In the 18-months to 30th June 2022 Trench Holdings, a subsidiary of McLaughlin & Harvey Holdings, made a pre-tax loss of 拢3.7m on turnover of 拢331m.
This compares with a pre-tax profit of 拢3.1m for the 12 months to 31st December 2020 and turnover of 拢208m.
The board decided to delay the financial year-end because of an ongoing legal dispute between its subsidiary Barr Environmental Ltd (BEL) and the tax authority, Revenue Scotland, over landfill tax. BEL maintains that virgin soil is not waste and should not be taxable; Revenue Scotland disagrees. BEL appealed to the Upper Tribunal for Scotland and claimed substantive victory, which promoted the Scottish government to enact new legislation in July 2022 to give effect to Revenue Scotland鈥檚 position. In the meantime, Revenue Scotland is appealing the Upper Tribunal for Scotland judgment.
Chairman Ken Cheevers writes in Trench鈥檚 annual report: 聽鈥淭he dispute between Revenue Scotland and BEL has had a huge detrimental impact on the business of BEL and all efforts are currently being made by the directors to amicably and sensibly resolve this legal dispute.鈥�
He said that while construction activities had grown 16% on a like-for-like basis, BEL had seen a decline in trading 鈥渁s a direct result of the legal dispute and lost two long-standing local authority clients as well as 鈥渁 significant proportion鈥� of its private client base.
鈥淭he loss of these clients was a direct result of BEL having to re-price its waste acceptance gate fees at the time of a major re-tender based upon the errant judgment of the First Tier Tribunal, which has subsequently been overturned, and the associated reputational damage inflicted upon the business by this judgment,鈥� Mr Cheevers said.
BEL had to make a provision of 拢1.95m in the accounts to recognise the liability of the legal action and had been forced to restructure after the drop-off in business, closing two of its sites.
The second factor hitting the company鈥檚 profits during the period was a single construction contract in remote Stornaway.
鈥淐onstruction activities were strong across leisure, education and industrial & commercial sectors for both public and private clients,鈥� Mr Cheevers said, 鈥渞esulting with a number of key standout projects including a recently completed and very successful stadia project for the Birmingham Commonwealth Games.鈥�
However, he continued: 鈥淒espite a suite of solid performing projects throughout the year a large care and residential facility which is being construction in the remote location of Stornoway has resulted in an exceptional loss and is dominating annual performance. The extent of the loss provided is 拢8.3m in the most recent accounts and has undermined otherwise strong performances from the remaining projects.鈥�
Meanwhile, parent company McLaughlin & Harvey Holdings made a pre-tax profit of 拢3.2m for the same 18-month period to 30th June 2022 on turnover of 拢799.6m. In the year to December 2020 it had made 拢4.4m profit before tax on turnover of 拢480.3m.
鈥淲hilst market conditions in the UK and Ireland continue to be highly competitive across the business sectors we operate in, the on-going investment in business development, infrastructure and in our peoples and skills base will ensure continued success for the group going forward,鈥� group finance director David O鈥橬eill said in McLaughlin & Harvey鈥檚 annual report.
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