Amey has posted a 77 per cent fall in pre-tax profit in its latest financial results, while turnover at the firm has hit £2.2bn.
The company saw pre-tax profit for the year to 31 December 2015 fall to £23.6m, down from £106.7m a year earlier, while turnover increased 2.9 per cent to hit £2.23bn, up from £2.17bn.
Amey said the fall in profit was largely due to exceptional charges of £55m in its local government division in relation to “the possible impact of an unfavourable resolution in ongoing litigation” on a contract in Birmingham.
Birmingham City Council has been in dispute with the contractor since 2014 over the quality of repairs to its roads network carried out by Amey, while Amey counter-claimed over the quality of roads it inherited from the council when the contract began in 2010.
Amey said it had now undertaken “a revision of the contract’s profitability” following the exceptional charge. It added that cash collection in the local government sector had been “particularly challenging” over the course of the year.
Major contract wins for the division during 2015 included a 15-year, £235m deal with Trafford Council, which will see Amey provide highways and property services as well as waste collection, street cleaning and street lighting.
The firm has also won a 25-year, £225m contract for the Isle of Wight to deliver waste collection and treatment services.
In total, the local government division reported revenues of £950m, up from £904.4m a year earlier, while it saw an operating loss of £41m, compared with a profit of £55.9m in its previous results.
Revenue in its central government and utilities business hit £835.1m for 2015, up from £799.5m in its previous results.
The division’s contract wins include a £250m extension to its wastewater contract with Severn Trent Water and a £125m deal with Yorkshire Water to deliver wastewater services until 2020.
Mel ewell former ceo amey cropped
Its consulting business posted revenue of £601.6m, up from £537.2m a year earlier, with particular growth in overseas markets including Qatar, Australia and the US.
Chief executive Mel Ewell (pictured), who retired after 15 years with the business in March this year, said public spending cuts had led to “huge challenges” for Amey.
“However, by contiuously adapting the way we work, we were able to understand the challenges our customers face and assist them to deliver more with less,” he said.
Mr Ewell has been replaced by Andy Milner, who was formerly managing director of the firm’s consulting and strategic infrastructure division.