Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Cash levels slow their decline among the top contractors

The contractors in the CN100 have shown slowing declines in their cash or cash equivalents over the past year

This would appear to indicate that across the board there is a bottoming out of the troubles seen over the past few years.

Looking at the cash in bank/in hand or equivalent figures for the top 100 contractors, where comparative figures are available, reveals a total decline of just £24m, or 0.5 per cent on the previous year.

Rewind a further year and the situation was harsher, with a fall of £283.3m (5 per cent), indicating that cash was being used more to sustain declining margins.

Worst is over?

EC Harris’s head of strategic research and insight Simon Rawlinson says the data indicates that the situation is “not getting significantly worse”.

He highlights that in general terms, those specialist or more region-specific contractors in the top 100 appear to have seen cash levels getting a little tighter.

Cash Growth by quartile

“Although there was a similar number of national, regional and specialist contractors in the negative cash bracket, proportionally a greater share of regional and specialist contractors were in the bottom half. Most of the poorer performing contractors (in cash terms) are specialists.

“The market shrank last year and it is plausible that a lot of contracts have come to an end for some of the companies [in the CN100] and they have not been able to renew or replace them. There could also be some falling off of frameworks, but some are rebidding,” he says.

Top 25’s cash contracts

The proportion of cash accounted for by the top 25 contractors has declined over the past three years, and in fact the total cash of these companies has fallen by 11.5 per cent.

It is telling that a number of those in this bracket have had some significant merger and acquisition activity, plus an increase in staff numbers across the board, indicating some investment into their businesses.

“It is reasonable to assume that many contractors could be facing a tougher 2013”

Simon Rawlinson, EC Harris

In fact, a rise in headcount of more than 7,000 across the top 100 and cash still falling is not entirely coincidental.

Given the threat of skill shortages thought to be occurring already and becoming a significant issue over the next year, signs are there that the UK’s top contractors are positioning themselves for growth.

Second quartile improves

Conversely, those companies ranked 26 to 50 in the CN100 league table have seen an increase in the proportion of cash, indicating a resolve to protect their businesses by upping their cash supply.

This group saw their total cash rise by 42 per cent over their past three years of results.

Cash Top 5

At the lower half, the situation is largely stable, with a slight fall over the past year.

Across the CN100, almost half have seen their cash fall between their current and previous financial results, while almost a third have seen declines across three years of results.

Green shoots

As thoughts turn to recovery, it is encouraging to see some optimism in the form of investment into business across the top 100 companies.

It is doubtful that evidence of the expected growth will be immediate, with next year’s set of results across the UK’s top contractors expected to show muted signs of improved performance in terms of margins.

The recent profit warnings from Balfour Beatty highlight that construction is still facing challenges, and that recovery is not yet universal.

“With most of the accounts [in the CN100 data] reporting up to the end of 2012, it is reasonable to assume that many contractors could be facing a tougher 2013,” Mr Rawlinson says.

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.