Inflation and contract complications have slashed Ardmore’s profit by more than half, with pre-tax profit shrinking to £6.5m in the year to 30 September 2022, compared with £15.3m the year prior.
In newly released accounts, Ardmore said it made a £27m provision relating to a series of unspecified contract difficulties.
It also missed its £550m turnover target for the year, only managing to post £435.1m. This was still up from £404.8m in the previous year, reaching a record level for the firm.
In a statement accompanying the accounts, directors said that although they had recognised the challenge of inflation during the period, they did not anticipate “significant” macro-economic and geopolitical events that would “turbocharge inflation” and restrict the supply of materials from China and Europe.
The firm also struggled with the “ongoing challenge of remedial works”. It reported that there was a marked increase in defect reports over the last few years, which it attributed to “heightened concerns” linked to 2017’s Grenfell Tower fire.
Elsewhere it said “four pipeline opportunities” had their start dates delayed, helping to dent turnover.
“Supply-chain failure” on three other projects and a serious scaffold collapse at Ardmore’s £155m scheme at Hammersmith Town Hall in west London in May 2022, when two workers were seriously injured, also pushed down revenue, it added.
A combination of factors has pushed directors to “reset [their] expectations” for the coming year, targeting a “trimmed” turnover of just under £450m and a post-tax profit of just under £7m.
“The expectation is this will allow the inflationary pressures on fixed-price construction contracts to work its way through before margins recover to more normal levels in 2024,” the firm’s statement added.
It also said that overheads will come under “greater scrutiny” and it will need to make some serious strategic decisions. “It is essential we collectively reduce risk, and root out waste and inefficiency.”
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Joshua Stein