Exclusive: McAlpine targets 20% civils work in strategy shake-up

The contractor has set up a new civil engineering business unit that will be expected to bring in 20 per cent of its revenue by 2019, when it celebrates its 150th anniversary.

Construction News understands the new business unit will be led by director Mark Williamson.

Sir Robert McAlpine will also no longer enter into fixed-priced contracts in residential fit-out.

It marks the first change in strategic direction since the company conducted an internal review and 

The strategy shake-up comes as the contractor posted a pre-tax £50.9m loss for the year ended 31 October 2015.

This compared with a pre-tax loss of £64.5m the year before.

Group turnover including joint ventures stood at £804.9m, compared with £1.05bn the year before.

Its 2015 turnover was made up of £745m in contracting, £59.3m in PPP concessions and £246,000 in property joint ventures.

McAlpine said the small number of problem contracts it identified in 2014 continued to cause problems for the group in 2015.

“Although a prudent view of the final outcome of those contracts was made last year, the financial position has deteriorated further as the completion dates have extended by more than expected and costs have consequently also increased,” it said.

The company added that, of those contracts, the worst performing had reached practical completion.

It said: “During late 2014 the group implemented revised risk management and tendering procedures, which we have diligently applied and enhanced.

“We are pleased to note that these procedures have led to much better performance and margin from contracts that we entered into following the introduction of these new governance procedures.”

The group said it was confident of a return to profit in 2016, with a new strategy in place for 2019 “and beyond”.

Mr Aikenhead said: “I am very positive about our future prospects and I look forward to the business returning to profitability in 2016.

“I am confident that, alongside our continued focus on our clients, our new strategy combined with a firm focus on productivity, engineering excellence and first-class delivery will have significant impact as we continue to realise our company vision of ‘Proudly Building Britain’s Future Heritage’.”

Results at a glance:

  • Cash balance: £242m (2014: £198.9m)
  • Borrowings: £184m (£117.2m)
  • Group turnover: £791.6m (£857.3m)
  • Turnover including joint ventures: £804.9m (£1.05bn)
  • Gross loss: £46.7m (£80.5m)
  • Pre-tax loss: £50.9m (£64.5m)
  • Wages and salaries: £111.9m (£110.6m)
  • Average number employed: 2,119 (2,209)

The contractor confirmed it will no longer enter into fixed-priced contracts in residential fit-out, having suffered serious blows in the sector.

It said: “As in 2014, the UK construction market remains highly competitive with some sectors suffering from high cost escalation and a very stretched and limited supply chain – particularly in central London.

“We have found this particularly evident in the high-end residential market and consequently we have decided we will no longer enter into fixed-price contracts in the residential fit-out subsector.”

Alongside its expansion into civil engineering, Sir Robert McAlpine also wants increase its framework and public sector activities.

Recent contract wins for SRM include its appointment as British Land’s construction partner for Broadgate, an advisory role on the £150m Buckingham Palace refurbishment and its work on Capco’s £8bn Earl’s Court scheme.

Construction News revealed this week its joint venture with Vinci, IHP, had recouped £584m on the ProCure21+ framework through just 63 contracts, at an average value of £9.27m – the highest of any contractor. 

It has also added two retail and leisure centres for Hammerson: Victoria Gate in Leeds and West Quay Watermark in Southampton.

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