Troubled contractor Forrest could be in line to rack up losses of £2m on problem contracts, Place North West understands, as the company continues to pursue a refinancing deal.
Forrest confirmed it was exploring a refinancing deal yesterday following rumours administrators could be called in, and it is understood the company met with its banks last Friday following financial difficulties.
Financial director Keith Reid said there had been “a number of challenges on a number of projects”; industry sources said one of these is Salboy’s Citu NQ, where the contractor could be due to lose in the region of £2m.
The scheme is around a third complete with the steel frame already erected and some cladding now put in place; its original completion date was set for the first quarter of 2019, according to marketing material.
The project, being built on the former car park opposite Afflecks Palace, features 183 flats; these have primarily been marketed for overseas investors, and the development is almost fully sold. Apartments have been marketed from £190,000 for a one-bed, and £250,000 for a two-bed.
Sources also suggested Domis, the contractor set up by ex-Forrest boss Lee McCarren, could be drafted in to complete the project should Forrest step away. Domis is already delivering a number of projects for Fred Done’s property companies including The Crescent in Salford, featuring 392 apartments, and Trinity, which features two residential towers off Trinity Way.
Yesterday, the normally-busy site was largely empty with only a handful of construction workers on site.
Since news broke of Forrest’s difficulties, numerous contractors contacted by Place said they had been interviewing staff from Forrest over the past month, with staff looking to leave while subcontractors on some sites are refusing to work unless they are paid on a pro-forma basis.
However, other sources were more bullish on the company’s future, with one telling Place: “If they can sort those major problem jobs, then they have enough work in the bank, and good projects too, that they will be able to limp on. A lot of the new staff that have been brought in are largely blameless for these historical problem contracts”.
Other projects the company is working on include the £100m Aura development, also for Elliot Group, and X1 The Gateway in Salford Quays, a £28m, 20-storey apartment scheme.
Clients contacted by Place revealed they had been made aware of the contractor’s difficulties in the last two weeks, and it is understood some have already worked up contingency plans should the company enter administration.
Other projects in the pipeline that are yet to start on site may also be in doubt, with the contractor also reportedly struggling to agree a price on the No1 Old Trafford residential scheme, which was initially agreed under Forrest’s former management. Sources close to the project said Forrest’s original price was “undeliverable” with the company set to make losses if it went ahead, with one saying: “A lot of the ex-Carillion team that has been brought on board have really struggled to get a price agreed given the original cost wasn’t feasible”.
It is understood developer Cole Waterhouse has already started discussions with other contractors to deliver No1 Old Trafford.
Last year, Forrest made 30 staff redundant in a restructuring move after unearthing 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.
In August this year, Nicholson and Reid set up two companies – Forrest Construct and Forrest Services – with a registered address of Forrest’s headquarters in Westhoughton.
Forrest and Salboy were both approached for comment.