Forrest clients reveal ‘Plan B’ if contractor goes bust
High-profile clients of troubled contractor Forrest, which is still embroiled in refinancing talks, have revealed projects will continue as normal if the company collapses with replacement teams already being lined up.
It has been a difficult two weeks for Forrest with the Bolton-based company first forced to deny rumours it was to enter administration, followed by an admission last Friday that it had made “a series of incorrect pre-construction estimates” on some of its projects.
As a result, clients have now taken steps to safeguard schemes if the contractor does eventually call in administrators, with a decision on the company’s future expected this week.
Among these is Elliot Group, for whom Forrest is delivering a contract haul worth £170m and including nearly 1,500 homes and student beds. The contractor is on site at Aura, a £100m project on the former Erskine Industrial Estate featuring 142 homes and more than 1,000 student beds.
The contractor is also delivering The Residence for Elliot Group in Salford, a £70m residential scheme of 300 apartments, although work has currently stalled on this site.
“We have a Plan B and we’re satisfied that it is robust,” said the company’s director Elliot Lawless. “There are lots of great people at Forrest and it’s a shame to hear about the company’s problems but we are ready should the worst come to the worst.
“We’ve delivered more than 3,000 units for our clients in recent years without any issues and nobody should under-estimate my determination to get the right result for my funders. I and my professional advisors have had our sleeves rolled up and have a team ready to go if need be.”
According to Lawless, both schemes are already sold out and these contingency measures would protect investors’ interests in the result of Forrest entering administration.
Other clients are understood to have put back-up plans in place including Iliad, for whom Forrest is delivering 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.
Last week, Forrest’s financial director said the company was continuing to work with FRP Advisory to find a way forward 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.”
He also admitted there had 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”.
Last week, Place North West revealed 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.
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.
Forrest 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.
A spokesperson from Forrest said there would be no further statements “at this stage”.