Two trading statements from major contracting firms have revealed differing fortunes this week.
Growth in fit-out business lifted Morgan Sindall’s expectations of higher profits, while Galliford Try has become the latest firm to flag up writedowns from legacy contracts.
In its trading statement today Galliford Try said: “A reappraisal of costs to complete and recoveries from two major infrastructure joint venture projects has substantially increased the anticipated liability to conclude the legacy contracts (contracted in 2014 and earlier) in the group’s construction business since Galliford Try reported its half year results on 21 February 2017.”
The group has set aside £98m to cover the costs with 80% of that accounted for by the two problem jobs.
It added: “One of these projects will finish on site in summer 2017, while the other, which represents the larger proportion of the estimated non-recurring costs, is scheduled to complete in mid-2018.
“The underlying construction business continues to perform well as it continues to be selective about future bidding.
Chief executive Peter Truscott said: “The impact of the legacy projects in Construction, in particular the two large infrastructure projects, is regrettable.
“However, as described in our recent strategy presentation, Galliford Try is no longer undertaking large infrastructure jobs on fixed-price contracts.
“There are no other similarly procured major projects in our current portfolio and we are encouraged by the performance of the underlying portfolio of newer work.”
Meanwhile, Morgan Sindall has signalled a strong start to the first quarter of the year with growth and profit margins being driven by fit-out work.
In a trading statement the company said that its order book for fit-out as at 31 March was up 17% from the year-end position, to a record £544m.
“Each division has performed as expected, with the overall group result being driven by further margin and profit growth in fit-out and the expected margin improvement in Construction & Infrastructure,” said the statement. “The Group’s committed order book as at 31 March 2017 was up 5% to £3.83bn from the year-end position, while the regeneration & development pipeline was up 2% to £3.28bn.”
John Morgan, Morgan Sindall chief executive, said: “We have had a strong start to the year, and with our strategy geared towards those areas of the economy we expect to grow strongly, together with the size and quality of our order book and pipeline, we are confident that the momentum we have seen so far is set to continue.”
