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Skanska to target councils for work

Skanska is to target more local authority work in the UK following a 35 per cent drop in orders during 2011.

The Swedish-owned contractor last week posted full-year results for 2011, which saw the firm’s operating margin increase to 3.3 per cent, but on a 4 per cent drop in revenue to £1.22 billion and a slump in orders from £1.27bn to £878 million.

UK chief executive Mike Putnam told Construction News the firm was planning to forge better relationships with local authorities, take on more smaller projects and increase its investment activity.

“We are trying to make sure we are connected to the local councils in a way that allows us to do more business in that area,” he told CN, following the firm’s opening of a new office in Birmingham.

“We have got government saying we want to devolve responsibility down to local level and we think it makes good sense to have local contacts.”

Although feeling the effect of public sector cuts, Mr Putnam highlighted that Skanska’s order book is done “on a very conservative basis”, only reporting a rolling two-year period and excluding frameworks.

Pointing to the backlog orders at £1.89bn - also down 16 per cent - he added:  “Clearly we would like it not to be down because it’s one of the key metrics, but the quarter four results for orders are up and if you link that to expectations, then I’m not worried, I think we will be fine.”

He stressed Skanska does not intend to compete with SMEs, but will continue its strategy to rebalance the portfolio to smaller schemes.

“We do want to make sure we talk about them a bit more as we grow and do a larger number,” he said, adding that the firm will naturally continue with big, high profile projects.

Skanska also wants to increase investments and developments as commercial work slows in the capital, while expanding the residential business it launched last year.

Mr Putnam said many in the industry were cheered by Chancellor George Osborne’s autumn statement.

The National Infrastructure Plan’s pipeline of projects had helped make “one or two” sidelined projects a possibility again, including the A14 and the M1 junction 19 schemes, he said.

Mr Putnam said the margin boost is “off the back of projects won in better times”, but also largely down to rigorous risk testing during the selection of projects, carried out by a UK team and another in Sweden.

Skanska results

Profit – operating profit up 6 per cent to £40.4m, from £38.2m in 2010.  Operating margin up to 3.3 per cent, from 3 per cent in 2010. 

Revenue – £1.22bn, down 4 per cent on the £1.27bn of sales in 2010.

Order book – down 35 per cent to £878m, from £1.34bn. Order backlog down 16 per cent to £1.89bn.

Total group revenue – £11.67bn, £780m profit, with £11.7bn of orders.

Major projects –  the Skanska/Costain joint venture for the £150m Crossrail contract at Paddington station; a Skanska and John Laing 50/50 consortium reaching financial close on the £150m Croydon & Lewisham Street Lighting PFI project; two commercial jobs in the City worth £80m; the £57m prisons construction contract at Grampian.

Figures: January-December 2011

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