Last week Construction News published their annual league table of contractors. The CN100 compares the latest company accounts with those of last year to produce the Top 100 contractors.
The report measures 8 data points; turnover, pre-tax profit, pre-tax margin, working capital ratio, cash, total borrowing, employee count and average salary.
The contracting market has been under a microscope since the fall of Carillion in January 2018 – and figures weren’t exactly thriving for a long time before that. So this year’s report was always going to be much anticipated by the market.
And for once, the news isn’t all doom and gloom and it seems the top contractors may have finally turned a corner.
But what are the main headlines and how will they affect the market?
To summarise, here are some key facts and figures:
The Top 10:
- Balfour Beatty
- Morgan Sindall (Up 2 from 2018)
- Galliford Try (Up 2 from 2018)
- Interserve (Down 2 from 2018)
- Laing O’Rourke (Down 2 from 2018)
- Mace (Up 1 from 2018)
- Amey (Down 1 from 2018)
- ISG (Up 1 from 2018)
- Skanska UK (Down 1 from 2018)
Turnover Growth has slowed
The average growth of turnover had slowed to +2.6%, compared to +7.6% last year.
This is in part due to construction output stagnating. According to the ONS construction output for the UK increased less than 1% versus 10% growth for the previous two years.
But it is also a reflection on the shift in strategy for the largest contractors. There has notably been move away from focusing on turnover growth towards prioritising profit margins.
The impact of this on the industry could mean that we see less need for Business Development people at the moment, as contractors focus on delivery in core markets and reducing central overheads.
This fits with our experience over the past 12 months with more BD and Strategy candidates actively on the market.
Profit growth is significantly higher
The shifting of strategies amongst the contracting giants has been paying off. On the whole, most companies are now sitting comfortably within that golden sweet spot referred to as the “industry average” of 2-3% profit, and total pre-tax profit has risen from £534m to £931m.
The Top 10 companies, historically the worst when it comes to profits margins, recorded an average of -0.1% compared with last years’ -0.9%. But if you remove Amey from this mix, who skew the data with a huge pre-tax loss, then this rises significantly to 1.4% which is a promising figure for the industry.
As far as recruitment needs go, demand for top Project Directors is certainly at a premium. With projects won on tight margins, contractors need people who can reliably deliver projects on time and to budget (preferably under budget) more than ever. Likewise for commercial, planning and project controls talent.
In recent year our experience is that salaries in contractors tend to rise by around 2-3% annually. From CN’s figures, we can see that on average for the Top 100, salaries have risen by 3.87%.
So this is pretty much as we would have expected, perhaps a little higher than we would have guessed, especially considering the focus on profit margins.
Across the top 100 contractors, employee numbers were almost identical, with a slight decrease from 43,557 to 43,446.
So people are moving around within the industry, but few are leaving the industry at the moment.
How do these results compare to your business and strategies? It would be interesting to see the numbers in action and what the impact is for the wider industry, not just contractors. So please do get in touch for a chat, you can reply to this email or call on 0203 026 3871.