CJ50 Market data: Balfour runs away with the 2005 crown

PDF of market data Annual Review 2005

2005 surpassed all expectations for construction business, with the total value of work won by our CJ50 contractors topping an astonishing £29bn. This exceeds 2004’s total by more than £5bn and shows the industry surging ahead following four years of more modest growth.

The biggest expansion was seen in the infrastructure sector, which shot up from £5.7bn in 2004 to over 11bn last year, more than three times its 2000 total. This massive jump can be largely attributed to AMP4 water contracts flooding in during the early part of the year, and there was a healthy level of roads work as the Highways Agency dished out a number of big deals.

So who enjoyed the busiest 2005? Every company that made the year’s top 10 could boast forward orders of over £1bn, ensuring healthy competition among the big players. There was a swap for the top two places, with Balfour Beatty and Bovis Lend Lease still on peak form, but musical chairs across the chart kept everyone on their toes, with a surprising amount of movement in the top 10.

There was a fair bit of shuffling in the first half of the year as several contractors vied for the top spot each month, but the latter half of 2005 unquestionably belonged to Balfour Beatty, which spent seven months at the top of the chart and never left the top 10.

Apart from briefly ceding first place to Bovis Lend Lease in September, Balfour dominated the top spot from June to December. Its haul for 2005 was a massive £4.6bn, £2.8bn ahead of the year’s runner-up Bovis and nearly twice its 2004 total of £2.4bn.

Infrastructure was best for Balfour by some distance, netting it £2.4bn. Other public was another hugely profitable sector for the company, and Balfour also comfortably topped the regional tables for the North, Midlands and Scotland.

Balfour’s first month at the top of the CJ50 table in 2005 was March, when it secured the £241m early contractor involvement M1 widening contract, a joint venture with Skanska. This contract netted the company a further £48m in November. Other road work included the ECI contract for the A421 scheme between the M1 and Bedford, adding to an already impressive PFI portfolio.

Schools work also provided rich pickings for Balfour last year. June was a slow month for new work generally, but not for Balfour, which announced 87 awards worth £390m. Its biggest deal was the £140m North Lanarkshire Schools PFI scheme. July brought more work from the education sector in the form of a £127m PFI deal for Nottingham County Council, and a further £44.3m deal with North Lanarkshire. In August it won £21.7m of schools work for Glasgow City Council.

Other large deals for the company included £22.5m-worth of repairs work for Northumbria Water, £16.4m of work on the Channel Tunnel Rail Link, work for the National Grid and Heathrow T5. It ended the year as strong as ever, December bringing two new contracts from Network Rail worth £66m over three years, and a £63m PFI street lighting contract for South Tyneside Council.

Second-placed Bovis Lend Lease brought in a similar level of business to 2004, winning around £1.8bn of forward orders. It was particularly strong in the private commercial sector, leading by some distance with an annual haul in excess of £825m. Other public and private industrial also proved lucrative for the company.

Bovis secured its position on the back of just 41 contracts compared with Balfour Beatty’s 1,068. Its strongest month was September, when it ousted Balfour from the top spot with a whopping £500m of forward orders, the bulk of which was comprised of just two contracts.

The largest, a £300m retail development, is a 50-50 joint venture between the company’s Australian parent Lend Lease and London property developer Minerva.

Kier was only just behind Bovis with £1.7bn from nearly 600 contracts. Despite never topping the monthly table throughout the year, it leapt from sixth place to take third. It made it into the top 10 for every sector except infrastructure, with private commercial and other public contracts furnishing the bulk of the work. Infrastructure nevertheless figured in its portfolio, and it was named by Network Rail in January on a five-year contract to carry out improvement work throughout the South East, a deal which would have brought it £20m over the first year.

Costain came fourth, up from 10th place in 2004, enjoying a particularly strong performance in London and the South East, with over £1.3bn of work in the region. April was the company’s most lucrative month with more than 300 contracts added to the books. One of its largest deals was its £198m involvement in the widening of the M1 between junctions 10 and 13, one of the Highways Agency’s biggest projects.

Fifth-placed Carillion dropped a place from 2004. The contractor had a rollercoaster year, enjoying some very busy months interspersed with periods of no forward order activity at all. It topped the private industrial table and was particularly successful in Wales and the South West. December was particularly lucrative, pushing the contractor to second position for the month with £492.5m of work. It will be interesting to see Balfour’s reign at the top challenged if Carillion’s acquisition of Mowlem goes ahead this year.

Morgan Sindall retains its lead in the social housing sector, but the bulk of its £1.34bn workload was secured in May in the infrastructure sector. It soared to the top of the chart after its civils arm, Morgan Est, signed a mammoth framework contract with United Utilities. It was one of several contractors to benefit from United’s huge AX4 programme, the collective term for its capital works and maintenance water and wastewater assets (AMP4) and its electricity assets (XD4). This one deal was enough to secure Morgan Sindall seventh position in the infrastructure table and a two-place rise to sixth in our 2005 chart.

Laing O’Rourke was in seventh place, putting in another strong year after nearly doubling its returns in 2004 compared to the year before. It secured work across several sectors and enjoyed a busy April, powering into third place up from ninth in March thanks to two very different projects – a £200m sewage and water treatment scheme for Welsh Water, and work for Manchester United.

Eighth-placed Skanska climbed an impressive 10 places to take eighth, thanks in part to a healthy amount of infrastructure work. It had a particularly strong April, winning a highways hat-trick following its work on the £23m A66 Temple Sowerby Bypass and the £241m widening of the M1 between Junction 6a and Junction 10. Its third highways scheme for the month involves designing and constructing the new M1 Junction 19 near Rugby in the Midlands.

HBG Construction rose to ninth place from 13th in 2005 thanks to a strong showing in the PFI market, especially following Jarvis’s exit. May was a particularly good month for the contractor, when it closed in the £62m Bromsgrove grouped schools scheme in Worcestershire.

Mowlem rounds off the top 10, falling from fifth to 10th, but making it on to the annual top 10 across all regional sectors outside London and performing particularly strongly in the private commercial and infrastructure markets.

The six new entrants to the table were ISG InteriorExterior (22nd with over £445m of work), Amey (back after a two-year absence at 24th), Watkin Jones (35th), Durkan (36th), Haymills (43rd) and Multibuild (48th).

Will next year see Balfour maintain its huge lead, or will some reshuffling in the market see a new player emerge on top? CJ50 will continue to keep you up to date.