Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

That's capital


In Andrew Bolton's 'Can contractors nail profit growth?'

(NCE last week) he mistakenly uses contractors profit on turnover in a comparison with the profits of other listed companies.

Margin on turnover is just one useful tool when comparing one contractor with another, though it tells you as much about the operating style of a company than about underlying profits.

Return on capital employed is the relevant definition of profitability to use when comparing listed companies.

Contractors have been able to compete on this basis by remaining cash positive and employing relatively little capital, maintaining a comparable ROCE of 10-15%.

Year-on-year increases in profits have come about by reducing the working capital to turnover ratio.

Perversely, recent legislation to tighten up late payments may well be partly responsible for driving necessary increases in contractors margins.

Martin Godet, 13 Craddock Drive, Canterbury, Kent CT1 1DJ

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Please note comments made online may also be published in the print edition of New Civil Engineer. Links may be included in your comments but HTML is not permitted.