Burgeoning workloads have given specialist contractors a boost and signalled a shift in their relationship with main contractors. Some of the big players reveal what they’ll do with their new found powers …

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There’s little doubt that things are looking up for specialist contractors. Last week we detailed how the recent uplift in workload is putting particular pressure on main contractors who have secured work at low prices. In contrast, for many specialists the upturn is providing some much needed respite after years of diminishing workloads and cash flow problems.

The National Specialist Contractors Council’s most recent quarterly state of trade survey shows that new enquiries are at their highest level for more than 15 years, with around half reporting an increase in orders. Many are seeing tender prices rise and payment periods improve as main contractors realise they need to keep specialists on-side in order to secure their services. After years in which many have felt like they were being kicked by main contractors, the boot is now shifting to the other foot.

But of course these improvements in the market bring their own challenges - most notably in securing skilled staff to back their expansion.

This week we publish the latest analysis by Building’s sister company Barbour ABI of the firms which are winning the most work in each of the biggest specialisms. To accompany this analysis, across the next couple of pages, we interview five leaders of successful specialists about how they are dealing with the pressures of growth, and whether they’re using the opportunity to settle any scores with main contractors.

The concrete specialist

Paul Salmon

Paul Salmon, managing director, Byrne Brothers

Concrete frame and formwork specialist Byrne Brothers, part of Byrne Group, made a decision during the recession to hang on to nearly all of its staff, despite the fact the workload of the business inevitably reduced. The firm’s turnover fell from £166m to its low point of £114m in both of the last two years.

The company expects that the substantial pick up it is now seeing will allow it to achieve turnover of £150m in the current financial year to March 2015, and up to £180m-£200m next, growth of well over 60% in two years. According to managing director Paul Salmon, retaining all of its staff was something it was able to do as a family-owned company that a listed firm would not have got shareholder support for, and this is now paying dividends. With staff in place it is now able to expand at minimal cost and, importantly, with no risk of impacting the quality of the delivery of projects. “The family recognised that the firm’s major asset was its people, so when the work fell we didn’t actually lose any people. It now gives us the opportunity to capitalise on the market without taking on unknown quantities,” Salmon says.

Byrne specialises in more complex projects such as Battersea Power Station and the new Bloomberg headquarters that require innovation, and where it has fewer competitors. It relies on highly experienced and technically adept staff, and Salmon says it has to be “eternally vigilant” against employees being poached, particularly in the current market. “We’re now taking on staff as we need them, and we’ve set £200m as a ceiling because we know we can service that turnover. It means we can be selective because we’ve got more work coming through than we can tender,” he says.

This means the opportunity for main contractors to take advantage of specialists is ending, but the market demand is also causing labour costs to spike by 10%. “During the recession there were some clients and contractors that stood by us. We remember it and these are the people we stand by now. This time next year there won’t be enough specialists around to service it all [the work]. We’re not an infinite resource,” he says, though he rejects the idea specialists are now ruling the roost. “It’s not healthy if one side or other holds the balance of power. The pendulum swung one way and I think now it’s come back to the middle.”

The M&E specialist

David Hurcomb

David Hurcomb, chief executive, NG Bailey

 

Of all the specialist sectors within construction, there’s little doubt that M&E was hit hardest. And also being the last specialism to get on to a construction site, it’s little surprise that NG Bailey hasn’t yet seen work take off in the way other specialists have.

Chief executive David Hurcomb says he expects turnover and profit this year (to February 2015) to be broadly the same as last, at £380m and £6.9m respectively. However, things are looking up: NG Bailey’s order book is 5-10% up on the same point last year, at £560m, on the back of increasing infrastructure activity, and the outcome of some large bids soon to be decided could further increase this.

The increase in the pipeline is even higher outside of London, with its order book running 30% up on last year. This is enabling it to change its approach: “We’re trying to be more selective, and clients are keen to engage us earlier in the process,” says Hurcomb. The pick-up is also enabling it to focus more on jobs where it partners with a contractor to win the overall job, rather than being taken on as subcontractor after the main contract has been won.

