Turnaround no reason to celebrate for Galliford Try

GALLIFORD Try swung back from last year's interim loss to a half-year profit yesterday, but the construction group warned it was bracing itself for drastic cutbacks in UK government spending after the general election.

The company, which owns Edinburgh-based Morrison Construction, has laid off 20 per cent of its Scottish workforce over the past nine months, taking its headcount down to about 1,000.

Chief financial officer Frank Nelson told The Scotsman that the company was "cutting its cloth" in preparation for cutbacks, adding that the market in Scotland was even more competitive than south of the Border.

He said that Morrison faced increased competition from foreign firms – such as the Bilfinger Berger, CAF and Siemens consortium building Edinburgh's tram network – and that the group would take on fewer contracts to keep up profit margins.

"If the Tories get in, then I think the cuts will be stiffer," Nelson said, "but no matter who gets in there will be cutbacks, and the easiest thing to cut is big infrastructure projects like roads."

He added: "We've factored that into our thinking – I don't think we've bottomed out yet in terms of falls in the construction industry, I think we still have some way to go. But the stock market is factoring that into construction companies share prices.

"Our annual construction turnover is about 1.2 billion, but we're prepared to let that drop to about 800 million to reflect the reality of the economic environment and to make sure our margins are kept where they are."

Nelson confirmed Galliford was part of a consortium bidding to construct the replacement Forth road bridge and it would also be bidding to build Aberdeen's peripheral distribution road.

Morrison recently completed construction of the 30m St Andrews community hospital in Fife and the company said work was progressing on the 450m M74 motorway extension.

The group is also renovating St Pancras station in London.

Nelson said Galliford had been "wisely" spending the 119.3m it raised in a rights issue in October, buying Bank of Scotland's stake in a house building joint venture in London at a nominal price of 4 with 42.5m of debt refinancing.

Interim group revenue fell from 774m in 2008 to 570m last year, but pre-tax profit stood at 6.4m, compared with an interim loss of 37.5m in 2008. The interim dividend was held at 3.3p.