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Skanska UK's profit falls 44% as margin halves

Skanska UK’s pre-tax profit margin has slipped from 3 per cent to 1.5 per cent in its latest full-year results.

According to documents filed at Companies House, the contractor posted a pre-tax profit of £23.6m for the year to 31 December 2016, down 44 per cent compared with £42.1m a year earlier, while revenue rose 19.3 per cent to £1.65bn, up from £1.38bn.

The company blamed “a challenging business environment” for the decline in its profit margin, and said it had “added an additional layer of scrutiny to bolster tender review processes”, as well as implementing a system “to better monitor large project performance”, as a result of the decline in profit.

The group also cut its construction staff by 118, reducing headcount to 1,465, but increased administration staff by over 300. As a result, staff numbers increased to 5,559, up from 5,312.

Earlier this year, the contractor’s Stockholm-based parent company issued a profit warning after £33m of writedowns in the UK business, which group CEO Johan Karlström slammed as “not acceptable”.

Mr Karlström is due to step down his role next year after 30 years with the company, although he will remain in an advisory role until January 2019.

Skanska UK said its chief executive Gregor Craig, who took over from Mike Putnam in May, was “actively addressing the issues” relating to the writedowns.

The group has secured a number of major contract wins in the year, including a £165m deal with Network Rail to upgrade Waterloo Station and its rail systems, as well as a £245m seven-year road maintenance contract with Devon County Council.

However, the contractor was replaced by Mace on the £1.15bn second phase of Battersea Power Station after the contractor and client “mutually agreed to end their association” in July this year.

Skanska UK added that the EU referendum had created “uncertainties and opportunities” for the business, with the firm welcoming the government’s decision to invest in infrastructure including HS2.

The contractor has won two packages on the high speed rail line alongside joint venture partners Costain and Strabag.

Overall, the group reported cash and cash equivalents of £299.6m at year end, down from £329.6m a year earlier.

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