Hurcomb says the huge contraction in the M&E sector, where major players such as Emcor have withdrawn, and other such as Rotary and Balfour Beatty have downsized, means there is a “chronic shortage” of expertise to finish existing projects right around the corner, particularly in London. “It hasn’t bitten yet,” he says. “It is scary how much has to be delivered.” The pick-up means NG Bailey is able to get work on better terms. “In the recession some subcontractors were really bullied into accepting very difficult commercial terms. We lost a lot of work because we wouldn’t accept the commercial terms. Now margins remain tight but the terms are more reasonable,” says Hurcomb.
One of the reasons NG Bailey is not seeking to grow rapidly is because of the difficulty of bringing new people in. “It’s massively risky, and the London market is silly, people are moving round and round for daft salaries. We’re in for the long-term development of people.”

The foundations specialist

John Patch

John Patch, director, Roger Bullivant

 

Piling and foundations contractor Roger Bullivant had its best ever year in 2007 - then, in the words of director John Patch, “shit happened”.

By 2009 its turnover had halved, and the firm, which works primarily in the residential sector, was eventually forced to make 300 people redundant. In 2011 it was acquired by French groundworks giant Soletanche Bachy, itself part of construction giant Vinci. At about the same time, Patch says, the market started to pick up.

After reporting turnover of £69m in the year to December 2013, it will grow to £72m this year, and is targeted to reach £77m in 2015. It expects to make a 4.5-5% profit margin this year, more than double what it made last year and “something we’ve not seen in quite a few years,” according to Patch. With most of its work in the residential sector, its forward order book is also the largest it has ever been. This expansion brings its own challenges, as the firm is looking to increase staff count by 5-7%. “We’re recruiting at all levels, from senior management to site operations. We have a factory that produces pre-cast products, and we’re looking to expand production there. Resourcing is a big problem,” he says.

The firm is looking to address this by bringing young people and graduates through, and is willing to pay more than the market rate for the right people. All this means Roger Bullivant is taking a different approach to new business, and refusing to price jobs for main contractors which have no intention of actually taking them on. “The greatest change is in the risk assessment. Some customers expect the industry to take on significant risk, and I think that’s going to disappear,” says Patch.

Main contractors are also realising this shift means the rules of engagement have changed. “They’re acting better and behaving themselves. There are fewer payment problems and they realise they do rely on specialist contractors. Some specialists are suggesting to me they’re rapidly reaching a point where they choose who they work for. It’s getting to the point where the boot is on the other foot.”

The fit-out specialist

Chris Booth

Chris Booth, mManaging director, Overbury & Morgan Lovell

 

It’s probably fair to say last month’s well-publicised profit warning for Morgan Sindall’s construction business has obscured the better news from its £430m turnover fit-out arm, which includes high-profile brands Overbury and Morgan Lovell.

While revenue at Morgan Sindall’s fit out division was down 8% at its June half year on the previous year, its operating profit margin is rising, from 2.3% the previous year to 2.8%. More significantly, its order book, according to its latest city update in October, is now 83% up on where it was last year, at £260m.

According to the MD of the business, Chris Booth, the business has this year bid £180m more work than the year before, a rise of 25%, and is now seeing tender volumes rise as fast in the regions as within the business’ core London market. It employs 600 people and is recruiting graduates to enable steady growth. “We’re at the level we now want to operate. The most important thing for us in the current market is not to over-trade,” he says. “We’re not one for deploying untried or untested members of staff on a client - we’re just not going to throw away a reputation for delivery hard won over 20 years.”

Unlike other specialist contractors profiled here, Morgan Sindall’s fit out division does all of its work direct for end clients rather than main contractors, meaning it has the challenge of securing subcontractors in the rising market. “The supply chain is more selective about the work it takes on, there is a skills shortage. We never traded our values in the recession, and we were good to them. We hope we can get the benefit of that.”
While Booth says the business has not changed its approach to bidding work in response to the returning market, he admits that clients are starting to engage differently.

