Skanska Construction boss claims that contracting offers better profit than support services in the long term.
THE CHIEF EXECUTIVE of Skanska Construction Group has hit out at contractors that have rebranded themselves as support services firms.

Keith Clarke said that the advantages of the services sector were exaggerated, and companies abandoning construction were pandering to the stock exchange.

Clarke said there was a reliable profit to be made in construction, and that there was more scope to increase it than was the case in facilities management. This meant that those firms that had joined the services sector, such as Amey, Tilbury Douglas (soon to be known as "Interserve") and Jarvis, would gain no long-term advantage.

He said: "If the industry was super efficient, then maybe there is something to be said for it. But the industry has a long way to go." Clarke added that the rebranded firms had adapted their business strategies to please the City: "I think the move is something to pander to analysts. It's a mistake to structure your business around their expectations." Clarke said Skanska's recent performance proved that construction could produce steady income streams. The company's pre-tax profit jumped 30% to £33.8m in the year to 31 December. Turnover remained stable at £1.3bn Clarke said: "Our numbers were predictable. Profits have been steadily improving for four years. You can be a predictable contractor.

"The nature of contracting is changing. PFI has done a lot for that. Now contractors take a lot more risk and manage it well." Clarke's claim was dismissed by analysts. One said: "I can see his point but the reality is that the Ameys and the Tilbury Douglases of the world are better rated.

"The market still doesn't believe that earnings are secure in construction. Just take the recent write-offs at Allen, Carillion and Laing." Clarke attributed Skanska's improved performance to efficiencies in its operational performance, selective bidding and concentration on niche areas, such as the energy and fit-out markets.

The group consists of Kvaerner's old UK construction operation, the Hong Kong contractor Gammon and marine contractor Cementation India.

In the UK, the group formed fit-out operation Kontor last summer to target the London retail and commercial interiors market. Clients include Nike, Gap and Warner Bros.