Galliford Try has flagged up strong competition from new entrants for work on AMP6 programmes as leading to significant pressure on prices in its Annual Report and accounts for the year ended 30 June 2014 published today.
The construction group also said that the UK construction market has remained challenging during the last 12 months but it is now seeing more opportunities across the country and an improving outlook.
Galliford Try said its construction division had delivered a robust performance and that it had continued to follow a strategy of being selective about the work bid for, in order to protect margins. However, while revenues were up 1% at £832.9 m from £822.7m in 2013, profit from operations fell from £12.9 m to £8.0m, accompanied by a fall in operating profit margin from 1.6% to 1.0%. The water sector accounted for £349 million during the year.
Galliford Try said it was continuing its selective approach to new projects, a strategy that had seen it outperform its peers in the tough markets of recent years.
Commenting on its work in the water sector, the firm said that the regulated sector is driven by five-year investment plans, which means that “business has come through consistently as expected.” Yorkshire Water has recently appointed the firm’s joint venture with AECOM Design Build to continue as a contractor for its AMP6 framework. The framework will run from 2015 to 2020 and is expected to be worth at least £110 million to Galliford Try over the period. The framework is similar in value and scope to the current AMP5 contract.
At the year end, Galliford Try’s order book was £1.4 billion (2013: £1.2 billion). Of this, 29% was public sector, 19% was in regulated industries and 52% was in the private sector. Frameworks account for 56% of the order book.
The Group’s construction order book has now more than doubled, rising to £3.0 billion following the acquisition of Miller Construction in July 2014 – the deal will also provide Galliford Try with access to new frameworks.
On the decline in margins to 1.0%, the company said it had anticipated that margins would be lower in 2014, owing to challenging conditions in the supply chain, notably in building, leading to higher costs than expected at the time it bid for some contracts. The effect was mitigated by profits of £3.1 million on the disposal of three investments, held and managed within the building division.
Galliford Try said it expects to hold its construction margin steady during 2015.
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