黑洞社区

Margins at the top 50 contractors have increased significantly but are still below the 2% mark, according to 黑洞社区鈥檚 latest Top 150 contractors and housebuilders survey.

Average margins among the group rose from 1.05% to 1.78% since last year鈥檚 survey - an increase of two-thirds - but still some way short of the figures a number of contractors have set themselves in years to come.

Earlier this year, Leo Quinn, the boss of UK鈥檚 biggest builder Balfour Beatty, said he wanted the business to make operating margins of 5% from 2020.

And Paul Cossell, the chief executive of ISG - now delisted from the stock exchange after its takeover by US private equity firm Cathexis last year - said at the start of this year that 5% margins are achievable in the long run.

Others have set lower margin targets in the next few years but still significantly higher than the current average of 1.78%.

Galliford Try boss Peter Truscott said at the firm鈥檚 interims earlier this year he wants its construction business, which has been hit by 拢98m of costs on problem contracts, to be making a margin of 2% by 2021 while Bam chief executive Graham Cash told 黑洞社区 last month he is eyeing margins of 3% from 2020.

But the survey paints a gloomy picture for top contractors鈥� hopes of reaching margins even approaching the numbers talked about, with the average margin for the country鈥檚 10 biggest builders below 1%.

In contrast, the firms ranked 50-100 posted an average margin of 4%.

Turnover of the top 150 contractors and housebuilders rose nearly 9% to 拢100.2bn with smaller firms seeing average turnover increase by 13%.

But contractors are being hit by a slowdown following last summer鈥檚 EU referendum while uncertainty has been increased by last month鈥檚 hung parliament.

Steve Beechey, group strategy director at contractor Wates, said: 鈥淯ncertainty is the big issue, politically and economically. Clients are very uncertain about the future, it鈥檚 very hard to know what鈥檚 going to happen in policy direction too. It鈥檚 making it a very difficult time for contractors.鈥�

Chief executive of Osborne, Andy Steele, added: 鈥淚t鈥檚 a strange market. Using a football analogy, it鈥檚 like a tough away game 鈥� you鈥檙e pleased to come away with 1-0.鈥�

Some other contractors questioned those with a strategy of growth through acquisition. Rick Willmott, group chief executive of 拢1.2bn firm Willmott Dixon, said: 鈥淲hen we鈥檝e grown fast in the past it鈥檚 almost impossible to tell if the people you鈥檙e recruiting are good people for at least a year.鈥�

The country鈥檚 second-biggest contractor, Carillion, has been hit with a 拢845m writedown against underperforming contracts. The firm has spent more than 拢1bn buying rival contractors Mowlem and Alfred McAlpine and solar panel firm Eaga in the past 11 years.

Carillion will announce the outcome of a strategic review at the business when it publishes its half-year results this September.