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IN

AS SO CI AT IO N

W IT H

20 12

Th eC N to p 10 0 co nt ra ct or s


Š photo credits: MVB, VINCI and subsidiaries photo libraries, Andras Nemeth, Clarence Michel.

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Contents 4 Review of the year

A look back on the performance of the CN100 in 2012

6 CN100 2012: 1-50

The top 50 contractors in the UK this year

8 CN100 2012: 51-100

The second half of this year’s top 100 main contractors table

10 Mergers and acquisitions

Interest from overseas players in the UK market remains strong

13 Regional outlook

The North faces downturn but prospects brighten closer to London

18 Top 20 housebuilders

Top housebuilders’ profits soar as their land values grow

22 Top 10 specialist contractors

A look at the leading building envelope, concrete, ground engineering, demolition, M&E, scaffolding and steel contractors

28 Top engineering consultants Overseas prospects continue to attract the top players

30 Top QS consultants

Strong turnover growth as focus turns to international waters

32 Sector outlook

Rail offers prospects for many but commercial upturn will falter

34 Profits

Analysis shows stronger average margins in the bottom tier

36 Remuneration

Directors’ pay dips but employee salaries and headcounts hold

CONSTRUCTION NEWS cneditorial@emap.com forename.surname@emap.com Telephone 020 7728 plus: EDITORIAL Editor, Construction News Rebecca Evans (4817) CN100 2012 editor Sarah Dennis Contributors Katie Barker (4605) Chris Berkin (4636) Luke Cross (4641 Tom Fitzpatrick (4630) Damon Schünmann (5309) Digital editor Tim Miller (4643) Head of production Kim Sampson (4645) Deputy head of production Andy Rennison (4646)

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SALES/AD PRODUCTION / MANAGEMENT Display Advertising 4562 Services Directory 4606 Website Advertising 4562 Recruitment 3829 Commercial director James Clements (4562) Commercial manager Maria Gonzales (4610) Account managers Sarah Ince (4318) Bob Ditchfield 01928 574837 Display sales executive Steven Barnes (4606) Classified sales executive Matthew Fenton (5623) Recruitment account manager Jonathan Snowden (3829) Production manager Paddy Orchard (4111) Managing director Nicki Brown (2399) Chief executive officer Natasha Christie-Miller (3569)

G To subscribe, follow one of these steps:

G Visit www.

subscription.co.uk/ conews/cqbr M Or call 0844 848 8859 (UK only) and quote CQBR Subscriptions UK (one year) £179; UK (two years) £322.20; Europe (one year) £240; Rest of World (one year) £274; UK students £89.50. Subscription enquiries Tower House, Sovereign Park, Lathkill Street, Market Harborough, Leics LE16 9EF. Overseas enquiries +44 1858 438847. Orders +44 1858 438804). Fax 01858 461739. News trade enquiries Seymour Tel 020 7429 4000. Printed in England by Headley Brothers Ltd. Registered at the Post Office as a newspaper. List rental Unimarketing. Tel 020 8995 1919. Fax 020 8742 7245. Email info@uni-marketing.com ISSN 0010-6860 ©2012

Pinpoint opportunities for your firm in 2013 The construction industry weathered the 2011 storm better than perhaps expected, despite conditions still being tough. But the delayed effects of public sector spending cuts with no private sector recovery to bolster them, along with the long-held uncertainty over the economy this year, means harsher SARAH challenges lie ahead in the short term before DENNIS CNinsight Editor a long-awaited recovery. This year’s top 100 contractors saw a collective rise in turnover, pointing to strong performances, and indeed in some cases this is true, but our detailed analysis of the profits and margins of the UK’s top 100 contractors (page 34) reveals that in some cases, revenue is being considered king, sometimes at the expense of the bottom line. We also analyse the remuneration of both the “Revenue is being boards of directors and considered king, employees of this year’s CN100, sometimes at the while revealing that on average expense of the the companies have marginally increased headcount (page 36). bottom line” Our regional focus (page 13), reveals which areas of the country are most likely to be able to offset the effects of government spending cuts, and when recovery will occur. Meanwhile our sector focus (page 32) on commercial, rail and private housing highlights when and how any upturn will occur, with some prospects and opportunities that firms may not have previously considered. We explore the flurry of mergers and acquisitions over the past 18 months, and look at prospects ahead both in the UK and internationally, with our detailed table covering the highlights in activity over the past 18 months (page 10). The theme of overseas prospects continues in our expanded focuses on engineering consultants (page 28) and QS consultants (page 30), which reveal where the top firms are targeting along with their financial performance over the past year. Our analysis of the housebuilding (page 18) sector identifies the current and potential prospects thanks to government funding initiatives, along with a detailed review of 20 largest housebuilders’ financials. Finally, our expanded analysis of the prospects for the UK’s top specialist contractors across ground engineering, concrete, scaffolding, M&E, building envelope, demolition and steel (page 22) reveals that performances are being bolstered through diversification, while IN ASSOCIATION WITH identifying the struggles that need to be overcome. 6 September 2012 | 3


turnover grows but marg Turnover Total turnover for this year’s top 100 contractors cneditorial@emap.com has grown by almost 4 per cent, but this year is already proving a challenge for the industry, and the low margins seen across many of the UK’s top firms speak for themselves. Despite expectations of a fall in activity last year, output grew, owing partly to the impact of public sector spending cuts being less than imagined, as well as a relatively buoyant year for retail and London office construction. But investors and consumers are growing ever more cautious, while the effects of government cuts are intensifying across the industry. What is evident is that the top contractors are increasingly diversifying and looking overseas for work in order to bolster revenues ahead of hoped-for recovery in 2014. review of the year sarah dennis

turnover: the rises and falls

Up

Down

122%

42.7%

81.8%

37.3%

79%

20.7%

Durkan

Longcross

Clugston

Lend Lease

Buckingham

robertson

proportion of total turnover BY Chart position Entry into the Construction News 2012 list of top 100 contractors has become more competitive, with the turnover of the company ranked 100th being 9.2 per cent higher than that seen in 2011’s review, as 63 firms in this year’s list have reported revenue growth. Rydon, which has slipped eight places to prop up the top 100 table, reported turnover of £115.8 million in the year to September 2011, compared with the £106m recorded by last year’s 100th-placed firm J Reddington. While combined underlying

turnover (excluding joint ventures) of this year’s top 100 contractors was up by 3.6 per cent compared with their previous financial years – at £59.8 billion – 2012 has presented several challenges, prompting the industry’s top firms to prepare for further tough times ahead – some through strengthening their overseas footholds. One example is new entrant Dawnus Construction, which has shot into 89th place after a 74.4 per cent revenue rise, part of which is attributed to significant growth in

14.7 4.8

1-10

%

6.2 9.9

11-20 21-30

48.4

31-40 41-50 51-100

16.0 The top half of the table (companies in positions 1-50) makes up 85 per cent of the turnover of the full CN100 Source: cninSight

roll Call – this Year’s neW and re-entries

4 | 6 September 2012

The contractor has been in business for 120 years, operating in the Midlands

DAWNUS daWnus Significant significant in-roads into South south africa, Africa, as well as strong UK growth, has led to entry into the top 100

84

Turnover is up by almost 80 per cent for the silverstoneSilverstonebased contractor

GF Gf TOMLINSON toMlinson

89

The company almost made the top 50 having more than doubled its turnover

rE-ENTriEs re-eNtries BUCKINGHAM BuCKinGhaM

87

LONGCROSS lonGCross

75

52

New ENTriEs NEW eNtries

BARHALE Barhale After after slipping out last year, a turnover growth of almost 50 per cent means a strong top 100 return

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gins take strain in 2012

MICHAEL MiChael J LONSDALE lonsdale A a three-year hiatus has come to an end after a 51 per cent revenue rise

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94

88

The £1bn ticket This year’s top five rankings are the same as in 2011, but, unlike last year, three of these contractors reported growth in revenue, including Balfour Beatty – the subject of a major restructure this year that is set to result in the closure of 35 offices. Three more companies managed to gain entry into the £1bn club in this year’s table compared with last year, while Bam Construct’s turnover fell from £1.03bn to £945.9m, with the firm saying that the market is expected to remain challenging in the medium term. Those posting turnovers of more than £1bn include Wates, which has risen to 14th place. ISG has also entered the top 10 despite facing challenges over the current year: one of its core markets – retail – is set to contract after announcements from major chains that they are scaling back expansion plans following poor performance during the prime Christmas sales period.

WHAT YOU NEED TO KNOW ABOUT THE CN100 The tables and statistics in the CN100 were compiled using annual reports and accounts for companies filed on Companies House or contractors’ websites, with additional research by CN. Figures are accurate to 21 August 2012. Turnover figures quoted are for group turnover where applicable. The CN100 table is ranked by underlying turnover, but we include a column accounting for turnover including shares of joint ventures and associates, where appropriate. Figures for the top specialist contractors whose turnover is not high enough to be included in the main CN100 table, along with housebuilders and consultants, are

Despite growing turnover to more than £1bn, Willmott Dixon has slipped one place down the table to 13th, with strong performances from Galliford Try and Mitie bolstering the top 10. Amey’s 17 per cent growth in revenue meanwhile moves it up to 12th. Skanska, however, has fallen outside the top 10 following the impact of public sector spending cuts, though its pre-tax profits have risen by 16 per cent. Both Skanska and Bam Construct have spoken of a general move towards lower-value projects as the market shifts amid challenging conditions. This year’s table has seen some notable exits, including Henry Boot; J Reddington, which

HENMEAD henMead The parent firm of eric Eric Wright Group posted turnover of £124m in its latest results

96

its ventures across Africa. The Swansea-based firm expects the continent to continue to contribute around 50 per cent of its revenue, with the remainder gained in the UK. International expansion remains a strategy across the top companies, with Balfour Beatty and Carillion among those continuing to announce a string of overseas contract wins over the year.

CLUGSTON CluGston The significant rise in revenue for Clugston has secured its re-entry after three years away

reported in separate analyses. Where a number of UK-based companies are owned by a foreign parent firm, or where a UK holding company owns a number of subsidiaries, attempts have been made to combine the figures. n Bouygues/Colas Figures are from combined results for Bouygues UK and Colas, divisions of Bouygues SA. n Enserve Spice has been rebranded as Enserve. n Leadbitter Leadbitter, now owned by Bouygues, reports as a separate entity. n Sir Robert McAlpine Figures are from Newarthill, the official name for Sir Robert McAlpine.

re-entered last year; Harsco Infrastructure Services; SDC; and Simons Group. Others remain despite having recorded significant falls in turnover, such as Durkan, whose 42.7 per cent contraction in revenue saw it plummet down the table. The company suffered the largest drop in places across all 100 firms, falling 36 spots to 95th. Major movers Of last year’s top 100 roll call, McLaren is the fastest mover up the table, lying just outside the top 50 following a 75 per cent increase in turnover. The company has enjoyed some significant commercial, industrial and retail wins over the year. Other developments across the top 100 include Bouygues announcing its takeover of Midlands contractor Thomas Vale (55th in the table) in April, while the firm also bought out the remaining stake of Leadbitter. Lorne Stewart subsidiary 4th Utility acquired four Rotary divisions after the latter’s

n SSE Contracting SSE Contracting is the new name for Southern Electric Contracting. n Thomas Vale The takeover of Thomas Vale by Bouygues was announced in April 2012, so figures for Thomas Vale have been recorded separately. n Vinci Figures include Vinci plc, Taylor Woodrow and Eurovia. Vinci SA does not consolidate all its UK operations so its actual UK-based turnover may be higher. cninsight.cnplus.co.uk Visit CNinsight to rank the top 100 by the financial measure of your choice

Australian parent Hastie went into administration, while the collapse of top 100 regular Doyle hit the headlines this summer. Facilities management and support services are offering attractive opportunities, with Interserve and Carillion queuing up to strengthen these areas of their businesses. Carillion announced last month in its half year report that it expects a stronger operating margin after implementing its strategy to cut UK construction activity by a third. Others, such as Lend Lease, are responding to the calls for growth in infrastructure – forecast to be the strongest sector over the next few years and expected to drive recovery as private commercial activity fails to get going at the speed needed to offset public sector contraction.

In aSSocIatIon wIth

6 September 2012 | 5


CN100 1-50 ranked by underlying turnover Current Previous Change Rank rank

Company name

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Balfour Beatty Carillion Laing O'Rourke Morgan Sindall Kier Group Mitie Group Interserve Vinci Galliford Try ISG Skanska Amey Willmott Dixon Wates Bam Construct Mace Enterprise Costain Group Bam Nuttall Sir Robert McAlpine Bowmer and Kirkland May Gurney Shepherd Lend Lease Mears Volkerwessels Morrison Utility Services Miller Homeserve Imtech UK SSE Contracting NG Bailey J Murphy Bouygues/Colas Apollo Renew Tarmac National Contracting Leadbitter Norland Managed Services Spie Matthew Hall Cape Enserve Emcor GSH Morrison Facilities Services Ardmore Seddon Osborne John Sisk & Son Severfield-Rowen

1 2 3 4 5 6 7 8 10 13 9 15 12 17 11 20 18 16 22 21 23 24 26 14 27 25 28 * 29 35 30 32 33 31 34 42 39 36 55 43 37 38 40 56 47 58 49 45 46 50

0 0 0 0 0 0 0 0 s +1 s +3 t -2 s +3 t -1 s +3 t -4 s +4 s +1 t -2 s +3 s +1 s +2 s +2 s +3 t -10 s +2 t -1 s +1 0 s +5 t -1 0 0 t -3 t -1 s +6 s +2 t -2 s +16 s +3 t -4 t -4 t -3 s +12 s +2 s +12 s +2 t -3 t -3 0

Latest turnover (£m)

Including JV share (£m)

9494.0 4153.2 3010.6 2226.6 2123.0 2002.5 1847.5 1626.8 1284.2 1195.6 1166.8 1093.6 1052.1 1006.8 945.9 928.0 926.2 868.5 808.7 788.8 707.5 695.3 607.7 605.1 589.0 557.0 545.2 536.2 534.7 514.6 469.2 419.5 400.8 387.6 367.2 356.7 342.0 338.8 312.1 311.8 310.9 300.7 297.7 291.8 290.9 286.1 281.3 280.7 278.0 267.8

11,035.0 5,051.2 3,320.0 2226.6 2,178.8 2002.5 2,319.6 1626.8 1,284.2 1195.6 1,166.8 1,093.6 1,059.0 1,117.0 945.9 950.5 1125.4 986.3 808.7 845.5 708.3 695.3 611.0 605.1 589.0 557.0 545.2 587.6 534.7 514.6 469.2 419.5 400.8 431.1 367.2 356.7 342.0 338.8 312.1 311.8 310.9 300.7 297.7 291.8 290.9 286.1 283.2 280.7 278.0 267.8

Previous % turnover turnover change (£m)

9236.0 4236.5 3069.5 2101.9 2056.0 1891.4 1872.0 1607.6 1221.9 972.2 1267.4 935.2 989.5 895.3 1037.2 851.0 881.0 924.5 694.8 707.0 667.3 571.4 526.7 964.5 523.9 563.9 494.3 628.4 467.1 340.7 460.4 464.2 408.0 467.5 345.8 290.4 318.0 337.2 250.7 288.0 284.3 303.3 320.9 208.0 274.6 214.1 266.9 287.0 161.3 266.7

2.8 -2.0 -1.9 5.9 3.3 5.9 -1.3 1.2 5.1 23.0 -7.9 16.9 6.3 12.5 -8.8 9.0 5.1 -6.1 16.4 11.6 6.0 21.7 15.4 -37.3 12.4 -1.2 10.3 -14.7 14.5 51.0 1.9 -9.6 -1.8 -17.1 6.2 22.8 7.5 0.5 24.5 8.3 9.4 -0.9 -7.2 40.3 5.9 33.6 5.4 -2.2 72.3 0.4

Latest operating profit (£m)

331.0 238.2 46.1 40.8 66.0 111.7 73.8 36.1 36.8 10.2 39.4 83.3 19.4 32.7 9.6 23.9 58.6 23.6 10.8 36.0 44.3 30.1 30.0 12.9 22.7 -1.0 19.9 20.8 85.3 21.7 29.0 -5.1 21.9 15.6 16.3 7.8 6.6 6.1 10.0 14.2 33.0 18.9 16.1 5.2 -7.6 0.8 5.6 0.2 0.8 11.7

Previous % change operating profit (£m)

