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May Gurney seeks to profit from cuts

May Gurney chief executive Philip Fellowes-Prynne is targeting double-digit growth in turnover despite looming spending cuts.

Mr Fellowes-Prynne told Construction News that May Gurney - which works in rail and utilities as well as providing environmental services, building enhancements and highways maintenance to local authorities - would look to benefit from central and local government outsourcing.

He said: “We’ve been maintaining an annual growth level of about 10 per cent, and we see great opportunities for further growth on top of that.

“We think there is quite a lot of resilience in the spending areas that we’re in and, if anything, there’s a pressure on existing inhouse activities to be outsourced.

“If you look at highways, about 30 per cent is still in-house in current direct labour organisations, so we think that will put pressure on local authorities, and we can see them moving to a more enabling approach.”

As well as securing more longterm contracts with local councils, Mr Fellowes-Prynne wants to win work with central government agencies, such as the Department for Environment, Food and Rural Affairs and the Ministry of
Defence, as he believes they will face similar pressures to outsource.

He is also keen to win jobs with the Highways Agency, particularly maintenance work, which is let through long-term Managing Agent Contractor deals.

“In local authorities we’ve got over 37 km of network under our management,” said Mr Fellowes-Prynne. “We would see this as one of the leading market sizes in terms of local authorities but we haven’t got any presence or activity
in the Highways Agency.

“But obviously, to break into that market, you need a track record. We need to consider how best to deliver that and to justify our bidding process with the agency.”

Mr Fellowes-Prynne said the highways sector was one of the areas in which May Gurney was looking to make an acquisition.

“We’ve got no long-term debt and we have cash, therefore there’s an opportunity through acquisitions to grow at a faster rate as well and that’s something we’re considering.”

He added that it was unlikely any deals would be announced in the next couple of months but that the firm was also looking for “anything that will enhance our service footprint or offering” in utilities and environmental services.

May Gurney reported a turnover of £470.3 million and a pre-tax profit of £20.5m in the year to 31 March 2009.

Mr Fellowes-Prynne said that falls in public sector spending were not a worry given the areas May Gurney operates in. “It does not concern us to a huge extent because essential services will still need to be maintained, whether it is in rail, utilities, environmental services or even highways.

“The roads will have to be looked after, the bridges supporting the train tracks have to be maintained and you’ll need clean water so there will be continued spending in those areas.”

On the £55 billion Building Schools for the Future programme - where May Gurney’s recent wins include the £400m Lambeth Council scheme - Mr Fellowes-Prynne said spending cuts could play to the firm’s advantage.

He said: “Our major focus in BSF has been on non-PFI activity, and a lot of those jobs have been around enhancements rather than complete new build.

“Therefore, if you look at pressure on spending, enhancement and improvement will probably be the order of the day rather than complete new build. So the ratio will move more towards our skill sets.”

He added that May Gurney was unlikely to pursue PFI deals in any sector, but remained open to the possibility in the future.