This time last year, Yorkshire鈥檚 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 拢328.5m (2022: 拢360.3m).
However, this time it made a pre-tax profit of 拢916,000, compared to a 拢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 拢10.2m (2022: 拢333.7m) and the order book had shrunk to 拢232m (2022: 拢325m).
Average contract value during the year increased from 拢17m to 拢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: 鈥淥ur 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.
鈥淎 deliberate and focused action of 鈥榗ontrolled consolidation鈥� 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 拢8.6m (2022: 拢2.6m).
鈥淎 critical factor in GMI鈥檚 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.
鈥淎ligned with the strategy of 鈥榗ontrolled consolidation鈥�, 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.鈥�
A year ago GMI鈥檚 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: 鈥淟ooking 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鈥� funding pipeline for a range of projects that are ready to go.
鈥淲e 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.鈥�
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