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CN Briefing: Specialists Index 2016; margins; turnover; profit

The idea that the industry’s main contractors could post an average profit margin of more than 7 per cent sounds highly ambitious today.

But this year’s Construction News Specialist Index shows that, for some specialists, it can be done.

For specialist contractors in the UK’s seven major sectors – building envelope, concrete, demolition, ground engineering, M&E, scaffolding and steel – financial results have pushed beyond simply ‘recession recovery’ but into all-out growth mode for the first time in a number of years.

Leading the way is demolition, with the top 10 firms reporting an average profit margin of 7.1 per cent, which main contractors would snap your hand off for.

It’s not just the large demolition firms that are showing strong margins either: Keltbray was by far the largest by turnover at £272.3m and showed a strong pre-tax margin of 4 per cent, but this was exceeded by smaller firms McGee (4.5 per cent) and John F Hunt (7 per cent).

It’s a similar story for other sectors. In building envelope, new entry Mac Roofing reported a pre-tax margin of 6.6 per cent, only bettered in the sector by fifth-placed CA Group at 8.5 per cent.

So what’s going so right for specialists at a time where some main contractors are still battling through legacy contracts and restructuring problems?

In today’s market, specialists’ skills are more in demand than they have been since before the recession, but those lessons learned from 2008’s crash mean that specialist firms are choosing profitable work, rather than stretching themselves too thinly.

That doesn’t mean the year has been without its casualties – concrete firm Dunne Group being the latest. But specialists’ pragmatic outlook on today’s economic climate, particularly in the wake of June’s referendum result, bodes well for the future of the industry.

After all, a strong supply chain helps main contractors deliver work when and where they need to. But keeping specialists busy is just part of the battle.

Collaboration and early engagement are the two key threads that run all through this year’s Specialists Index – and make it essential reading for main contractors and clients alike.

Get the full report here.

Also in the news

A Spanish contractor has formed a JV to bid on the new Overground extension to Barking Riverside, reports Jack Simpson.

The CN Specialists Awards 2017 are open for entries – entering is quick, easy, online and free.

And a survey from trade body Build UK has reported that nearly half of contractors are operating at over 90 per cent capacity.

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