Profit slips at family-owned contractor after £2.5m provision

Gratte Brothers has seen its pre-tax profit dip after booking a £2.5m provision, according to its latest annual financial results.

And company’s directors said they expected the family-owned contractor’s bottom line to come under pressure in 2025, in light of tax measures introduced in the government’s Autumn Budget in October.

The firm’s pre-tax profit fell by nearly £50,000 to £1.9m for the year to 31 March 2024, marking a 2.5 per cent year-on-year decrease.

Revenue increased by £12.1m (4 per cent) to reach £262.2m.

As a result, the Kings Cross-headquartered firm saw its profit margin shrink for the second successive year. Its 0.7 per cent margin in the latest accounts compares with 0.8 per cent the year before and 1.3 per cent in 2021/22.

Turnover growth was slower than the previous year, when it doubled, propelling Gratte Brothers to 66th place in the CN100 2024 table of top contractors.

Profit was affected by a £2.5m increase in provisions booked against contract losses. This rise was mainly connected with delays and cost inflation on an unnamed “significant and complex long-term project”, group managing director David Gratte said.

The year before, Gratte Brothers booked a £12.1m provision.

The firm’s activities cover mechanical and electrical (M&E) contracting, security systems and commercial catering.

M&E accounted for the bulk of its 2023/24 turnover, at £225.9m – up from £219.6m in the previous year, helped by continuing demand in the data-centre sector.

But while inflationary pressures have eased, Gratte noted that the construction industry “still faces significant cost pressures linked to [the] labour skills shortage and material supplies”.

These pressures “are expected to increase further since the announcement of the recent Autumn Budget”, he added in his strategic review accompanying the accounts.

Gratte Brothers’ cash at hand increased from £37.9m to £39.7m in 2023/24.

The firm held no short-term or long-term repayable bank loans, and it paid out dividends worth £100,000 in the latest financial year.

Its average monthly headcount rose from 445 to 484 employees. This resulted in an 11 per cent increase to the firm’s annual wage bill, from £25.5m to £28.3m.

Despite the slower turnover growth and reduced profit, Gratte Brothers’ directors said they “consider the group well positioned to continue adapting to current economic and political uncertainties”.

They added in the accounts: “The group continues to have a strong order book and pipeline of contracts with reputable partners in the medium term.”