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Steady growth for the UK’s earthmovers

3 Apr 20 With revenues and profit margins improving, the UK’s earthmoving contractors appear to be making steady progress. David Taylor reports

Last year’s review of the top 20 earthmoving specialists painted a confused picture: some contractors had surged ahead, picking up plenty of work and turning a good profit; others seemed stuck in the doldrums with several struggling to win contracts and some trading at a loss.

This year, the picture is somewhat clearer – and, overall, brighter. Although five of the top 20 still reported a fall in turnover in their latest figures (the corresponding figure last year was seven), and five saw their pre-tax profit figure decline (nine companies last year) overall revenues have increased substantially and so has profitability.

Total revenue for the sector’s 20 leading firms, according to the latest figures filed with Companies House, is £832.8m – a more than 15% increase on the previous figure of £721.1m. Last year, the same tranche of the industry managed to grow turnover by only 6.5%.

Similarly, whereas we recorded a 13.8% increase in pre-tax profit last year, our latest research shows that the top 20 earthmovers grew pre-tax profits by more than 27%, from £45.1m to £57.5m.

There is still, however, quite a lot of jockeying for position on the table. Collins Earthworks, for example, has jumped into second place from fifth, thanks to an almost 60% surge in turnover during the year to November 2018.

Collins – a privately-owned company based in Kirkby-in-Ashfield, Nottinghamshire – is a no-nonsense, what-you-see-is-what-you-get earthmoving specialist with a focus on its local market. Its business model clearly works well; besides occupying the number two position for turnover this year, Collins is also notched up the second-highest profit before tax – which it also did last year. 

While Collins Earthworks is a solid performer, there’s a large gap between it and first-placed M&J Evans Construction, with a turnover of £130.3m over the same period (year to November 2018). Evans’ 28% increase in turnover was accompanied by an 18.6% increase in pre-tax profit, from £22m to £26.1m. 

The company not only made the biggest pre-tax profit last year, it was also the most profitable, with a whacking 20% margin.

And yet, despite its significant lead, M&J Evans has only recently come to dominate the sector. Until two years ago, the leader of the pack was CA Blackwell which, in 2016, came close to breaking through the £100m-turnover threshold. Then, M&J Evans was in second place on the table, with turnover nudging £70m.

CA Blackwell was taken over in January 2016 by opencast mining group Hargreaves Services. The subsequent full financial year saw turnover dip from £98m to £65m. Since then, CA Blackwell has been trading consistently in the red with a pre-tax loss of £7m in the year to 31st May 2017.

Last year, turnover slipped further to just over £50m – but at least the losses weren’t quite so bad: only £5.3m in the red for the year to 31st May 2018. Despite the losses, CA Blackwell is still a force to be reckoned with and with the financial might of Hargreaves (around £300m annual turnover), Blackwell is still able to invest in the fleet. 

Blackwell’s plant is used within both its own and Hargreaves’ operating markets of earthmoving, surface mining, quarrying and materials handling. Blackwell is one of the two leading earthmoving contractors to have dominated the £1.5bn A14 upgrade project in East Anglia.

The other big name on the A14 is Walters UK, based in Hirwaun, South Wales. Walters’ most recent figures, for the year to March 2019, show continued prosperity with turnover up more than 28% from £47.1m to £60.4m. Its rather lacklustre profit margin (only 1% last year, with a pre-tax profit of just £500,000) has rallied to 3.8%, yielding a profit before tax of £2.3m.

“Within the period, the company has again continued to successfully undertake and complete large earthwork schemes within the roadworks and infrastructure sector UK-wide and has successfully been awarded contracts direct for Welsh government and local authorities,” said the company.

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It added that “securing high value ‘early contractor involvement’ projects” continues to be a priority, but that “the growth in its regional general civil engineering, remediation and development work is playing an increased part [in] the company’s business strategy”.

Another strong performer is Fred Champion Groundworks, headquartered in Liskeard, Cornwall. Identified last year as one of Cornwall’s 10 fastest-growing companies, Champion achieved a 35% increase in turnover (from £49.5m to £66.98m) during the 12 months ending 30th September 2018.

Pre-tax profit also more than doubled, from £3.2m to £6.5m over the same period.

Although earthmoving remains Fred Champion’s core activity, the company’s steady growth has resulted in the emergence of a number of sub-divisions. The company now offers in-situ concrete and scaffolding services, for example.

Even the muckshifting operation has been divided into two semi-autonomous divisions: 

“Over recent years we have expanded our groundworks business to include bulk excavation earthworks,” says the company. “We have developed this section of the company because we found that in some instances earthworks packages were being offered separate to the groundworks package. We are now able to offer the full benefit of bulk earthworks economy to our overall groundworks operation.”

At the other end of the country RJT Excavations, located in Jedburgh in the Scottish Borders, has had a much rougher ride than Fred Champion. Its turnover for the year to the end of May 2018 was down nearly 40%, from £23.6m to £14.4m. Consequently, the company fell from 15th place on the table to 19th.

Pre-tax profits also tumbled, from £2.4m in 2017 down to £1m in 2018.

RJT Excavations carries out general earthmoving and groundworks contracts, plus associated activities such as crushing and screening for quarry operators and plant hire. It says that the market sectors it serves “are considered to be sustainable and profitable for the long term” and that demand for its services is “reasonable for the foreseeable future”.

However, it describes the market as “challenging” and while both turnover and profits were down, the results were in line with expectations and are regarded by the directors as “a good result in a very challenging marketplace”. 

“The underlying business continued to perform in line with expectations,” it adds.

At present, it’s hard to know what to expect with the current uncertainty over the future of HS2 – the big-ticket item for the UK’s earthmoving sector. The main enabling-works contracts were awarded 18 months ago, but precious little of it has actually got underway, and recent debate over whether to forge ahead, modify the project or scrap it entirely has not helped.

At the time of writing, prime minister Boris Johnson had yet to decide whether or not to give HS2 its final go-ahead – though the signs appeared good. The directors of the 20 companies listed on this page are no doubt waiting with bated breath. 

This article was first published in the February 2020 issue of The Construction Index magazine (magazine published online, 25th of each month.) 

UK readers can have their own copy of the magazine, in real paper, posted through their letterbox each month by taking out an annual subscription for just £50 a year. Click for details.

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