325.0 213.5 102.8 41.8 60.7 108.3 74.4 54.4 29.4 11.1 35.4 85.5 25.7 41.1 16.2 20.7 58.6 29.4 12.3 39.1 33.6 25.1 17.3 24.3 18.8 6.0 17.7 2.4 106.9 10.8 37.0 19.9 22.9 32.0 10.3 4.5 5.8 11.8 13.3 12.3 27.9 30.4 11.6 6.9 18.9 7.7 9.0 3.3 0.4 16.2

Operating margin %

1.8 11.6 -55.2 -2.4 8.7 3.1 -0.8 -33.6 25.2 -8.1 11.3 -2.6 -24.5 -20.4 -40.7 15.5 0 19.7 -12.2 -7.9 31.8 19.9 73.4 -46.9 20.7 2.8 767 -20.2 100.9 -21.6 -4.3 -51.3 58.3 73.3 13.7 -48 -24.8 15.4 18.3 -37.8 38.8 -24.6 -89.6 -37.7 -71.4 100.0 -27.8

3.5 5.7 1.5 1.8 3.1 5.6 4.0 2.2 2.9 0.9 3.4 7.6 1.8 3.3 1.0 2.6 6.3 2.7 1.3 4.6 6.3 4.3 4.9 2.1 3.9 0.6 3.7 3.9 16.0 4.2 6.2 -1.2 5.5 4.0 4.4 2.2 1.9 1.8 3.2 4.6 10.6 6.3 3.9 1.8 -2.6 0.3 2.0 0.07 0.2 4.3

The top 100 contractors: 6 | 6 September 2012

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Latest pre-tax profit (£m)

Previous pre-tax profit (£m)

% change

Pre-tax margin (%)

Latest total directors’ remuneration (£m)

Previous total directors’ remuneration (£m)

Number of employees

Previous number of employees

Current average salary (£)

Previous average salary (£)

Last analysed accounts

334.0 212.0 39.7 40.0 65.5 104.5 72.8 44.0 35.1 9.0 44.9 84.3 21.1 40.1 11.5 23.2 7.6 25.5 14.1 20.1 44.6 28.4 31.5 13.5 20.6 -1.5 18.2 -30.4 126.0 18.4 30.1 -4.2 23.5 14.6 16.3 8.1 6.6 6.2 10.3 -4.4 29.2 10.8 16.1 5.1 -6.5 0.5 5.4 1.0 3.4 10.1

306.0 188.1 92.6 40.7 59.7 105.7 69.6 68.9 26.1 8.7 38.7 87.2 26.6 43.5 17.1 21.0 10.1 27.9 15.7 27.4 32.6 24.3 16.0 25.2 16.4 4.2 17.7 -55.8 117.1 7.4 38.1 19.9 24.9 29.2 10.3 4.6 5.8 11.9 13.2 -4.1 24.8 16.9 11.2 6.8 19.6 7.0 8.8 3.5 1.6 15.3

9.2 12.7 -57.1 -1.7 9.7 -1.1 4.6 -36.1 34.5 3.4 16.0 -3.3 -20.7 -7.8 -32.7 10.5 -24.8 8.6 -10.2 -26.6 36.9 16.9 96.9 -46.4 25.6 2.8 7.6 148.6 -21.0 -5.6 -50.0 58.3 76.0 13.9 -48.0 -22.0 17.7 -36.0 43.8 -25.0 -92.9 -38.6 -93.9 121 -34

3.5 5.1 1.3 1.8 3.1 5.2 3.9 2.7 2.7 0.8 3.8 7.7 2.0 4.0 1.2 2.5 0.8 2.9 1.7 2.5 6.3 4.1 5.2 2.2 3.5 -0.3 3.3 -5.7 23.6 3.6 6.4 -1.0 5.9 3.8 4.4 2.3 1.9 1.8 3.3 -1.4 9.4 3.6 5.4 1.7 -2.2 0.2 1.9 0.4 1.2 3.8

4.3 3.8 0.4 3.3 3.6 3.3 4.3 2.1 1.9 1.7 2.3 1.8 2.7 5.5 0.9 2.9 2.0 1.7 -1.1 5.1 10.4 2.1 1.2 1.5 0.6 2.7 2.7 4.9 0.4 0.9 2.0 3.3 3.0 0.8 1.2 0.6 2.0 1.1 0.4 2.0 1.0 2.2 0.6 0.1 1.5 1.7 1.4 2.3

4.1 2.7 0.5 3.4 2.9 3.1 2.3 2.1 1.9 1.5 2.3 2.1 2.5 5.3 1.0 7.6 1.6 1.7 0.9 5.6 13.5 0.9 1.7 2.6 1.5 -0.5 1.4 2.4 4.8 0.4 0.9 1.8 6.5 2.3 0.9 1.0 1.8 11.6 1.1 0.4 2.0 1.2 1.7 0.9 0.1 1.7 1.5 1.1 2.1

50,195 29,992 15,027 6,744 10,685 62,930 20,308 6,136 3,665 2,527 4,194 10,739 2,845 2,650 2,503 2,933 9,924 4,159 3,073 1,956 1,471 3,187 1,380 11,317 2,143 3,456 1,117 4,036 3,262 4,724 2,929 2,915 1,845 905 2,036 1,125 700 2,542 2,107 4,106 3,290 3,190 2,093 3,454 280 1,774 937 411 1,207

50,524 30,056 19,668 7,662 11,606 58,860 20,539 6,853 3,528 2,028 4,586 10,546 2,707 2,222 2,619 2,781 9,377 4,349 3,038 1,996 1,495 4,708 3,322 1,773 10,801 2,302 3,261 1,162 3,766 1,538 4,772 3,625 2,815 2,277 884 1,280 1,154 694 2,143 2,338 3,816 3,486 3,163 2,212 2,894 251 1,843 950 335 1,179

42,255 24,830 42,969 49,733 31,221 13,656 26,453 35,918 38,008 39,389 45,578 27,736 40,590 47,744 38,793 62,552 27,771 33,638 39,602 54,668 47,010 35,206 55,914 18,155 42,568 35,431 50,940 30,079 35,454 30,494 34,447 42,833 44,901 42,341 34,685 41,924 40,473 37,435 38,038 30,213 31,603 44,523 28,958 39,720 27,086 40,747 47,455 37,413

40,852 24,844 42,923 42,326 28,123 14,319 26,491 34,560 40,249 42,259 39,597 29,068 39,069 54,220 39,633 62,924 28,005 30,099 38,406 54,613 43,364 27,251 32,812 53,724 17,532 44,564 35,029 48,623 31,040 41,141 30,252 36,895 43,004 40,609 40,773 39,716 40,758 40,152 31,767 38,833 26,822 33,213 29,470 30,338 40,062 26,992 42,234 48,460 38,145

31/12/11 31/ 12/11 31/3/11 31/12/11 30/6/11 31/3/12 31/ 12/11 31/12/11 30/6/11 30/6/11 31/12/11 31/12/11 31/12/11 31/12/11 31/12/11 31/12/11 31/12/11 31/12/11 31/12/11 31/10/11 31/8/11 31/3/12 30/6/11 30/6/11 31/12/11 31/12/10 31/3/12 31/12/11 31/3/12 31/12/11 31/3/11 25/2/11 31/12/10 31/12/11 31/3/11 30/9/11 31/12/11 31/12/10 30/3/12 31/12/10 31/12/11 30/4/11 31/12/10 31/12/11 31/3/12 30/9/11 31/12/11 31/3/12 31/12/10 31/12/11

1-50 www.cnplus.co.uk

The CN100 table is updated in real time and is available to subscribers every day of the year at cninsight.cnplus.co.uk

In aSSocIatIon wIth

6 September 2012 | 7


CN100 51-100 ranked by underlying turnover Current Previous Change Rank rank

Company name

51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

McLaren Longcross Barr Cofely Thomas Vale RG Carter Northstone (NI) Byrne Group United House Graham RGCM Midas Clancy Robertson Integral McLaughlin & Harvey Teighmore Higgins T Clarke William Hare Patton SGN Babcock Rail Esh Buckingham North Midland Carey Lorne Stewart Ogilvie City Building (Glasgow) Bullock Lagan Forth Holdings Barhale Brookfield Rotary G F Tomlinson Michael J Lonsdale Dawnus Headcrown Breyer Mulalley GB Building Solutions Henmead Durkan Holdings Clugston Daniel Contractors Thomas Armstrong McNicholas Rydon

81 52 51 54 53 48 44 * 65 57 62 60 * 67 74 64 63 66 80 61 71 83 90 76 69 72 82 77 78 75 93 84 68 88 97 79 94 59 89 99 86 92

s +30 New t -1 t -3 t -1 t -3 t -9 t -14 s +5 t -4 0 t -3 s +2 s +8 t -3 t -5 t -3 s +10 t -10 t -1 s +10 s +16 New 0 t -8 t -6 s +3 t -3 t -3 t -7 s +10 Re-entry t -1 t -18 New Re-entry New t -2 s +6 t -13 s +1 Re-entry t -36 Re-entry t -8 s +1 t -13 t -8

Latest turnover (£m)

Including JV share (£m)

266.5 263.7 253.6 252.8 251.6 249.2 239.0 232.2 222.9 216.6 214.8 211.7 205.2 204.5 198.9 197.9 194.3 185.5 183.8 182.2 176.5 174.2 168.5 168.3 167.4 167.2 165.6 162.0 161.6 158.9 158.7 154.0 151.9 149.9 149.7 147.3 137.5 136.1 135.6 134.2 133.6 131.7 125.9 123.8 122.3 121.6 117.5 116.2 116.0 115.8

266.5 263.7 253.6 252.8 251.6 249.2 239.0 232.2 238.7 218.9 214.8 211.7 205.2 231.2 198.9 197.9 194.3 185.5 183.8 182.2 176.5 174.2 168.5 169.3 167.4 167.2 165.6 162.0 171.8 158.9 158.7 154.0 151.9 149.9 149.7 148.5 137.5 136.1 135.6 134.2 133.6 131.7 125.9 148.6 122.3 121.6 136.8 116.2 116.0 116.3

Previous % turnover turnover change (£m)

152.7 118.4 170.4 262.8 196.5 252.9 271.8 287.8 168.8 208.9 219.3 185.2 183.5 257.8 177.7 165.3 210.6 182.7 179.0 154.1 162.7 174.1 149.9 133.0 93.5 164.5 174.9 173.2 151.7 161.9 191.4 193.5 125.4 100.5 178.1 175.5 153.8 90.0 77.6 140.6 121.6 156.1 125.0 128.4 213.4 66.9 136.8 110.4 144.6 127.1

74.5 122.7 48.8 -3.8 28.0 -1.5 -12.1 -19.3 32.0 3.7 -2.1 14.3 11.8 -20.7 11.9 19.7 -7.7 1.5 2.7 18.2 8.5 0.1 12.4 26.5 79.0 1.6 -5.3 -6.5 6.5 -1.9 -17.1 -20.4 21.1 49.2 -15.9 -16.1 -10.6 51.2 74.7 -4.6 9.9 -15.6 0.7 -3.6 -42.7 81.8 -14.1 5.3 -19.8 -8.9

Latest operating profit (£m)

6.7 1.3 3.2 7.7 3.7 4.3 8.1 7.1 15.3 4.0 2.3 0.5 1.1 1.0 6.8 3.2 2.8 4.3 5.4 1.7 2.0 -0.2 5.5 5.9 4.0 -0.7 9.2 6.8 2.4 23.4 3.7 2.4 6.7 1.8 7.3 -1.3 1.9 6.9 13.0 -3.2 1.7 7.3 0.3 5.9 5.5 2.1 0.9 6.4 2.6 6.1

Previous % change operating profit (£m)

3.5 1.3 1.9 5.1 3.6 8.6 9.0 10.3 8.7 4.8 2.9 0.5 0.1 -7.4 9.5 3.0 3.1 3.4 6.0 6.6 -2.6 -0.1 1.4 5.7 2.7 3.7 1.8 5.2 2.1 -1.6 6.6 2.5 6.5 0.5 7.5 6.5 2.8 3.6 3.4 1.4 2.2 7.7 0.3 4.5 13.1 -4.4 -0.03 7.9 0.3 -0.2

Operating margin %

91.4 0.0 73.0 51.0 2.8 -50.0 -10.0 -31.1 75.9 -16.7 -20.1 0.0 1,000 -28.4 6.7 -9.7 26.5 -10 -74.2 292.8 3.5 48.1 411.1 30.8 14.3 -43.9 -4.0 3.1 260.0 -2.7 -32.1 91.7 282.4 -22.7 -5.2 0.0 31.1 -58.0 -19.0 766.7 -

2.5 0.5 1.3 3.1 1.5 1.7 3.4 3.1 6.9 1.8 1.1 0.2 0.1 0.5 3.4 1.6 1.4 2.3 2.9 0.9 1.1 0.1 3.3 3.5 2.4 -0.4 5.6 4.2 1.5 14.7 2.3 1.6 4.4 1.2 4.9 -0.9 1.4 5.1 9.6 -2.4 1.3 5.5 0.2 4.8 4.5 1.7 0.8 5.5 2.2 5.3

The top 100 contractors: 8 | 6 September 2012

www.cnplus.co.uk


Latest pre-tax profit (£m)

Previous pre-tax profit (£m)

% change

7.3 1.2 3.0 8.3 3.9 5.1 9.2 8.8 14.8 4.0 2.4 0.7 2.0 6.5 6.4 4.3 2.8 3.0 4.9 1.5 -5.8 -1.0 9.9 0.5 4.1 -0.8 7.8 7.8 2.8 22.5 3.8 4.2 7.4 1.4 7.3 -1.6 1.9 7.0 12.5 -9.9 1.7 7.4 0.4 7.1 4.4 2.0 1.4 7.0 1.4 6.4

4.1 1.2 1.5 5.7 3.6 9.1 9.8 10.2 11.6 4.4 2.9 0.6 0.7 2.7 13.0 4.1 3.1 2.0 5.7 6.2 -10.1 -0.2 5.0 0.3 2.7 3.7 0.8 6.1 2.6 -2.8 6.7 1.6 7.0 0.3 8.1 6.7 2.9 3.7 3.2 2.8 2.2 8.1 0.4 5.3 11.1 -4.4 0.01 8.2 -2.5 8.7

78.0 0.0 100.0 45.6 8.3 -44.0 -6.1 -13.7 27.6 -9.1 -17.2 0.2 175.0 140.7 50.8 4.9 -9.7 50.0 -14.0 -75.8 98.0 66.7 51.9 875.0 27.9 7.7 -43.3 162.5 5.7 366.7 -9.9 -34.5 89.1 290.6 -22.7 -8.6 0.0 34.0 -60.4 -145.5 -199.0 -14.6 -26.4

Pre-tax Latest total margin directors’ (%) remuneration (£m)

2.7 0.5 1.2 3.3 1.6 2.1 3.9 3.8 6.6 1.8 1.1 0.3 1.0 3.2 3.2 2.2 1.4 1.6 2.7 0.8 -3.3 0 5.9 0.3 2.4 -0.5 4.7 4.8 1.7 14.2 2.4 2.7 4.5 0.9 4.9 -1.1 1.4 5.1 9.2 -7.4 1.3 5.6 0.3 5.7 3.6 1.6 1.2 6.0 1.2 5.5

51-100 www.cnplus.co.uk

2.4 0.5 2.0 1.0 1.8 1.1 0.7 4.4 1.1 0.9 1.7 1.2 1.5 1.1 0.6 2.1 0 4.5 0.7 6.6 0.9 0 0.8 0.7 0.3 0.9 1.0 0.9 1.1 0 0 0.9 2.8 0.8 2.1 1.0 1.3 1.1 1.1 2.6 1.3 0.7 0.7 0.5 0.8 1.0 0.7 0.8 0.9 1.1

Previous total directors’ remuneration (£m)

Number of employees

Previous number of employees

Current average salary (£)

Previous average salary (£)

Last analysed accounts

5.4 0.5 1.5 1.1 1.9 1.0 1.0 9.3 1.4 1.1 2.2 1.3 1.5 1.6 0.6 2.7 0 4.8 0.9 6.7 1.1 0 0.8 0.5 0.4 1.2 0.7 0.7 1.5 0 0 1.3 3.4 0.6 1.6 0.6 1.1 1.5 0.9 2.7 1.1 0.8 0.6 0.02 1.1 1.2 0.8 0.8 1.5 0.9

