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Review of the year: Fortunes improving slowly for CN100

Although the industry has turned a corner since last year’s CN100, improvement for the biggest companies is slow. But with combined turnover, employment numbers and profit margins all rising, contractors have lots of reasons to be positive about the future.

This year’s CN100 delivers two important messages: the going remains tough, with aggregate operating profits falling by close to 10 per cent, and workloads have only improved modestly so far.

Combined turnover across the CN100 increased by just over 4 per cent in 2013 to £58bn.

CN100 2014 table rises and falls

This figure is around 10 per cent below the 2007/08 high, but it does show some progress compared with last year’s overall increase of just 1.9 per cent.

Meanwhile, operating profit margins are reasonable at 2.5 per cent, and not that far removed from the peak margin of close to 3 per cent recorded during the boom of the last decade. 

Importantly, however, this 2.5 per cent recorded margin is boosted by the inclusion of facilities management and other services which tend to be more profitable. 

More encouraging still, numbers employed increased by close to 5 per cent and average wages also rose.

However, since 2007/08 average wages in the industry have risen by around 12 per cent – half the growth seen over the previous six years.

The composition of the main table sees familiar companies at the top, with little changes amongst them.

Kier jumped back into the top five following its acquisition of May Gurney last year, while Interserve also climbed two places up the table to become the UK’s fifth largest construction company.

Mace continues its impressive growth, increasing revenues to £1.2bn and climbing four places up the table but still sitting just outside the top 10.

Increased scale pays off

What is striking – and reflective of the situation around demand for non-residential construction services – is the number of companies experiencing a decline in turnover during 2013.

They include some big names, such as Carillion, which since 2010 has had a policy of re-scaling its UK business, as well as Bam Construct, Bowmer & Kirkland, Lend Lease, Wates and Willmott Dixon. 

While not shown in the data, turnover in Balfour Beatty’s UK Construction Services division fell by 12 per cent in 2013.

It is against this background that the recently mooted merger between Balfour Beatty and Carillion, as well as Galliford Try’s recent acquisition of Miller Construction (not reflected in the main table) seem attractive.

There is much to be said for increased scale.

By acquiring Miller Construction, Galliford Try now has a construction business with turnover of around £1.2bn – roughly 40 per cent the size of Balfour Beatty’s UK construction business, but significantly larger than Carillion and Interserves’ near £800m UK construction divisions.

New entries stand out

Several new entries are worthy of note including Mouchel, which via acquisition and restructuring has become one of the UK’s largest infrastructure asset management companies.

Eurovia Group, also a new entry, was previously included under Vinci but is better highlighted on its own as a leading roads maintenance company.

CN100 2014 new entries and reentries

Hill Partnerships, a new entry at 53, undertakes housing renewal and refurbishment, mainly in the public sector. Its turnover grew by 30 per cent in 2013 to £200m – in 2007 its turnover was just £77m.

Caddick, also new to the CN100, undertakes construction and property development. Its recent growth – 68 per cent in 2013 – reflects a rapid increase in development, although construction revenue also increased in 2013 to £76m. New entry Cruden meanwhile is a construction and housebuilding company.

Acquisitions drive growth

Many companies experiencing significant growth did so mainly via acquisition. Amey posted turnover growth of 53 per cent following its purchase of Enterprise, which also saw it move four places up the table and break into the top 10.

CN100 2014 turnover rises and falls

Mears delivered turnover growth of 40 per cent with its acquisition of Morrison.

Keepmoat’s acquisition and consolidation of Apollo resulted in turnover rising 31 per cent and turnover approaching £1bn. The majority of this relates to social housing repair, maintenance and urban renewal.

Not all of the table’s large increases came through acquisitions, however; Clugston saw turnover growth of 38 per cent due to its construction business, while Brookfield Multiplex boosted turnover by 32.5 per cent largely as a result of its strong London presence.

The top 100 table of 2014 reveals an industry still adjusting to the after-effects of the economic crisis. Housebuilding may well be motoring ahead, but general contracting has yet to show a meaningful recovery.

Pressures in the form of materials costs, pricing difficulties and labour shortages all still pose a threat to continued growth in the industry, and how these issues play out over the coming years will have an effect on the future make-up of the CN100.

Martin Hewes is founder of Hewes & Associates

What you need to know about the CN100

The CN100 ranks those firms judged as contracting and construction maintenance companies. While companies that undertake other associated activities are included, only firms involved primarily in the construction process qualify.

The tables and statistics in the CN100 2014 were compiled using annual reports and accounts filed on Companies House or contractors’ websites, with additional research by Construction News. Figures are accurate to 31 July 2014.

The table is ranked by underlying turnover, but accounts for turnover including shares of joint ventures and associates where appropriate.

Figures for the top specialist contractors, along with housebuilders and industry consultants, are reported in separate analyses.

Where a number of UK-based firms are owned by a foreign parent, or where a UK holding company owns a number of subsidiaries, attempts have been made to combine the figures.

This year Construction News has removed facilities management and support services companies from the main CN100 table where they have no contracting business or focus.

These companies are now ranked in a league table of the top 10 facilities management or support services firms

Bouygues Group Figures combine the results of Bouygues UK, Colas, Leadbitter, Thomas Vale and Warings.

Eurovia Was previously included under Vinci.

John Sisk & Son Latest figures are for the 11 months to December 2012.

Kier/May Gurney The completion of the acquisition of May Gurney by Kier occurred in July 2013, so for Kier’s entry this year we have combined figures for Kier Group and Kier MG, and May Gurney is no longer in the CN100 table with its own entry.

Lend Lease Data includes Lend Lease Construction Ltd and Lend Lease Scotland.

Michael J Lonsdale Data represents 18 months adjusted to 12 months.

Mouchel Data relates to its Infrastructure Services division.

One Group Construction Was formerly SEH. Data for 2013 refers to SEH, data for 2014 is from five months of data in accounts, adjusted to 12 months.

Severfield Rowen Data represents 15 months adjusted to 12 months.

Sir Robert McAlpine Figures are for Newarthill, its official name.

Spie Matthew Hall/Garside Laycock SPIE UK acquired Garside Laycock in July 2012 so this year’s entry for Spie Matthew Hall includes Garside Laycock’s latest results.

Vinci Includes Vinci plc only.

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