Construction top 100

If the UK construction industry’s top 10 largest contractors had combined their most recent turnover figures, they would have posted a revenue of £31.9bn.

At the same time, combining the pre-tax profit/loss figures for those same 10 companies would leave you with a loss of £52.9m – and an average pre-tax margin of -0.5 per cent.

Those figures are a damning indictment of the troubles that have rocked some of the industry’s largest contractors in the past 12 months, all of which is reflected in this year’s CN100.

Chief among these is Laing O’Rourke, which was hit with a £245.6m pre-tax loss after losses on a number of UK contracts and a £93m writedown on its Centre Hospitalier de l’Université de Montréal PFI in Canada.

These difficulties have seen O’Rourke slip from fifth to seventh in this year’s CN100, with turnover falling 18.4 per cent to £2.35bn – down from £2.89bn a year earlier. Its pre-tax loss is also the largest of any contractor in 2017’s CN100. In a rare interview, chief executive Ray O’Rourke told CN in March that the group would return to profit this year.

But Laing O’Rourke isn’t alone, with several of the other top 10 firms struggling with ongoing problem jobs and changing markets.

Interserve, having been plagued by issues on its energy-from-waste projects, posted a £94.1m loss for the year in its most recent results– its first pre-tax loss for more than five years. The cost of its exit from the energy-from-waste sector has more than doubled from the initial £70m reported last May to a colossal £160m, while long-serving chief executive Adrian Ringrose will exit the firm next month, to be replaced by Sodexo boss Debbie White.

Amey is another contractor to have struggled, its loss of £43.9m marking a major reversal in fortune from its pre-tax profit of £23.6m a year earlier. The firm’s highways division in particular has laboured, posting a £77m loss after several key contracts ended early and disputes emerged with local councils. Across the group as a whole, Amey has enacted a restructuring plan that has added to exceptional costs at the firm, while it also reduced its workforce by more than 1,000 over the year.

And although not yet reflected in this year’s CN100, the industry has been rocked by Carillion’s ongoing woes, with the contractor revealing a writedown of £845m and the exit of its chief executive Richard Howson in July.

It’s not all been bad news for the industry’s biggest players, however, with Balfour Beatty’s Build to Last programme reaping rewards after years of heavy losses.

By August last year, the firm had completed 81 per cent of the 89 problem contracts identified in 2015, and has now turned a full-year pre-tax profit – £8m – for the first time in three years, marking a significant turnaround from the £199m pre-tax loss posted in 2015.

But away from the industry’s largest firms, this year’s CN100 also reveals a market where smaller, more agile firms have been fleet of foot – and their rewards are reflected in the table.

The average pre-tax profit margin among this year’s top 100 contractors has crept up to 2.8 per cent, having stood at 2.4 per cent in 2016 and 2.1 per cent in 2015. However, if we exclude results from outlier Canary Wharf Contractors – which posted the highest pre-tax profit margin in the CN100 by far at 47 per cent– the average margin drops to 2.3 per cent, suggesting that overall margins have changed little since last year’s CN100.

Overall turnover is up 4.5 per cent, with the top 100 posting a combined revenue of £67.33bn – up from £64.40bn a year earlier.

At the same time, the number of people employed by the largest 100 firms is down by around 650, with notable reductions at industry giants Amey, Balfour Beatty and Interserve, alongside smaller firms such as Renew, which has cut headcount by around 250. However, this hasn’t stopped pay packets rising, with the top 100 now shouldering an average wage bill of £11.2m – up 2.2 per cent from £10.9m a year earlier.

This year has also seen a number of new entries and re-entries, particularly among the bottom quartile of the CN100. Newcomers include Morrisroe Group in 84th place, which boosted turnover by 47.4 per cent to £162.8m, while Bristol-based contractor Beard enters the table for the first time with a turnover of £136.4m, up from £110.8m last year.

Among the re-entries is Caddick, which climbs to 89th place after posting a turnover increase of 60.1 per cent, while Simons Group also returns to the top 100 in 91st after increasing revenue to £141.9m.

Firms dropping out of the CN100 this year include scaffolding giant Actavo, which falls from 96th place after its turnover declined 6.7 per cent, while M&E specialist Gratte Brothers also exits the rankings after turnover went from £130m to £104.4m.

There have been some significant moves both up and down, with Multiplex’s revenue passing the £1bn mark for the first time as its meteoric rise continues. The London-based contractor was in 41st place just two years ago but is now the UK’s 18th largest by turnover, ahead of the likes of Vinci, Sir Robert McAlpine and Lendlease.

Northampton-based firm Winvic also stands out, rising 45 places in two years from 81st in 2015 to 36th this year, following an 83.5 per cent increase in turnover to £417.7m. The firm has focused on industrial developments and is now increasing its workload in the PRS sector, winning a £46m project in the centre of Nottingham this year.

The biggest climber this year is Henry Boot, up 28 places from 73rd to 44th, with the contractor-developer’s turnover increasing to £306.8m from £176.2m a year earlier.

Social housing and residential contractor Durkan is the biggest faller in terms of ranking, with the firm dropping from 70th to 92nd after turnover fell from £192.6m to £141.1m. Dawnus Group also drops 20 places to 71st following a decline in revenue to £189.7m, with turnover at the contractor’s African arm dropping from £101.9m in its 2014 results to just £21.3m in its most recent financials.

This year’s table represents an industry that has, for the most part, reaped the benefits of increasing selectivity, closer collaboration, and the adoption of technology to increase productivity. It is also important to remember that the top 100’s financial results represent conditions both before and after the EU referendum, with the Leave vote’s effect on the market continuing to emerge.

But at the same time, losses at some of the industry’s biggest players show the spectre of recession still haunts construction, as economic uncertainty continues to build around the UK.

Here, some of construction’s leading contractors reflect on the past 12 months and reveal their expectations for the year ahead.