For the year ended 30th June 2017 Galliford Try posted pre-tax profit of 拢58.7m, down from 拢135m the previous year, on revenue up 6% to 拢2,820m (2016: 拢2,670m).
Profit was hit by one-off charges of 拢98.3m, which includes 拢87.9m in respect of two infrastructure joint ventures in Scotland: the 拢790m Queensferry Crossing and the 拢550m Aberdeen Western Peripheral Route (AWPR).
Both projects were contracted on fixed-price terms 鈥� Queensferry Crossing in 2011 and AWPR in 2014. The Queensferry Crossing has now opened; the AWPR, which has done the more damage to Galliford Try鈥檚 books, is scheduled to complete in mid-2018.聽
Galliford Try's partners on the AWPR are Balfour Beatty and Carillion, who have also suffered heavy construction losses recently. Sharing the pain on the new Forth bridge are ACS (Hochtief, Dragados) and American Bridge.
Galliford Try鈥檚 construction division made an operating loss of 拢88.8m for the year on revenue of 拢1,526.9m. Even excluding the one-off costs associated with writing off major contract losses, the division still failed to break even, making a pre-exceptional operating loss of 拢900,000.
Chief executive Peter Truscott said: 鈥淲e have put into place rigorous processes to ensure a more disciplined approach towards project selection. Today, we are focusing on lower-risk public and regulated sectors and two-stage negotiated work, rather than large infrastructure projects on fixed-price, all-risk contracts which these legacy projects were.鈥�
He added: 鈥淭he construction market remains largely positive, as the UK continues to require substantial investment in its social and economic infrastructure. As a result, the order book in our 萝莉原创 business remains strong and we have already secured a significant proportion of work for the financial year, and much of the following year 2019. Our focus is on contract quality and risk management, and we will continue to be rigorous in our project selection, with revenue expected to remain broadly stable year-on-year as a result. Our newer work has been operating under these parameters and performance to date has been encouraging and is supportive of our target margins. As our legacy positions close out we expect margins to improve as we work towards our 2021 target of at least 2.0%.鈥�
Fortunately for Galliford Try, its house-building division saved the day. Linden Homes made an operating profit of 拢170.3m (2016: 拢147.2m) on revenue up 11% to 拢937.4m (2016: 拢840.8m).
Galliford Try is not the first major contractor to come a cropper from escalating costs on fixed-price contracts agreed several years ago. It joins the ranks of Balfour Beatty, Carillion, Laing O鈥橰ourke, Interserve, Bouygues UK, Vinci UK and ISG, who have all reported heavy losses in UK construction in recent times.
Many lower down the supply chain are braced for a chill wind as the cash starts to run out.
鈥淲e鈥檙e on the verge of the next massive downturn in construction,鈥� a scaffolding contractor tells us. 鈥淚n fact outside of the artificially buoyed up house-building market it has already started. My company has basked in two years of sector leading net profit margins (30%+) but I鈥檓 already making plans for these to be slashed next year. The shit is on the way to the fan again and those who are slow to realise and adapt will be in trouble by this time next year.鈥�
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