“They became very price sensitive in the recession; now they’re looking for speed to market, speed of delivery and certainty. We’re not always the cheapest. There has been some return of negotiation and management fee contracting. I think some clients are asking whether fixed-price contracting served them very well, as a number of projects haven’t delivered.”

The demolition specialist

Steve Darsey

Steve Darsey, chairman, Erith

 

Demolition and groundworks contractor Erith is expecting turnover to soar this year by nearly 50% as it takes advantage of the returning market. In the year to September 2013 it made a £500,000 profit on turnover of £56m; this year it expects revenue to rise to £80m, and profit to reach £2m. And while it is still to set exact budgets for next year, it already expects turnover and profit to rise again to around £90m and £3m respectively.

As with other specialists, the task then will be to consolidate at that level. Steve Darsey, group chairman of Erith Group, says: “The surge this year in business is not sustainable, I think it will plateau after that.” The business has already grown from 310 staff at its nadir to around 430 now, and it has a plan to reach £100m turnover by 2018.

“The constraints on us are staff. We’ve been helped by recruiting a few senior directors in the recession from companies in liquidation, who retained good links with their former staff and have been able to bring them in. It’s not been easy, but so far we’re managing it without it affecting quality and delivery. We don’t want to be busy fools,” he says.

Because of this, Darsey is targeting work with long-term clients. “We want to look after our existing clients, as they’ll be there for us when this boom is over. We want new business too, but it will be with people we want to do business with and where we think we can add value,” he says.

As the credit crunch started and queues formed outside branches of Northern Rock, Darsey says he realised how severe the problem might be and made a decision to downsize Erith’s traditional logistics business, where it subcontracted services to main contractors, to focus instead on demolition jobs where it was more likely to work directly for the client. Now the majority of its work comes direct from end clients, and he says he is seeing the benefits.

“We were experiencing bad debt and slow payment, [so] it was the right decision for us.

“Clients now realise that value, certainty and delivery are paramount, not just a cheap price that can land both the project and the contractor in trouble. Our approach ensures that clients get a completed project on time and on budget, and we and the contractor make a reasonable margin, so all parties are satisfied.”

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Barbour ABI: Most Active Specialists 2013-14

 

Most active demolition specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1Portsmouth Demolition and Salvage55.017
2Downwell Demolition149.715
3Boss Plant Hire83.513
4Keltbray1560.212
5McGee Group1342.210
6Squibb Group223.09
7Wring Group122.49
8Carey Group195.09
9General Demolition131.88
10Greater London Demolition118.78
11John F Hunt Demolition583.07
12Erith264.67
13DSM Demolition Services147.66
14777 Demolition & Haulage287.05
15Franklin Demolition50.25

 

Most active M&E specialists


CompanyTotal value of projects worked on (£m)Number of
projects
won
1Kone Lifts1295.654
2T Clarke Group729.144
3Lorne Stewart326.836
4H Malone & Sons83.133
5Dodd Group (Midlands)158.330
6Otis Lifts433.229
7Schindler685.026
8Balfour Beatty Group541.726
9A & B Engineering213.326
10Laing O’Rourke1459.125
11Briggs & Forrester Group329.425
12SES481.323
13NG Bailey & Company391.423
14Bowmer & Kirkland173.823
15Dalziel Services56.321

 

Most active concrete frame specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1Heyrod Construction423.55
2John Reddington Limited/UK Facades111.55
3Northfield Construction113.34
4Corbyn Construction47.44
5Banagher Concrete48.54
6Addington (Formworks)98.03
7Mitchellson Construction110.03
8JB Developments & Construction24.03
9Dunne Group355.03
10Modebest Builders29.53
11MJS Construction (March)22.63
12Oliver Connell & Son36.83
13Carey London10.53
14Masterson Holdings227.13
15Thames Valley Construction68.53

 

