Ferguson Marine hit by £1.58m yearly loss

Group Business Editor

Wednesday 7 March 2012

FERGUSON Marine, the last independent shipbuilder on the Clyde, plunged to a £1.58 million annual loss as the collapse of key renewable energy sector customer Subocean left a hole in the order book.

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Ian McConnell Business Editor EXCLUSIVE

But Port Glasgow-based Ferguson says it should return to profitability on the back of a £20m-plus contract for two ferries won in autumn 2011, new business from the renewables sector, and "reasonable prospects" for other tenders.

Ferguson was named preferred bidder last November for the two low-carbon, hybrid diesel electric and battery power ferries, being built for Caledonian MacBrayne fleet owner Caledonian Maritime Assets and due in operation in 2013. This contract will create about 100 jobs – a welcome boost following a sharp decline in staff numbers at the Port Glasgow yard in recent years.Richard Deane, managing director of Ferguson, told The Herald that Aberdeen-based Subocean had been a "very, very important" customer. He said it was apparent in November and December 2010 that offshore wind farm cable-laying firm Subocean, which appointed administrators in January 2011, had been "in difficulties".Ferguson cited "considerable bad debt expenses", as well as the gap in its order book, as having contributed to its £1.58m loss in the year to May 31, 2011. But it emphasised the ongoing financial support of 88%-shareholder and chief executive Alan Dunnet through his Holland House Electrical firm. Holland House's loans to Ferguson rose from £921,000 to £1.34m in the year to May 2011, the accounts reveal. Holland House had moved to relieve the burden on Ferguson in the shipbuilder's 17-month accounting period to May 2007 by writing off previous loans of £4.425m. Ferguson made only a small loss of £55,000 in the year to May 2010. Its £1.58m loss in the 12 months to May 2011 left it with a balance sheet deficit of £637,000 at the year-end. This total net liabilities figure, or deficit on shareholder funds, was in contrast to the £944,000 of total net assets which Ferguson had at May 2010.In their statement on the accounts for the year to May 2011, which have just become available from Companies House, the directors of Ferguson highlight the Subocean impact.They say: "The group loss is very disappointing in the main as a result of the unforeseen collapse of our major customer, from the renewables sector, at the end of 2010. "This customer, as in previous years, was expected to keep the yard busy for the remaining six months of our financial year. Regrettably, there was a real lack of volume, and we were unable to fill the gap. This was disappointing, as restructuring expenditure had previously been incurred to undertake work in the renewables sector as well as the traditional shipbuilding base."However, the directors highlight the wisdom of their decision to "retain the key skills, rather than reduce staff" – a stance based on hopes of "securing major marine contracts".They say: "Future events have confirmed this action to be correct, when a major contract for two vessels was secured."Auditor Henderson & Company, under the heading "emphasis of matter – going concern", draws attention to Ferguson's disclosures "concerning the preparation of accounts on a going concern basis, and the reasons why this is appropriate". Henderson emphasises its "true and fair view" audit opinion is "not qualified in respect of this matter".Ferguson states: "The financial statements are prepared on a going concern basis, despite there being a deficit of shareholders' funds in the consolidated balance sheet... of £637,000, following a loss for the year of £1.58m."This basis is considered appropriate because the group has been able to obtain sufficient long-term funding from another company under the same ownership to enable continued trading, it has an agreed facility with the bank lasting well into 2012, and has recently secured a major shipbuilding contract which commenced early in 2012. This is projected to return the group to profitability, and positive cash flows."The accounts show Ferguson's bank overdraft rose from £734,000 to £973,000 in the year to May 31.The directors note there is "no requirement" to make payment on the loan to Holland House, which bought Ferguson for £4.9m in 1995, "until the overdraft is eliminated".The average number of people employed at Ferguson dipped to 94 in the year to May 2011, from 98 in the prior 12 months. The workforce is now 120.Ferguson, which can trace its roots back to 1902, was hit in the first decade of the new millennium in its efforts to land big shipbuilding contracts by competition from countries including Poland.

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Ferguson Marine hit by £1.58m yearly loss

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