Engineering company Cordell Group was forced to wipe £1.25m off its profits after exiting a major contract at the Grangemouth oil refinery, accounts have shown.
The Stockton-headquartered firm has published accounts for the 17 months from August 2012 to the end of 2013, in which continuing growth in all sectors was marred by a “bitterly disappointing” loss triggered by events at Grangemouth.
Industrial action began in 2013 after owners Ineos said the plant was making losses and could only survive if staff accepted worse employment terms, and terms were agreed in October 2013 in which staff moved to a new pension scheme and accepted a three-year pay freeze.
In a strategic report accompanying the Cordell Group accounts, finance director Nigel Park said trading within its Scottish subsidiary Cordell Engineering Services Ltd (CESL) had been difficult, and that due to “the well-publicised and degenerating situation at Grangemouth the directors took the decision to depart from site.”
The group recorded pre-tax profit of £281,000 – a figure reduced by £1.25m through costs arising from the contract loss.
Mr Park said: “The board of directors took the decision to exit the contract, a tough decision, but ultimately one that has been proven to be well founded. Without this exceptional item profit before tax would have been £1.533m.
“Our exceptional event during the period was bitterly disappointing but delivered many valuable lessons that have been implemented.”
Formed 14 years ago, the group employs some 780 people across nine UK sites, predominantly in the North East, and has operations in Canada and the Middle East, working in a range of markets including oil and gas, petrochemicals, mechanical construction and pharmaceuticals.
Turnover topped £70m in the period, while 2012’s revenue was posted as £40.04m, giving an average monthly revenue of £3.42m in 2012, compared to £4.12m a month in the period covered in the accounts.
The company said its term contracts remain the backbone of the business and, within its project work, significant progress was being made at the start of 2014 with a healthy list of work ahead.
Outside of large mechanical and electrical projects, the firm has identified 10 areas that have the greatest potential for growth, including pipework fabrication services, marine engineering and machining and fitting services, prompting the firm to spend “considerable resource” in sales and marketing as well as enhancing employees’ trade skill sets through training initiatives.
To take advantage of growing opportunities the firm also invested in sites, including a new 90,000sqft pipeshop in Stockton, opening the door to the group taking on larger contracts and making further headway into the offshore market.
New facilities in Thornaby for the panel shop and EC&I Construction Services business has also led to growth and new revenue and profit streams.
Looking ahead, the firm said it had started the year in a very good position despite “known but manageable” problems within Scottish operations and deployment into larger Teesside premises.
“Cordell Teesside has performed exceedingly well through 2013 and will continue with significant new orders. For the group, the forecast prospect register indicates a target annual turnover of circa £50m.
“Cordell is a different business from our competitors and from top to bottom we have to perform, make impact, make profit and invest in an ever changing future.”
Cordell is the second Teesside firm to have reported problems from Grangemouth in the last few weeks.
At the end of September, Middlesbrough-based Hertel reported a fall in profits after it lost a major contract at the refinery.