Ferrovial’s British construction arm has defied the odds, turning a profit last year despite failing to secure any new contracts.
The company, known as Ferrovial Construction UK (FCUK), saw its revenue climb for the fifth consecutive year, reaching a record-breaking £536.6 million in 2023. This growth stands in stark contrast to the lack of new projects coming through the door, highlighting the resilience of ongoing contracts.
While FCUK emerged from the red with a pre-tax profit of £5.5 million, the shadow of 2022’s £30.4 million loss still lingers. That financial blip stemmed primarily from a provision for expected losses on the troubled Silvertown Tunnel project in east London.
“We had a setback last year on Silvertown, but we’re back on track,” assured Karl Goose, FCUK’s managing director, in an interview with Construction News.
Looking ahead, FCUK isn’t shying away from challenges. The report acknowledges the impact of rising costs across the industry, with inflation squeezing both labour and materials. The company has, however, adopted a strategic approach to mitigate these risks.
Adeptly sidestepping fixed-price contracts, FCUK has ensured most of its major projects are cost-reimbursable with inflation adjustments. This clever manoeuvre effectively transfers the burden of inflation to the client. Additionally, the company hedges significant material purchases, further fortifying its financial position.
FCUK’s cash reserves dipped slightly from £213 million to £189 million last year, partly due to the Silvertown provision. However, the company maintains this reduction hasn’t impacted its supply chain payments. Furthermore, FCUK boasts a healthy financial standing, with no short-term or long-term bank loans on its books.
The company’s workforce has seen a minor contraction, with the average monthly headcount falling from 589 in 2022 to 566 in 2023.
While large-scale infrastructure projects seem to be on hold, with delays plaguing the Lower Thames Crossing and the cancellation of HS2 phase two, FCUK is setting its sights on new horizons. The company is actively pursuing smaller ventures, including the £107 million Norwich Western Link road scheme.
Beyond traditional construction, FCUK is exploring exciting new avenues. The company sees potential in the energy, water, and complex building sectors, with data centres being a particular area of interest.
Leveraging the expertise of its parent company, Ferrovial, FCUK is poised to introduce its water subsidiary, Cadagua, to the UK market. Similarly, the company aims to establish Ferrovial’s energy and power transmission business as a new player in the British market.
With a strategic eye on the future and a commitment to financial prudence, Ferrovial’s UK arm appears to be well-positioned to weather the current storm and capitalize on upcoming opportunities.