Pochin posts loss after values plummet

Cheshire-based construction and development group Pochin's today posted a £9.4m loss for the year to the end of May 2009, a sharp fall from a £1.8m profit the year before.

The group recorded a turnover of £102m, compared to £115m in 2008, and cancelled its final dividend.

Net assets also fell, to £38.3m, down from £53.1m, and were equivalent to 184p per share (2008: 255p).

Borrowings during the year were down £1.4m, against an £11.9m increase in 2008.

On the brighter side, a series of construction wins saw the division turn a profit of £1.1m (2008: £0.3m).

The company said a number of valuable construction contracts were won in areas with which Pochin's has not generally been associated. For example, three recent contracts were gained in the education sector.

The division has an order book of £47m for the current year (2008: £55m). Work includes a new distribution centre for Stobart in Widnes and an office for Morson International in Eccles.

Pochin's concrete pumping division recorded a loss before tax of £1.4m (2008: £0.3m profit) on a turnover of £10.8m (2008: £14.9m). The total number of jobs in the year was 16,645 (2008: 21,206) with 1.1m cubic metres of concrete pumped (2008: 1.4m cubic metres pumped). Average price per job was £611 (2008: £648). The division's on-site reliability remains in excess of 99%.

The developments and investments division reported 'a further decrease in property values and extremely weak market conditions.'

The company statement said: "While substantial losses have been incurred through the downward value of the group's wholly owned property and of its investments in joint ventures, the rents in its investment portfolio have held up well with relatively few voids being experienced. Additionally, Pochin has achieved two significant land sales in the year at Midpoint 18, Middlewich and at Ellesmere, Shropshire. In addition Pochin secured the letting of Emperor Court in Crewe to Cheshire East Borough Council."

Development and investment produced an underlying profit of £6.1m but this was reduced to a net loss before tax of £4.3m (2008: £4.3m profit), following review and impairment of property values, investments and inventories. The value of investment property now totals £25.9m (2008: £46.2 million).

Despite the challenging market, Pochin has been committed to its joint venture partnerships. Pochin has continued to work with UK Land & Property Limited (UKLP) on joint projects in Liverpool and North Wales. The refurbishment at Walker House at Exchange Flags, Liverpool was completed and the anchor tenant, the Ministry of Defence, has now taken occupation. The year saw further lettings, including Blankstone Sington at Walker House and more space secured at its sister building, Horton House, where occupation has increased to over 80%.

Chairman Richard Fildes said: "These results reflect the most dramatic and sustained collapse in property values in living memory. Values of commercial property have almost halved since their peak just over two years ago and this is the context in which these accounts have been prepared. It is, however, encouraging to see that the construction arm has increased its profit by almost four-fold in comparison to last year, notably winning contracts in areas with which Pochin's has not generally been associated.

"It is likely that the group will be operating in subdued market conditions for the foreseeable future. However, the group continues to generate cash, and combined with the continued strong support of its principal bankers, the Royal Bank of Scotland, this will enable Pochin to position itself appropriately to take advantage of the improved conditions, which will eventually materialise.

"Pochin's has great strengths and considerable resilience. It has a well deserved reputation for both quality and service in its trading divisions, and those attributes, allied to its considerable holdings of land and investment property, will enable it to benefit from profitable opportunities as the property cycle turns."

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