253 407 700 2,408 736 1,298 971 753 374 1,081 171 402 1,605 1,039 2,605 363 382 1,311 1,512 409 2,160 1,280 952 220 993 568 1,163 403 2,193 602 386 1,531 740 170 890 495 102 1,524 541 466 540 258 517 203 447 1,181 819 1,015 502

196 255 738 2,534 764 1,286 1,074 790 439 1,076 158 425 1,657 961 2,657 334 376 1,411 1,573 494 2,134 1,294 915 205 937 525 1,271 454 2,286 655 486 1,392 591 165 1,500 513 94 600 601 324 538 267 375 207 475 1,241 796 1,169 506

52,097 33,656 38,044 33,404 35,996 29,743 30,533 47,130 47,947 30,575 48,579 42,391 34,298 30,689 24,553 35,714 53,620 36,589 22,200 34,191 24,679 43,154 28,779 43,709 34,138 44,613 36,003 33,330 25,249 25,829 45,202 29,207 36,164 90,153 47,430 35,457 50,630 17,306 33,311 35,142 36,193 50,190 29,623 54,662 32,219 40,839 24,299 34,758 34,126

68,823 40,204 36,686 33,151 36,052 29,477 28,618 52,472 50,030 30,514 54,989 31,226 32,811 41,442 23,179 36,431 54,923 34,934 21,254 33,353 23,985 40,046 27,742 35,295 34,061 46,564 37,231 33,244 25,439 25,627 44,500 29,542 35,310 78,552 25,770 33,005 53,438 25,130 32,200 45,665 35,654 46,311 35,501 55,886 32,583 33,328 23,775 34,635 35,040

31/7/11 31/3/11 31/12/10 31/12/10 31/3/11 31/12/11 31/12/10 31/5/11 31/12/11 31/3/11 31/12/11 30/4/12 31/3/11 4/4/11 31/12/11 31/12/11 31/12/11 31/7/11 31/12/11 31/12/10 30/11/11 31/3/11 31/3/12 31/12/10 31/12/10 31/12/11 31/3/11 31/12/11 30/6/11 31/3/11 30/9/10 31/3/11 31/8/11 31/12/11 31/12/10 30/6/11 31/12/10 31/3/11 31/12/11 30/9/11 31/5/11 31/3/12 30/6/11 31/12/10 31/1/11 31/1/12 30/9/11 2/10/11 31/3/11 30/9/11

The CN100 table is updated in real time and is available to subscribers every day of the year at cninsight.cnplus.co.uk

In aSSocIatIon wIth

6 September 2012 | 9


M&A HIGHLIGHTS OVER THE PAST 18 MONTHS TARGET COMPANY

BIDDER COMPANY

AUG 12

Rotary UK (four divisons)

Lorne Stewart

JUL 12

Garside & Laycock

SPIE UK

Kier plant business

Wernick Hire

Balfour Beatty – plant/equipment hire business

Vp

Leadbitter Group (49 per cent stake)

Bouygues Batiment International

Celotex Insulation

Compagnie de Saint-Gobain

SERCO Technical Services (nuclear)

Amec

WSP Group

Genivar

Capula

Imtech

Pullman Rail

Colas Rail

Business Employment Services Training

Interserve

Thomas Vale Group

Bouygues Batiment International

Stewart Milne (construction)

Kier

Davis Langdon &Seah

Arcadis

JUN 12

MAY 12

APR 12

MAR 12 Apollo (merger)

Keepmoat

Northcroft Group

Capita Symonds

The Miller Group

GSO Capital Partners (Blackstone); senior Miller executives; Noble Grossart; RBS

Nottingham Readymix

Breedon Aggregates

Utilyx Holdings

Mitie

Toolstation (remaining stake)

Travis Perkins

Phoenix Surveying Equipment

Brandon Hire

NOV 11

PJD Group

Lloyds TSB Development Capital

OCT 11

Mouchel Energy

Mott MacDonald

Mouchel Rail

Sinclair Knight Merz

EC Harris

Arcadis

Crest Nicholson (controlling stake)

Varde Partners

Halcrow

CH2M Hill

Buck & Hickman

Brammer

Office Projects Group

Balfour Beatty

Promanex Group

Costain

Choices (supported living division)

Mears

Roger Bullivant

Soletanche Bachy

Roger Bullivant (25 statutory entities)

Chargill

Service Management International

Mitie

Build Center

Compagnie de Saint-Gobain

C & G Concrete

Breedon Aggregates

Redrow Homes Scotland

Springfield Properties

NSG UK

Altrad

Pöyry’s oil and gas business

Atkins

Linbrook Services

Wates Group

MAY 11

Heating Plumbing Supplies

Heating Plumbing Supplies (MBO)

APR 11

Eaga

Carillion

Power Efficiency

Balfour Beatty

Smith Group UK

Imtech

ClerkMaxwell

Costain

Leadbitter (51 per cent stake)

Bouygues Batiment International

Technical Services Scotland (RWE npower firm)

Atkins

Conex Universal

China Source Investment

Inviron

Imtech

Amco Group

Renew Holdings

JAN 12

SEP 11

AUG 11

JUL 11

JUN 11

MAR 11

FEB 11

10 | 6 September 2012

M&A: the year o

Analysts expect a steady flow of mergers and acquisitio overseas firms drive activity, with suggestions of a signi While Bouygues UK chairman Madani Sow said at the time that the French group would halt UK LUKE CROSS takeovers for now, he added that luke.cross@emap.com the country remains an attractive Overseas firms are tipped to make market to foreign firms. Bouygues bought the remaining 49 per cent further moves into the UK this of its stake in Leadbitter two year as British contractors focus months later. on ‘bolt-ons’ that can open the Closer to home, another gates to new sectors and provide high-profile move has been the one-stop shops to major clients. Keepmoat merger with Apollo, Energy is likely to be a central completed at the end of March hunting ground for acquisitive 2012. Keepmoat chief UK contractors. But with a executive Ian Sutcliffe major focus on UK says that he views a infrastructure quick integration investment, process as a KPMG’s head of preferred strategy, construction M&A rather than trying Jan Crosby suggests UK industry merger to avoid a dilution it could be the year & acquisition deals of the company by of a significant in 2012 to date leaving it to operate Chinese move. as it was. “The longer “New entrants from you prolong that, the longer China have started to come into Europe – this year may be the your eye is potentially off the ball,” he says. “If people are concerned year that we see one acquiring [in about whether they have a job, they the UK],” says Mr Crosby. can’t possibly give 100 per cent.” Adrian Pritchard, partner and construction merger and acquisitions specialist at Nash Broad perspective Fitzwilliams, says his company Other CN100 firms are focusing has seen both Far Eastern and on creating a more holistic transatlantic buyers acquiring offering, both to cater for major in Europe. existing customers and to access He says that there were 42 UK growth sectors. Lend Lease merger and acquisition deals in revealed to CN in July that construction last year, as recorded acquisition is one of three routes by Mergermarket, with another it is taking to expand further into 22 this year to date, indicating “a economic infrastructure. light but steady flow of deals”. Costain – which has a £600 But he adds: “2012 remains a million war chest for acquisitions, difficult year for construction including £100m cash – plans to M&A, with buyers being extremely grow its support services after two selective and considerable acquisitions last year. Its finance downward pressure on valuations.” director Tony Bickerstaff says that This year, one acquisition of a broadening its services “will UK contractor by a major remain a key priority” in 2012, European player has taken centre though potential acquisitions stage: the Bouygues takeover of must meet strict criteria, including Midlands contractor Thomas Vale enhancing share value. announced in April. Some contractors see energy

MERGERS AND ACQUISITIONS

22

www.cnplus.co.uk


f the Chinese?

ons in the near term as the energy sector and nificant entry from the Chinese into the UK efficiency as a valuable service for clients looking to cut costs. Despite culling 1,400 jobs this year following its acquisition of Eaga in response to government changes to Feed-in-Tariff rates, Carillion says the rebranded Carillion Energy Services has given it a strong market position at a time when both commercial and public sector customers are increasingly looking for “comprehensive service solutions, particularly with energy services”. Kier has shown it will invest in innovative energy firms, most recently with £24m in the energyfrom-waste JV Biogen, which plans to build a number of plants to serve local authorities as well as food retailers and manufacturers. This follows its acquisition of Pure Recycling in 2010. Group finance director Haydn Mursell revealed in June that Kier

THE GLOBAL STAGE Research by PwC found that in 2011 the engineering and construction sector saw 1,751 deals of unknown value, 668 worth less than $50m, 114 between $50m to $250m, 50 between $250m to $1bn and 17 worth more than $1bn. The first half of 2012 featured 701 deals of unknown value, 274 under $50m, 46 between $50m to $250m, 21 between $250m to $1bn and four worth more than $1bn. Global activity fell in Q2 2012 due to the European sovereign debt crisis, slowing growth of the Chinese economy and increasing uncertainty over industry growth prospects. Asia and Oceania have seen the most M&A activity globally in the past 18 months, due to demand for infrastructure and urbanisation. The next most active regions were the UK, the eurozone and North America.

www.cnplus.co.uk

– which also snapped up the Scottish construction business of Stewart Milne for £20m this year – had its eye on a large support services company with a facilities management component, as well as smaller infrastructure firms. Mitie says it will continue along an acquisitive path, particularly in energy, so that it can provide bundled offers to specific sector clients looking to make efficiency savings. Its latest acquisition was Utilyx, a specialist energy and carbon consultancy, in January 2012. Vinci meanwhile has said it is focused on energy-related work. Elsewhere, KPMG’s Mr Crosby is expecting more real estate and housebuilding deals – particularly as banks face market and regulatory pressure to divest and reduce their exposure to highrisk-weighted assets, while private equity offers an alternative to cash-starved businesses that can deliver relatively high returns in a low growth market. The debt subsidiary of private equity giant Blackstone took a majority stake in Miller in March, while Crest Nicholson signed a “loan to own” deal with Varde last September. Mid-size mergers have been forecast as firms look for ways to survive or grow. The strained mechanical and electrical sector is likely to see further failures and takeover opportunities, as UK consultancies facing a need to globalise and deal with succession remain attractive to international firms, while materials companies are looking closely at assets that could result from the Tarmac and Lafarge merger.

IN ASSOCIATION WITH

ANALYSIS M&A RUPERT RAWCLIFFE DIRECTOR OF CORPORATE FINANCE GRANT THORNTON UK

Activity both home and abroad persists despite the downturn The acquisition of Thomas Vale Group by Bouygues in April highlighted that the UK remains attractive to overseas groups. June saw the announcements of the acquisition of Celotex Group by construction products supplier Cie de Saint-Gobain, Transys Projects – a respected UK rail vehicle engineering company – being bought by Vossloh Kiepe, and Genivar – the Canadian engineering consultancy – agreeing to buy WSP. It is evident that conditions are right for overseas groups to strengthen their position via UK acquisitions, particularly in areas where significant future growth is likely, such as transport, waste infrastructure and power generation, which are key government investment areas. In fact, Lend Lease and Vinci have already signalled their interests. Likewise in international professional services there is a continuing need for flexibility, mobility and investment in the core retained workforce. Mergers such as the recent combination of Pringle Brandon (London and Dubai) with Perkins + Will (US) are on the cards, with businesses looking to retain and invest in their people while strengthening their services, markets and geographical footprint. But the strategy for forming business partnerships is not restricted to the international arena. UK and regional partnerships can be equally compelling, such as the proposed link-up between Tenants First Housing Co-operative and the Sanctuary Group to form a stronger position in the housing and social care sectors, or the local merger of Edinburgh architecture practices A&J Burridge and Sinclair Hay Sutherland. A very real option in uncertain

times is the strategy of focusing on core strengths and ‘sticking to the knitting’; building on core business and remaining strong in a company’s selected markets. We are seeing increasing signs that non-core disposals are back on the agenda. Pochin has announced the sale of its small residential business and concrete pumping division, and Kier has sold its plant business to Ashtead and Wernick Hire, raising £16 million. Such an approach is attractive, as demonstrated by the recent management buy-out of specialist refrigeration and air-conditioning experts Flowrite Services with funding raised by Natwest and private equity firm Foresight Group. The funding was gained by concentrating on an award-winning level of service and continued growth based on a focused offering. Redundancies continue to impact the industry: Carillion recently cut 1,400 jobs in its Energy Services division, highlighting just how tough the past year has been for all firms. And tough it is: despite low interest rates there is evidence of fatigue causing stress alongside the more common causes of failure, such as sudden bad debts or failing cash resources. But merger and acquisition activity can drive opportunism when administrators are appointed. Such action can preserve jobs and skills and the ‘white knights’ are to be applauded.

“Conditions are right for overseas groups to strengthen their position via UK acquisitions” 6 September 2012 | 11


Chemical Building Products For 75 years we’ve been helping to build large and small dreams

Mapei’s Heritage Mapei, the specialist adhesive, sealant and chemical building product manufacturer, have expertly manufactured building products since being founded in Milan in 1937.

Mapei’s Structural Strengthening / Concrete Repair, Waterproofing, Protective & Decorative Wall Coatings, External Thermal Insulation and Resin & Cementitious Flooring lines are already firmly established across Europe and the rest of the world and becoming a popular choice in the UK.

From humble beginnings, Mapei has grown to become one of the worlds largest producers of Chemical Building Products and a market leading brand that is recognised for its outstanding quality, consistency, ecological credentials and competitiveness.

As Mapei enter into its 75th anniversary year, and with a worldwide annual turnover exceeding 2 billion Euros, Mapei continues to grow through considerable investment in its products and manufacturing facilities both in the UK and worldwide.

Structural Strengthening / Concrete Repair

Mapei has developed a complete and integrated series of Structural Strengthening / Concrete Repair products which comply with EN 1504 certification. The range consists of products for the preparation of concrete and brick substrates, strengthening concrete, steel, masonry and wood structures, in addition to repair mortars, internal and external renders, corrosion inhibitors, bonding agents and anchoring products.

Protective & Decorative Wall Coatings

Mapei’s Wall Coatings are decorative, anti-mould with high filling properties and a low retention of dirt, also having a high resistance to alkali solutions & UV light and an excellent water repellence. They’re suited for interior & exterior applications and are available in a wide range of colours.

Waterproofing

Mapei offer a comprehensive range of waterproofing products which comply with EN 1504 certification and can satisfy each and every building application. This includes the repair and new construction of underground structures e.g. tunnels, rail platforms, lift shafts and basements, as well as structures above ground, e.g. bridges and viaducts, in addition to bathrooms, wetrooms and swimming pools.

External Thermal Insulation Resin & Cementitious Flooring

A sustainable alternative to traditional insulation material, Mapei’s EWI systems create a feeling of warm comfort in the winter months and a feeling of cool comfort in the summer months. Limiting heat loss and guaranteeing great energy savings due to their excellent insulation properties.

Mapei’s technologically advanced resin & cementitious flooring systems offer characteristics of functionality, ease of maintenance and an attractive finish. Suitable for use in a wide variety of applications including industrial uses, hospitals, retail and showrooms.

Len Tyson

Martin Andrews

Mapei’s team Steve Price

07970 638783

07814 416026

07967 147694

As the UK’s Building Product Manager Steve specialises in all As the UK Specification Manager, Len ensures Mapei products With 27 years experience in the Building sector, Martin heads the building areas, having 30 years experience in the Building industry. are utilised on some of the UK’s most prestigious projects. EWI team and the Protective & Decorative Wall Coatings range.

Alan Pepper

07976 253087

In charge of Mapei’s Underground & Rail projects, Alan has over 20 years experience in the Building Sector.

Adrian Jones

07854 152323

Kevin Morgan (South West UK) 07794 248313 Paul Russell (North UK) Specialising in contract repair, waterproofing and sealant application, Kevin has 25 years contracting experience and covers the South West of the UK.

Andrew Lamburn

07805 057122

Adrian has a building contracting background, specialising in With an architectural and building practises background, Andrew EWI for the last 12 years and forming part of Mapei’s EWI team. has specialised in EWI and insulation for the past 13 years.

07964 122031

With over 35 years experience in the Building sector, Paul covers the North of the UK and specialises in structural strengthening, in particular composites.

0121 508 6970 • www.mapei.co.uk

George Guesford, Jason Brunt & Graham Baker 0121 508 6970 (option 2) Mapei’s experienced Technical Service team are available to offer information, advice and site visits when required.


