Infrastructure firm Galliford Try has announced an extra £98m in costs after reappraising its construction contracts, tarnishing what it describes as an otherwise ‘strong trading performance’.
In the wake of the announcement the firm reiterated that it is is 'no longer undertaking large infrastructure jobs on fixed price contracts'.
In a statement the group said it estimates non-recurring costs of around £98m, some 80% of which relates to its share of two joint venture projects.
These schemes were contracted in 2014 or earlier with one of these projects due to finish on site this summer and the other, which represents the larger proportion of the estimated non-recurring costs, scheduled to complete in mid-2018.
Galliford Try also reported that its construction orders book is currently £3.5bn, up slightly from £3.4bn at the end of 2016, with 73% of next year’s revenue secured.
It also revealed that 85% of its workload is now within frameworks, lower risk public and regulated sector and two-stage negotiated work.
'This focus is expected to deliver turnover growth by 2021 to £1.8bn, with an improvement in the operating margin to over 2.0%,' it stated.
The infrastructure firm added: ‘Whilst construction's result will be impacted by the non-recurring charge, the underlying business continues to perform well. As set out in our recent strategy presentation, the business is focused on improving operating performance and risk management processes to support margin improvement.
'Significant progress has been made through a strong focus on selective bidding and ensuring that new work contains sufficient allowances for risk, margin and inflation.’
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.
‘Excluding the non-recurring charge, we remain confident in delivering a strong performance over the full year, and we plan to pay the dividend in line with previous guidance. The group continues to make good progress on our strategy to 2021, supported by the strong leadership of our reorganised management teams.'