Citu NQ Salboy November 2018

Forrest enters administration

Charlie Schouten

After weeks of speculation and a failed attempt to secure a refinancing deal, administrators have been called in at Bolton-based contractor Forrest.

Administrators at FRP Advisory have been appointed at the company, which employs around 230 people, roughly a month after it was first forced to deny rumours it was on the brink of collapse.

Three problem jobs – Citu NQ in Manchester’s Northern Quarter, and X1 The Gateway and X1 The Plaza – have been the root of the company’s financial woes.

Last week, the company confirmed it was looking to sell its energy and regeneration arms in a bid to stay afloat after talks with banks and lenders over a refinancing deal collapsed.

Some of the company’s regeneration contracts have been sold to Engie, saving 64 jobs, but the construction and housing divisions of the company will now be wound down.

Joint administrator Anthony Collier said: “Despite the best efforts of the directors, the legacy issues facing the company have been unable to be resolved, resulting in an unsustainable financial situation.

“We have successfully agreed a sale of certain contracts to Engie Regeneration Limited, which will preserve 64 jobs and provide continuity for customers in the refurbishment and energy divisions

“Unfortunately, it has not been possible to secure a sale for the construction and housing elements of the company, and we are working with all stakeholders to deal with the orderly wind-down of these divisions.

“We are pleased that during this process, working alongside management, we have assisted a large number of employees find alternative employment within the industry and will continue to work closely with agencies, including the Redundancy Payments Service, to ensure that employees receive every support at this difficult time.”

The group struggled to recover after admitting it had made “a series of incorrect pre-construction estimates” on some of its 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 were largely unsuccessful.

The contractor was replaced over the past two weeks on many of its major projects as it looked to stay afloat. These include the £100m Aura scheme in Liverpool for Elliot Group, where it was yesterday replaced by Vermont; the developer replaced Forrest on another of its projects, the £70m, 34-storey The Residence in Salford. Careys has been drafted in on this site to deliver the concrete frame while the developer looks to appoint a permanent main contractor replacement.

Developer Salboy also acted quickly to replace Forrest on the contractor’s loss-making Citu NQ job in Manchester following administration rumours last month, drafting in Domis, the company founded by former Forrest boss Lee McCarren, to complete the project.

Other projects the contractor was delivering included Plaza 1821 on Liverpool Waters for developer Peel, in a project designed by Hodder + Partners. Work on this scheme stopped last month after concrete frame contractor Heyrod walked away from the project following payment disputes.

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.

The company’s former finance director, Matthew Farrimond, was also jailed this summer for siphoning off nearly £370,000 from the company during his time in charge.

Nicholson and Forrest financial director Keith Reid have already established two new companies at Companies House: Forrest Services, and Forrest Construct.

Troubles at the contractor have already hit the supply chain with M&E company Proline forced to call in Cowgill Holloway in a bid to keep trading after being hit by cash flow problems following Forrest’s troubles.

Your Comments

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It’s a shame that the guys responsible for the demise will walk away Scott free

By Scott

We need to start looking and questioning the fitness-for-purpose of Human Resource departments. They seem to always get off criticism free considering that businesses rise and fall base don their people.

By Lloyd Hitchmough

So which overpaid figurehead jobs for blabber-mouths are the executives responsible moving too? They are all so good at what the do, they deserve at least a million pounds annually just for attending meetings. Just because the business they were ruling has gone bankrupt should not in any way reflect upon their ability to run a business properly, should it? Oh, I forgot, the old boys network. Scratch my thingy, and I’ll scratch yours. See you on Sunday at the golf club! give my regards to Samantha.

By james yates

Lloyd – ridiculous comment. HR departments do not hire people they aren’t directly responsible for. Senior Managers will interview & hire those that report to them, and so on down the line

By Anonymous

Clearly the (past) management must shoulder most of the blame for a complete lack of governance, bordering on incompetence and negligence, when entering into contracts which were plainly not financially viable.

Notwithstanding, in incidences such as this, you never hear any criticism of the Clients. Well, here it is: entering into these contracts was also grossly negligent on their part, as they would have been fully aware, through their cost consultants, that the contract sums proposed were not realistic. When any part of a supply chain is certain to lose money (be that a contractor, subcontractor, supplier, or in this case – all three) that project is doomed to fail.

Just another in the long line of examples confirming that the UK construction industry is broken.

By Vincent Morecambe

Anonymous – keep reading the Ladybird books…

Vincent – good stuff. Did you work there perchance – I can smell the passion.

By Lloyd Hitchmough

The overall shambolic decision making by those at board level (past) and (present) are responsible for this sad state of affairs, how on earth can they month by month by pass the fact they have legacy jobs costing them a fortune and just continue like it will just go away……
Instead they will let staff lose their jobs weeks before Christmas, and to have a contractor replace them on a job they were on and an ex Director whom is now the head of that company all sounds very iffy.

By Anonymous

James moaning Yates…… get a job. You seem a tad bitter my old friend.