Project starts set to rise The construction ALLAN WILÉN industry is Economics director, poised to benefit Glenigan from a gradual strengthening in project starts over the next year. While this will take time to lift overall volumes, main contractors, groundwork specialists and heavy-side materials producers should be among the first to see workloads rise. The private sector-led nature of the upturn is not treating all parts of the country equally. Private residential and commercial activity in London and southern England are important drivers behind a 3 per cent forecast rise in the total value of underlying project starts during 2012. In contrast, parts of the UK where historically the public sector accounts for both a greater proportion of workload and the regional economy remain especially vulnerable to government investment cuts, and to the impact of weaker household confidence and spending power upon private sector activity. In addition to underlying market conditions, the timing of major infrastructure and building projects (worth £100 million-plus) can make a significant impact on workload in different parts of the country. London will remain a magnet for these, with Crossrail contracts and major commercial schemes in the development pipeline, though a number of major projects are scheduled to start across the UK over the next 18 months, with energy and renewables being especially active areas. REGIONS

FORECAST VALUE OF UNDERLYING PROJECT STARTS IN 2013 (£BN)

4.4

7.7

1.4

5.5

7.5

FORECAST PROPORTION OF UNDERLYING STARTS IN 2013 3.9 20.4 28.0

%

14.9

London Midlands Northern England Scotland Southern England Wales

10.3

11.9 21.0 SOURCE: GLENIGAN

www.cnplus.co.uk

IN ASSOCIATION WITH

EXCLUDES PROJECTS WORTH MORE THAN £100M AND FRAMEWORK AGREEMENTS

6 September 2012 | 13


Free copy of the Construction Industry Forecasts 2012-2016 (summer and autumn editions) worth over £350 for all delegates on the day

Book now and save up to £100

This year’s expert speaker line-up includes: Stephen Beechey Group Investment Director Wates

Mike Peasland CEO, Construction UK Balfour Beatty

Geoff Cooper Chief Executive Travis Perkins

Simon Rawlinson Head of Strategic Research and Insight EC Harris

Noble Francis Economics Director Construction Products Association

Martin Rowark Head of Procurement Crossrail

Stephen Fox Chief Executive BAM Nuttall

Richard Threlfall UK Head of Infrastructure KPMG Endorsed by:


LONDON – VALUE OF UNDERLYING STARTS (£M) 8,000 7,500 7,000 6,500 6,000 5,500

2007

2008

2009

2010

2011

2012(f) 2013 (f) 2014 (f)

Excludes projects worth more than £100m and framework agreements SOURCE: GLENIGAN

(F)=FORECAST

strengthening in project starts is LONDON anticipated during 2013. The capital will remain a bright The London office market has spot over the next 18 months. benefited similarly from overseas London has already seen a investment, especially in prime strengthening in project starts office accommodation. This has over the past two years, primarily pushed up capital values and, driven by increases in the private coupled with the tightening in housing and office sectors. available office space, is pushing Private new housing activity developers to revive stalled jobs has benefited from a more buoyant market than elsewhere in and seek approval for new ones. In the first eight months of 2012 the UK, with London house prices the value of office starts (excluding being among the first to recover. Housebuilders have capitalised on £100m-plus schemes) was 79 per cent up on a year earlier.Approvals a recovery in the regional economy and tapped interest from in the first half of the year were 21 per cent up on 12 months overseas investors. earlier, pointing to The value of underlying further growth over private housing starts the coming months. during the first eight The capital is also months of 2012 was benefiting from the 73 per cent up on activation of the low point seen Year-on-year rise in several major office in 2009. Although London office schemes that will the pace of growth approvals in first further boost activity has eased in recent half of 2012 over the next year. months, a further

21%

NORTHERN ENGLAND Government cuts have weighed heavily on activity in the North. The value of underlying starts fell 6 per cent last year in response to falls in the education, health and social housing sectors and slipped a further 2 per cent during the first eight months of 2012. There has, however, been a marked rise in private housing, industrial and office starts. While these have been from a low base and could not offset a weakening in public sector and civils projects, the improvement bodes well. Looking ahead to 2013, the North is forecast to see continued gains in private housing starts. However, the importance of the public sector as an employer in the region is

likely to cool the pace of recovery as cuts limit employment growth, consumer confidence and activity in the wider housing market. The private non-residential development pipeline is improving; the North-west saw a rise in approvals for office projects in the first half of this year, while approvals for industrial projects across the North rose 23 per cent. Collectively the strengthening in private sector work is set to result in a 6 per cent rise in the value of underlying project starts next year. The region is also set to benefit from several major energy and other civil engineering projects that are scheduled to start on site during 2013, including a £1.6bn wind farm in the Irish Sea.

NORTHERN ENGLAND – GROWTH IN UNDERLYING STARTS 15% 10% 5% 0% -5% -10% -15% -20% -25%

2007

2008

2009

2010

2011

2012 (f)

2013 (f)

2014 (f)

Excludes projects worth more than £100m and framework agreements SOURCE: GLENIGAN

(F)=FORECAST

SOUTHERN ENGLAND – GROWTH IN UNDERLYING STARTS 20% 15% 10%

SOUTHERN ENGLAND Over the past 18 months the upturn in London’s residential market has spread to the South, while the region has also seen a rise in industrial and retail work. The value of underlying starts grew by 13 per cent in 2011 and a further 7 per cent increase is forecast for this year. Private residential starts in the South in the first eight months of 2012 were 26 per cent up on a year ago, while a sharp rise in approvals during the first half of the year suggests the sector will www.cnplus.co.uk

remain solid in the near term. The pace at which sites are started, however, will reflect local conditions; accordingly, locations close to London are likely to be the fastest growing areas of the region. In contrast, the recent flurry of retail and industrial starts is set to stall due to a fall in the value of jobs gaining approval. Retail work has been driven by supermarkets’ investment schemes and will be dented by Tesco’s and Sainsbury’s decisions to scale back their plans. This, combined with sharp falls in civil engineering work and the

5% 0% -5% -10% -15%

2007

2008

2009

2010

2011

2012 (f)

2013 (f)

2014 (f)

Excludes projects worth more than £100m and framework agreements SOURCE: GLENIGAN

squeeze in public sector areas such as health and education, is set to lead to a decline in underlying project starts next year prior to growth resuming in 2014.

(F)=FORECAST

IN ASSOCIATION WITH

6 September 2012 | 15


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MIDLANDS The Midlands is well positioned to benefit from a private sector-led economic recovery over the next two years. Indeed, the region has already benefited from a sharp rebound in industrial building projects starting on site in 2010 and 2011. While the flow of industrial starts has slowed during 2012 so far, the development pipeline remains strong. Detailed planning approvals during the first half of 2012 increased by 27 per cent compared with a year earlier. The past two years have also seen a revival in planning approvals for private housing projects from their 2009 low point. This has now begun to filter

“Growth is anticipated going into 2013 as rising employment and consumer confidence bolsters house sales”

MIDLANDS – VALUE OF UNDERLYING STARTS (£M) 6,500 6,000 5,500 5,000 4,500 4,000

2007

2008

2009

2010

2011

2012(f) 2013 (f) 2014 (f)

Excludes projects worth more than £100m and framework agreements SOURCE: GLENIGAN

(F)=FORECAST

through to project starts, which were up by 50 per cent during the first eight months of this year. Further growth is anticipated going into 2013 as improving

employment and consumer confidence serve to bolster new house sales. Looking ahead, growth in these areas will be partially offset by

weakness in government-funded areas, such as health and education, which have already seen sharp falls in project starts this year. Nevertheless, the flow of underlying project starts is expected to gather momentum during the remainder of 2012 and is forecast to rise by 12 per cent next year.

WALES – GROWTH IN UNDERLYING STARTS SCOTLAND – VALUE OF UNDERLYING STARTS (£M)

10%

4,750

0%

4,500

-10%

4,250

-20%

4,000

-30% 2007

3,750 3,500

30% 20%

5,000

2007

2008

2009

2010

2011

2012(f) 2013 (f) 2014 (f)

Excludes projects worth more than £100m and framework agreements SOURCE: GLENIGAN

2009

2010

2011

2012 (f)

2013 (f)

2014 (f)

Excludes projects worth more than £100m and framework agreements SOURCE: GLENIGAN

(F)=FORECAST

(F)=FORECAST

The demand for prime office SCOTLAND The value of project starts fell by accommodation in Edinburgh, Glasgow and particularly Aberdeen 8 per cent last year as a result of has tightened and should help declines in private housing, support the reinstatement of health and education and civils stalled schemes. work. This left Scotland the In addition, the first half of this poorest performing part of UK. year saw the value of industrial Underlying starts have projects more than double. remained weak during this The anticipated strengthening year so far, but a stronger in private sector starts performance is expected for during 2013 is forecast to the coming year. offset contractions in Recent months government-funded have seen a rise in areas, such as private housing health and and civil engineering Forecast year-on-year education, fuelling an 8 per cent rise starts. Industrial rise in the value of starts for Scotland in the value of and office pipelines in 2013 underlying project have also been starts for the year. improving.

8%

www.cnplus.co.uk

2008

WALES approvals, after a strong 31 per cent Recent months have increase last year, seen project starts in suggests that Wales buoyed by a Forecast year-on-year housebuilders combination of fall in the value of have become strong growth in starts for Wales more cautious private housing and in 2013 regarding the non-residential activity prospects for the and a firm flow of Welsh housing market. education and health projects. As a result, the value of However, the flow of starts is underlying project starts is expected to lose momentum forecast to fall back by 3 per cent during the remainder of this year and during 2013. The tightening in next year, before recovering in 2014 thanks to an increase in government investment funding private sector activity as Welsh is evident in a marked drop in economic growth strengthens. related planning approvals and is expected to feed through to a slowing in public sector projects. In addition, the growth in private sector starts appears set to IN ASSOCIATION WITH be moderate. In particular, a recent drop in private housing

3%

6 September 2012 | 17


Top housebuilders grow land The market remains stable for the larger housebuilders, with pent-up demand for housing trickling through thanks to government funding initiatives – with rumours of more to come housebuilding

Tussle aT The Top barratt has pipped Taylor Wimpey to the top spot of our housebuilders table this year after the latter sold off its north American arm Taylor Morrison to strengthen its balance sheet and boost investment. The top four have all been making positive noises over the summer, with barratt expecting a 150 per cent rise in profits over the year. bullish talk also comes from the Taylor Wimpey corner, with chief executive Peter redfern telling cn the firm is coping well and is poised for growth. in fact, turnover across the top 20 housebuilders was 7 per cent up on the previous year according to their latest financial results, while collective pre-tax profits shot up by 322 per cent.

Galliford Try’s three-year housebuilding plan has proved a success this year, with a convincing 23 per cent rise in turnover and pre-tax profits soaring 226 per cent. its most recent trading update for the year to 30 June 2012 revealed a record rate of housing completions, representing an increase of 40 per cent on the previous year. berkeley has boosted turnover by 40 per cent to break the £1 billion barrier, with agreement thought to be near on the 2,517-home Woolwich station development. The company also chalked up the highest pre-tax profit margin on the table. One firm to watch will be cala, which managed to boost turnover by 42 per cent while pulling itself back into the black.

chris berkin

chris.berkin@emap.com

The housing market has appeared something of an enigma in recent years. Though August’s new start figures from the Office for National Statistics confirmed that it remains depressed, profits at the top 20 housebuilders are improving. Unit volumes are stagnating at around half of 2006/07 levels, in what some are calling ‘the new normal’. Yet the market is remarkably stable for larger housebuilders, with strong potential for growth as planning changes and localism bed down. The big players are also snapping up cheap land in the wake of the credit crunch – though such moves represent a threat to the survival of smaller companies.

Although house prices are dropping around the country, even showing signs of weakness in London, mortgage lenders are warming to new-builds, as pent-up demand starts to trickle through and builders adapt their offerings to larger developments with healthier returns. Government initiatives are easing the situation. Funding for Lending, though still in its early stages, has also enjoyed success in bringing down the costs of NewBuy mortgages. FirstBuy meanwhile has been praised for taking the stigma off first-time buyers for many lenders, but the scheme needs to be extended past the March 2013 deadline if the boost is to continue. With the government increasingly recognising the role of housebuilding in driving the

Top 20 housebuilders Current previous Change Consultant rank rank

latest turnover (£m)

previous turnover (£m)

% change

latest preprevious pretax profit (£m) tax profit (£m)

pre-tax profit margin (%)

Current land bank

last analysed accounts

1

2

s1

Barratt

2,035.4

2,035.2

0.01

42.7

-33.0

2.1

60,083

30/6/11

2

1

▼ -1

Taylor Wimpey

1,808.0

1,767.7

2.3

89.9

-15.9

5.0

65,264

31/12/11

3

3

▼0

Persimmon

1,535.0

1,569.5

-2.2

143.7

90.9

9.4

63,335

31/12/11

4

5

s1

Berkeley

1,041.1

742.6

40.2

214.8

136.2

20.6

26,021

30/4/12

5

4

▼ -1

Bellway

886.1

768.3

15.3

67.2

44.4

7.6

18,086

31/7/11

6

6

0

Keepmoat

677.1

604.4

12.0

67.9

68.9

10.0

16,101

31/3/11

7

7

0

Redrow

452.7

396.9

14.1

25.3

0.7

5.6

11,190

30/6/11

8

9

s1

Galliford Try

388.5

316.0

22.9

15.0

4.6

3.9

10,250

30/6/11

9

11

s2

Bovis

364.8

298.6

22.2

32.1

18.5

8.8

13,723

31/12/11

10

8

▼ -2

Gladedale

339.4

355.9

-4.6

-25.1

-78.4

-7.4

7,700

30/12/10

11

12

s1

Crest Nicholson

319.1

284.4

12.2

-14.8

-3.7

-4.6

14,772

31/10/11

12

10

▼ -2

Bloor

300.9

312.0

-3.6

30/6/11

267.5

228.1

17.3

3.5

-10.1

1.3

8,500

30/9/11

13

15

s2

Countryside Properties

14

16

s2

Galliard

207.8

162.4

28.0

-2.1

-16.8

-1.0

31/3/11

15

17

s2

McCarthy & Stone

230.6

230.3

0.1

1.3

-8.7

0.6

31/8/11

16

14

▼ -2

Stewart Milne

229.1

250.8

-8.7

0.4

0.1

0.2

30/6/11

17

13

▼ -4

Miller Homes

220.9

261.3

-15.5

-17.2

-33.2

-7.8

4,480

31/12/11

18

19

s1

Cala

204.8

144.5

41.7

1.3

-18.6

0.6

30/6/11

19

18

▼ -1

Kier

153.1

157.7

-2.9

-39.4

-3.3

-25.7

4,800

30/6/11

20

20

0

Morris

136.0

126.1

7.9

2.9

1.8

2.1

31/3/11

18 | 6 September 2012

www.cnplus.co.uk


values as profits soar

COMMENT HOUSEBUILDING JOHN STEWART, DIRECTOR OF ECONOMIC AFFAIRS, THE HOME BUILDERS FEDERATION

Undersupply is the real issue war chests, just in case”. economy, a flurry of initiatives Mr King says it is “absolutely have emerged in recent months, imperative” that FirstBuy is ranging from softening section extended to try to get credit 106 requirements through to flowing again, and that guaranteeing finance for Funding for Lending ‘shovel-ready’ is “a great start projects. that’s actually There may be getting banks to further carrots from loosen their Westminster on the Average rise in policies”. way, aimed at turnover among Redrow group persuading builders the top 20 managing director to prioritise volume John Tutte meanwhile over margins, with is optimistic. “We haven’t reports of a “Letwin plan” to been looking to increase volumes; underwrite housing association we’ve been looking to change bonds expected to hit the front product mix to family housing – pages in September or at the time there’s been a huge switch from of the autumn statement. apartments to housing. That’s outside of London, the superBank challenges prime market,” he says. With the eurozone crisis hanging But Mr Tutte is frustrated with over the country and continuing to spook the banks, challenges still the banks making conditions in the buy-to-let market more hostile, exist. Kier’s housebuilding and with a lack of appreciation of division saw its pre-tax loss the merits of home ownership. deepen to £39.4 million in its “This is a government which 2010/11 results. Managing director does recognise that housing is of affordable homes Chris King says sales were “steady but fragile”, economically good as well as socially good, and I think it has hampered by banks “stockpiling

7%

worked hard,” he says. “But it needs to help banks to make products more competitive.” Others are mindful of different dangers. Federation of Master Builders chief executive Brian Berry thinks that although the green construction and retrofit markets will increasingly provide opportunities, the industry risks a skills shortage. “Social housing has been 20 per cent lower than a year ago, and big projects are coming to an end, like the Olympics,” he says. “There’s also a marked fall in repair and maintenance work due to local authorities cutting budgets and responding to a new government, while households have less to spend. “The government is starting to recognise the value of the sector, but a coherent plan for growth is needed.”

