The 2023 CN Specialists Index highlights the significant growth among the top 10 ground engineering contractors despite economic challenges.
- Total revenue increased by 29% compared to the previous year, with a significant rise in pre-tax profits of 42%.
- Van Elle maintains its lead, with remarkable revenue growth of 48%, while Keller sees a 67% boost in pre-tax profits.
- The sector has managed inflation pressures well, aided by pent-up demand from previously shelved projects.
- Concerns loom over the impact of HS2’s northern-leg cancellation and the availability of skilled workers.
The 2023 CN Specialists Index showcases a remarkable improvement in financial performance among the top 10 ground engineering (GE) firms, despite being the second-lowest in combined turnover among all specialisms. The firms recorded a substantial increase in total revenue, up by 29% from the previous year, and an even greater rise in pre-tax profits, which soared by 42%. Their median pre-tax margin also saw a significant enhancement from 1.8% to 3.9%.
At the pinnacle of the index is Van Elle, demonstrating exceptional growth with its revenue increasing by 48% to £124.9 million for the year ending 30 April 2022. Following Van Elle, Keller reported a remarkable 27% increase in turnover and a substantial 67% rise in pre-tax profit, bringing it to £7.9 million. Socotec entered the index in fourth place with a turnover of £109.1 million, marking an 11% year-on-year growth and a return to profitability with £2.2 million in pre-tax profits.
The GE sector exhibited resilience to inflation challenges that have impacted the broader construction industry. This resilience can be attributed to the release of pent-up demand in 2022 after projects were postponed during the pandemic’s peak. Kelly Boorman, partner and head of construction at RSM, notes that the sector’s proactive approach towards inflation risk exclusion in bids played a crucial role in mitigating inflationary impacts.
John Chick, chair of the Federation of Piling Specialists, highlights that sectors such as power, water, and transport infrastructure continue to present substantial volume opportunities, despite past inflationary pressures causing limited damage to results. Chick underscores the strategic decisions by firms to avoid inflation risk in new bids and to forgo projects where these conditions were not met.
The ongoing pipeline of High-Speed 2 (HS2) activity has supported GE firms; however, the cancellation of HS2’s northern leg by Prime Minister Rishi Sunak introduces uncertainty. While some firms, including Fugro, were recently involved in early stages of the Birmingham-to-Manchester phase, the discontinuation of this segment poses potential challenges.
Yet, as Chick suggests, there are still ample opportunities within the sector, thanks to replacement projects like the upgrading of northern regional rail networks. Despite an optimistic outlook, concerns persist regarding the skilled labour shortage and the downward pressure on bids from delayed payments. Chick warns of the risks of engaging in price-cutting practices, which GE firms consciously navigate.
The ground engineering sector shows resilience and growth amid challenges, yet uncertainties and workforce concerns remain.
