Two major Scottish infrastructure projects have left construction group Galliford Try nursing a near-£80 million headache.
Additional costs on the £790m Queensferry Crossing bridge contract and the £550m Aberdeen Western Peripheral Route are understood to be responsible for the bulk of what the group described as a “regrettable” £98m hit following a financial review of projects.
Galliford Try is no longer undertaking large infrastructure jobs on fixed-price contractsPeter Truscott
The company said that a re-appraisal of two unnamed major joint venture projects – introduced as fixed-price contracts in 2011 and 2014 – showed it was on the hook for approximately £78m more than previously thought.
Galliford Try shares fell by more than 10 per cent following the news.
The company, which employs more than 1,600 people in Scotland, said it will no longer agree to large infrastructure projects on fixed-price contracts.
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.”
Aside from the one-off hit, Truscott said he was still confident the company will deliver a “strong performance over the financial year”.
“Whilst we remain cautious of continuing macroeconomic uncertainty, all three businesses are focused on exciting targets and clearly-defined plans to improve operating efficiency and grow both margins and revenue,” he said,
The group’s construction order book stands at £3.5 billion, up slightly from £3.4bn at 31 December. Its partnerships and regeneration division has seen its order book increase by 6 per cent since the end of last year to £980m, while its Linden Homes arm is seeing sales running at 5 per cent higher than last year.
Last month Galliford Try abandoned its pursuit of rival Bovis Homes, having been in a takeover tussle with fellow suitor Redrow.
The firm said it was unable to secure the support of the Bovis board on terms that would have represented “the best interest of Galliford Try shareholders”.
• Construction output rebounded in April, rising at its fastest rate so far this year amid a jump in house building and civil engineering activity.
The closely watched Markit/Cips UK construction purchasing managers’ index rose to 53.1 in April, up from 52.2 in March and above economists’ expectations of 52. Any reading above 50 indicates growth.