IN ASSOCIATION WITH

70,000 63,000 56,000 49,000 42,000 35,000 28,000 21,000 14,000 7,000 0

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Gross mortgage lending (£m)

No. of housing starts

NUMBER OF HOUSING STARTS AND LEVEL OF GROSS MORTGAGE LENDING

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2006 2007 2008 2009 2010 2011 Housing starts

SOURCE: HOUSING MARKET – ONS; MORTGAGE LENDING – COUNCIL OF MORTGAGE LENDERS

www.cnplus.co.uk

Gross mortgage lending

The housing market has been surprisingly buoyant – although starting from a low base – against the backdrop of falling GDP and construction output. Housebuilders reported year-on-year increases in net reservations from January to May, with a modest dip in June followed by a July rebound, according to HBF’s monthly survey. The government has promised a housebuilding package to help drive the UK recovery. The announcement was planned for July, but is now expected between September and November. On the demand side, the priority must be additional funding for FirstBuy. Current funding, due to end in March 2013, is almost exhausted. The scheme has been successful, with around 10,000 new home sales in just over 12 months. The Funding for Lending Scheme should boost the supply of mortgage finance and bring down rates. We hope the FLS will allow major lenders to cut their rates for the NewBuy scheme and give it added momentum. On the supply side, the government is looking at ways to use its balance sheet and some form of guarantee to generate a big rise in affordable housing, involving registered providers and private housebuilders. The details are not available but the intention is clear. The HBF has also proposed revising the definition of ‘affordable’ to free the private sector to deliver more homes for lower-income households. The government’s package will focus on boosting output in the next two years. But any short-term measures must also improve delivery capacity to sustain any short-term boost beyond 2014/15 and begin to address our long-term undersupply of housing.

6 September 2012 | 19


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We can deliver* School

34.8%

Hospital

21.8%

on a project value of £23 million

on a project value of £150 million

Office

Residential

28.2%

31.1%

on a project value of £260 million

on a project value of £30 million

Our mission is to make your life easier on site, and add value to your project wherever we can. *Based on analysis conducted in August 2011.

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ADVERTISING FEATURE

INDUSTRY SNAPSHOT BY MARK TOMLIN

SIG plc’s UK Group Sales and Marketing Director finds some rays of light in an otherwise gloomy outlook...

T

here is no escaping the fact that, for a number of reasons, we’re still fighting through a tough time for the construction industry. The precarious nature of the country’s economic recovery means that construction is taking a double hit both from low confidence in the private sector, and from reduced public spending. However, whilst the outlook remains far from bright, there are rays of light beginning to penetrate the gloom that has held sway over the industry in recent years. In the medium to long term RM&I activity related to carbon emission reduction presents real opportunity for those businesses who can contribute to the decarbonisation of our housing stock. Likewise the need for new infrastructure, especially in the energy sector, presents a further area for growth in the coming years. Whilst competition will undoubtedly be fierce, for those with the aptitude and desire to succeed, the opportunities are there for the taking. We must also acknowledge that not everything that has come out of the economic turmoil of the last few years is bad. The need for resource efficiency brought on by recession has imbued into the supply chain an unprecedented focus on collaborative working. Integration has become the watchword of the modern construction industry, and long may this continue even when the days of economic hardship are behind us. The increasing importance of carbon performance for construction products has had a big impact on the supply chain. Keen to ensure that their products deliver against performance promises, manufacturers are becoming increasingly interested in the application of their products. For contractors, this means there is a pressing need to get to grips with the technical aspects of the products they are using, and best practice for installing them – failure to do so will mean missing crucial performance targets and facing remonstration from not only the customer, but from the manufacturer as well. In practice, this

Casio has launched the new VX-100 EPoS terminal

means that the distance between manufacturers at one end of the supply chain, and main contractors at the other, has dramatically shortened. New relationships are increasingly being formed between elements of the supply chain that previously had little or no interaction with one another. The need for cost-efficiency has likewise positively impacted on the supply chain. Gone are the days when the default spec is accepted without question. Contractors are becoming increasingly aware that there are a multitude of options out there, and are more than willing to change a specification if a more appropriate and cost-effective solution is available. Value engineering has become the cornerstone of the specification process, and contractors are now eager to draw upon the experience of those around them to find the right product for the job at hand. It is, after all, the quickest and easiest way to make a project more cost-effective. For SIG, this evolution in the way the different elements of the supply chain interact with one another has made our role even more

important, and provided great opportunities for our business. Innovative partnerships such as our groundbreaking Supply Partner Agreement with Carillion at Southmead Hospital is a real-life manifestation of how an integrated approach can deliver across-the-board efficiencies and benefits for all involved. Of course, we face challenges just like any other business in this industry – however we are also proactively seeking out opportunities. Where work might be drying up in one sector, projects are starting to flow back in to another – and the principles of cost-efficiency and value engineering that our business can deliver remain at the heart of each and every one of them.

www.sigplc.com


Demolition grows but other sp The uncertainties and challenges BUILDING ENVELOPE CN TEAM for the country’s top specialist Glassolutions Saint-Gobain, cneditorial@emap.com contractors continue, and any formerly Solaglas, has remained optimism regarding recovery top of the building envelope table, with turnover dipping by during 2012 has all but disappeared. Some sectors only 3.9 per cent; however, the are boasting a healthier position than others, company posted a pre-tax loss of according to the numbers. But the reality is the £9.8 million in its latest accounts UK’s top specialists are not immune to the overall for the year to December 2010. contraction in the industry that is set to continue M Price, meanwhile, saw turnover soar by 40.5 per cent, for longer than was anticipated a year ago. defying a downturn which has While virtually all of the top demolition seen the top 10’s combined contractors have posted turnover growth and the turnover fall by almost 20 per cent. scaffolding sector remains stable with little Prater and Alumet have also bucked the trend, with the former change in the rankings compared with last year, boosting turnover by 8.3 per cent, other areas have fared less well. building on its pedigree following The M&E sector has seen significant turbulence the Olympic Stadium and over the past year, with forecasts of further Velodrome projects. But less able to weather the storm have been challenges ahead over the next 24 months, Josef Gartner, McMullen and MPG while concrete contractors are facing an Group, whose turnovers have each uneasy 12 months according to commentators, slumped by more than 50 per cent. with the sector reliant on London and the McMullen may now however have halted its decline, having South-east for opportunities. secured five lucrative contracts in Administrations have also affected our London and Oxford in April this specialist tables, with three companies year, worth a combined total that were convincingly in the top 10 of £35m. Cashflow remains a last year having suffered. S Robinson danger for many & Son and Parry Bowen went into firms, with cashadministration in late 2011, while strapped clients one of the most high-profile M Price growth in striving to hold on to turnover, year to administrations in the industry this money and wary of April 2011 risk in a market likely year – Doyle group – has meant the loss to keep treading water of John Doyle from the concrete top 10. for the next two years. SPECIALISTS

40.5%

Parry Bowen’s administration,

despite securing work on the Athletes’ Village for London 2012, represents a warning of the effect of thin margins. Lakesmere business development director Chris Horsfall tells CN his firm was able to retain third place in the table by reducing overheads, innovating in offsite assembly and design, and diversifying into new markets. “It’s essential that people don’t just take work for the sake of it – you’re better off reducing your overheads and focusing on sectors where you’re guaranteed a return.” For Lakesmere, these areas were transport, retail, leisure and utilities. In particular, the firm’s infrastructure activities and contact base in the Middle East helped offset the difficult UK market. “I’ve been through three recessions – this is the longest one,” says Mr Horsfall. “People that are still around now are the ones that have slugged it out, and they do know what to do.” With competition from abroad intensifying, particularly from German and Chinese companies, UK Trade and Investment can be a useful vehicle for companies that want to break into lucrative overseas markets such as Australia, South America and India.

TOP 10 BUILDING ENVELOPE Latest position

Previous position

Contractor

1 2 3 4 5 6 7 8 9 10

1 3 4 2 9 7 6 10 5

Glassolutions Saint-Gobain Prater Lakesmere Josef Gartner M Price Red Architectural MPG Group Permasteelisa Alumet Systems McMullen

22 | 6 September 2012

Latest turnover £m

Previous turnover £m

% change

Latest pre-tax profit £m

Previous pre- tax profit £m

Pre-tax profit margin (%)

Last accounts

93.3 65.4 42.3 37.6 28.1 26.7 24.2 22.1 17.7 16.7

97.1 60.4 43.4 83.2 20.0 23.8 54.3 34.5 13.2 35.9

-3.9 8.3 -2.5 -54.8 40.5 12.2 -55.4 -35.9 34.1 -53.5

-9.8 2.9 0.8 4.1 1.0 -0.1 -0.9 0.3 0.4 -0.6

-15.6 3.4 1.5 4.1 1.3 0.2 1.3 0.2 0.1 3.0

-10.5 4.4 1.9 10.9 3.6 -0.4 -3.7 1.4 2.3 -3.6

31/12/10 31/12/11 31/1/11 31/12/10 30/4/11 31/3/11 31/12/10 31/12/10 31/12/10 31/1/11

www.cnplus.co.uk


specialists face tough times TOP 10 GROUND ENGINEERING Latest position

Previous position

Contractor

1

1

2

2

3 4 5 6 7 8 9 10

4 5 6 3 7 8

Bachy Soletanche Balfour Beatty Ground Engineering Bam Ritchies Keller Cementation Skanska Van Elle Roger Bullivant* Dawson Wam Abbey Pynford Rock and Alluvium

Latest turnover (£m)

Previous turnover (£m)

% Change

Latest pre-tax profit (£m)

Previous pre-tax profit (£m)

Pre-tax profit margin (%)

Last accounts

89.4

54.4

64.3

-

-2.3

-

31/12/11

62.0

65.8

-5.8

-7.7

0.5

-12.4

31/12/10

55.1 53.6 38.9 34.0 27.4 17.0 15.6 13.8

40.9 49.6 48.3 30.0 19.2 12.6 10.9

34.7 8.1 -19.5 13.3 -11.5 23.8 26.6

-1.8 c.1.0 -0.6 0.2 0.1 -0.3

0.09 0.7 0.3 0.02 -0.8

-4.6 -2.2 1.2 0.6 -2.2

31/12/11 31/12/11 31/12/10 30/4/12 31/12/11 31/12/10 30/9/11 30/6/11

*RESULTS FOR PERIOD 1 AUGUST 2011 TO 31 DECEMBER 2011

GROUND ENGINEERING The shift in profits and turnover growth among some of this year’s top 10 geotechnical contractors has accompanied market turbulence over the past 12 months that has shaken up or seen the disappearance of some of the big players. Following May Gurney’s closure of its piling division in December 2010, Morgan Sindall followed suit in April last year and Carillion last November. Meanwhile, Balfour Beatty Ground Engineering went through a restructure back in October 2011 to better face the current environment. In the times of consistent economic growth and higher geotechnical margins, there was a trend for main contractors to acquire independent firms to enable them to offer clients a “one-stop shop”.

“Anyone buying piling at the moment is getting a good deal. We live for today; tomorrow will have to look after itself” PAUL HODGSON, BACHY SOLETANCHE www.cnplus.co.uk

the future in terms of But as margins sector buoyancy. have shrunk, and the “Main contractors number of big jobs can plan two years where main ahead, but we live contractors could Bachy Soletanche for today; feed chunks of work turnover growth tomorrow will have to in-house 2010-11 to look after itself.” specialists has Bachy Soletanche dramatically contracted, finance director profits have tumbled. Graham Trafford Nonetheless, there explains that its has still been £35m turnover merger and growth from 2010 acquisition activity, to 2011 is due to the with one Van Elle forecast firm working on a of the largest and turnover, year to number of major highest-profile April 2013 projects last year, such independents, Roger as the Lee Tunnel Bullivant, being snapped London Tideway improvement up by Bachy Soletanche (part and the London Gateway freight of the Vinci group) last year. terminal at the Thames Estuary. Bachy Soletanche business “The Lee Tunnel work along development manager Paul with Crossrail jobs should sustain Hodgson says the firm is looking turnover figures for 2012 and to public sector work as the driver prevent a drop back to those of in a tough marketplace. 2010,” he says. “We have been surviving on Independent company Van Elle infrastructure and we hope that puts its growth down to the situation will continue,” he says. effort it puts in to impress clients. “Roads were big but the tap has The firm’s group business been turned down. development manager Mark “Commercial was good for us Williams adds that the forecast previously but it’s gone quiet – it turnover for the year to April 2013 may pick up a bit in 2013 but the is £36.5m, with profits remaining situation is fragile. in the black. “Anyone buying piling at the “We have also launched a new moment is getting a good deal.” specialist rail division, recently But he says ground engineering firms aren’t able to look too far into opened an office in Lagos, Nigeria,

£35m

£36.5m

to undertake piling and stabilisation works in this fastdeveloping country, and opened a new office in Crawley, Sussex, to further focus on clients based in London,” he says. “Infrastructure has been the big growth area for us in recent years and we see this being the case for at least the next couple, alongside projects such as High Speed 2, rail electrification schemes, flood alleviation projects, motorway widening, the development of many waste water treatment plants, and an increased demand on our ports and harbours.” Abbey Pynford is another independent company that is managing to make a profit, albeit a marginal one. Chairman Paul Kiss says: “We predict a slight downturn in inward investment to London, but the basements market there will still remain strong. “For underpinning the market has remained fairly constant – competition was intense before the recession but we have learned to live with it, and being a market leader helps.”

IN ASSOCIATION WITH

6 September 2012 | 23


TOP 10 SCAFFOLDING Latest Previous Contractor position position

1 2 3 4 5 6 7 8 9 10

1 2 3 4 5 6 7 8 9 10

Cape Industrial Services Interserve Industrial Services Harsco Infrastructure Services Deborah Services Pyeroy Xervon Palmers Lyndon Denholm Trad Brogan Group

SCAFFOLDING The top 10 scaffolding companies have remained relatively stable over the past year, with overall combined turnover up 6.4 per cent to £825 million according to their latest financial results. Profits were more variable. Brogan Group managed to turn a pre-tax loss into a pre-tax profit this year, which company director Giles Williamson puts down to strategic business relationships. “The increase can be attributed to an increased emphasis on partnering with key clients, resulting in better planned access solutions and ‘buy-in’ from other specialists,” he says. He also points out that figures don’t always tell the full story. “While we did increase our profitability, the previous year was profitable also, though the bottom line was affected by a one-off exceptional, which was the writedown in value of property,” he says. Trad’s latest figures show a pre-

Latest turnover (£m)

Previous turnover (£m)

% change

Latest pre-tax profit (£m)

Previous pre-tax profit (£m)

Pre-tax profit margin (%)

Last accounts

310.9 135.7 107.6 81.2 73.8 37.2 29.8 20.0 14.8 13.9

284.3 133.6 122.4 70.0 59.8 32.5 29.9 15.3 14.5 13.3

9.4 1.6 -12.1 16.0 23.4 14.5 -0.3 30.7 2.1 4.5

29.2 0.4 -26.9 3.1 2.9 -10.3 0.7 4.1 3.5 1.5

24.8 0.2 -10.6 0.6 3.5 -3.3 0.5 1.2 1.0 -0.2

9.4 0.3 -25.0 3.8 3.9 -27.7 2.3 20.5 23.6 10.8

31/12/11 31/12/11 31/12/10 30/4/11 31/12/11 30/9/11 31/3/12 31/12/10 30/11/10 31/12/11

facing scaffolding contractors. tax profit rise from £1m to £3.5m “This is fuelled by the lack of over the course of a year. confidence of private investors “The latest profit was and the climate of austerity,” says exceptional because of an Mr Williamson. insurance claim pay out in the “To address this we need more year,” says Trad Scaffolding group government and private sector managing director Des Moore. investment in construction.” “We have not improved National Access and Scaffolding profitability by nearly four-fold; Confederation managing director it was an exceptional item.” Robin James agrees, adding: The real picture for his “[The challenges are] linked to company and other scaffolding the bigger picture with principal contractors, Mr Moore says, is contractors and the fact that the less positive. “I think it’s probably true across whole construction market has contracted.” the board that margins are under Mr Williamson says that pressure and you’ve got problems Brogan Group is looking at with skilled labour leaving the diversification as well industry and young as repeat business people not being as bright spots for attracted to join it.” the future. Both Mr “Brogan Group Williamson and has a 95 per cent Mr Moore consider Rise in total turnover repeat business the ongoing across the top 10 rate and we use our reduction in general scaffolding service and health construction activity firms and safety record as a as a major challenge

6.4%

platform for gaining new clients,” he says. “More generally, in the medium term we are hoping to achieve further growth through increased diversification, particularly into rail and infrastructure.” Mr Moore is less optimistic about short-term growth. “Future growth will only come from a return in the commercial market – that’s a key factor,” he says. “It’s been at a fairly low level for the past four or five years and I don’t think it’ll recover for at least another two – that’s the message coming from our clients.” Geographically, London might offer contractors some hope in the coming months, particularly once the Olympics are over. “There could be a spike in the London market, as there is work that has been put on hold because of the Olympics – work which will take place in the last quarter of this year or early next year,” says Mr Moore.

