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Skanska UK margins trimmed again

25 Jul 16 Skanska UK grew its construction revenues by 24% in the first half of 2016 but its profit margin fell for a fourth successive year.

Skanska completed the Monument Building in the City of London in May, two weeks early
Skanska completed the Monument Building in the City of London in May, two weeks early

Skanska UK construction revenues reached £836m in the first half of 2016 (2015 H1: £675m). Operating profit for the six months to 30th June 2016 was up 2.5% to £16.5m (2015 H1: £16.1m), which equates to an operating margin of 2.0%.

In the first half of 2012, Skanska UK’s construction business made an operating margin of 3.6%. There has been a steady deterioration every year since then. However, Mike Putnam, president and CEO of Skanska UK, said the operating margin remained ‘sound and stable’.

“Despite a tough contracting environment and with an uncertain future caused by the EU referendum, we have a strong order book and pipeline of work,” he said. “We have also maintained a sound and stable operating margin throughout the first half of 2016. The financial crisis and recession showed that Skanska has a well-honed capability to manage through external change. We will continue to take a measured and calm leadership approach to our business as the picture following Britain’s decision to leave the EU becomes clearer.”

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Mr Putnam added: “While the EU referendum result has created some uncertainty in our sector, we have seen little impact on our UK business to date. We have a wide portfolio of operations across public, regulated and private sectors that will provide diversity and resilience. We will continue to monitor the situation carefully and work very closely with all our customers, delivering against our commitments.”

Business won during the past six months includes a: a £45m contract to build the Copyright Building in the West End of London; a Network Rail contract for the Northern Hub project in Manchester, worth more than £74m to Skanska; and the design and construction of a 5km tunnel underneath the river Humber for National Grid, worth £40m to Skanska.

In addition, Barts Health NHS Trust has extended Skanska’s facilities management contract to provide a waste management service until 2021 and there have been highway maintenance wins in North Somerset, Hampshire and West Sussex.

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