Shepherd to cut turnover 40% over next two years

Allan McDougall, chief executive of Shepherd Construction, plans to cut turnover 40% to create a more profitable company focused on partnership schemes rather than design-and-build contracting.

The decision follows a drop in turnover at the firm from £329m to £326m in the year to 30 June 2009, which it revealed this week. McDougall said his planned restructuring would further reduce turnover towards £200m in 2009/10.

The company, which has reduced its staff levels by 180 to 750, made a loss of £10.5m in 2009; this included restructuring costs and a £12.4m writedown after the collapse of the £200m Trinity Walk scheme in Wakefield.

McDougall said the business had been reorganised around winning work on frameworks and long-term partnering agreements, but admitted the planned reduction in turnover was partly a reflection of the state of the market. The firm is aiming to return to £500m by 2012/13.

He said: “We felt we needed to change direction. We wanted more of our work to be on frameworks and partnerships.

“We want more repeat clients. But it’s also about trying to move away from a confrontational construction relationship.”

The change will be a sharp turnaround from Shepherd’s traditional design-and-build business. In the past year it has won places on three frameworks, including Partnerships for Schools’ academies framework in the North and Midlands, the NOMS Alliance prisons framework and York’s primary capital programme for primary schools.

McDougall said the firm would be able to announce £180m of business in the next few weeks, on top of the restart of the Trinity Walk scheme, which Shepherd has invested in to help it get off the ground.

This week Shepherd Group, the family-owned parent company, announced a loss of £1.5m on turnover of £701m.