Company focus Contractor Durkan is benefiting from the move to mixed-tenure housing
Durkan, the South-east construction group, is one of a host of regional contractors that are benefiting from the explosion in social housing schemes in and around the capital. The company is expected to announce a 33% growth in turnover when its accounts are published next month. If that is the case, Durkan would establish itself as a £145m turnover group only 44 years after William Durkan founded it as a plastering firm.
Durkan’s growth, which has been at its strongest over the past five years, has been driven by the rapid expansion of Durkan Ltd, the housing-focused public sector arm and the group’s largest division. It also comprises Durkan Estates, a private residential arm, Durkan Pudelek, its heritage division, and Durkan Ireland.
Management accounts for Durkan Ltd for the year to 31 January 2007 show a 30% rise in turnover to £107m, up from £75m the previous year. The growth so far has been mirrored in Durkan’s returns: pre-tax profit leaped 35% to £4.6m over the period, although margins have dipped from 4.6% to 4.3% as a result of the expansion. The company says it has factored this into its business plan.
Durkan Ltd’s focus has shifted over the year from being a pure contractor to being a developer of large mixed-tenure schemes, on which it shares the risk and commercial elements of a project with the client.
With housing providing about 85% of the company’s workload, its management has taken this path as a result of government pressure on developers and housing associations to look beyond affordable housing to larger mixed-tenure schemes. The scale of these schemes has caused many housing associations to seek to seek to share risk with their development partners.
“We certainly think estate regeneration has slowed over the past couple of years, and clients are looking to procure on a much larger scale,” says Robert Clark, managing director of Durkan Ltd (pictured).
The regeneration of estates has slowed over the past couple of years
Durkan Ltd has also begun to establish framework deals with its major clients: housing associations including Octavid, Genesis, Origin and Metropolitan.
From a consortium including the latter, it has just won a £400m regeneration contract for an eight-year scheme in Hackney, east London. This is Durkan’s largest contract to date: it tends to focus on schemes with a value of £100m.
Durkan Ltd and Durkan Estates are forming an increasingly close working relationship now that Durkan Ltd is moving into large-scale development. The Hackney scheme, which involves the construction of 3,000 homes across eight estates, includes an initiative with sister company Durkan Estates to provide private residential homes. Expertise from Durkan Estates is being used to assist housing association clients with estate purchases.
The company plans to formalise relationships with more registered social landlords (RSLs) over the next five years. “The introduction of strategic framework agreements has given a degree of continuity to our relationships with RSLs that wasn’t there before. This has helped us increase the size and scope of our business.”
In an era in which regional players are increasingly able to compete with the major contractors in their chosen strongholds, Durkan Group as a whole has no plans to expand beyond its South-east base.
“We are well positioned now in a construction and development capacity,” says Clark. “We are looking to concentrate in that area.”