Appetite for PFI

by John Leitch



High-Point Rendel, the business management and capital project consultancy, is contemplating an entry into the PFI market as a consortium member, having shied away from taking such a role in the past.

Stephen Greenwood, finance director, said last week: "We've not been active so far, not having had the appetite for such a role as yet." The problem, from High-Point's position, has been the high cost of PFI bids that prove unsuccessful. However, Greenwood feels the group's balance sheet has now strengthened sufficiently to take on such a challenge.

"PFI will spread round the world," Greenwood said. "It introduces more of a partnering approach so the conflicts that have typified the construction process are less likely to happen."

Latest interim financial results (six months to 31 January 2000) showed High-Point's pre-tax profit ahead at £1.2m (£900,000) on a turnover of £12.8m (£12.4m).

Of High-Point's two business streams, the Business and Management Services division was the one that delivered the highest margin - after climbing to 15% in the last full year it moved further ahead to 16% in the latest six-month period. "The figure of 15% was the target we were working to," said Greenwood. "A new target of 20% has been introduced."

The second business stream, Capital Project Delivery, operates in a more traditional and competitive market. The latest margin of 5%, while down on the 6% figure in the last full year, should rise in the second half. "It compares well with the sector," said Greenwood.

After running with a stable turnover for the past two years, High-Point is now keen to expand. If the take-over of the MDA Group had gone through, it would have given turnover a 60% boost.

"This was digestible," said Greenwood. "MDA, a UK-based cost consultant and project manager, would have increased our UK presence, brought in a high-quality client base and additional skilled staff." Talks ended because the two sides couldn't resolve a fair price for MDA. The gap between them was more than 5%.

The pursuit of an acquisition has gathered pace. The focus is on a UK player in the management consultancy business with a capital project emphasis. The pool is large, offering High-Point a range of opportunities. If growth came in one fell swoop; High-Point could cope with a similar-sized player, its turnover doubling as a result.

"We're not sitting on a war-chest," said Greenwood, "but our shareholders and banks would support such a move."