Why did Gariff Construction use GBP 3.3m of cash in a year it earned GBP 2.1m?

Fewer people, more than twice the revenue

Gariff Construction Limited, a British construction company, took GBP 25.2m in revenue in the financial year that ended in March 2026. A year earlier it took GBP 12.0m. That is a rise of 110.5%, so the business more than doubled its sales within a year. Over the same period the average number of employees fell, from 52 to 47.

Put those two lines together and revenue per employee jumped from GBP 230k to GBP 536k, up 132.9%. The figures cover the company on its own, not a group, under UK accounting rules (UK GAAP, the framework most British private companies use), in pounds sterling.

Profit moved even faster. Operating profit rose from GBP 284k to GBP 2.8m, and the operating margin, the share of each pound of revenue left after running the business, went from 2.4% to 11.2%. Net profit reached GBP 2.1m, against GBP 211k the year before.

On the income statement this reads as a company that suddenly learned to do far more with fewer hands. The cash flow statement reads differently. Operating cash flow for the same year was GBP -3.3m. The business reported a profit and, in the same year, its day-to-day operations consumed cash.

In construction, output per head often measures who did the work

Revenue per employee is a popular efficiency figure because it is easy to calculate. It usually rises for one of a few reasons. Sales grow without new hires because the existing team was underused. Prices rise faster than the volume of work. Or the work itself is done by someone who is not on the payroll.

In construction the last reason is the usual suspect. A main contractor wins a larger job, keeps a core team of site managers, quantity surveyors and estimators, and buys in the trades: groundworks, steel, mechanical and electrical, finishes. The revenue lands in the contractor's accounts in full. The people who poured the concrete appear only as a supplier invoice in cost of sales. Headcount stays flat or falls, and revenue per employee climbs, without anyone working harder.

That does not make the improvement fake. A contractor that manages subcontractors well can earn a good margin on their work, and the jump in operating margin to 11.2% suggests Gariff priced the year's work well. But the efficiency sits in a different place than the headline figure implies. The cost did not disappear. It moved from the wage line to the supplier line, and it brought new risks with it: subcontractor failure, disputes over variations, and a company whose profit depends on the gap between what clients pay and what suppliers charge.

The accounts do not show how much of the year's work was subcontracted. The figure that would settle it is the split of cost of sales between direct labour, materials and subcontractors, set against the same split a year earlier. Without it, I would treat the 132.9% rise as a sign that the business model shifted, not as proof that the same people became more productive.

The cash line points the same way

The cash flow fits the subcontracting reading, though it does not prove it. A contractor running more of its work through suppliers usually pays them monthly, often on shorter terms than the client pays the contractor. Large construction contracts also tend to be billed by stage, with retentions held back until completion. When revenue more than doubles in a year, the gap between work done and cash collected grows with it. Profit is booked as the work progresses; the money follows later.

That is one plain explanation for a profitable year in which operations used GBP -3.3m. Year-end cash still rose, to GBP 2.7m from GBP 1.5m, an increase of GBP 1.2m, so money arrived from somewhere other than trading. Equity rose to GBP 3.7m from GBP 1.8m, and the equity ratio, equity as a share of total assets, improved from 32.9% to 41.7%. The balance sheet looks sturdier than a year earlier. The trading cash, for this one year, does not.

I would not read too much into a single year of negative operating cash flow at a contractor that has just doubled in size. Growth of this kind ties up money almost by definition. What I would watch is whether the cash catches up with the profit once these contracts are finished and the retentions are released. If it does not, the margin of 11.2% was partly an accounting estimate of work in progress, and estimates in construction have a way of shrinking at final account.

What to check in your own company

If you track revenue per employee, and many founders do, it is worth making it honest. Open your last two income statements.

First, calculate revenue per full-time employee for both years, using the average headcount rather than the year-end figure. Second, put next to it the total of everything you pay people who are not employees: subcontractors, agency staff, freelancers, outsourced services. Third, add that external labour cost to your payroll and divide revenue by the combined figure. That gives you revenue per pound of labour, wherever the labour sits.

If revenue per employee rose sharply but revenue per pound of total labour barely moved, you did not become more efficient. You changed who you employ. That may be a perfectly good decision, but it should be made knowingly, with an eye on the supplier risk and the payment terms that come with it.

Then ask your finance team one more question: how many days pass between paying a subcontractor and collecting from the client for the same work? Multiply that gap by your daily external labour cost and you have a rough measure of how much cash your growth will lock up. For Gariff, a year of rapid growth produced a strong profit and an operating cash outflow at the same time, and that combination fits the pattern this calculation points to.

Gariff Construction ended the year to March 2026 larger, more profitable and with more equity than it started. Whether it also became more productive is a separate question, and the payroll figure alone cannot answer it. A rise in revenue per employee tells you who is on the payroll; the supplier ledger tells you who did the work.