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Risk management pays off for HBG as margins rise
11:32 14 May 2003
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HBG Construction's stronger risk management capability has helped
boost its operating margins to 1.6%.
Chief executive Brian May said: "Design is the biggest risk element and we now have 70 in-house people, which gives us a big advantage. Their capabilities mean that we interact with external designers better."
Such is the strength of HBG's in-house capability that the group made a fee income of £4.5m from design work for external clients. The largest element of this was the £1.6m from the Royal Court extension in Guernsey - a project that HBG is not building.
"Risk management is at the top of our agenda. We're not risk averse and are happy to take it as long as we feel able to manage it," May said.
"That means the procurement method has to be right: where someone is only attempting to download it, the reality is that it will come back and bite someone.
"A lot of construction clients are sophisticated and want to see us make money on their project. They vary when it comes to risk sharing: one says it prefers us to increase our price and take all the risk, while another prefers both parties have a joint risk and that we manage it together."
HBG made a £15m pre-tax profit last year on a £650m turnover. "It was a good year," said May. "We forecast the drop in turnover as we realigned our markets.
"We look to sell more than one service to our clients and have made progress in that direction. Last year, a fifth of turnover was from clients taking more than one service, up on the 15% figure in the previous year. I want to take that figure up to 40% to 50%."
HBG operates as seven regional businesses, all of which are profitable. Most projects are valued at £5m to £100m. "Mowlem, Kier and Morgan Sindall all have more regional turnover than us, but they take on slightly smaller-sized contracts," said May. "Our focus means we are now strong in commercial - there is still a market in the South East - and retail, along with town centre developments, health and education."
Chief executive Brian May said: "Design is the biggest risk element and we now have 70 in-house people, which gives us a big advantage. Their capabilities mean that we interact with external designers better."
Such is the strength of HBG's in-house capability that the group made a fee income of £4.5m from design work for external clients. The largest element of this was the £1.6m from the Royal Court extension in Guernsey - a project that HBG is not building.
"Risk management is at the top of our agenda. We're not risk averse and are happy to take it as long as we feel able to manage it," May said.
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"That means the procurement method has to be right: where someone is only attempting to download it, the reality is that it will come back and bite someone.
"A lot of construction clients are sophisticated and want to see us make money on their project. They vary when it comes to risk sharing: one says it prefers us to increase our price and take all the risk, while another prefers both parties have a joint risk and that we manage it together."
HBG made a £15m pre-tax profit last year on a £650m turnover. "It was a good year," said May. "We forecast the drop in turnover as we realigned our markets.
"We look to sell more than one service to our clients and have made progress in that direction. Last year, a fifth of turnover was from clients taking more than one service, up on the 15% figure in the previous year. I want to take that figure up to 40% to 50%."
HBG operates as seven regional businesses, all of which are profitable. Most projects are valued at £5m to £100m. "Mowlem, Kier and Morgan Sindall all have more regional turnover than us, but they take on slightly smaller-sized contracts," said May. "Our focus means we are now strong in commercial - there is still a market in the South East - and retail, along with town centre developments, health and education."
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