Weekly Glenigan Newsletter - 8th June 2010
Welcome to Glenigan's weekly customer newsletter that brings you
comment on major industry developments and news updates from the
past week. Click on the links to read the full story.
Fewer shelved projects as
confidence improves
Promotions: Allan Wilen to chair
panel discussion at Recycling and Waste Management
Exhibition
ONS Construction Development/Key
Performance Indicators Launch Event
Featured Region: Scotland
Featured
Sector: Utilities
Project News
Applications to tenders for
housing refurbishment
Applications to tender invited for
87 dwellings
Applications to tender for
Crossrail scheme
Applications to tenders for T5
completion works
Crossrail invites bids for Pudding
Mill civils job
Shropshire Council seeks interest
in £137m PFI
Company News
Network Rail reports sharp fall
in profits
May Gurney pre-tax profit up 7pc
Canadian outfit snaps up Nightingale Associates
BAM parent company in £216m cash call
Billington reports drop in turnover
Severn Trent profits up 19pc
How can we
help?
Fewer shelved projects as confidence
improves
There has been a significant reduction in the
number and value of projects that are being placed on hold,
according to Glenigan’s latest data. Furthermore, in a number of
cases were developers have reviewed and reactivated stalled
projects earlier than they planned as market conditions have
brightened. Glenigan is now undertaking additional research into
stalled projects in order to rapidly pick-up on any change in a
scheme’s status.
The number of projects on hold in the three
months to May was 43% down on the same period last year. In
addition, the value of the projects (under the value of £100m)
being placed on hold fell 61% over the same period.
Once again, this trend was not restricted to
sectors which are either funded by the public or private sector.
The value of education projects put on hold fell by 84% in the
three months to May, while industrial projects also fell year on
year by 71%. Similarly, the value of shelved social housing schemes
and office projects were also running at a third of the level of a
year ago.
While this decline is inflated by the
comparison to a bloated first half of 2009, it can also be sign
that private sector is no longer locked in the downward spiral it
once was. Less encouragingly, potential cuts in government spending
and policy reviews are likely increase the number of public sector
projects put on hold over the coming months.
Another positive was the news the value of
projects that were restarted, having been on hold increased over
the three months to May compared to the previous three months. The
residential, health and hotel sectors particularly benefitted from
this.
However the value of project cancellations has
also increased. Over the three months to May, the value of projects
which were abandoned having previously been on hold increased
significantly. Education and private housing projects were
particularly affected: education projects accounted for 38% of all
cancellations, while the value of abandoned private housing schemes
was especially inflated by a £83 million project which had entered
administration.
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Featured region: Scotland
Recent performance
The construction industry began 2008 strongly in Scotland and
several large projects helped carry momentum into the second half
of the year for some sectors. Official statistics recorded a 2%
rise in the value of Scottish construction output in the year.
However, output weakened during the final quarter and was 6% down
on a year earlier, by which point the impact of the credit crunch
had begun to be felt in many sectors. In particular the value of
underlying construction starts contracted by a quarter in 2008
year, with the fourth quarter especially weak.
Civil engineering starts have continued to bolster construction
in Scotland. Whilst the value of underlying civil engineering
project starts slipped back during 2008, a number of major projects
helped to maintain momentum in the sector, with total project
starts during the year more than doubling. Furthermore 2009 saw a
subsequent rebound in the value of underlying civil engineering
starts, which were 19% up on the previous year. In addition, the
start of works in April on the £320 million project to upgrade the
M80 will help boost industry output over the next three years.
In contrast, private housing starts have suffered a dramatic
reversal of fortunes since the third quarter of 2008. The value of
underlying private housing starts during 2009 was 40% down on the
previous year, at its lowest level in more than three years. The
flow of social housing projects, however, doubled during 2009,
boosted by several sizable developments for housing
associations.
Scotland’s non-residential sector has experienced mixed fortunes
in recent months. The hotel & leisure and education sectors
have performed strongly since the start of 2009, countering the
sharp falls endured in 2008. In contrast, the poor economic
environment has continued to weigh heavily on the flow of new
industrial buildings, office schemes and retail projects starting
on site.
