Ferrovial Construction bounces back from Silvertown hit

Ferrovial’s UK contracting arm posted a record turnover and returned to profitability last year, despite winning no new work.

Revenue from contracts in the 2023 calendar year rose by 9 per cent to an all-time high of £536.6m – its fifth successive year of revenue growth.

All the contracts were ongoing from the previous year.

The firm achieved a pre-tax profit of £5.5m compared with a £30.4m loss in the year to 31 December 2022. The Spanish multinational firm’s profit margin improved from -6.2 per cent to 1 per cent.

in a strategic report included with the accounts, managing director Karl Goose said: “The year-on-year [turnover] increase was in line with the expected lifecycle of the company’s existing projects.”

But the firm’s year-end order book slipped back from £795m in 2022 to £648m in 2023 “as a result of no new contracts being awarded during the current year”, he added.

Ferrovial Construction UK (formerly Ferrovial Agroman UK) was ranked 38th in the CN100 2023 index of top contractors by turnover.

Its 2022 loss derived mainly from a provision for expected losses on the £179m Silvertown Tunnel project in east London, where the firm is involved in a tunnel-boring joint venture (JV) with Bam Nuttall and SK Ecoplant.

“We had a blip last year on Silvertown but now we’re going in the right direction,” Goose told Construction News.

However, the latest accounts mentioned the impact of macroeconomic factors such as “widespread” cost inflation in labour and energy.

“The market continues to experience supply issues and difficulties in the distribution chain for specific materials,” they added.

Goose said that Ferrovial Construction UK has mitigated these issues by avoiding fixed-price contracts in all of its major jobs bar Silvertown. Most of the firm’s contracts are cost reimbursable with inflation adjustable, “so inflationary increases in costs are largely borne by the client”.

It also hedges significant materials purchases “where appropriate”, the accounts stated.

Cash at bank fell from £213m to £189m last year, partly due to the Silvertown provision.

“The decrease was partially mitigated by the company’s efficient cash management,” the accounts said, but Goose insisted this was not “to the detriment of the supply chain”.

The firm has no short-term or long-term bank loan debts and paid no dividends last year.

Headcount decreased slightly to a monthly average of 566 employees, compared with 589 in 2022.

Apart from Silvertown, live projects for Ferrovial Construction UK in 2023 included work in JVs on HS2 phase one and the Thames Tideway Tunnel. It also completed work on the Northern Line extension in London, again in a JV.

The firm is also interested in going alone on smaller jobs because the big infrastructure projects “aren’t there right now”, said Goose. He cited the delay in a planning decision for the Lower Thames Crossing and the cancellation last October of HS2 phase two as examples.

“We’re still very interested in joint ventures but I think it’s fair to say that the market is in a state of flux at the moment – so we’ve looked to do smaller projects on our own.”

It is building the £107m Norwich Western Link road scheme in a two-stage contract and it has multiple jobs at Heathrow as part of the London airport’s H7 framework.

Goose said that the company is eyeing opportunities to move into energy, water frameworks and “complex buildings” such as data centres.

Parent firm Ferrovial has a specialist water subsidiary called Cadagua. “They’re very interested in the UK market,” he said. “We’ve put together a proposal to introduce them into this country.”

In a similar vein, Goose said he aims to promote Ferrovial’s energy and power transmissions business as a new player in the UK market.

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