The rhetoric of some mechanical and electrical (M&E) specialists over the past few years has been somewhat of an outlier from the rest of the industry.

While main contractors have queued up to extol the virtues of flat revenue and abandon targets for higher turnover, certain M&E firms have done the opposite.

Coronavirus did little to change that, with both Imtech and Briggs and Forrester reiterating aims to hit £600m and £300m in revenue, respectively – albeit on different timescales.

2020 Company Revenue – latest (£m) Revenue – previous (£m) Pre-tax profit – latest (£m) Pre-tax profit – previous (£m) Pre-tax margin – latest Pre-tax margin – previous Accounts for year ending
1 NG Bailey 573.4 555.7 20.5 16.1 3.6% 2.9% 28/02/2020
2 Imtech 460.7 387.8 8.4 6.5 1.8% 1.7% 31/12/2019
3 TClarke 334.6 326.8 9.0 7.8 2.7% 2.4% 31/12/2019
4 SSE Contracting 319.2 317.9 5.4 -6.3 1.7% -2.0% 31/03/2019
5 Briggs & Forrester 262.2 222.4 4.7 6.5 1.8% 2.9% 31/10/2019
6 Skanska Rashleigh Weatherfoil 230.3 377.2 6.6 8.9 2.9% 2.4% 31/12/2019
8 Spie 229.0 241.8 7.4 -27.9 3.2% -11.5% 31/12/2018
9 SES 208.3 197.7 -0.5 -1.0 -0.2% -0.5% 31/12/2019
7 Balfour Beatty Kilpatrick 196.1 229.2 31/12/2019
10 Michael J Lonsdale 180.2 173.3 7.4 7.6 4.1% 4.4% 30/09/2019

No new data recorded since last year’s index for: SSE Contracting and Spie.

With COVID-19 hitting workloads, the possibility of suicide bidding by companies hungry for turnover would appear inevitable. However, Imtech, the contractor with the biggest target, denies this to be the case.

“We’ve seen no evidence of that,” is the unequivocal response from Imtech Engineering Services (IES) managing director Steve Wignall, when asked by Construction News if he was seeing any low-ball bidding. “[We’ve] lived through previous recessions and we know the damage it does to organisations.”

Margins on the up

In this year’s index, the M&E sector, which has the highest turnover of all the specialisms, saw a slight decrease in overall revenue, which dropped just below £3bn. At the same time, total profit for the top 10 was up from £18.1m to £68.9m. The improvement was broadly spread as well with a majority seeing profit rise and number of loss-making firms dropping from three to one.

The five-year high median profit margin achieved last year (2.4 per cent) was improved upon (2.7 per cent) and edged closer to the 3 per cent mark. M&E was also the only specialist out of the seven to record a rise in median margins.

Revenue is unlikely to drop in the coming months or years according to companies in the market. This is because coronavirus-related delays to projects has created a backlog which has filled up M&E firms’ pipelines. Although it remains to be seen if margins can be maintained in a sector that relies on a high number of staff working in close proximity.

“We’ve got a pipeline of work that stretches through to 2022”, SES Engineering Services managing director Steve Joyce tells CN. “Whilst there may have been an issue at the beginning of lockdown, the pipeline’s still there. Projects have started and are on the ground. So I’m reasonably confident.”

Cash boost

Workload may not be an issue for M&E specialists, but in a sector with very few tangible assets and a great deal of risk, cash can quickly become a problem. Positively, this year’s index showed an increase in the overall cash reserves of the top ten M&E firms, as total cash climbed almost a third, from £179.4m to £236.8m.

Imtech’s wealthy owners EDF were injecting cash into the business even before COVID-19 hit in the form a £18.5m debt-for-equity deal agreed in December 2019. This was followed up by a £30m loan facility provided by the French Government-owned EDF as the virus hit. Unsurprisingly, Wignall describes the financial backing of EDF as a “huge benefit.”

SES is also able to lean on a parent company to bolster finances. After being blighted by the Carillion liquidation in last year’s Specialists Index, the company suffered losses relating to the collapses of Clugston and Styles and Wood this time around.

Its second consecutive loss demonstrates the risks that come with being at the end of the build process. Even with an order book filled with work for two years, the firm’s owner, Wates, decided it needed to reduce the business costs, which led to the firm cutting 300 jobs. The group’s changing structure also saw the departure of managing director Jason Knights.

Joyce believes this was essential in preparing the business for what lies in the months ahead. “We had to take a view on headcount and overhead based on the downturn of work, [but we are] well set up for 2021 and onwards,” he adds.

2020 Company (ranked by turnover) Cash – latest (£m) Cash – previous (£m) Employees – latest Employees – previous Accounts for year ending
1 NG Bailey 42.0 14.0 3223 3224 28/02/2020
2 Imtech 52.1 40.5 2684 2198 31/12/2019
3 TClarke 12.4 12.4 1389 1346 31/12/2019
4 SSE Contracting 0.1 0.5 2153 2380 31/03/2019
5 Briggs & Forrester 24.3 34.7 924 780 31/10/2019
6 Skanska Rashleigh Weatherfoil 75.2 26.5 1063 1158 31/12/2019
8 Spie 4.5 11.8 3257 3615 31/12/2018
9 SES 3.3 5.7 728 813 31/12/2019
7 Balfour Beatty Kilpatrick 31/12/2019
10 Michael J Lonsdale 22.9 33.2 178 139 30/09/2019

To read the full article on Construction News please view here.