The firm revealed it is now seeking compensation from a subcontractor’s insurers to recoup some of the £17.6m it paid in damages to the developer Unite Students late last year after the cladding subcontractor involved went into liquidation.
A High Court verdict at the end of 2022 ruled that the specialist cladding contractor European Sheeting Ltd, which went bust in May 2022, was liable for the defects.
Sally O’Brien, joint chief executive at Downing, reported in accounts that the court held the subcontractor entirely responsible for the defects and as such, subsidiary George Downing Construction was pursuing the subcontractor’s insurers for recompense.
To restore financial strength, Downing group’s shareholder injected £6.5m into the business at the start of 2023.
Setting aside total provisions, the group delivered a pre-tax profit of £2m down from £4.8m in 2021, said O’Brien.
Over the year revenue slumped from £83m to £29m due to project phasing with several contracts coming to an end and Downing’s two large First Street jobs just beginning to mobilise.
O’Brien added: “The group has a very healthy pipeline of contracts programmed over the next five years.
“Its business for the most part comes from related entities where typically schemes are fully funded by a mix of upfront equity and development loans thereby reducing liquidity risk for the group.”