黑洞社区

Wates has taken a major step forward in its ambition of doubling turnover to 拢2bn, with the acquisition of the bulk of Shepherd Group鈥檚 construction businesses, analysts have said.

Wates and Shepherd confirmed last Thursday Wates had bought Shepherd Engineering Services (SES), Shepherd鈥檚 facilities management division, and a batch of contracts from Shepherd Construction for an undisclosed price, after building.co.uk broke the news earlier that morning.

According to accounts filed at Companies House, Shepherd Construction and SES turned over 拢240m and 拢208m respectively in the year to June 2014. Financial information was not available for the Shepherd FM brand.

Tony Williams, analyst at 黑洞社区 Value, welcomed the deal, saying it was a 鈥渂ig step鈥� towards Wates鈥� target of doubling turnover from 拢1.05bn in the 2014 calendar year, although he noted Wates鈥� chief executive Andrew Davies (pictured) had 鈥渃leverly鈥� not put a timeframe on the target.

The deal was also the latest step in Shepherd Group鈥檚 strategy of rationalising down its businesses to focus on its fast-growing Portakabin group of modular construction companies, hot on the heels of the sale of Yorkshire housebuilding division Shepherd Homes to Galliford Try earlier this month.

Shepherd Group launched a review of its construction divisions in December, following what it described as 鈥渧ery disappointing鈥� performance in its construction businesses, offsetting strong profit growth in the Portakabin group to drag overall group pre-tax profit down 12% to 拢11.4m in the year to 30 June 2014, on turnover of 拢686m.

Earlier last week, Shepherd confirmed that it had made 55 employees redundant from its Shepherd Construction business, including 37 compulsory and 18 voluntary redundancies. A spokesperson said at the time: 鈥淲e are doing everything possible to prioritise the welfare of staff affected.鈥�

Williams said introducing Wates management at the acquired Shepherd construction businesses could be the 鈥渒ey to turning it around鈥�.

He added: 鈥淭he challenge for Wates is to get in there and make sure there are no problem contracts and if there are to fix them and then run ahead with the business.鈥�

Commenting on Shepherd鈥檚 Portakabin group of businesses, Williams said it was 鈥減henomenally profitable and a fantastic brand name鈥�.

Stephen Rawlinson, an analyst at Whitman Howard, said the deal was part of what appeared to be 鈥渃onsolidation in the sector鈥�, noting that Miller Construction and Morrison Construction have also been bought by Galliford Try in recent years. 鈥淚t鈥檚 interesting to question what likely combinations might happen next,鈥� he added.

Commenting last week, Davies said: 鈥淭he acquisition [鈥�] would complement and enhance our existing construction and property services businesses, with access to additional areas of expertise in off-site construction, design for manufacture and assembly operations and expansion in new markets into the north of England.鈥�

David Williams, chairman of Shepherd Group, said: 鈥淭he Shepherd Group Board recognises that Shepherd Construction needs scale in order to capitalise on its full potential and the market opportunities arising out of its acknowledged technical capability.鈥�

The transaction is subject to due diligence being completed.

Both parties declined to disclose the terms of the proposed deal and said they would not provide further detail until the transaction closes.