Business is brisk at contractor Haymills but sharp rises in insurance cover and labour costs have hit margins.
Big increases in insurance and labour costs have led to a sharp fall in operating profit at private contractor Haymills, despite a rise in turnover.

Operating profit for the year to 31 March was £740,000, a fall of 60% on the £1.2m for the same period last year. Despite this fall, the firm's pre-tax profit stood at £1.6m – up from £777,000 last year – because of two exceptional items: it won £854,000 from a legal dispute and sold a number of properties. Turnover rose 17% to £120.2m.

Chief executive Steve Feery said: "We as an industry seem to be busy but not always profitable because we're not successful at passing on the cost rises to our clients."

Feery said the market for tendered work was very competitive and margins were therefore "quite thin". Haymills' contracting arm, which accounts for most business, only managed to break even despite turnover rising 16% to £96m. The division turned in an operating profit of £800,000 last year.

We’re always busy but not always profitable, as we’re not successful at passing on cost rises to our clients

Steve Feery, chief executive, Haymills

Feery said insurance costs had risen 80% after the collapse of the firm Independent Insurance and the attacks of 11 September. He said: "We did not use Independent Insurance, but the company did help to keep premiums down. Insurance companies were also more reluctant to insure construction firms after 11 September."

Feery added that labour costs had also risen 18% because of the shortage of skilled staff. He said: "The shortage of good people is a big problem. We have to attract and retain good people, but staff are more prepared to move around, especially in the South-east."

Average pay at the company rose from £21,000 last year to £23,500. It also took on 6% more staff.