This time last year, Yorkshire’s GMI Construction Group post financial results showing threefold growth in a single year but only a pre-tax loss to show for it.
After some concerted consolidation and a closer look at contract risk, the pattern has been reversed.
Newly filed accounts for the year to 30th September 2023 show that GMI saw turnover fall 9% to £328.5m (2022: £360.3m).
However, this time it made a pre-tax profit of £916,000, compared to a £2.3m loss in the previous financial year.
GMI completed 27 projects during the year to September 2023, compared to just 11 in the previous year; but as of 30th September the number of projects on site was just 15, compared to 32 a year before.
At financial year-end cash at bank had reduced to £10.2m (2022: £333.7m) and the order book had shrunk to £232m (2022: £325m).
Average contract value during the year increased from £17m to £21m while, despite the drop in workload, average headcount swelled from 216 to 274.
Group finance director James Smith explained what has been going on: “Our strategic investment programme, which began three years ago, has played an important part in helping GMI navigate through a period of intense market turbulence that started with the pandemic and ended with massive inflationary pressures and then subdued orders due to the high interest rate environment.
“A deliberate and focused action of ‘controlled consolidation’ resulted in a reduction in turnover of 9% from the previous year but, more importantly, helped deliver significant improved profitability with gross profit increasing by 227% to £8.6m (2022: £2.6m).
“A critical factor in GMI’s increased profitability, and continuing forecast of future profits, was the decision to apply tough stress tests relating to the financial risk on larger projects. Our pricing will always be realistic and we are watching the respected economic forecasts with great care to ensure we can accommodate wider economic factors when triaging new work to establish the value/cost and risk elements.
“Aligned with the strategy of ‘controlled consolidation’, GMI has focused pn prudent business practices to ensure sustaibale profitability. This stratehgu emphasieses selecting the right project opportunities with robust business partnets and maintaining sound commercial footing in pricing and procuremnent, and prioritising sustaonavble and risk averse investments.”
A year ago GMI’s workload was all in the private sector. It has been looking to balance this out and get 30% of its work in the public sector. During the last financial year it secured places on five public sector frameworks , from which work is now starting feed through, James Smith said.
Chief executive Lee Powell added: “Looking to the future, we are approaching the next financial year with confidence. Inflation has already fallen significantly and has been predicted to drop to 2%. We are cautiously optimistic that modest, but helpful, reductions in interest rates will follow, unlocking our clients’ funding pipeline for a range of projects that are ready to go.
“We have decided to focus on deliverable projects with clients that have realistic cost expectations and expect turnover next year to remain subdued while we focus on a sustainable recovery in profitability.”
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