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Prospects
Scotland’s construction industry is set to experience increased
volatility in the flow of new projects and a sharp divergence in
sector fortunes. The value of underlying planning approvals fell by
7% 2009, despite a pickup in planning approvals during the closing
months of the year. We expect this protracted weakness in planning
approvals to act as a drag upon the value of underlying
construction starts over the coming year.
Economic recession and rising unemployment will continue to have
a big impact on construction in the region. Private housing
construction starts, which had been performing relatively well
until the final quarter of 2008, are expected to remain under
pressure near term.
In contrast, the utilities sector is set to buck the trend.
During 2008, the value of underlying planning approvals rose by 16%
on the previous year in this sector and remained firm during the
first eleven months of 2009. Scotland’s geographic position makes
it particularly attractive for wind farm investment and a number of
schemes are in the early planning stages. In addition, Scottish
Water is also expected to continue with a strong investment
programme. We expect prospects for the utilities sector to improve
in the medium term.
The Scottish Government’s decision to bring forward capital
funding from 2010-11 supported public sector investment in areas
such as education and social housing. However, the decision to
bring capital funding forward into the last financial year will
increasingly constrain the flow of public sector projects over the
course of 2010. In addition the value of underlying planning
approvals, a leading indicator for construction activity, fell by
34% during 2008 and dropped a further 7% last year. Against this
background Glenigan anticipates construction starts will remain
subdued over the next two years, despite the possibility of modest
growth this year.
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Featured sector: Utilities
Recent performance
The utilities sector grew strongly during 2009, with the value
of underlying construction starts rising by 19% year-on-year. The
rise was driven by several mid-sized construction projects in the
water and renewable energy sub-sectors.
In particular, Wales is benefitting from the strong interest in
wind farms (and other renewable energy options), as well
construction commencing on a new £50 million recycling centre. The
underlying value of construction starts rose 74% in the sector
during 2008, and although project starts slipped back during 2009,
they remained at a high level. In addition during the third quarter
of 2008, work started on site on a £450 million gas-fired power
plant in Wales.
Major schemes have also boosted utilities construction starts in
other parts of the UK over the last two years. While Scotland has
seen work start on site on a £2 billion biomass CHP project and
several offshore wind farms, London saw work start on the £200
million Beckton desalination plant. In addition, construction
commenced on a £350 million recycling plant in the East of England.
Major projects continued to boost sector activity, doubling the
overall value of project starts during 2009 against the previous
year. However, the contribution of these major projects to sector
workload will be spread over a number of years and the scope and
timing of some projects, such as large offshore wind farms, may yet
be vulnerable to re-appraisal even where preliminary works are now
underway.
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Prospects
Whilst long term prospects for the utilities sector remain
bright, the value of underlying project approvals fell by 23%
during 2008. This decline appears to have tempered the flow of new
project starts during the closing months of 2009 and has remained a
drag on starts during the first quarter of 2010. In addition the
fallout from the credit crunch is hampering some clients’ access to
capital funding, albeit to a lesser extent than faced by developers
and housebuilders, delaying some project starts.
Nevertheless the sector, which tends to have longer lead times,
is benefitting from a relatively strong pre-construction pipeline.
For instance, several wind farm projects are scheduled to start on
site over the next twelve months; although, it should be added that
such projects are politically sensitive and vulnerable to delay.
Previous Government policies were providing a strong investment
incentive in the energy sub-sector. In addition, both the water
utilities and several major UK ports are pressing forward with
strong investment programmes. Having risen 19% last year,
underlying projects starts are forecast to hold firm with a robust
9% growth this year, before falling back by 16% in 2011.
The new five-year capital expenditure programme agreed with
Ofwat, the industry regulator for water companies in England &
Wales, started this April. Historically, the first year of these
programmes (2010 is the first year of the current five year
investment programme) have seen sharp falls in project starts as
the companies finalise their new investment plans.
However, the timing of planned major projects will remain an
important influence upon the overall value of project starts in the
sector. Several large projects (that is, projects greater than £100
million) in pre-construction planning are also expected to boost
the flow of utilities-related project starts. Major expansions at
many of the UK’s largest ports will generate high value
construction work over the next 12 months. For instance, a £400
million project at London Gateway and £200 million project at
Felixstowe started on site late in 2008. In addition, major port
developments are also planned for Middlesbrough and Belfast and
these could see construction work starting on site within the next
18 months.
