Business remains brisk for the majority of contractors working in the UK鈥檚 utilities sector. With most of the top 20 utilities contractors securing work on frameworks of anything from three to 10 years鈥� duration, revenue security is conferred by solid forward order books.
Our analysis of the top 20 specialists in the utilities sector covers a period of more than two years, from June 2017 to October 2019. The figures quoted here represent the most recent results submitted by each business at Companies House.
Since our last review of the sector, overall revenues for the top 20 contractors have risen more than 14% from 拢2.3bn to almost 拢2.7bn. Total pre-tax profits have risen even more steeply, from 拢48.7m last year to 拢60.7m 鈥� an increase of almost 25%.
Morrison Utility Services (MUS) remains the dominant player in this sector, with turnover in the year to April 2019 of 拢873.8m 鈥� getting on for three times that of its nearest competitor, JN Bentley, which recorded revenues of 拢307.9m in the calendar year 2018.
Morrison鈥檚 turnover has risen by 12.3% since 2017/18 (拢778.4m), largely due to an increase in the volume of work in the gas, water and telecommunications business. Growth was offset by a slight reduction in work on electricity infrastructure projects, says MUS.
During the relevant period, the group launched a new business to focus on work in the telecommunications industry. The telecoms activity previously carried out by MUS is now being undertaken by the new outfit, Morrison Telecom Services.
MUS made a pre-tax profit of 拢28m in the 12 months to April last year, up 9.8% from the previous year (拢25.5m).
Second-placed JN Bentley (part of the Mott MacDonald group since 2014) registered a significant increase in turnover for the 12 months to 31st December 2018. At 拢307.9m, revenues were up almost 20% on 2017鈥檚 figure of 拢257.3m. This was the second year of robust growth 鈥� in 2016 the company turned over 拢168.5m.
鈥淎s we go forward into 2019, we are expecting this rate of growth to moderate, albeit with the majority of our 2019 budget already secured via direct allocation within our existing frameworks,鈥� said the company.聽
Around 85% of JN Bentley鈥檚 workload is in the water and wastewater sector and the company says its priority now is to retain a focus on this sector 鈥渁nd look to develop further revenue streams whilst exploiting opportunities presented by its membership of the Mott MacDonald Group鈥�.
JN Bentley鈥檚 pre-tax profit figure actually fell in 2018, from 拢8.3m to 拢6.3m (down about 24%) and margin also declined from 3.2% to 2.0%. The company says that this is due to 鈥渁 small number of under-performing contracts across several of our frameworks. Maintenance of a strong set of operational control procedures and further enhancing the skill-set of our project delivery teams is seen as a key priority over the coming year to reverse this recent decline.鈥�
In contrast to JN Bentley, Boskalis Subsea recorded the sharpest decline in annual turnover in 2018. Revenue for the year was 拢58.2m, down 66% from 拢173m the previous year. Profitability also suffered, falling from 拢4.7m before tax in 2017 to 拢1.8m in 2018.
The company 鈥� which changed its name from VBMS (UK) in December 2018 鈥� is a specialist in the laying and burying of export and infield cables for offshore wind farms. It also carries out cable repairs and shore-landing operations for the renewables market and the oil and gas industry as well as the installation of subsea interconnectors.
鈥淭he reduced turnover for 2018 compared to 2017 is due to timing, with contracts either starting or finishing. It is expected that turnover for 2019 will be significantly improved,鈥� said the company.聽
鈥淎t the end of 2018 the order book amounted to 鈧�268m [拢233m] of which we expect to execute 鈧�103m [拢90m] in 2019, 鈧�113m [拢98m] in 2020 and 鈧�52m [拢45m] in 2021,鈥� the company explained.
鈥淚n the past few years we have seen the market shift from installation only towards a more engineering, procurement and construction approach on projects, where companies like Boskalis Subsea are not only responsible for the installation of the cables but are also responsible for the procurement and engineering of the cable.鈥澛�
Boskalis Subsea remains part of the Dutch-owned VBMS Group. In January 2018 it changed its functional currency from pounds Sterling to Euros. 鈥淭his decision was taken as the company鈥檚 contract and operating costs are predominantly transacted in Euro,鈥� it explained.
With disastrous-looking pre-tax losses for at least the past three years, MWH Treatment would seem to be a business mired in trouble. The fact that ownership of the company has been somewhat fluid in recent years adds to that impression. But all is well, says the company.
MWH Constructors (as was) changed its name to Stantec Treatment in January 2018 following the acquisition of its US parent company (MWH Global) by Canadian rival Stantec Inc. But Stantec swiftly decided to dispose of its new loss-making subsidiary and sold it to a US-based investment fund, Oaktree Capital Management.
The Salford-based company subsequently reverted to a new version of its old name and became MWH Treatment in December 2018.聽
A specialist in water treatment, MWH issued a statement to the press in May 2019 setting out its financial position: the water business was doing well and had 鈥渆xceeded forecasts鈥�, said the company. In fact, it generated operating profits of over 拢5m for the financial year to March 2019.
鈥淭he losses reported in this and previous year鈥檚 financial statements are almost exclusively as a result of projects executed in the waste and energy sector,鈥� explained the company.
鈥淢WH Treatment no longer operates within the waste and energy market and as a legal condition of the disposal of the MWH Group and change of ownership on 2nd November 2018, the company was indemnified against liability for all future costs associated with these projects by the former parent group headed by Stantec Inc.
鈥淭he directors believe the core water business is both profitable and sustainable and they remain optimistic as to the future prospects for the company,鈥� concluded the statement.
So the overall picture for companies reliant on the utilities markets seems fairly bright 鈥� despite all the usual fears over Brexit (which, of course, haven鈥檛 gone away simply because the UK has officially left the EU).聽
Average margins in the sector are pretty thin at around the 2% mark. But as long as those framework contracts keep coming, the sector should be able to breathe easily.
This article was first published in the
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