TOP 10 STEEL Latest position

Previous position

Contractor

Latest turnover Previous turnover (£m) (£m)

1

1

Severfield Rowen

267.8

2

2

William Hare

182.2

3

3

Rowecord

64.3

% change

Latest pre-tax profit (£m)

Previous pre-tax profit (£m)

Pre-tax profit margin (%)

Last accounts

266.7

0.4

10.1

15.3

3.8

31/12/11

154.1

18.2

1.5

6.2

0.8

31/12/10

77.6

-17.1

-4.3

0.3

-6.7

30/6/11

4

5

Billington Structures

39.5

55.7

-29.1

0.2

4.2

0.5

31/12/10

5

4

Cleveland Bridge

37.2

65.3

-43.0

1.2

5.2

3.2

31/12/10

6

6

Bourne Group

36.2

37.8

-4.2

0.9

1.8

2.5

31/10/11

7

-

BHC

36.2

32.2

12.4

1.4

0.8

3.9

31/3/12

8

7

Walter Watson

35.8

30.4

17.8

0.3

0.4

0.8

31/12/11

9

10

Caunton

32.2

29.4

9.5

0.1

0.02

0.3

31/1/12

10

9

John Reid and Sons

25.4

24.2

5.0

0.7

2.4

2.8

31/3/11

24 | 6 September 2012

www.cnplus.co.uk


M&E Consolidation is set to continue in the M&E sector after a year of upheaval and mixed fortunes. A number of M&E firms are also extending their facilities management services as they adapt to the moving market and look to provide additional offers to major clients. Current pre-tax profit at the top 10 M&E firms dropped collectively by more than 8 per cent year-on-year. The past year has seen a spate of high-profile failures including MJN Colston, part of Rotary UK and Airedale M&E. Margin pressures led to a raft of smaller regional firms being placed into administration, with some then returning under new names. Insolvencies have offered the

collapsed in May. Lorne Stewart opportunity to competitors finance director Puliyelethu looking to expand their regional Mathew says the company is also services, pick up significant expanding its FM business. contracts or overcome entry He predicts two more years of barriers to clients or new services. Integral bought up the Ministry challenging times for the sector, and suggested M&E – which can of Defence’s South Western and make up 25 to 30 per cent of a job – Eastern Prime contracts left is a likely target for contractors behind by MJN Colston, while and clients looking to save costs. Balfour Beatty took on contracts “If you’re not financially strong set to go to Airedale M&E. and you are going and buying MJN Colston saw 241 jobs lost, business then in the long with 146 going at Rotary term you will be in and 135 from Leedstrouble.” Mr Mathew based Airedale M&E. is planning to Lorne Stewart create a 50/50 subsidiary 4th balance in his Utility bought four Fall in combined business between Rotary UK divisions, pre-tax profit M&E and FM. saving 391 jobs, after across top 10 Elsewhere in the the latter’s Australian M&E firms M&E table, Imtech parent company

8%

continued on its acquisition strategy and reported turnover surging by more than 50 per cent, while SPIE Matthew Hall has also remained on the acquisition trail, buying FM firm Garside & Laycock. Paul Jones, partner at corporate finance firm Clearwater, is expecting consolidation in maintenance contractors and more technical service providers to offer managed services. Deloitte construction M&A partner Paul Trickett says: “There will be continued natural consolidation across the broader construction sector as businesses fail or are forced into sales. “The latter is most likely in areas such as M&E engineering, where subcontracting has been a strong tradition.”

TOP 10 M&E Latest Previous position position

Contractor

Latest turnover (£m)

Previous turnover (£m)

Turnover growth

Latest pre-tax profit (£m)

Previous pre-tax profit (£m)

Pre-tax profit margin (%)

Last accounts

1

1

Balfour Beatty Engineering Services

523.4

542.0

-3.4

31/12/11

2

-

Imtech

514.6

340.7

51.0

18.4

7.4

3.6

31/12/11

3

2

SSE Contracting

469.2

460.4

1.9

30.1

38.1

6.4

31/3/11

4

4

Skanska Rashleigh Weatherfoil

352.6

391.8

-10.0

18.5

9.3

5.2

31/12/10

5

3

Crown House Technologies

347.6

407.7

-14.7

13.4

9.5

3.9

31/3/11

6

5

NG Bailey*

339.6

382.4

-11.2

-5.6

24.9

-1.6

25/2/11

7

7

SPIE Matthew Hall

311.8

288.0

8.3

-4.4

-4.1

-1.4

31/12/10

8

6

Emcor

297.7

320.9

-7.2

16.1

11.2

5.4

31/12/10

9

8

T Clarke

183.8

179.0

2.7

4.9

5.7

2.7

31/12/11

10

10

Lorne Stewart

162.0

173.2

-6.5

7.8

6.1

4.8

31/12/11

*SUBSIDIARY OF NG BAILEY CHANGED ITS NAME FROM BAILEY

STEEL Severfield Rowen and William Hare continue to dominate the steel contractors table, accounting for almost 60 per cent of the total turnover across the entire top 10. William Hare’s 18 per cent rise to £182.2 million represents the lion’s share of growth. Its performance will be boosted by its market diversity and overseas growth, particularly in the Middle East, while Severfield Rowen continues to benefit from its operation in India, where it says opportunities

“Profit shrank by 67 per cent collectively across the top 10” www.cnplus.co.uk

are “becoming more numerous”. Most other firms saw revenues decline, while pre-tax profit fell 67 per cent collectively across the top 10, with BHC and Caunton posting the only profit growth. Rowecord meanwhile fell into loss, according to its latest accounts for the year to June 2011. Cleveland Bridge saw the biggest drop in turnover across the top 10. A spokesman tells CN the firm expects a further dip this year as market conditions continue to bite, but was optimistic about future prospects, particularly from activities overseas. He adds that the UK market is “certainly a lot more rosy than it was 18 months ago, and I think it’ll get rosier”, with higher levels of tendering and public works

with steelwork elements. Cleveland Bridge is close to signing off on a £35m Sri Lankan deal, and is running operations in Dubai and Saudi Arabia. Former top 10 steel company S Robinson & Sons entered administration late last year, blaming cashflow problems and a rapid decline in orders. British Constructional Steelwork Association director of market development Alan Todd says that although enquiry levels were good, robust competition was leading to shorter order books, wafer-thin margins and reductions in profits. But he says competition has put UK firms in contention for overseas contracts if they could muster the resources to set up shop in emerging markets like

South America or export a specialist product. “Even with the markets only at 50 to 60 per cent, very few main contractors have gone out of business,” he adds. In such conditions, payment is a serious issue, “especially when people are going in at very thin margins – if any margins at all”. Mr Todd expects conditions to worsen slightly this year due to falls in education and health work offsetting growth in private industrial and commercial activity, with improvement in 2014 after a flat 2013.

IN ASSOCIATION WITH

6 September 2012 | 25


TOP 10 CONCRETE Latest Previous Contractor position position

1 2 3 4 5 6 7

1 2 3 7 4 6 8

8

9 10

– 10

Carey Byrne Brothers J Reddington Masterson PC Harrington CJ O'Shea AJ Morrisroe and Sons Foundation Developments Mitchellson MPB Structures

CONCRETE The biggest talking point in this year’s top 10 concrete contractors is the demise of John Doyle, ninth in last year’s table. The top three remain the same, but Masterson climbs to fourth due to the biggest rise in turnover among the top 10, after taking a £17 million hit the year before. Laing O’Rourke subsidiary Expanded Structures has dropped out of the list this year, after turnover plummeted by 82.1 per cent, despite the firm having held DEMOLITION The demolition sector is seemingly weathering the storm of the recession better than others, with virtually all the top 10 contractors posting convincing growth in turnovers. Combined revenue for the top demolition contractors was up by 27 per cent to £448 million according to their latest results, while pre-tax profits collectively were 43 per cent higher. Second-placed McGee reported a staggering rise in revenue of 59 per cent. The group’s head of demolition Nick Taylor attributes this in part to diversification across the sector, saying that McGee is “consolidating the wider nature of the business now”. “We are all branching out, and have had to,” he says. He adds that client demand is a challenge. “Previously clients were facing three to four contractors, but now that list is more like six, nine or 12 contractors, so prices are going to vary,” he says. “We believe we can still attract a premium if we can show clients 26 | 6 September 2012

scale jobs could be progressed quickly if funding was available, 165.6 174.9 -5.3 7.8 0.8 4.7 31/3/11 for example to help much-needed improvements in the quality of 115.6 124.6 -7.2 3.2 8.0 2.8 31/5/11 local transport networks.” 106.0 88.9 19.2 2.2 4.3 2.1 31/12/10 Total concrete sales in 2011 91.2 67.1 35.9 6.3 5.1 6.9 31/8/11 were skewed by a huge reliance 70.1 84.0 -16.5 -0.2 -2.2 -0.3 31/5/11 on London and the South-east. 67.1 80.5 -16.6 7.8 9.0 11.6 30/9/11 MPA figures show that while 57.8 57.0 1.4 0.8 1.4 1.4 31/10/11 ready-mixed concrete sales were 54.1 34.7 55.9 1.2 0.4 2.2 31/12/11 up 7 per cent in 2011, demand in London increased by 44 per cent 36.0 42.9 -16.1 0.3 1.0 0.8 31/5/11 and in the South-east by 24 per 34.9 27.1 28.8 0.6 0.4 1.7 30/6/11 cent, with an underlying decline in sales across the rest of the UK the top spot just two years ago. said it is “no surprise that of 3 per cent. concrete contractors are The Mineral Products Doyle’s experience was that struggling” and called for lower Association has reported sales between March 2011 and 2012 its volumes of ready-mixed concrete value schemes to be supported. “There is a misconception that funding needs doubled to £16m have dropped 12 per cent in the as suppliers demanded shorter all infrastructure projects are first half of 2012 compared with credit terms while customers the same period in 2011. major schemes with long lead delayed payments to the times, but they are not,” he Q2 2012 sales volumes fell 13 group. This trend is says. “Eighty per cent per cent, while corresponding unlikely to cease in declines in construction activity of infrastructure the short term, orders recorded in that led to the lowest quarterly meaning an recent years have output figures since 2009 in Q2 anxious 12 months been valued at less have piled on the gloom. Fall in ready-mix ahead for many in MPA director for economics and than £2m. concrete sales in the sector. “Such smallerpublic affairs Jerry McLaughlin first half of

Latest Previous % change Latest pre-tax Previous pre-tax Pre-tax profit turnover £m turnover £m profit (£m) profit (£m) margin (%)

Last accounts

12% 2012

TOP 10 DEMOLITION Latest Previous Contractor position position

Latest Previous % change Latest pre-tax Previous pre-tax turnover £m turnover £m profit £m profit £m

Pre-tax Last margin (%) accounts

1

1

Keltbray

108.3

87.1

24.3

0.04

0.2

0.04 31/10/11

2

2

McGee

86.0

54.0

59.3

1.9

0.7

2.2 30/11/11

3

3

Erith

67.0

48.5

38.1

1.2

0.6

1.8 30/9/11

4

5

Euro Dismantling Services

33.6

32.2

4.3

-1.2

1.8

-3.6 30/6/11

5

7

John F Hunt

32.7

22.8

43.4

1.4

0.9

4.3 31/3/12

6

6

Cuddy*

31.2

31.2

0.0

0.6

0.9

7

8

DSM

24.8

16.7

48.5

7.7

3.6

1.9

31/7/11

31.0 31/12/11

8

4

Squibb**

24.1

32.4

-25.6

0.7

1.0

2.9

9

9

Brown and Mason

22.8

15.4

48.1

0.9

0.8

3.9 30/4/11

31/1/11

10

10

Coleman

17.2

11.3

52.2

0.5

-0.9

2.9 30/4/11

* PREVIOUS RESULTS ARE FROM 01/02/09 TO 31/07/10 **PREVIOUS RESULTS FOR ARE 18 MONTHS TO JANUARY 2010

how we can mitigate risks. Clients are more demanding; relatively speaking, it’s a buyers’ market.” DSM has grown turnover by almost half, and has had the most significant rise in pre-tax profit. Within its latest report, the company says the sourcing of new work is one uncertainty, but that “its diverse client base and niche position within the industry continues to afford protection against the worst effects of the recession within the construction industry”.

Mr Taylor is also optimistic. “Prospects over the next 12 to 18 months are good,” he says. “There is a better quality of jobs; those opportunities have not been there in the past two to three years,” He says McGee works on jobs varying in value between £250,000 to £15m. Typically the firm has worked on contracts worth £5m or more, but Mr Taylor says that such sources of work have been scarce over the last two to three years. Top demolition contractor Keltbray, meanwhile, posted

growth in turnover of 24 per cent to £108.3m. The company told CN in August that it expects its rail business to overtake its demolition and civils operations, though the latter still represented between 70 to 80 per cent of revenue last year and grew in turnover by 20 per cent.

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Consultants look to infrastru Atkins, Mott MacDonald and Arup remain the top engineering consultants in this year’s table, with overseas prospects looking increasingly attractive to companies as UK growth stalls ENGINEERING CONSULTANTS TOM FITZPATRICK

tom.fitzpatrick@emap.com

Engineering consultants are increasingly looking overseas to supplement falling UK income, but in sectors like rail and power, there is still comfort to be found at home. The top 10 engineering consultants table shows little change from last year, albeit URS’ takeover of Scott Wilson now means that URS includes consolidated revenue from all parts of its businesses in or managed from the UK. This sees URS jump to fourth on the table, among heavy-hitters Atkins, Mott MacDonald and Arup, all of whom recorded increased turnover. Atkins was, however, unique among the four in that it recorded growth in pretax profit of 48.9 per cent to more than £135 million. Mouchel drops a place, having generated more column inches than most in the past year, with changes in leadership, office closures and RBS, Lloyds Banking Group and Barclays taking control of the newly formed MRBL Ltd following its administration.

Mergers and acquisitions have merge with another one or two been buoyant in the sector, with employee-owned consultancies. consultants expecting the trend “I can’t see what is going to stop to continue in the short term. this M&A trend. It might slow Atkins bought consultancy down over time among those Technical Services Scotland for companies buying most strongly £785,000 from RWE npower’s if the people they have bought Bellshill Technical Services group, don’t work out,” he says. while it also picked up Pöyry’s oil He insists the firm is keeping and gas business for more than an eye on the market and has had £15m in June of 2011. conversations with companies, Mott MacDonald but that it would be bought Mouchel “employee-owned Energy in October firms with similar 2011 for an initial market interests” outlay of £2.55m, a that would be move that will start most attractive. Combined turnover to see real dividends of Genivar and in the coming Overseas battle WSP UK months, says Mott Mott MacDonald MacDonald group targets about 35 per strategic development cent of its work in the director Kevin Stovell. UK, but while it’s facing an He says the purchase “filled a increasingly tight battle for work hole” for the consultant in the UK at home with competition high in oil and gas and is important for among consultants, shifts in acquiring gas transmission spending abroad are also resulting distribution engineering skills in an increasing battle for work. that it can use internationally, as Mr Stovell says: “There is much well as strengthening existing more competition, not just in the relationships with high-profile UK. The Middle East is becoming clients such as National Grid. more competitive because firms Mr Stovell says he expects the are coming into the market that M&A trend to continue in the haven’t been there previously and sector and says he wouldn’t rule we are seeing contract terms that out Mott MacDonald seeking to are just not attractive to us.

