It’s difficult to avoid thinking of ground engineer Keller and electrical
contractor T Clarke as the front and back end of construction’s pantomime horse:
one’s going in one direction before the other gets a chance to catch up. Both
issued interim management statements today showing stark contrasts in
outlook.
Keller, which digs down, props up and prevents leakage of construction
projects from the ground downwards signalled a likely “beat” to analysts’
forecasts for the year to December; “Tommy” Clarke, which wires up buildings
when they are nearing completion said trading was “in line” but issued the
current war cry of probably every subcontractor in the land, “the b******s
aren’t paying us on time” (naturally, in language more befitting a stock market
announcement).
By about lunchtime Keller’s share price was up precisely 4.48%, while T
Clarke’s was down … precisely 4.48%.
Before other UK practitioners along the construction chain get too excited
about Keller unearthing green shoots along with everything else it digs up, the
British-based group actually does very little in (or under) these shores and
most of its improvements in order intake and margins have been down to self-help
rather than benign markets.
But two other announcements today suggest grounds for optimism on a macro
level. The RIBA’s Future Trends survey showed architects (who presumably hold
the reins of the pantomime horse) reporting that the three months to October
showed the first annual increase in workloads since the financial crisis.
Workloads for the quarter were up 11% on the same period in 2012.
Meanwhile, hybrid housebuilder-contractor Galliford Try, which represents
just about everybody in the middle of - let’s now call it - the construction
conga, saw an “encouraging start” to the year to June for both businesses. No
surprises from its housebuilding side, given the degree of support lavished on
the industry from HM Treasury, but even the construction division had seen a 9%
increase in orders, an improving pipeline of opportunities and “margin
protection”.
The division also achieved “continuing strong cash management” and there’s
the rub for companies later in the cycle and further down the pecking order.
Such as Tommy Clarke. Now I have first hand evidence that Galliford Try is among
the better eggs within the realm of main contractors in terms of payment (other
names regularly make the industry’s anecdotal black book). But even the better
payers have to preserve their cash and, with material and labour costs bounding
back across the industry, smaller companies, those naturally later in the cycle
or further down the supply chain may find themselves on the wrong end of
disputes for many months to come.
This post appeared on Building's website 19 November 2013
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