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James Bruce – Chief operating and financial officer
2017/2018 was a year of consolidation for BuroHappold as we focused on strengthening the resilience of our business and positioning ourselves for solid profitable growth in the coming years.
We’ve been investing heavily, rebalancing markets and developing our offer to better meet the needs of our clients. People are our biggest asset and by investing in individual and collective talent, together with streamlined processes and emerging technologies, we’re sharpening BuroHappold’s competitive edge, strengthening our impact, and deepening our market penetration.
We believe in digital design. The practice is totally committed to technological transformation both to drive efficiencies on behalf of our clients as well as deliver previously deemed impossible designs. Data analytics give us fresh insights which lead not just to greater transparency and accountability, but to even more imaginative transformational outcomes for our clients. And in spite of increased commercial and political pressures (including Brexit in the UK, where the largest proportion of our business occurs),
I’m pleased to report that business performance is still positive overall, particularly as profit was down on the previous two years. Although disappointing, this is entirely understandable. The global economy has been slowing, particularly in our sector, so organisations have been viewing new contracts with caution.
With a focus on growth for the coming years we aim to better balance our markets and geographical presence, identifying new markets and looking to gain presence in new territories. We will focus on developing our sector offerings and continue the development of our integrated service offers to continually raise the bar, providing clients with the world class cutting edge delivery they’ve come to expect from BuroHappold. In an industry of largely group owned engineering consultancies, BuroHappold remains fiercely independent, both in spirit, and as a business.
FINANCIAL PERFORMANCE 2017/2018
Increased economic headwinds in the UK led to a slight decline in the group’s turnover, generating a turnover of £163.6m (2017: £171.9m) and an operating profit margin of 10% (2017: 13%).
Turnover by destination saw a decline in the UK of 4% but roughly stayed proportionally consistent at 38% (2017: 37%) with Middle East turnover down by 6%, representing 28% (2017: 29%) of group turnover. This was somewhat offset by increased turnover in the rest of Europe of 18%, now representing 9% (2017: 7%) of group turnover.
The reduction in operating profit from £22.8m to £16.3m is attributable to three main factors:
- tighter operating conditions in the UK
- challenges with debt recoverability, resulting in an impairment
- of bad debt of £3.9m (2017: £1m)
- expenditure of £2.1m on a number of investment projects.
Exchange rate fluctuations will always affect the Group’s results because of the greater proportion of overseas earnings although we do seek to hedge risk where feasible. This resulted in an exchange loss of £1.6m (2017: gain £1.9m). The fair value loss on foreign exchange forward contracts was £0.1m (2017: gain £0.4m).
Cash has fallen in the year from £32.1m to £16.6m, linked to the increase in DSO of 12% to 120 days driven by ageing debt in the Middle East. Payments to current and former members increased by £5m to £22.5m and advance payments from clients declined £5.5m. Working capital management remains a key focus of the group, with DSO and cash forecast to improve during 2018/19.
The average number of employees remain consistent with turnover generated per employee of £98,000 (2017: £103,000). A solid set of results providing a platform for continued investment and future growth of the business.