£1.1bn

KEVIN STOVELL GROUP STRATEGIC DEVELOPMENT DIRECTOR MOTT MACDONALD

“In the Middle East money has moved so consultants are having to move around as well” “We are seeing lower margins than before, but those were in exceptionally good times and this is just normal. But even in the Middle East, the money has moved around and is in Qatar and Saudi Arabia now so [consultants] are having to move around as well.” One merger that has yet to see results – after only being completed last month – but will have an effect on the market in the coming year is Genivar’s £278m buyout of WSP UK. The engineering and design consultancies will form a company with a combined revenue of £1.1 billion and 14,500 employees working in 300 offices. WSP UK deputy managing director Mark Naysmith says that in the UK, 2011 had been a

TOP 10 engineering Top ENGINEERING consulTanTs CONSULTANTS current Current rank

previous consultant Previous Consultant rank

Latest latest Previous previous turnover change Change in turnover turnover (£m) (£m) (%)

latest pre-tax Latest profit £m

1

1

Atkins

2

2

Mott MacDonald

3

3

4

8

5

4

WSP

6

5

Jacobs

610.0

7

6

Mouchel

539.6

8

7

Halcrow

465.5

506.6

-8.1

9

9

Hyder

277.3

290.3

-4.5

10

10

Capita Symonds

174.6

213.9

-18.4

5.1

previous pre-tax Previous profit £m

change in pre-tax Change profit (%)

Latest pre-tax latest profit margin (%)

1,711.1

1,564.3

9.4

135.5

91.0

48.9

7.9

1,074.5

1,035.1

3.8

48.6

49.3

-1.4

4.5

Arup

966.4

889.2

8.7

24.5

84.7

-71.1

2.5

URS Scott Wilson*

859.7

717.3

706.9

1.5

30.2

35

-13.7

4.2

561.4

8.7

4.3

5.9

-27.1

0.7

632.6

-14.7

5

30.5

-83.6

0.9

8.8

16.3

-46.0

1.9

21.6

20.3

6.4

7.8

19.4

-73.7

2.9

* FIGURE SUPPLIED BY COMPANY

28 | 6 September 2012

www.cnplus.co.uk


ucture and energy for growth Top engineering consulTanTs’ Turnover £m 1,900 Mott MacDonald

Atkins

Arup

1,700 1,500 1,300 1,100 900 700 500

2007

2008

2009

2010

2011

2012

Top engineering consulTanTs’ pre-Tax profiT £m 150 Atkins

Mott MacDonald

Arup

120

90

60

30

0

2007

2008

2009

2010

2011

2012

previous Previous pre-tax profit margin (%)

current Current no of employees

previous Previous no of employees

5.8

16,453

16,263

31/3/12

4.8

13,162

13,013

31/12/11

9.5

9,934

9,852

31/3/11

c.9,000

31/12/11

5.0

8,882

9,060

31/12/11

1.1

5,836

5,802

30/9/11

4.8

9,402

10,425

31/7/11

3.2

6,307

6,842

31/12/10

7.0

3,671

3,859

31/3/12

9.1

2,300

2,966

31/12/11

www.cnplus.co.uk

last Last analysed accounts

challenging year for the first half, particularly in civils as highways work dried up, but the second half was stronger, with a particular boost from the rail sector. Mr Naysmith says the business has seen a lot of front-end planning work, but the building market is slow, including a “long four years [in recession] for very little new-build residential”. WSP UK’s strategy is to maintain the core of the highways team, despite reshaping the business in recent years, with average employee numbers down by almost 200 in the latest results. Mr Naysmith says highways work will pick up, but the firm is in a good position in rail, where it has grown consistently over the past five years. While it has yet to pick up High Speed 2 work from its engineering framework, it hopes to secure a first deal soon. nuclear option Firms will also be looking to the nuclear sector, with Arup and Jacobs among those already winning work with EDF and NuGen, but the associated infrastructure alongside the main reactor cores will be a lucrative field for years to come and is an area WSP UK will watch closely. “We don’t have the track record [to support bidding for reactor work] but our strategy is to support the associated infrastructure,” says Mr Naysmith. “We will position ourselves for buildings and infrastructure associated with new nuclear plants and will be aligning ourselves with contractors.” Consultants are reporting shifts in relationships with contractors too, with one managing director telling CN that the amount of work his firm is winning directly from contractors, rather than

Mark NaysMith deputy MaNagiNg director Wsp uk

“We will position for buildings and infrastructure associated with nuclear plants” clients, has increased significantly in recent years. The renewables sector is expected to be lucrative in the next few years, with firms looking to Scotland for work as it aims to provide 100 per cent of its energy needs through renewable sources by 2020, while offshore wind is seeing increasing government support and foreign investment. But target markets such as rail and power are already becoming increasingly competitive, with work on Crossrail ongoing, HS2 upping its consultant recruitment and the government’s £9.4bn rail investment from 2014 to 2019. Firms are expected to continue targeting more work abroad in the short term, with WSP UK looking to double global activity to 30 per cent of its business, and the likes of Arup and Atkins continuing to secure lucrative deals. All eyes will be on Mouchel as well, as the troubled firm looks to recover its strength with its lenders as its owners, a deal its chief executive Grant Rumbles said secured the “long-term future of the business”.

In aSSocIatIon wIth

6 September 2012 | 29


Top consultancies relying on QS consultants look abroad as nervousness remains in the commercial sector, particularly in the regions, while new infrastructure spending fails to have an impact in the shorter term QS conSulTanTS sarah dennis

The balance of work is tipping towards international waters as the UK’s challenging economic climate continues to restrict home-grown turnover growth for the UK’s top consultancies, but there are still opportunities within major infrastructure sectors closer to home. The industry’s top 10 QS consultants have collectively grown turnover by 2 per cent according to their latest accounts, compared with their previous financial years. Davis Langdon, an Aecom company, and EC Harris jointly top the table, both being the subject of takeovers over the past two years, most recently Arcadis taking full ownership of EC Harris at the end of 2011. Franklin + Andrews attributes its 12 per cent growth in turnover to an increase in work in core areas, with water and utilities singled out as two growth strands in 2011. The firm has been a part of Mott MacDonald for 10 years and managing director Andy Willis says this has meant growth

and diversity for the business. Various sectors offer growth potential both in the UK and internationally, most notably within energy generation, such as renewable energy and nuclear. Derek Pitcher, managing director of the re-branded Sweett Group, agrees that the major infrastructure sectors are targets, adding that Sweett Group is “so much more diversified”. Traditionally work for the firm largely involved retail and office projects, but it has got more involved in moves into energy and infrastructure, reflected in its place on the framework for Hinkley Point C to provide commercial support services. Mr Pitcher says moves into these projects also positions companies andy willis managing director, franklin and andrews

“There’s an air of nervousness outside london and it will be there for a few years to come”

well for international work, adding: “You’ve got to have the skills base and understand the vocabulary [in infrastructure]. “If the EDF programme comes forward, the UK is going to be at the height of that knowledge, with an ability to cross-sell that is enormous. And within rail we do work with tracks and signalling but also on the property side. “If you have rail experience here, there are good opportunities in the Middle East or Hong Kong.” He sees being an independent company as a strength. “There are no plans for mergers; we very much want to remain independent and we see it as a big plus,” he says. “Quite a few of the big engineers are finding us good as partners – especially if they don’t have a cost research function in-house.” Mr Pitcher acknowledges the tough UK climate within other sectors, though more niche areas, such as high-end retail and hotels, are offering work. “We’re having schemes stopped – we’re finding it difficult at the present time,” he says. Mr Willis suggests commercial property is one of the largest areas where confidence is lacking. “There’s still an air of

derek pitcher managing director, sweett group

“We truly have become a global business. our exposure has reduced in the uK” nervousness, particularly outside London, and it will be there for a few years to come,” he says. “Regions will continue to suffer in some of the property-related sectors – we have the balance that a lot of what we do is utilities to maintain our regional spreads. It’s difficult to see improvements in commercial property.” Gleeds Worldwide chairman Richard Steer says that “more strategic support is needed” to kick-start UK construction. “This might include a relaxation in funding requirements for construction, or a short-term change in VAT,” he says. “Although there is investment in infrastructure, this can take a long time to show tangible, measurable benefits, unlike

Top 10 QS CONSULTANTS TOP conSulTanTS Current Previous current previous Consultant consultant rank rank

Latest latest turnover (£m)

previous Previous turnover (£m)

Change change in turnover (%)

Latest latest pre-tax profit £m

Previous previous pretax profit £m

Change change in preLatest latest pre-tax Previous previous pre-tax tax profit (%) profit margin (%) profit margin (%)

1

1

Davis Langdon

254.0

284.3*

-10.7

33.9

11.9

1

2

EC Harris

254.0

245.0

3.7

40.3

34.1

18.2

15.9

13.9

3

3

Turner & Townsend

244.3

204.3

19.6

23.0

15.7

46.5

9.4

7.7

4

4

Gardiner & Theobald

109.6

110.6

-0.9

18.1

19.1

-5.2

16.5

17.5

5

5

Faithful + Gould

97.9

99.1

-1.2

7.2

4.9

46.9

7.4

4.9

6

-

Mace

92.3

91.8

0.5

7

6

Sweett Group

72.8

65.6

11.0

2.3

2.1

9.5

3.2

3.2

8

10

Franklin + Andrews/ Mott MacDonald

57.0

51.0

11.8

9

7

Gleeds

52.2

55.9

-6.6

10

9

Rider Levett Bucknall

41.2

39.9

3.3

1.1

1.2

-8.3

2.7

3.0

* reSultS for 1 May 2009 to 6 october 2010

30 | 6 September 2012

www.cnplus.co.uk


foreign shores

ANALYSIS TENDER PRICE FORECASTS SARAH DENNIS CNINSIGHT EDITOR

Prices are unsustainable but growth remains uncertain forward,” says Mr Willis, who also building projects, which can be cites Canada and Australasia as turned around and generate major prospects. an economic return He says the balance of in a much shorter international versus UK programme.   work will continue “The next two years to change, as it has are likely to see little over the past 12 growth in either to 18 months. output or costs. Davis Langdon Infrastructure Number of Sweett has seen a similar spending is Group employees trend. A spokesman welcome but not an in China for the firm tells CN: answer to the shortterm crises.” “The economy is restricting the growth of our UK business, but this is being International waters offset by other parts of Davis The restrictive UK climate means Langdon’s operations where we consultants are finding the are experiencing increased proportion of revenue is tipping more towards international work. opportunities and growing our teams – particularly Africa, North “There are opportunities in the America and the Middle East. Far East that we are keen to push “While we continue to RICHARD STEER experience success in London, CHAIRMAN, an increasing amount of Davis GLEEDS Langdon’s revenue is being generated from work outside of the UK. This is a trend we would see continuing.” Notable overseas projects for the “Infrastructure firm include the Portside Tower (to spending is be Cape Town’s tallest building); welcome, but is not the Siemens headquarters in Abu Dhabi; and, as part of the Aecom an answer to the team, the King Khalid Medical City short-term crises” in Saudi Arabia. Mr Pitcher says: “We truly have become a global business. Our exposure has reduced in the UK,” Current current no of previous Previous no of last Last analysed employees employees accounts adding that Sweett Group now has 2,800 1,985 30/9/11 650 staff in China. “In the past, we 2,807 2,951 30/4/11 worked mostly on individual big projects in the UK, but we’re now 2,484 2,250 30/4/12 increasingly looking for work 744 780 30/4/11 with corporates that have multi1,014 1,131 31/3/11 geographical locations,” he says. – – 31/12/11

650

1,280

724

31/3/11

605

389

31/12/11

616

965

31/12/11

343

338

30/4/11

www.cnplus.co.uk

The latest forecasts from the UK’s top QS consultants almost universally show predictions for a delay in tender price recovery, but next year will see a small turnaround as contractors are unable to sustain continuous cuts. Forecasts for this year have been downgraded, and a CNinsight analysis of the range (between a 3.1 per cent fall from EC Harris to a 0.2 per cent uplift according to Gleeds) reveals that the average tender price forecast is a dip of 1.2 per cent. There is a consensus that the level of tender prices has become unsustainable, and that contractors have cut as far as they can. In fact, Gleeds Worldwide chairman Richard Steer says that the firm

considers pricing at the moment to reflect levels seen in 2004. As a result, some forecasts show growth for next year, despite predictions that industry output will not start recovering until as late as 2014. The average forecast of a 0.3 per cent dip next year is largely due to EC Harris forecasting a 2.5 per cent fall and Faithful + Gould predicting that prices will remain flat. London tender prices are set to recover at a faster rate than the UK as a whole due to optimism over an eventual upturn in the commercial sector. An average 0.6 per cent decline for 2012 is followed by a 0.8 per cent recovery next year, further accelerating by 3.1 per cent in 2014.

TENDER PRICE FORECASTS – NATIONAL 3% 2% 1%

EC Harris Faithful + Gould Gardiner & Theobald

0% -1% -2% -3% -4%

2012

2013

Sweett Group Gleeds* Sense 2014

Annual percentage change forecast for the UK, 2012-14

*Figures for Q1

TENDER PRICE FORECASTS – LONDON 4% 3% 2% 1%

Davis Langdon EC Harris Gardiner &Theobald Sweett Group Gleeds* Sense

0% -1% -2%

IN ASSOCIATION WITH

2012

2013

Annual percentage change forecast for London, 2012-14

2014

*Figures for Q1 6 September 2012 | 31


Growth on horizon but econo With the UK in a NOBLE FRANCIS deepening recession Economics director, Construction and uncertainty over Products Association the eurozone unlikely to disappear any time soon, the outlook for construction for the next 12 months is bleak. Most concerning are public sector cuts and the subdued private sector, which are expected to result in significant industry contraction this year followed by a further marginal dip next year, before growth returns in 2014. Some sectors boast brighter prospects than others, though much of this is dependent on when economic recovery returns

RETAIL Despite retail construction falling by a quarter following the financial crisis, supermarket work proved enough to ensure growth over the previous two years. However, 2012 is likely to be an uncomfortable year for most retail contractors. Most major supermarket chains are well into expansion plans and while these will continue to provide fresh work, additional growth is unlikely. Tesco, Sainsburys and Marks & Spencer have all announced cutbacks to their renewal programmes.

SECTOR FOCUS

PRIVATE HOUSING Private housing has a relatively bright future, although large housebuilders have brighter prospects than smaller businesses. All the main housebuilders appear content at the moment, and having seen the positive results reported to the City over the past six months, it is not difficult to see why. Following the 2008 financial crisis, housebuilders went through a period of reducing capacity, destocking and writing down the value of their land. Although the UK is again in recession, housebuilders are in a very different position. They are raising the book value of the land, enjoying profit margins of around 10 per cent to 15 per cent and gradually raising the number of units. They also have plenty of land with planning

“It would not be a surprise to see large housebuilders raise unit numbers by between 5 per cent and 8 per cent this year before doubledigit growth next year onwards” 32 | 6 September 2012

PRIVATE HOUSING STARTS AND COMPLETIONS GROWTH 12% 10% 8% 6%

Starts Completions

4% 2% 0%

2012 (f)

2013 (f)

2014 (p)

SOURCES: CONSTRUCTION PRODUCTS ASSOCIATION, DCLG

2015 (p)

2016 (p)

(F)=FORECAST, (P)=PROJECTION

permission, around six or But small- and mediumseven years’ worth, sized housebuilders are although obviously not so fortunate. They not all of the land is are more dependent in the main areas on cashflow and of demand, such as suffer from delays greater London in planning, as well Average annual growth forecast in and the South-east. as struggling to housebuilding, The NewBuy obtain lending 2013-16 initiative should facilities and provide a small continuing to suffer positive boost but is from the general economic unlikely to be a game-changer, environment. In addition, they with some concern around the don’t benefit from NewBuy. mortgage rates being too high, but Private housing starts are it at least makes 95 per cent expected to increase by 3 per cent mortgages available now. over the course of 2012, driven by As a consequence, it would major housebuilders. Despite not be a surprise to see large problems for small housebuilders, housebuilders raise unit numbers economic recovery is set to boost by between 5 per cent and 8 per housebuilding by an average of cent this year before double-digit 10 per cent each year between growth next year onwards. 2013 and 2016.

