THE building and engineering company which erected the landmark steel arch at Wembley Stadium suffered a £17.7m pre-tax loss last year as a result of a bitterly contested legal battle over the contract.
Cleveland Bridge, of Darlington, said it had been hit by a £18.3m exceptional charge as a result of its long-running legal dispute with developer Multiplex Constructions, which contracted it to carry out work at the stadium in 2002.
CBUK’s 2007 annual results show it managed to increase turnover from £26m to £37m in 2007, but was hit by the huge legal costs after Multiplex became unhappy with the standard of work.
Multiplex, now known as Brookfield Europe, launched the case claiming CBUK was in breach of contract because of defective work, delays, failing to raise the arch in accordance with heads of agreement and by giving notice it would not carry out any more work in July 2004.
In the 12 months to December 31, CBUK had to write down the value of the contract by £11m and took a hit of £7.3m in legal costs. The dispute drove it £17.7m into the red compared with a pre-tax profit of £155,000 in 2006. And when Cleveland Bridge finally lost the case last September, it was ordered to pay £6m damages. Although Multiplex won the case, it faced a £10m bill for costs because the judge found against it on some issues.
The Darlington firm, which is owned by Saudi parent company Al-Rushaid Petroleum Investment, made 200 staff redundant after losing the case. Both companies have since filed an application to the Court of Appeal.
Independent auditor Goodman Jones said: “Any future settlement of the litigation with Multiplex Constructions could result in additional liabilities of a material nature to the company.
“The validity of the going-concern basis depends upon adequate financial support continuing to be available from the company’s ultimate parent.”
In his summing up of the case, presiding judge Mr Justice Jackson said he was disappointed the firms were unable to reach an agreement.
He said: “The level of expenditure far exceeds the sums which are seriously in dispute between the parties. The result of this litigation is such that, when costs are taken into account, neither party has gained any financial benefit.”
Despite the dispute, CBUK says it has a promising future, pointing out that it has managed significantly to increase its turnover as well as add 55 jobs to its 550-strong workforce.
A statement from its directors said: “2007 was a period of consolidation which takes account of the impact of dispute resolution. The company remains profitable on trading operations before exceptional items and this is a very good sign for future years.
“Many new projects were secured during the year and 2009 looks like being very profitable. The business is securing many repeat orders with blue chip clients.
“Major contracts have been secured in the bridge, offshore and commercial buildings sectors and the directors are confident for the future.”