M8 upgrade losses continue to hit Ferrovial profits

M8 openThe UK business of Spanish contractor Ferrovial has suffered another pre-tax loss after taking a further hit on the M8 improvement project.

Filings published at Companies House for Ferrovial Agroman UK revealed pre-tax losses of £12 million in the year to December 31, slightly up from a £13m loss in 2015.

The firm said its total provision for losses on the Glasgow to Edinburgh motorway job had risen from £14m at the end of 2016 to £29m after increased labour costs to meet the opening deadline this year. It has also been hit by higher material costs, due to “changes in design requiring larger quantities than previously forecast”.

The latest provisions follow a £25m loss on the M8 improvement scheme in 2015.

The firm warned that the M8 contract had proved difficult to forecast because of issues with design, the complexities of working on a brownfield site and the shortage of labour and materials.

It said: “As a result there is significant uncertainty in estimating the costs to come, the future operational performance and the degree to which certain cost overspends can be recovered from third parties.

“Management believe that is the possible outcome of the assumptions made regarding areas of significant uncertainty could require material adjustment in subsequent financial year.”

Ferrovial carried out the £500m M8 M73 M74 Motorway Improvements Project in joint venture with Lagan Construction Group. Much of the project opened on time in the Spring although snagging works continued into September.

The firm admitted 2016 had been “another mixed year”. Turnover increased 39% to £364m, helped by an extra £44m of revenue from road and projects and £38m from tunnelling.

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