Contractors with property arms top profit league

The gulf in profitability between developers and contractors has been highlighted by a new survey from financial analyst Plimsoll.

However, the study predicts strong future profit and sales growth for many of the UK’s large contractors in the future.

The top 15 construction companies, ranked by 2005 profit margin, show that housebuilders and developers, or firms with a significant interest in this area, outstrip contractors in terms of profit as a percentage of sales.

Top of the chart is Henry Boot, with a profit margin of 30% based on sales of £101m. The group’s business includes construction and plant, but more than half of its turnover is from property development and land.

Of the 15 companies with the biggest profit margin, 11 are involved in housebuilding. Persimmon, the highest-rated housebuilder, is in third place with a profit margin of 22% from sales of almost £2.3bn.

Leicester-based housebuilder Jelson Holdings is fourth with a margin of 20% on £75m sales.

Strata Homes of Yorkshire has the smallest turnover of the top 15, but is ranked fifth by profit margin. It has sales of £67m and a profit margin of 20%.

Housebuilders are not the only ones making large profits. In second place is ESH Holdings, a company in north-eastern England that offers

The survey predicts that Amec’s turnover will increase to £5bn

construction-related products and services such as equipment rental. It made a 23% margin from sale worth £86m.

At the other end of the scale, the UK subsidiary of Japan’s Kajima posted the worst profit margin of the 100 companies. It made –114% on sales of £79m. Last year, Kajima lost £80m on PFI contracts and announced the closure of its UK construction business to focus on PFI.

Troubled infrastructure group Jarvis came in at 99th place with a profit margin of –60% on £585m sales. Canary Wharf is 98th with sales of £293m and a profit margin of –28%.

The survey also details the market share between the top 100 construction firms based on sales and gives predictions on future financial performance.

The big contractors come out on top. Amec has the biggest share of the surveyed firms with 11%, thanks to £4.9bn of sales. The survey predicts Amec’s turnover will increase to £5bn and pre-tax profit will increase 380% to £122m for the year to 31 December 2006, up from £25m the previous year.

Balfour Beatty is close behind with a market share of 9% and sales of £3.8bn. The company is expected to raise its sales to £3.9bn and grow pre-tax profit 53% to £219m for the year ending 31 December 2006.

The top 10 firms in the table have almost 58% of the market share of the top 100 firms.