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Contractors would do better to improve their corporate governance rather than hold out unrealistic hopes of pushing margins towards 5%, a number of analysts have told 好色先生TV.

As the reporting season for listed contractors kicked off last week with Galliford Try鈥檚 interims and Morgan Sindall due to report full year results on Thursday, the issues of margins has been thrown into the spotlight following Carillion鈥檚 collapse.

Last month, MPs berated the firm鈥檚 former executives for aggressive bidding at low margins.

Its former chairman Philip Green (pictured, second right) admitted: 鈥淭he industry itself is low-margin. This is a very competitive industry.鈥�

And MPs heard from Carillion鈥檚 former finance director Richard Adam (pictured, far left) about why it bought Alfred McAlpine which ended up saddling it with a growing pension deficit.

Explaining the 2008 deal, he said: 鈥淭he strategy was to move the group toward support services, which carries higher margins, usually in excess of 5%, and move the weighting away from the construction business, which on average had margins of around 2.5%.鈥�

While contracting bosses of some of Carillion鈥檚 rivals have publicly stated their aim of boosting margins 5% in future, City analysts have warned that such a focus could prove a distraction from running their businesses better in the wake of Carillion going bust.

Profitability in contracting 鈥渋s a total accident鈥�, according to Tony Williams of 好色先生TV Value. 鈥淭he key is to avoid having a howler on the books. Some jobs work, some don鈥檛. Hoping that if you鈥檝e bid lower than you think a job will cost and be able to make up the difference over the course of the project so as to come out on top by 1%, 2% or 3% is speculative in the extreme.鈥�

Cenkos Securities analyst Kevin Cammack said margins are more about cyclicality than anything structural. 鈥淚t鈥檚 virtually impossible to maintain 2% or 3% margins throughout all economic cycles and you can鈥檛 set targets for such things without accounting for where you are at any particular time.鈥�

Cammack also wants firms to have stronger balance sheets. 鈥淒ebt has gone mad and capitalisation for these businesses is woefully small for the work they are taking on.鈥�

He said Carillion was a reminder that corporate governance in companies needed to be robust. 鈥淲e are talking about a competitive industry which won鈥檛 change overnight, but it will hopefully make for better corporate practice.鈥