Problem contracts cause surge in profit warnings

Grant Prior 4 years ago
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Problem contracts caused a surge in profit warnings at UK listed construction companies in the first half of 2018.

Public construction firms issued six profit warnings in the first six months of this year compare to seven in the whole of 2017.

The data is contained in the latest EY Profit Warnings report.

Ian Marson, Construction Leader at EY, said: “The last year has been one of growth, but also increased challenge and scrutiny, which has drawn attention to some of the sector’s long-standing structural weaknesses.

“Concerns over the efficacy of PFI, along with increased scrutiny have served to extend the bid process for public projects.

“Two years of political uncertainty has also diverted attention away from infrastructure planning and spending.

“Margins also continue to remain under pressure, with risks beginning to build in raw material and labour costs from increased geo-political tensions.

“Problem contracts are by far the most common reason for contractor profit warnings and so it’s vital that companies bid selectively for contracts, concentrating on their strengths rather than just seeking to build turnover.

“They also need to apply strong risk management disciplines at the bidding stage to ensure they only take on the right contracts at the right price — and that they ensure that problems are identified and managed quickly.”

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