Civils firm Colas Ltd has scrapped its regional business units after it was hit with “increasing, irrecoverable costs on projects”.
Soaring costs within the firm’s regional contracting division were partly to blame for a surge in Colas’ pre-tax loss to £15.3m in the year to 31 December 2023, compared with £2.2m in the previous year.
Colas decided in November 2023 to “exit activities” in its regional division, the firm said in its latest annual report.
As well as the specific difficulties in its regional contracting division, Colas pointed to the general impact of inflation on its project costs, which it said “increased sharply”.
The firm added: “Financial constraints on local authorities’ budgets have accentuated our losses due to lower and inconsistent work orders within our existing frameworks.”
Colas’ future strategy will focus on “aligning requirements with our existing markets and delivery of low carbon innovative highways services”, the report said.
Overall, however, turnover increased to £267.6m from £244.2m last year, thanks to two long-term contracts.
In particular, Colas pointed to a seven-year-long highways maintenance contract it signed with Cheshire West and Chester Council, on which it started work in April 2023.
Colas also benefitted from a £328m contract to deliver highways maintenance work in Area 9 of the UK.
While it started work on the project in 2022, it only spent half of that year working on the contract.
In contrast, it worked on the same contract across the entirety of 2023, meaning it contributed more funds to the firm’s coffers.
Area 9 encompasses Herefordshire, Worcestershire, Warwickshire, Staffordshire and Shropshire, and parts of Gloucestershire, Derbyshire and Leicestershire.
Colas’ cash reserves eroded from £9.2m to £5.7m. The firm’s short-term bank loan debt doubled from £10m to £20m.
It paid no dividends in 2023, compared with £6.1m the year before.
Average monthly headcount increased from 1,247 to 1,409 employees, and the firm’s annual wage bill rose from £53.4m to £63.8m.
Colas revealed an order book for 2024 worth £236m compared with £181m recorded for 2023. The increase itself was mainly down to the contract for Cheshire West and Chester Council.
The firm reported provisions for the year of £4.9m, though that was less than half of the £11m recorded in the previous year.
Most of the provisions – £3.2m worth – were so-called “contract provisions”, or cash used to rectify work completed in recent years. Most of that, Colas said, will be used over the next five years.
But the decrease was largely down to its onerous contract provision decreasing from £5.8m to £279,000. The specific contract which needed rectification – which was not named – came to an end in 2024, meaning Colas expected to pay off the majority of the provision over the course of last year.
Colas Ltd – combined with its sister firm Colas Rail – was ranked 32nd in the latest CN100 table of top UK contractors, and was the largest recipient of National Highways funding in both 2021/22 and 2022/23.