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Project News
Applications to tenders for housing refurbishment
Plymouth Community Homes is currently inviting applications to
tenders for housing refurbishment at various locations in Plymouth.
The final date for the receipt of requests to participate is 9th
July 2010 with tenders due to be invited mid July 2010. The £10
million contract will include external repair work and
painting/re-painting of their housing stock which will include the
communal areas and staircases to blocks of flats. The work will
involve cleaning /powerwashing, general repairs and maintenance to
windows, doors (timber & PVCu), masonry, rendering and fencing,
followed by repainting of timberwork and masonry painting of
previously coated and uncoated wall surfaces. Works are due to
start on site in November 2010.
Project ID: 10224501
Applications to tender invited for 87 dwellings
London Borough of Hackney is currently inviting applications to
tender for the construction of 87 dwellings at the Alexandra
National House and Bridge House site in London. The final date for
the receipt of requests to participate is 9th June 2010 with
tenders due to be invited late June 2010. The £13.5 million scheme
will be procured as two lot's, however only one lot will be
awarded. Lot 1 comprises of the construction of the 87 homes, 67 on
the Alexandra National House site and 20 on the Bridge House site.
Lot 2 is for the construction of the 87 homes as per lot 1 and the
development of the further homes or acquisition of land, as
required. Works are due to start on site in October 2010.
Project ID: 10224497
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Applications to tenders for Crossrail scheme
Crossrail Limited is currently inviting applications to tenders
for Contract 350 at Pudding Mill Land Portal. The final date for
the receipt of requests to participate is 25th June 2010.The
contract is for the main civil works and works will include he
construction of the portal structure. Works are due to start on
site early 2011.
Project ID: 10225610
Applications to tender for T5 completion works
British Airport Authority is currently inviting applications to
tender for airfield completion works at Terminal 5, Heathrow
Airport. The final date for the receipt of requests to participate
is 10th July 2010. Phase 2 of the works will include the
construction of 4 aircraft stands, a permanent tug park and the
reconfiguration of various stands. Works for the £30 million scheme
are due to start on site on 1st November 2010.
Project ID: 10225597
Crossrail invites bids for Pudding Mill civils job
Crossrail is inviting contractors to bid for a contract to carry
the main civils works at the Pudding Mill Lane portal in east
London. The scope of works under the 47-month Contract C350
includes: * Construction of connections between the Crossrail lines
to the Network Rail Crossrail infrastructure adjacent to the
existing Great Eastern Lines * Construction of a new DLR retaining
wall and earthworks * Construction of a new DLR station including
installation of track and systems * Construction of a six span DLR
viaduct * Bridges across the existing Northern Outfall sewer and
completion of the City Mill River Bridge Firms have until 25 June
to submit pre-qualification questionnaires.
Project ID: 10225610
Shropshire Council seeks interest in £137m PFI
Shropshire County Council is seeking firms interested in a £137
million Private Finance Initiate deal to build 400 extra care
housing units across eight sites in the county. The council is in
line to gain PFI credits under the Homes and Communities Agency's
Sixth Round of bidding for central government funding. An
information day has already been held for prospective bidders but
since then the council has increase the scope of the project to
include the development of 24 Special Care units across the eight
sites. A second bidders' day will be held on 18 June in the Council
Chamber in Shrewsbury.
Project ID: 09328031
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Company News
Network Rail reports sharp fall in profits
Network Rail today revealed that pre-tax profits over the past
year have fallen from £1.52bn to £395M a drop of almost 75%. The
rail infrastructure operator and owner reported the figure in its
preliminary results for the year to 31 March. Investment was also
down with the firm spending £3.92bn against a record high spend of
£4.74 the previous year. Meanwhile, net debt rose to £23.84bn from
£22.3bn over the same period, which Network Rail said was necessary
to help fund its investment programme. However, this year's figure
represented a lower gearing ratio of 64% down from 70% and within
the Office of Rail Regulation's 85% limit.
Net operating costs were up slightly to £3.69bn from £3.62bn,
which Network Rail said was attributable to higher staff costs. The
report said that a drop in revenue and profits was "in line with
the regulatory determination that reduced Network Rail's annual
rate of return expressed through track access charges to 4.8%
(compared to 6.5% over the last three years)".
