Dawn Group defends plan to close construction arm

Group Business Correspondent

Friday 13 July 2012

DAWN Group has defended its decision to close its construction arm to focus on development work and housebuilding after the homes division made a loss in the last financial year.

LATEST ACCOUNTS: Dawn Group, led by major shareholder Alan Macdonald, made a £4m profit from construction. Picture: Kirsty Anderson

Custom byline text:

MARK WILLIAMSON

The latest accounts for Dawn Group show the homes division lost £1.2 million in the year to January 31, after paying half of a £1.5m bill Dawn faced to get out of an interest swap agreement with Bank of Scotland.

Led by major shareholder Alan Macdonald, Dawn made a £4m profit from the construction business during the period.The accounts were filed at Companies House five months after Dawn announced plans for an orderly closure of its general construction arm, citing a "severe slowdown in the main contractor market".The closure is expected to result in the loss of around 60 jobs by the time it is completed next summer.However, finance director Stewart Rough yesterday said there was no doubt that Dawn Group had made the right decision. He said the construction results for the year to January had been boosted by income earned under contracts that were won at the start of the year and work generated by other parts of the group that may not be repeated.He said: "When you look at jobs that were being tendered at the end of the year the margins were non-existent in them. It was not a sustainable long-term business."Mr Rough said the construction market could remain flat for five years.By contrast, Dawn expects to be able to make steady profits from housebuilding by developing homes on land which it acquired at favourable prices.In the accounts, Dawn's directors said it remained difficult to forecast when the private housing market would improve and return to previous levels. The homes division loss for the year to January 31 was stated after charging a £736,000 share of the £1,471,000 Dawn paid to exit an interest rate swap agreement it entered before base rates were cut to a record low of 0.5% by the Bank of England.The company agreed to pay interest fixed at 5.335% plus a lending margin on £16.3m borrowing for seven years.Last month, the Financial Services Authority found Britain's biggest banks including Lloyds, which owns Bank of Scotland, guilty of serious failings in the sale of interest rate swap agreements. These left some firms locked into agreements that forced them to pay interest at much higher rates than might have become available. However, Mr Rough said Dawn would not be trying to take any action against Bank of Scotland.He said: "We made a decision (regarding the rate swap) for commercial reasons when rates were going up. They did not force us."In the year to January, Dawn Group made £6.3m profit before tax compared with £4m in the preceding year.The development arm made £2m profit in the latest year, after a £736,000 share of the interest rate swap break fee.Group turnover increased to £103m in the year to January from £73m.Housing turnover fell to £14.1m from £15.7m.Construction revenues increased 47% annually, to £76.3m.

Contextual targeting label:

Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis. If you're a relatively new user then your comments will be reviewed before publication and if we know you well then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules, which are available here.

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

Dawn Group defends plan to close construction arm

Commenting & Moderation

MOST READ

SPONSORED LINKS

MOST COMMENTED