More councils are outsourcing essential maintenance work such as repairing pot-holes and making sure street lights work, according to May Gurney, which reported a 17 per cent rise in full-year pretax profits.

Although local authorities are under pressure to cut spending, large capital projects are being affected more than everyday maintenance, leading to a steady flow of contracts for the FTSE 250-listed infrastructure repairs company. Underlying pre-tax profit for the year to March 31 rose to £28.4m, on revenues up 22 per cent to £695.3m.

Philip Fellowes-Pyrnne, chief executive, said May Gurney’s focus on essential services had boosted earnings. “These are difficult economic conditions but the spending pressure is giving us new authorities to work with. We are seeing a continual flow of new market opportunities but not a flood.”

The group said its order book had grown marginally from £1.4bn to £1.5bn, but there was a further £1.1bn in potential contract extensions in the pipeline. Britain’s next comprehensive spending review was expected to drive outsourcing further, Mr Fellowes-Pyrnne added.

Nevertheless, he urged the government to bring much-talked-about infrastructure investment forward, targeting smaller, regional improvements rather than large flagship projects that take years to agree.

“The government talks about Highspeed Two and other big projects, but if you want a quick effect, you want to get into the local economy. Many of the local projects are already on the books and these should be pushed forward,” he said.

The company, which earns 60 per cent of revenues in the public sector, is planning to continue its focus on highways, environmental services, and the provision of fleet passenger services. Last year it bought TransLinc, the snow-gritting and social care minibus group, for £35m, giving it access to 20 more councils. The group said TransLinc had integrated well but it would focus on organic growth in the near term.

New contract wins include a £5m five-year deal to provide street lighting for Richmond upon Thames council and a civil engineering contract for Welsh Water.

The company said bids were becoming more complex as the sales process became longer and more collaborative. The resulting high cost of competing meant margins for the first year of a contract were lower. Margins dipped from to 4.6 per cent to 4.3 per cent, partly as a result of environmental services deals for Bristol City, and Cheshire West and Chester coming on stream.

Investec analysts maintained a “buy” rating on the firm. “May Gurney is a well-run business and, despite some hiccups, the outlook remains encouraging with an increased order book.”

May Gurney said it would pay a final dividend of 5.63p, raising the total for the year 28 per cent to 8.42p.

Get alerts on May Gurney Integrated Services PLC when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Follow the topics in this article