10%

Growth elsewhere will likely come from coffee shop chains, such as Costa, and sandwich shop chains, such as Pret A Manger, both of which will continue expansion plans. But general retail new-build and major refurbishment is relatively subdued, having been adversely affected by the economy. Consumer confidence is unsurprisingly low given the return to recession and spending is subdued as a result. This will not have been helped by the recent poor weather but more generally, real disposable household incomes

RAIL Rail is a major growth area for construction and represents a great opportunity for many contractors. A lot of firms don’t think to enter into rail work as they don’t build tracks, but a considerable proportion of investment is not what most people think of as rail; it is station developments and refurbishments – retail, offices and even some residential. A prime example is the £1 billion Tottenham Court Road station redevelopment that forms part of Crossrail, Europe’s largest construction project. This includes 500,000 sq ft of high-profile retail, office and residential floor space. Work is continuing on the £15bn Crossrail programme across London in addition to the £6bn Thameslink programme. But there are a number of station refurbishments within Network Rail’s spending programme of £34.6bn up to 2014, and therefore opportunities for contractors exist across the country. Output rose by 59 per cent in Q4 2011 and was 28 per cent higher year on year in Q1 2012. New orders for rail construction during that quarter increased by one third compared with a year www.cnplus.co.uk


omic recovery required are under pressure, falling by the greatest amount in more than 30 years during 2011. Prime areas of central London continue to be boosted by international retailer investment at the very high-profile end of the market. In fact, investor activity in London was only constrained by lack of supply, with record rental values being achieved on Bond Street, Sloane Street, Oxford Street and Regent Street this year. But this is very much a niche area, with yields on other major UK retail streets outside of

London more than double those in prime retail areas of the capital this summer. Accordingly, our forecast for retail construction output for 2012 is a 3 per cent fall. Retail is expected to recover as the economy and real incomes return to growth in the longer term, with consumer confidence improving. But growth is unlikely to be rapid, with a negative longterm trend from the growth of internet shopping, leading to a rise in relatively low-value warehouse construction at the expense of retail construction and fit-out.

FORECAST VALUE OF RAIL OUTPUT 2012-2016 (£M) 6,000 5,000 4,000 3,000 2,000 1,000 0

2012 (f)

2013 (f)

2014 (p)

SOURCE: CONSTRUCTION PRODUCTS ASSOCIATION

2015 (p)

2016 (p)

(F)=FORECAST, (P)=PROJECTION

projects include electrification ago. Rail output is forecast to schemes from Sheffield to grow by 16 per cent this year, Bedford, £322m of track and accelerating to 22 per cent in capacity upgrades across 2013, and a further 9.3 per cent Manchester and Liverpool, and growth in 2014. electrification of the line to In the longer term, the Swansea, worth more than £600m. government has made it clear While this will boost spending that public subsidy in the from 2014 onwards, the next spending period to government’s 2019 will not be as commitment to high as in the 2009 cutting the public to 2014 period. subsidy means In July it hailed investment will a £9.4bn pipeline not be sustained at of projects from Value of new rail the level it will 2015, though more jobs announced reach over the next than half of these in July three years, which is had already been set to be a golden period announced. for rail investment. The remaining £4.2bn of new

£4.2bn

www.cnplus.co.uk

FORECASTS FOR RETAIL AND OFFICES OUTPUT 2012-2016 6% 5% 4% 3% 2% 1% 0% -1% -2% -3%

Retail forecast output growth Offices forecast output growth

2012 (f)

2013 (f)

2014 (p)

2015 (p)

SOURCE: CONSTRUCTION PRODUCTS ASSOCIATION

OFFICES With high-profile offices funded internationally, and international investors increasingly nervous, even the pipeline in the previously buoyant central London market is slowing. The Shard has now opened and focus has switched to other towers under construction, such as 122 Leadenhall Street (the Cheesegrater) and 20 Fenchurch Street (the Walkie Talkie), in addition to those on hold since January 2012 such as Principal Place and The Pinnacle, valued at between £800m and £1bn. Once economic recovery is under way, those projects currently on hold would certainly be expected to come back on line, but don’t expect this until 2013 at the earliest. The majority of the offices market, however, focuses on smaller mid-sized projects and it is these that appear to have dried up in central London – the pipeline over the next year appears insubstantial. The offices market outside London remains very weak with take-up around a quarter lower than the long-term average. Despite positive noises by property agents who appear to be talking up the market, a surplus of office space outside the M25 means the near-term

2016 (p)

(F)=FORECAST, (P)=PROJECTION

“Despite positive noises by property agents, a surplus of office space outside the M25 means the near-term future is relatively poor” future is relatively poor. Output in the first quarter of 2012 was 7 per cent lower than in Q4 2011 and new orders for offices in the six months up to the end of the first quarter were 14 per cent lower than the year before. Office construction is expected to be much more subdued than we had anticipated a year ago, with a forecast fall of 2 per cent in 2012 before a growth of 1 per cent in 2013 following the start of economic recovery, and a pick-up in demand for central London office space. Once the market is more certain, growth should accelerate to 6 per cent in 2015 with a further 5 per cent in 2016, yet even then activity will still be below prerecession levels.

IN ASSOCIATION WITH

6 September 2012 | 33


profits fall but lower-ranked CN Profits Average pre-tax profits and profit margins fell across the top 100 contractors but many of the firms showing the strongest pre-tax profit margins are among the lowest ranked by turnover profits

top 10 pre-tax profit margins

sarah dennis cneditorial@emap.com

23.6% 6 United House Group

1 Homeserve UK

2 City Building (Glasgow)

3 Cape industrial services

4 Dawnus Construction

14.2%

9.4%

9.2%

7 ssE Contracting

8 Bowmer & Kirkland

9 thomas Armstrong

7.7% 5 Amey 34 | 6 September 2012

10 J Murphy

6.6%

6.4%

6.3%

6.0%

5.9%

Companies ranked in the lowest quarter of the CN100 league table by turnover are among those with the 25 highest pre-tax profit margins – including this year’s 100th-placed firm. Across the UK’s top 100 contractors, 42 recorded pre-tax profit margins (calculated on pretax profits before exceptional items) of less than 2 per cent, while the margin for 19 of the firms hit more than 5 per cent. The average pre-tax profit margin across the top 100 was 2.5 per cent, a drop from the 3 per cent recorded in their previous financial years, while the total value of pre-tax profit across the UK’s top 100 contractors in the UK slid by 1.2 per cent. Shrinking margins are perhaps not surprising given the current economic climate. Increasingly, top contractors are bidding for smaller-value projects than they may have done previously, as the largervalue projects become more scarce and bid lists get longer and more competitive. Davis Langdon head of offices sector for Europe Iain Parker says the consultancy is seeing project proposals from contractors with margins of between zero and 2 per cent. “When you go into the detail around the rates, it can’t be done –

“the bigger fish are swimming in smaller ponds – we’ve been seeing that for a while” iain Parker, davis langdon www.cnplus.co.uk


N100 firms make strong showing it smacks of people that are desperate for work,” Mr Parker says. “There is a fear that we will see contractors go bust because they’ve ‘bought turnover’. “The bigger fish are swimming in smaller ponds – we’ve been seeing that for a while.” Larger contractors are also able to diversify. “They’re already in sectors where they’re getting good returns and can invest in sectors where things are tight,” Mr Parker says.

30% 25% 20% 15% 10% 5%

IAIN PARKER, DAVIS LANGDON

0% -5% -10% -15%

1 to 25

26 to 50

PROPORTION OF PRE-TAX PROFIT BY CN100 RANK 11.5 3.9

% 15.2

SOURCE: CNINSIGHT

www.cnplus.co.uk

76 to 100

Percentage change in pre-tax profit for each quartile of the CN100

2.5%

14.0

51 to 75

CN100 rank

compared with previous year Marginal strength SOURCE: CNINSIGHT Almost half (47) of the CN100 reported a fall in pre-tax profit according to their latest sets of profit of 0.6 per cent, while pre-tax accounts, with 31 of these seeing profit among the bottom 25 grew a drop of more than by more than 28 per cent. 10 per cent. Of the top 25 firms Six companies in the CN100, just moved into a presix were in the top tax loss, including quarter for pre-tax Morrison Facilities profit margins, Services, North including Bowmer Average pre-tax Midland and Kirkland, May profit margin across CN100 Construction and Gurney and Headcrown Group, Shepherd, with while McNicholas margins across the top 25 Construction and re-entrant of between 0.8 and 7.7 per cent. Clugston swung back from a loss Carillion and Mitie are two top into pre-tax profit. 10 contractors that are among The top quarter of firms saw a those reporting stronger margins – marginal drop in overall pre-tax of more than 5 per cent – with both

5.6

“There is a fear that we will see contractors go bust because they’ve ‘bought turnover’”

% CHANGE IN QUARTILE PRE-TAX PROFITS

49.8

1-10 11-20 21-30 31-40 41-50 51-100

companies placing an emphasis on support services and facilities management, though figures do not account for exceptional items. It is in fact the bottom 25 firms where we see the highest number of those ranked in the top quarter for pre-tax profit margins, including Rydon Group, at 100 in this year’s table, along with new entry Dawnus and re-entry Michael J Lonsdale. This tier is also the only one where the average pre-tax profit margin has grown over the latest financial years, up to 2.7 per cent from 2.2 per cent. Homeserve – the 29th firm in the overall CN100 table ranked by underlying turnover – showed the strongest pre-tax profit margin across all the top firms, before taking into account exceptional items, including its acquisition of the remaining 51 per cent of equity interest in Domeo and £24.2m of one-off charges partly due to changes in its sales, marketing and customer complaints functions. Cape Industrial Services, the top CN100 scaffolding specialist contractor, is also among the top five companies ranked by profit margins following a second

successive year of profit growth, having come back into the black in the year to December 2010. Of those firms posting a positive profit margin (eight posted a pre-tax loss this year) Ardmore recorded the lowest – at 0.2 per cent. Others recording margins of less than 1 per cent include re-entrant Barhale and ISG. But the top 10 firms retain the lion’s share of pre-tax profit, accounting for 50 per cent earned in the latest financial years. Those companies ranked between 21 to 30 in the main CN100 league table had a notably larger proportion of pre-tax profit – 14 per cent – than they did turnover – 9.9 per cent. Mr Parker points out that the struggles facing the industry are far from over, with contractors that are able to diversify being the ones that are likely to see the stronger returns. This is evident in examples such as Dawnus, which has seen a meteoric rise in turnover and pretax profit (and one of the strongest margins among the top 100) as a result of the growth in business both in the UK and Africa. “The middle-tier contractors operating in one country are going to struggle,” Mr Parker says.

IN ASSOCIATION WITH

6 September 2012 | 35


.

TOP 5 BOARD REMUNERATION:

£10.4m Bowmer & Kirkland

£6.6m

£5.5m

£5.1m

£4.9m

William Hare

Wates

Sir Robert McAlpine

Homeserve

Directors’ pay plummets but employee salaries hold firm Total pay for boards of directors across this year’s CN100 drops by nearly 20 per cent yet average staff wages remain stable while almost half of UK construction’s top contractors increased average number of employees REMUNERATION SARAH DENNIS

The total pay to the boards of companies in the CN100 2012 fell by almost 20 per cent according to the companies’ latest financial reports. At an average of £1.2 million, the total remuneration paid by companies to their board in the UK’s top 100 contractors fell by 17.2 per cent, compared with the average of £1.45m posted for the previous financial year. In contrast, average employee salaries for the top 100 companies remained stable. Of the 96 companies for which remuneration data was available, 25 per cent reduced their boards’ remuneration despite posting turnover rises. 36 | 6 September 2012

A total of 40 firms cut total profit in the year to December 2011. directors’ pay over their current Bowmer and Kirkland remains financial years. the top paying firm for its group Meanwhile, 36 increased pay for of directors , though at £10.4m their directors, with 15 of this is 23 per cent less those recording a fall in than the £13.5m it revenue, though paid last year. At the most of the same time, the percentage hikes company paid out were muted – an average salary Fall in total director with the majority across all its 1,471 remuneration of those increases employees that across CN100 being worth less than was 8 per cent 1 per cent. higher than the Top 10 firms Interserve previous year, standing and Carillion recorded at just over £47,000. rises in total Of the five firms remuneration paying their despite a fall in boards the most, turnover – of 2 per Wates, Bowmer Rise in average cent and 1.1 per cent and Kirkland employee salary respectively – but and Sir Robert across CN100 both companies McAlpine paid out increased their pre-tax less to their boards of

17.2%

0.4%

directors than in their previous financial years. The average remuneration for boards of directors across the top 10 CN100 firms was £3.3m – almost a third higher than the £2.5m for their previous financial years. Meanwhile, the average remuneration for the board of directors across the rest of the CN100 was £1.1m, 18.5 per cent lower than the previous year. Four of the top 10 companies are among the 10 highest-paying for boards’ remuneration. Among the lower paying of those that awarded directors remuneration included Ardmore Group, CN100 new entrant Buckingham Group, Laing O’Rourke, Cape Industrial Services and Imtech. Almost one third of the CN100

IN ASSOCIATION WITH

www.cnplus.co.uk


CN VIE 10 W 0 T ON HE LIN E

VIEW THE CN100 TABLE ONLINE – INTERACTIVE AND UPDATED IN REAL TIME

Visit the Construction News online data service CNinsight for real-time financial and business information on and for the UK’s top 100 contractors as it changes throughout the year. Use the CN100 interactive table to benchmark and rank companies by a host of criteria including turnover, profits and growth. Understand the latest market trends with downloadable graphs and raw data from more than 50 sources. And use the live contract database to see who is bidding for and winning work by sector, region and contract value.

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TOP 5 AVERAGE EMPLOYEES SALARY:

£57,820

£55,914

£54,668

£54,662

£53,620

Mace

Lend Lease

Sir Robert Mcalpine

Durkan

Higgins

38 | 6 September 2012

1.2%

AVERAGE REMUNERATION, THE TOP 10 CN100 FIRMS 3.5

37,500

Employees

Directors

3.25

37,400

3.0

37,300

2.75

37,200

2.5

37,100

2.25

37,000

2.0 Previous

Current

Previous

Current

Employees’ pay (£)

Stable salaries Despite the total remuneration of the CN100 company directors falling steeply, the average employee wage – which includes the directors’ cut – was 0.4 per cent higher, at £36,000, compared with £35,853 previously. Those firms paying the highest average salary across all their employees include Mace and Durkan, despite the latter’s turnover declining by more than 40 per cent, according to its latest accounts. Brookfield paid the highest average employee salary across the CN100 according to latest figures, at £90,153, but this was for the 2010 financial year and the company employs 170 staff. In contrast, Mitie paid the lowest average salary for employees across the top 100, at £13,656, but the firm records by far the highest average number of employees at almost 63,000; the firm’s average headcount rose by more than 4,000 over the year. Other companies paying an average salary to employees of below £20,000 are Dawnus Construction, which at £17,306 was a third lower than the average in the firm’s previous financial year, and Mears. More than half of this year’s top 100 contractors (55 per cent)

that increased average salary increased their average employee included Balfour Beatty and Kier, salary, 19 of these doing so despite while Morgan Sindall’s average falling revenue. Firms recording was 18 per cent higher in the year the largest percentage increase in to December 2011 compared with average employee salary were 2010. None of the UK’s 10 largest Rotary (84 per cent), GSH Group contractors featured in the top 10 (51.1 per cent) and Midas Group league for highest average (35.8 per cent). Midas Group employee salaries. recorded a drop in total directors’ pay, at £1.2m compared with £1.3m. Headcount rises The biggest falls The CN100 firms in average have collectively employee salary grown their Fall in average include Robertson, average number of employee salary Dawnus and employees, albeit across the top McLaren, though the marginally, with the 10 firms latter slashed total pay number of staff rising for its directors by more by 223 to stand at an than half despite huge rises in average of 366,569. both turnover and pre-tax profit Almost half of this year’s top in the year to July 2011. 100 contractors increased average Across the top 10 firms, the staff numbers, with nine of these average employee salary was 1.2 doing so despite falling turnover. per cent lower than the previous Those that more than doubled year, at £36,963. Those top 10 firms headcount include Dawnus and

Directors’ pay (£m)

paid less than £1m to their boards of directors.

“Almost half of this year’s top 100 contractors increased average staff numbers” Imtech, though Longcross and Renew grew staff by more than 50 per cent. At the other end of the scale, Rotary downsized its average number of staff by 40.7 per cent, while Laing O’Rourke, Lend Lease and Lagan slashed headcount by more than 20 per cent. Average employee numbers fell at each of the top five firms. After Laing O’Rourke, Morgan Sindall saw the biggest drop in staff across the 10 largest contractors at 12 per cent, taking its average below 7,000. Mitie, Galliford Try and ISG were the only top 10 firms that grew staff numbers over their most recent financial years – the latter by 25 per cent – while total average headcount for the 10 biggest contractors was down by 1.2 per cent. The rest of the CN100 firms collectively saw a 2.3 per cent rise in average staff numbers.

36,900 IN ASSOCIATION WITH

SOURCE: CNINSIGHT

www.cnplus.co.uk


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The CN100