it has also emerged that there have been a series of incorrect pre-construction estimates on certain new construction projects.”

Industry sources told Place North West one of the contractor’s major jobs had been heavily under-costed by around £5m despite months of negotiations, while on another scheme, subcontractor packages had been “wildly under-estimated” making certain parts of the project “unprofitable”.

It is understood Forrest had attempted to renegotiate a number of jobs in the last month but these efforts have been largely unsuccessful.

Reid added: “We recognise the uncertainty of the position is extremely difficult for our customers, employees and suppliers and we appreciate their continued support. We will provide a further update in due course.”

The revelations follow after Forrest was forced to deny rumours it would enter administration this week. Following this, a number of sites ground to a halt as subcontractors walked off.

In Liverpool, the contractor has also stopped work on Plaza 1821, pictured above, a £21m project for Peel and Regenda at Liverpool Waters. The project includes 105 one and two-bed apartments over 15 storeys, and worked stopped late last week following a walk-off by concrete frame contractor Heyrod.

Site sources told Place North West: “Forrest were the lowest price on Plaza 1821 and have seen a lot of change in their personnel. They owe us money but what we’re hearing is that they are optimistic they will be back on site after meeting their banks next week”.

It is also understood that Forrest has also downed tools at The Eight Building in Liverpool’s Ropewalks; the contractor was picked in April this year to deliver the Tim Groom Architects-designed project, which features 120 apartments. Discussions are already understood to have taken place with other contractors, should Forrest enter administration.

Work has also ground to a halt on Aura, a £100m student and key worker accommodation project designed by architect Falconer Chester Hall on the former Erskine Industrial Estate. Forrest started on site in April this year but it is understood the contractor has ceased work on the site.

Earlier this week, Place North West reported the contractor could be in line to lose £2m on one of its main problem contracts, Citu NQ in Manchester’s Northern Quarter for developer Salboy, pictured below.

Citu NQ Salboy November 2018

A spokesperson from the developer later told Place that it would be looking to replace Forrest on the job with its in-house construction company Domis, which was set up by Forrest’s former chief executive Lee McCarren last year.

In Salford, projects that have ground to halt include the £28m X1 The Gateway, which only topped out in September. The concrete frame on this project is complete and stands at 20 storeys, but as of yesterday, very little construction work was ongoing at the site.

Similarly, at The Residence, 34-storey private-rented project in Greengate, works have also stopped. Completion of this project was initially pencilled in for the fourth quarter of 2018.

The contractor has found itself in difficulty after it last year unearthed a pre-tax loss of £26m, which it said was down to accounting “errors”.

The company had previously reported a pre-tax profit of £3.6m in 2015 but this was revised heavily downwards to a pre-tax loss of £19.2m. This was followed by a £6.8m loss for the year to 29 February 2016.

Following this, the Greater Manchester Combined Authority agreed to step in with a £2m finance package to keep the contractor afloat. The GMCA was a new lender to the group replacing the Royal Bank of Scotland. At the time, Palatine Private Equity remained as majority shareholder, alongside Lloyds Development Capital.

Mark Nicholson, Carillion’s former managing director of building for the North, Midlands, South West, and Scotland, took over as chief executive in September 2017, following the exit of McCarren.

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Forrest has admitted it made “a series of incorrect pre-construction estimates”.,,,,..which translates to we have been buying work, trading on debt and cooking the books……and its now caught up with us…..sorry about that….

By Didn'tseethatcoming!

The sooner incompetent companies like this are out of the market the better…..Who in the right mind would bale them out, you would not see a return on any investment with idiotic management steering the ship, better off putting it all on black at the casino…. I hate to say it, but I really hope they stop trading, and the directors investigated for incompetence if nothing else (I think they should also return any Bonuses they may have had in the last 5 years). The construction industry has enough issues at the moment without the likes of companies trading like this… I hope they joint Carillion, ROK, Lagan……That said I feel for the workers, subbies, suppliers and the employees who all have mortgages to pay.

By Anonymous

“Forrest were the lowest price on Plaza 1821” height of quality for our city’s waterfront, eh?

As for under costing, what if people have invested in those schemes on the basis of their supposed profitability?

A big question is whether GMCA should have plunged £2m into this, and not simply from a point of whether they’ll get the money back.

By Mike

Lessons learned ? Somehow I doubt it and this will happen again and again as many clients still remain focussed in the cheapest price rather than the most responsible and realistic price that ensures the jobs gets completed and quality and innovation can be delivered

By Nigel

Is anyone surprised? Tier 1 contractors have pretty much stopped bidding for many of these types of mid-value residential schemes in the Manchester/Salford/Liverpool because of the Tier 2 contractors, such as Forrest, massively under costing jobs to win. Looks like its come back to bite them and so it should. I find it hilarious the amount of recruiters that tried to offer jobs at Forrest to many construction professionals in the area but ones who knew what was going on declined. I feel sorry for those that have recently been recruited by Forrest and are now being screwed over. There are many ex-Carillion staff at the company and it’s an absolute shame if they are to be made redundant once again in less than a year

By Anonymous

So surely we should start calling them “problem contractors” not “problem jobs”?

By Anonymous

I agree with By Anonymous fully: apart from attributing Forrest’s failure to “idiotic management” and “incompetent directors”. Those lads (and lasses?) know exactly what they were doing, still are doing and still will do, and why. Those are smart sly Operators who will end up with a few millions of pounds in their back pockets,

By James Yates

Liverpool is becoming known as the City of incomplete projects. Latest news confirms investor fears about the fragile state of the market.

By Glen Fiddich

Poor Mark Nicholson, from the frying pan of Carillon to the fire at Forrest. Very unlucky

By Onlysaying

Tier 1 contractors don’t have the first clue how to price these high rise resi jobs either and they all still buy work.

By Mrqs

It’s a contractor from the Greater Manchester region who has difficulties not the Liverpool developer? So on that premise should investors be weary of GM. contractors and it’s market. According to your unbiased opinion?

By Anonymous

@Glen Fiidich Liverpool ? There is a few stalled projects no different from any other major city , the city’s skyline is dotted with cranes so again your wrong

By The facts

I would like to comment that those at the coal face and those in the office are a great bunch. Professional and talented. No of us know fully what has gone on and who is to blame. But top and bottom is many people will be potentially without salary and work over this difficult time of year. Rather then wishing for the end of a company why not wish these blameless people some luck….many of whom don’t have savings and backup like the more senior team may have. Also when you talk about problem contractors also aim things at clients and external cost managers who put these contractors into this position and knowingly agree to costs and programmes that are clearly wrong…..

By Inside man

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