With profit passing £10m, the Willmott Dixon boss is confident he will avoid the losses incurred at other big names
Despite reporting strong annual results on Monday, Willmott said the company would have to make changes if it was to continue to prosper. Although Willmott Dixon has ignored PFI in the past, Willmott now sees it as the firm’s main challenge and has started to look at how it will enter the market.
He said: “There is a continual drift to PFI, which we have to address because we have no experience, although we are now involved in two health service LIFT projects, which are similar.”
Meanwhile, the annual results revealed that Willmott Dixon made a double-digit profit for the first time last year. Pre-tax profit hit £10.1m, a 58% increase on 2003, for the year to 31 December 2004. Turnover rose 24% to £410m.
There was further good news for Willmott following the demerger of Inspace, the company’s support services business, which is to be floated on the alternative investment market later this month, valued at £85m. Willmott refused to comment on how much the Willmott and Dixon families are set to make from the Inspace float.
Willmott took over as chief executive at the end of last year, swapping roles with Colin Enticknap who became chairman of Willmott Dixon and chief executive at Inspace.
He describes the fact that the company was founded by his family in 1852 as “hugely important to me” and suggests that it is the company’s roots, and not the money, that are the motivating factor.
Two hundred and fifty of the company’s 1650 staff were eligible to attend its 10-year club dinner in London, which was due to take place on Thursday, which he says demonstrates the loyalty of staff.
But of course, it is the financial performance of the company that is pivotal to its future. With £200m turnover in 2004, it is construction that remains the biggest part of that business. Despite the shadow cast over the industry by recent losses incurred by contractors including Mowlem, Alfred McAlpine, Gleeson and Kajima, Willmott says he is not concerned.
We have a lot of eggs in a lot of baskets, and we don’t do the big £50-£100m deals
He said: “We have a lot of eggs in a lot of baskets and don’t do the big £50-£100m contracts. Our average contract is below £10m, which gives us scope for one or two disaster projects a year.”
The 2004 results were mainly driven by work in the education sector, boosted by government spending. A decrease in government spending could therefore hit Willmott’s balance sheet. Despite the fact that industry surveys, including those published by the Construction Products Association and research company Experian, have forecast a slowing in the growth of government spending, Willmott said that he did not intend to decrease the firm’s exposure to government work in the next four years.
“We hope that there will be a continued spend in the public sector, but if that stopped we’d have to dabble again in the commercial market,” says Willmott.
“At the moment though, the government has made an open commitment to health, education and social housing, so we cannot see in the short-term a radical change to government spending.”
However, he concedes that in order to adapt to the market, there will be a “progressive shift back to the corporate sector,” but not within the next four years.
The firm is made up of three divisions, since the demerger from Inspace. They are: construction (the biggest), social housing and development. Willmott said construction margins reached 2.5% last year, which he described as as “good as you’ll get in construction”.
The plan for next year is to make a 2% profit on a turnover of £350m, taking into account the loss of Inspace’s £105m turnover.
Willmott Dixon at a glance
- Group pre-tax profit £10.1m (+58%)
- Group turnover £410m (+24%)
- Construction pre-tax profit £4.5m
- Construction turnover £200m
- Housing pre-tax profit £3.5m
- Housing turnover £100m
- Forward order book £600m