The profits in PPP projects contrast sharply with construction operating profit rates of the same contractors. They remained low throughout the last decade. Table 14 is based primarily on UK construction profits and excludes profits from PPP joint ventures, although differences in corporate policies and accounting practices may result in a small margin of overlap.
The average operating profit for construction companies between 2003-2011 was 2.9%, reflecting recent upturn in average operating profit rates since 2009. They are a stark contrast with the 12.0% - 66.3% annual rate of return obtained by the same contractors when they sell equity in PPP projects (Table 12).
Table 14: Construction operating profit rates of major contractors 2003-2010 (%)
Company | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
Balfour Beatty | 3.7 | 2.2 | 1.9 | 2.1 | 2.1 | 2.3 | 2.7 | 3.1 | 3.0 |
Carillion | 0.6 | 1.1 | 1.4 | 1.7 | 0.7 | 1.4 | 1.4 | 2.3 | 4.4 |
Costain | 1.3 | 0.0 | 1.3 | -8.7 | 0.3 | 6.9 | 4.6 | 2.9 | 2.9 |
Galliford Try | -0.1 | 0.8 | 1.7 | 2.1 | 2.1 | 2.0 | 2.4 | 2.4 | 2.4 |
Kier | 1.0 | 1.1 | 1.3 | 1.5 | 1.6 | 2.3 | 2.6 | 2.6 | 2.7 |
Morgan Sindall | 1.5 | 1.5 | 1.6 | 1.3 | 1.3 | 1.5 | 2.0 | 2.2 | 1.7 |
Skanska | 0.6 | -0.2 | 3.4 | 3.3 | 1.7 | -2.9 | 2.5 | 3.0 | 3.3 |
Average | 1.2 | 0.9 | 1.8 | 1.2 | 1.7 | 2.0 | 2.4 | 2.6 | 2.9 |
Source: Company Annual Reports & Accounts. Notes: Based on UK construction/building activities: Balfour Beatty - Group margin for 2010 and 2011; Carillion - 2003-06 includes international contracts whilst 2007-09 figures based on UK and Canadian building, civil engineering and development excluding Middle East Construction, 2010 and 211 UK construction only; Costain - 2009 and 2008 Infrastructure division, 2007-2004 building division, 2011, 2010 and 2003 Group; Morgan Sindall - based on construction and infrastructure services divisions; Skanska AB - based on UK construction division.