Most active steel frame specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1BHC138.28
2Finley Structures209.78
3Leach Structural Steel Work36.28
4J&D Pierce Contracts141.17
5Caunton Engineering372.47
6Evadx22.47
7TW Fabrications41.07
8Robinson Construction39.96
9Francis & Lewis International45.96
10Morgans Of Usk20.06
11Conder Structures61.56
12Steel Fabrications (Martock)22.16
13Hescott Engineering Company29.66
14Elland Steel Structures72.56
15Monkbridge Construction Company11.05

 

Most active groundworks specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1Kier Group441.242
2Willmott Dixon Construction537.639
3Advance Construction(Scotland)555.538
4Roger Bullivant454.935
5Morgan Sindall840.132
6Balfour Beatty Group911.231
7Van Elle323.931
8Carey Group1321.130
9Interserve664.028
10Modebest Builders605.828
11Laing O’Rourke2620.824
12Galliford Try Construction614.423
13McDermott Building & Civil Engineering712.223
14John Reddington Limited/UK Facades666.322
15ND Civils & Groundworks76.020

 

Most active interior fit out specialists


CompanyTotal value of projects worked on (£m)Number of
projects won
1CAP Ceilings & Partitions319.034
2Gypsum Plasterers184.030
3Plastering Contractors (Stanmore)1776.629
4Roseville Plastering235.627
5Horbury Building Systems588.025
6TJL Plastering392.124
7Gray’s Dry Lining341.722
8SCL Interiors492.722
9Optimum Drywall Systems388.622
10SCS1194.720
11Mansell Finishes590.620
12Sound Interiors437.119
13Redrose Drylining294.918
14Acheson & Glover Precast169.418
15JMS Interiors85.517

 

Most active scaffolding specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1TRAD Scaffolding Company567.226
2Lyndon Scaffolding506.422
3Allied Scaffolding455.222
4Interserve139.922
5Harsco Infrastructure221.921
6Brogan Group985.221
7Rilmac Fire Protection150.320
8Mac Scaffolding76.618
9LTC Specialist Scaffolding106.715
10Project Scaffolding110.315
11Pedley Scaffolding25.815
12Interlink Scaffolding111.814
13Amber Scaffolding117.713
14Connect Scaffolding274.713
15Bryson Scaffolding70.113

 

Most active floors specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1Elite Tiling354.748
2AC Plc516.532
3John Abbott (Flooring Contractors)448.327
4Birmingham Tile (Mosaic)144.925
5Advance Construction (Scotland)126.621
6Pinnacle Flooring148.121
7Laing O’Rourke634.421
8FPL Flooring100.420
9Hillside Contracts95.419
10Horbury Building Systems248.419
11Heat & Screed24.419
12Loughton Contract Carpets296.618
13A De Cecco236.418
14Westcotes Flooring Company141.918
15Phoenix Flooring183.517

 

Most active roofing, cladding, glazing specialists

 CompanyTotal value of projects worked on (£m)Number of
projects
won
1Progressive Systems205.847
2Roofline Group598.046
3Spectrum Building Envelopes120.944
4Briggs Amasco436.740
5Voland Roofing168.632
6Bracknell Roofing Company208.630
7Bradfords Group220.129
8CA Group459.727
9Lakesmere Cladding1605.325
10Barry Collen87.625
11AMS Cladding83.724
12SIG Trading193.624
13MAC Roofing & Contracting266.724
14Environmental Surface Preparation185.123
15ICS166.123

 

RANKINGS METHODOLOGY

These rankings were collated by construction intelligence company Barbour ABI and show the specialists winning the largest number of contracts in each of nine specialisms between November 2013 and October 2014. The rankings are based on the number of projects awarded to each firm in the period and, where more than one company has won the same number of projects, they are then ranked according to the total construction value of the projects they are working on. These firms are not, therefore, necessarily the largest specialists in each sector. For any queries with the data, please contact Barbour ABI (www.barbour-abi.com or by email to info@barbour-abi.com).