HG Construction sees profit drop despite soaring turnover

High-rise residential specialist HG Construction has reported a 38 per cent drop in pre-tax profit despite a jump in turnover, after rising energy and material prices and sector volatility hit its performance. 

The Hertfordshire-based CN100 contractor posted a pre-tax profit of £15.3m in the year to ending December 2022, compared with £24.9m the year before. The drop in profit came despite the group’s turnover leaping 39 per cent to £336m.

The group’s operating profit margin also slid to 4.6 per cent, compared with 10.2 per cent the prior year. 

However, in its annual accounts, HG Construction said it had seen a “more stable situation” around cost inflation since April this year and gross profit margins will be “similar to or slightly above those achieved in 2022”. Turnover is also on track to top last year’s, the firm said.  

“Nonetheless, we are mindful of the volatility in the wider market and its potential impact on our business and supply chain,” it added. “Our internal delivery capabilities enable us to mitigate risks, and we have demonstrated throughout the year that we have the expertise and capacity to intervene and self-deliver packages, thereby ensuring that programmes continue unaffected.” 

HG Construction’s clients include major housing associations such as Clarion, Southern and MTVH. The group, which describes itself as a “design and build partner”, also operates in the student accommodation, commercial, hotel and retirement-living sectors.

It said it had been affected by “the inflationary consequences of post-Covid-19 shortages, the ongoing war in Ukraine, and a cost-of-living crisis which has increased energy and material prices”. It also pointed to “volatility in the UK construction sector and the broader economy”.

HG Construction chief executive Adam Quinn said: “We are working through challenging times, but the investment decisions we have made in the past five years place us in a strong position to successfully navigate this turbulent period. We continue to invest in our people, processes and capabilities to ensure an excellent level of service for our clients.”

Quinn took up the chief executive role last summer as a replacement for co-founder Chris Benham, who became the firm’s executive chair. He is the son of Kevin Quinn, also a co-founder of HG Construction.

The firm was formed in 2000 through a management buyout of developer Hunting Gate’s construction arm.