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Main contracting cuts into Skanska UK profit margin

Firm remains optimistic despite contracting division's profits fall, and hopes to double margins

PRE-TAX profits at Skanska Construction UK fell to £648,000, despite a rise in turnover to £559 million during the year to last December.

Results filed at Companies House show profits sagged from the previous year's figure of £7.6 million due to a couple of loss-making housing jobs and the closure of several regional offices.

Skanska Construction UK specialises in general civil engineering, building, mining and tunnelling works.

The contracting company forms part of Skanska's wider UK construction operations, which include PFI, facilities management, technology and piling divisions.

The overall UK construction business saw pre-tax profit jump 5.6 per cent to £14.7 million on £933.4 million turnover in 2002, which translates into an operating margin of 1.6 per cent.

David Fison, chief executive of Skanska's UK operations, is aiming to double the margins from contracting work.

He said: 'I see 3 per cent as do-able but being predictable is more important. We are delivering to budget and the plan is to keep doing so while steadily lifting the profit margins.'

Skanska Construction Group is the main holding company for all of the firm's UK operations and holds a 50 per cent stake in Hong Kong-based contractor Gammon.

The workforce at the group slumped by 1,600 to 6,600 as two big Channel Tunnel Rail Link contracts came to an end and the Gammon stake was sold last December. Skanska's final share of pre-tax profits at the Hong Kong firm crashed £2.9 million to £5.3 million in 2002.

Skanska Construction Group includes the old mining and liquid natural gas operations that operate across the world and were bought when the business was sold by Kvaerner.

The departure of Keith Clarke as Skanska UK's chief executive last year reduced the board to four members and cut the wage bill by 12 per cent to £1 million.

The highest paid director at the firm is now on £263,000, compared with £393,000 in 2001.