Its chief executive Iain Coucher said that the priority for
passengers was punctuality of trains, which this year remained
almost stable at 91% compared with 90.6% last year. "Passengers
care most about trains being on time and we have delivered another
record year with punctuality surpassing 91%," Coucher said.
"Network Rail also has a duty to get best value for the British
people and we have retained a tight focus on controlling costs.
This has meant that we can cut charges to passenger and freight
operators. As a result, the savings we make could be passed on to
passengers in lower fares or to taxpayers through lower government
subsidies to the rail industry."
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May Gurney pre-tax profit up 7pc
Turnover at May Gurney rose 3 per cent to £483.1 million as
pre-tax profits grew 7 per cent to £21.6m in the year ended 31
March 2010 the firm said today. In a very positive results
statement May Gurney said its turnover grew by 3 per cent to
£483.1m in the year to 31 March 2010 compared to £470.3m a year
earlier. Underlying pre tax profits, excluding one off charges,
rose to £21.6m, compared to £20.2m last year. After winning work,
including contract extensions, of £1.1bn in the last financial
year, its order book increased by nearly £500m to £1.7bn.
On top of this, directors said there is a pipeline of bidding
opportunities and contract extensions totalling £4bn in its core
markets. More than 95 per cent of revenue was generated from
long-term contracts, fitting in with the strategy chief executive
Philip Fellowes-Prynne detailed to Construction News in a recent
interview. Mr Fellowes-Prynne said: "We are delighted to report
record turnover and profits for the eleventh year in succession,
together with a strong cash position, significant business wins, an
enlarged forward order book of more than £1.7 billion (excluding
potential extensions) and a healthy pipeline of sales opportunities
in our core markets." The firm ended the financial year with £29.2m
cash in the bank. Group revenue was split as follows: * Public
Services Sector £285.3m * Regulated services Sector £200.8m
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Canadian outfit snaps up Nightingale Associates
Nightingale Associates has been bought by Canada-based architect
IBI Group for £13.1 million The news comes two months after parent
company Tribal Group decided to offload the healthcare specialists
'following a widescale review of operations'. Nightingale's senior
management team will be transferred with the sale to the Canadian
transport and systems specialists, but no statement has been issued
to confirm whether redundancies or office closures may be part of
the deal.
The practice, which employs 260 staff across seven offices and
was ranked as the UK's 13th largest practice in the recent AJ100
league table, has a raft of major hospital and educational building
projects including the £840 million Glasgow Southern General
Hospital scheme. At the end of last year Nightingale had assets of
£14.1 million, making a profit of £1.3 million from a turnover of
£17.4million. Peter Martin, chief executive of Tribal, said:
'Tribal's core markets are education, health and government, for
which we provide service delivery, advisory and technology
solutions and so Nightingale is no longer central to our strategic
direction. 'We wish both parties continued success in the future.'
Tribal in 2002 bought the practice for £9 million. No-one from
Nightingale Associates was available to comment.
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BAM parent company in £216m cash call
Royal BAM, the Dutch parent company of BAM Construct and BAM
Nuttall, this week released details of a rights issue intended to
raise £216 million from its shareholders. The bulk of the funds
from the capital raising will be used to fund PPP projects, which
the firm hopes will lead to work for both its construction and
civils divisions. The balance will be used for general
expenses.
The statement released to the Dutch stock exchange said: Royal
BAM Group intends to use approximately £130m from the net proceeds
of the offering to make equity contributions to new and existing
PPP projects. The investment of part of the proceeds of the
offering in new PPP projects is an important element in order to
facilitate growth. Increased PPP activity may secure significant
future revenues for other sectors of the group. The Dutch housing
division proved to be a big drag on the group¿s profitability in
2009, with losses, including write downs, of £230m from that
division alone, while the UK divisions outperformed the group and
made combined profits in 2009 of £54m. The proceeds from the rights
issue will improve the firm¿s financial position, as it currently
has net debt of £1.2bn. This compares to a current market
capitalisation of £805m for the entire group.
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Billington reports drop in turnover
Steel contractor Billington Structures has reported a 6.3 per
cent drop in turnover for 2009 while pre-tax profit increased 13
per cent. Billington¿s turnover for the year to 31 December 2009
totalled £55.7 million compared to £59.5 million in 2008. The
Barnsley-based firm¿s pre-tax profit rose to £4.2 million from £3.7
million.