By Jimmy 5 bellys

Once again decent hardworking subbies take the kicking for totally incompetent management/directors … who no doubt will have filled their boots over the last few weeks.. it will not be a great Christmas for lots of families this year because of this and an even worse new year with I’m sure many of said subbies going out of business… total disgrace once again …..

By D Cooke

Well we saw that coming didn’t we! Ex Carillion staff ruin another company, blame it on others, and then undoubtedly roll onto the next job- probably for even more money! The sheer amount of senior managers there must have cost the business hundreds of thousands and wasn’t sustainable

By Anonymous

Lloyd you have definitely been reprimanded by HR somewhere along the line and have a slight chip on your shoulder I think!!

By AR

I worked for 8years for Forrest and got no respect no gratitude nothing wages was always wrong I’m glad there going under it was badly managed to many office staff at Dodd lane bolton directors dident have a clue what was going on good riddence

By Gary jones

“I know, lets strip out the profit then not pay our subcontractors….. that will win us the scheme”…… evil laugh …….

on a serious note, the tendering processes have to be robustly reviewed with more stringent quality measures in place to prevent clearly incompetent companies buying schemes. once that’s in place, its may the best company win.

By Anonymous

Totally shambolic business models, their nickname was Farillion in the industry as they had upwards of 40+ ex Carillion staff. They were in trouble for circa 18 months though and people in the industry knew they could go under at any time. To be fair it was the regime from 18+ months ago that sewed the seeds of their demise they have just about managed to stave it off ever since with re-structuring debts, exacerbated through buying more work to realise cash flow. They paid staff around 20% more than the going rate to entice people in or you wouldn’t have joined them as they were too shaky!!

By TBC

Sounds like the books were well and truly cooked by the previous directors, I find it hard to beleive that someone can make an accounting error of £26m! The industry needs a complete shakeup as this happens too often. Clients need to be more responsible, what other industry would take on so much risk for a 2% profit margin which is what most Main Contractors make.

By Anonymous

AR – dribbly comments like that are the exact reason why we find it so hard to move to an improved condition in our industry. Instead of listening to, reflecting on, and contributing to intelligent debate (which is one of the first steps to *real* change) you come out with a dead-end comment that takes a critical debate nowhere.

By Lloyd Hitchmough

Just gotta thank all you directors and decision makers at Forrest. We worked our balls off for you and you have done us for 40k. At what point does it get personal???

By Scott

It’s interesting that all the blame is aimed at estimating, there are a number of schemes which have been completed over 6 months late and in one instance aiming to be over 12 months late all with significant damages.

The influx of a significant number of Carrilion staff change the delivery dynamic from that of a tier 2 contractor to a tier 1 contractor utilising tier 1 subcontractors.

There was no pipeline of work for construction and housing with the only scheme that was bid under the new management being the Liverpool football club Training academy in whivh they finished 3rd on price beaten by 2 tier 1 contractors.

Many of the schemes were bid based on self delivery of M&E unfortunately the management team decided to close the decision down.

So not a simple case of jobs being under priced ……. Just a convenient scapegoat after all with all the Carrillion staff why would it not be a success ……

By Employee

Another case of buying to much work at low margin !

By Anonymous

Unfortunately – the usual story of great leadership. Lets buy work cheap & fudge the numbers so they pick up bonuses. Ride into the sunset and then go again. Carillion- Forrest- Lagan – Interserve.

By Anonymous

Dear Jimmy 5 bellys: I assume you are one of those who scheme and scam to fill your own pockets and just do not give a damn if your ruin decently-run businesses, other people’s careers, and other people’s lives. Yes, to cheat, steal and swindle others is one way of getting up the corporate ladder. Your Christian values are shining through. And, I do have a job. I have luckily not yet been made unemployed by money-grabbing actions of others.

By James Yates

It seems the blame sits squarely with whoever was directing the pre-construction team. It doesn’t sound like they were deliberately buying work, more likely uncovering errors as they went. For it to happen with the frequency and severity it has the pre-construction director should not be in a position to sit and relax on their backside counting bonuses, they should be directly culpable for this mess. over 140 people lost their jobs through this .. .scandelous

By Anon 1

I love unicorns and sunshine! Let’s spread some love folks and not make the comments section an extension of the passive aggressive Twitterati.
Peace and love to all during this festive month xxx

By Fr Christmas Helper

Pass the soap.

By Matt F

Daaaad, I think you got it wrong again

By Marty

Interesting

By Andrew Green

Who in the right mind would believe that a well established pre -construction team would under estimate a job by £5 million.

There are enough processes in place for the figures to be checked and rechecked by the supposed hierarchy prior to offering the price to the client.

Forrest were a tier 2 contractor which was reiterated by Mr Nicholson on several occasions so why did he outsource a tender to a Carillion friend to “review” to find the £5million deficit. Of course there was a deficit, every price obtained was from a tier 1 contractor with increased prelims and prices. Stop trying to make scapegoats out of people who worked their arses off and focus on the people who actually made the decisions to offer the price to the client!

The increased wage bill after the jobs for the boys certainly did not help and the previous comment is correct – the hr team did not employ most of the ex Carillion staff as they were offered jobs by their mates with over inflated salaries!

By tier 2 my arse

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