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Aberdeen bypass blows giant hole in balance sheet for construction firm

The bank being blown up on the Aberdeen Western Peripheral Route
The bank being blown up on the Aberdeen Western Peripheral Route

Work on the Aberdeen city bypass road has blown a giant hole in the balance sheet at construction giant Galliford Try.

Middlesex-based Galliford Try, the owner of bypass consortium partner Morrison Construction, said yesterday two major infrastructure joint-venture projects accounted for a £78million shortfall in “legacy” contracts.

The company’s shares dived more than 9% after it said it was taking a “regrettable” hit following a financial review of the work.

It is believed the contracts involve Scotland’s two biggest current infrastructure projects – the £745million road currently taking shape around Aberdeen and the new Queensferry Crossing over the Firth of Forth.

Extra provision for the bypass and bridge are thought to make up the lion’s share of a total £98million in one-off costs being booked by Galliford Try in its current trading year.

There is no extra cost to the public purse as both projects are being delivered on fixed price contracts.

Weather-linked delays to work on the Queensferry Crossing and challenges posed by the north-east’s famous granite bedrock are understood to have led to the two schemes costing far more than expected.

And the experience has caused Galliford Try to rule out bidding for large infrastructure jobs on fixed price contracts in the future.

In a trading update yesterday, chief executive Peter Truscott said: “The impact of the legacy projects in construction, in particular the two large infrastructure projects, is regrettable.

“Galliford Try is no longer undertaking large infrastructure jobs on fixed price contracts. There are no other similarly procured major projects in our current portfolio and we are encouraged by the performance of the underlying portfolio of newer work.”

He added: “Excluding the non-recurring charge, we remain confident in delivering a strong performance over the full year.

“Whilst we remain cautious of continuing macroeconomic uncertainty, all three businesses (Linden Homes, Galliford Try Partnerships and construction and investments) are focused on exciting targets and clearly defined plans to improve operating efficiency and grow both margins and revenue.”

Morrison Construction is part of the Aberdeen Roads consortium, alongside Balfour Beatty and Carillion, building the 28-mile Aberdeen bypass and upgrading the A90 between Balmedie and Tipperty.

The overall estimated project costs amount to £745million. The contract value with Aberdeen Roads is worth about £530million.