Cheesegrater bolt failures to cost Severfield £6m.
Steel company Severfield puts price-tag on repair work for bolts which plunged from City skyscraper.
The cost of repairing the giant bolts on the City’s “Cheesegrater” skyscraper after two bolts broke and part of one of them plunged to the ground are likely to land their maker with a £6m bill.
Severfield, the structural steel business which produced the bolts, revealed the estimated hit it expects to take from the remedial work in its annual results.
In November last year, two bolts, each the size of a human arm, broke on the 738ft tower – officially known as the Leadenhall Building. One fell to the ground from the distinctive wedge-shaped building’s 15th floor, while the other dropped from a lower level, but was caught in the skyscraper’s framework.
A third bolt later fell from the building and was caught by “precautionary tethering” installed after the earlier incidents.
Losing the bolts – which connect the Cheesegrater’s “nodes” to its “megaframe” – did not affect the building’s structural integrity.
An investigation into what caused the bolts to fall from the building found they had fractured because of a process called “hydrogen embrittlement”. This occurs when hydrogen atoms diffuse into a substance and combine to create internal pressure.
Severfield provided 18,000 tonnes of steel for the 48-storey Cheesegrater, including bolts ranging from 20cm to 120cm long and with diameters of between 5cm and 7.5cm.
In its results, the company said it was working with partners on the building, including developer British Land, contractor Laing O’Rourke and structural engineer Arup, to replace all other bolts that could fail.
The work is likely to continue until the end of the year and has so far cost Severfield £1m. However, the company said it estimates the total bill will amount to roughly £6m, which has been recorded as a non-underlying charge.
Ian Lawson, chief executive of Severfield, said that five bolts have failed so far and the follow-up work will result in nearly all of the fixings being replaced.
He added: "It's in the interests of all parties to change all of them. It's a sensible, pro-active and professional approach that we - and the other parties - are taking.
"Often when things like this happen you see people go back to the trenches and don't want to solve the problem. That's not what has happened here."
While the £6m figure is the "best worst-case estimate" according to Mr Lawson, the final cost could be higher - or lower - as it is still to be established where the liability is.
Severfield’s revenue for the year ending March 31 fell 12.8pc to £201.5m, and the company reduced its losses to £191,000 before tax, down from £4.1m last year.
Operating margins improved on an underlying basis by 120 basis points to 4.5pc over the year and the order book strengthened to £194m, from £185m in November last year.
The company has "vastly improved" its bidding process with greater focus on risk and profitability, said Mr Lawson.
"We are pricing work at a sensible margin and not allowing ourselves to be battered down on price by clients so we lose money... Risk management means we are not taking on [work] that later comes back to bite us."
New contracts won during the year included the redevelopment of Liverpool’s Anfield stadium and a link bridge between Machester’s Victoria and Piccadilly stations.
The reduction is revenue was down to the company’s decision to focus on boosting profitability, chief executive Ian Lawson said. However, he was confident that revenue will rise this year with major infrastructure work beginning to come to market and major projects - such as the new Spurs stadium and a roof for Wimbledon's Number 1 Court - set to kick off. Major commercial projects such as a new base for Goldman Sachs and expansion of shopping centres are also expected.
Losses at the company's joint venture in India have also been reined in, from £3m last time round to £200,000.
Severfield is now well placed to win contracts in the emerging market, said Mr Lawson, which has not delivered the work at the rate expected by the wider market.
The company also returned to the dividend list, having halted payouts last year after a rights issue. A dividend of 0.5p will be paid on August 14.