Danish contractor Pihl has spoken of the “great and far-reaching negative consequences” of its decision to wind up a 126-year-old business, largely as a result of incurring significant losses in the UK and other overseas markets.
One of Denmark’s oldest contractors, Pihl employs a total of 2,400 staff and has recently built several projects in the UK under subsidiary Pihl UK, set up in 2007. It filed for bankruptcy at the weekend, blaming over aggressive expansion at home and abroad and cost overruns on various projects.
In a statement, the group’s board of directors said: “The bankruptcy will have great and far-reaching negative consequences, financially and personally, for many skilful employees, for owners of construction projects, for partners and for subcontractors and suppliers. It is terrible to have to make a decision that will affect the day-to-day lives and financial foundations of so many people and businesses.”
Pihl’s problems were first laid bare in its 2012 annual report, released in May, which showed a significant loss of DKK473m (£54m) on a turnover of £625m, caused mostly by write-downs of current projects and debts from previous projects run by its subsidiaries in the UK, the US and projects in Sri Lanka and Sweden.
Pihl built the University of Aberdeen’s new library
The statement added: “The expansion took place without sufficient balance in the contract terms, and without having sufficiently verified the credit quality of the foreign customers and subcontractors, and without making sure that the qualities of the work processes and the risk management procedures were sufficient to support the increase in activity level.”
UK projects included Aberdeen’s 3R school programme, the £32m Cowes college project on the Isle of Wight and the troubled Museum of Liverpool project, and together accounted for a loss of roughly DKK90m (£10.3m).
The Pihl and Galliford Try joint venture building the Museum of Liverpool was earlier this month ordered to pay £205,000 in damages to the client over an external amphitheatre, and may have to cover further damages related to problems with suspended ceilings at the £72m project.
Pihl also built the University of Aberdeen’s new library, designed by Danish architect Schmidt Hammer Lassen.
Two bridge projects in Sweden incurred a write-down of roughly DKK135m (£15.5m), and a loss on a bridge project amounted to DKK40m (£4.58m). The statement said that the firm also had to pay DKK125m (£14.3m) in claims after losing a lawsuit for a project carried out abroad with a consortium.
The company revealed on Monday that: “The write-downs and provisions made were insufficient, and thus the actual amount of write-downs required was greater than had been anticipated so far. The board of directors, together with the largest financial creditors, has struggled to establish the framework for a new recapitalisation to ensure the viability of the company… on Sunday it became clear that it would not be possible to find a solution that could secure the continued operation of the company.”
