Mace has reported a slight fall in profits after taking a £13m impairment in relation to a property development in Oxford.
The contractor made a pre-tax profit of £36.5m in 2022, compared with £38.3m in 2021, while its turnover rose by £3m to £1.936m of pounds Mace’s headcount grew by 11 percent last year, from 6,054 to 6,710.
The group’s profit was reduced by a £13m impairment on a loan to its joint development venture with Doric Properties, understood to be Botley Development (Holdings) Limited, which offers a build-to-let scheme of 150 tenements in Botley, West Oxford. . The deterioration left Mace with a profit margin of 1.9 per cent, despite an operating margin of 2.4 per cent.
Mace CEO Mark Reynolds said New constructions the company “took a hit” in the plan after a Red Book assessment reduced the value of the property above a “0.5 per cent reduction in expected rental yields”.
“These are strong results,” he said. “Without the property blight, we had a blistering year. But we have to weather the storm, just like other property companies – Landsec and British Land had to write 600 million pounds i 1 billion pounds respectively. That’s how auditors review things.”
Mace has now scaled back its property development activities, with the value of its ongoing development work down from £12.5m to £7.5m. The company was working on seven developments simultaneously, but has now sold property assets in Cardiff, Exeter and Oxford, and is working on one property development at a time, according to Reynolds.
“We cannot carry property valuations and revaluations [as well as real estate investment trusts],” He said. “Our main business is not development. We made money [from development] in previous years, but we stuck to the cycle and learned a lot”.
In 2022, Mace saw its consultancy revenue rise by 36%, from £366m to £500m, while its construction turnover fell from £1.5bn to £1.4bn. The company earned 27 per cent of its revenue (£516m) overseas, with major projects in the Middle East, Canada and the US.
Mace expects turnover of £2.45 billion in its 2023 financial year despite the government decision to stop work to the £4.8 billion Euston Stationfor which the Mace-Dragados joint venture expected to receive 350 million pounds this year.
Reynolds said the pause was “not ideal”, admitting there was a “possibility” HS2 would scrap its contract with Mace-Dragados and tender it the construction of Euston station, which is currently is redesigning to cut costs.
However, the company still hopes to progress construction work at HS2’s Curzon Street station in Birmingham won the £570m job with Dragados in 2021.
Reynolds said Construction news that the company “wasn’t really” interested in further work on the football stadium, including projects Manchester City, Crystal PalaceAston Villa and Leeds United, adding: “We’re not a mid-table player, we’re a global player.”
“We’re looking at mega-complex commercial projects, life sciences, data centers, gigafactories, as well as aviation,” he said. “We have been supporting [the establishment of new public agency] Great British Nuclear, so we are well placed there. We don’t expect the government to invest [heavily] on road and rail”.
Last year, Mace’s highest-paid director, understood to be Reynolds, received £2.2m in salary and other benefits, with a total of £10m paid to the company’s directors.
Reynolds has been Mace’s CEO for 10 years this year, but he said CN he “will not be CEO [another] 10 years, that’s not healthy”, and adds: “Ask me [again about succession] in five years”.
The Mace boss and co-chairman of the Construction Leadership Council also pointed to the government’s progress in building homes and fixing building safety, saying CN that the government was “more interested in small boats than in houses for the people”.