The average weekly tonnes of steel produced during the year fell
to 423 tonnes from 442 tonnes in 2008. During the year the firm
completed the new Royal Shakespeare Company theatre in Stratford
upon Avon as well completing steelwork for Sir Robert McAlpine on
the expansion of Eldon Square shopping centre in Newcastle City
Centre. In accounts filed with Companies House, the firm said its
profit had been boosted by the completion of a number of jobs won
in 2008 on better margins. But the company is expecting a much
poorer performance in 2010 with market conditions having worsened
considerably during 2009 which will impact on sales and
margins.
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Severn Trent profits up 19pc
Severn Trent Water profits were up 19 per cent to £541 million,
before interest and tax, for the year ended 31 March 2010 as it
gets under way on the £2.5 billion AMP5 investment plan. Under the
agreed investment plan for AMP5, it will spend up to £497 million
per year over the next five years. Highlighting the balance between
investing in its services and generating returns for shareholders,
directors said: "Based on the process improvements and investment
Severn Trent water has caried out over the last three years, and
plans in place to deliver efficiencies during AMP5, we are
confident that we can meet the requirements of the Final
etermination, while delivering a sustainable and progressive return
to shareholders." During the year Severn Trent achieved record
levels of energy generation from renewable sources, producing 176
Gigawatt hours (GWh) - over 20 per cent of its electricity use.
How can we help?
We always welcome your comments and suggestions on how we can
help improve our service. Whether you have a suggestion about the
website, or would like assistance from your Account Manager on how
to meet your aims and objectives, please contact us.
Allan Wilen to chair panel discussion at Recycling and Waste
Management Exhibition
The seminar programme for Recycling and Waste Management
Exhibition (14-16 September at the NEC Birmingham) is NOW LIVE
so that our visitors can begin to plan their time at the
show. Allan Wilen, Economics Director at Glenigan will be
chairing a panel discussion entitled ‘Waste
to energy plant construction - new facilities and
investment in the pipeline’ on day 2 in the Business Seminar
Theatre. Indeed, with 3 seminar theatres and over 40 sessions
covering numerous recycling and waste related themes, the topics
covered are designed to interest our very diverse visitor audience.
Register here for free entry and to be kept updated with
regular show news and updates.”
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ONS Construction Development/Key Performance Indicators Launch
Event
Location:- BIS Conference Centre, 1 Victoria Street,
London SW1H 0ET
Date:- Monday 21st June 2010
Time:- 10:00am start, 2.00pm close
Agenda
Time Topic
10:00 Registration and coffee
10:15 Introduction & Welcome
10:20 Project background and deliverables
10:30 Explaining the Current Price Output Series
11:00 Inclusion in National Accounts
11:10 Future Publications
11:30 Coffee Break
11:45 Introduction to KPI Launch
11:55 2010 KPI results
12:35 Case study
13:00 Summing up and conclusions
13:15 Lunch
14:00 Close
Please note that places are limited and attendance will be
confirmed on a first come, first served basis. To secure your
attendance, please contact Gemma Thomas by email (gemma.l.thomas@ons.gsi.gov.uk
) or by phone – 01633 455577
Directions
BUS: Nos 11, 24, 148, 211 stop right in front of our building.
Other bus routes pass nearby. Visit Transport for London for
further information.
UNDERGROUND: 1 Victoria Street in walking distance of Victoria, St
James' Park and Westminster stations. Check the TFL website
to plan your journey.
RAIL: Victoria, Waterloo and Charing Cross stations are 10 to 20
minutes away by foot or by tube. Schedules on National Rail
website.
CAR: Parking is available at sites in Horseferry Road and Abingdon
Street.
Allan Wilén, economics director,
Glenigan
Allan joined Glenigan to head the development of the new market
intelligence service for Glenigan subscribers. Allan has over
twenty years of experience analysing and forecasting the UK
construction industry. He was previously Economics Director at the
Construction Products Association and responsible for all economic
aspects of the Association’s activities. This included briefing
members, the media and Government on the commercial implications
for the construction industry of the changing economic environment
and the delivery of the Government’s expenditure plans. Allan was
also responsible for developing the wide range of regular economic
reports published by the Association, including its Construction
Industry Forecasts, which provide members with timely and valuable
market intelligence.
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