WET News

4 Leaders 2015 The LeADeRS 2015 Contractors invest for ture growth The Leaders 2015 first index reveals contractors' return on capital has fallen, as they invest their profits. Maureen Gaines reports. The index also clearly illustrates how the cyclicality of the AMP periods is impacting the industry. There is little sales growth during the transition from AMp4 to AMP5 (2009-1010) and then a steeper rise from 2012 and mid-AMP cycle. The Leaders 2015 is the only guide that offers an insight into how the leading civil and process engineering companies serving the water industry are performing in a very competitive market place, especially with the transition from AMP5 to AMP6. We have taken the top Tier 1, 2, and 3 contractors and profiled each company in turn, including accounts for the past three years*. There is strong rivalry among contractors at the best of times but competition over the past year or so has been even more intense because of the arrival of AMP6, and the very expensive and time-consuming tender process. There is more than £40bn worth of work over the next five years to fight over, aˆer all. Galliford Try, whose AMP6 contracts includes Yorkshire Water and Southern Water, has highlighted strong competition from new entrants for work on the water companies' AMP6 programmes, putting pressure on prices. A spokesman for the group says: "The competition for AMP6 work has been fiercer than ever with the ongoing market conditions putting an unprecedented focus on price." He says Galliford Try has maintained "a disciplined approach to pricing and bidding" for water business. The "newcomers" bring an interesting point. Some of the companies to have successfully won AMP6 contracts missed out in the AMP4/5 programmes. Locked out For instance, VolkerStevin had no AMP4/5 frameworks but is on United Util- ities' AMP6 programme through its C2V+ partnership with CH2M Hill. Skanska has gained Thames Water and Dwr Cymru Welsh Water for AMP6 and has also retained Anglian Water, its only water business in AMP4/5. It is an interesting thought that companies missing out on AMP6 work could be locked out for the next five, ten even 15 years, in some cases. Not a welcome thought for those companies where the water sector forms a major part of their business. It is also worth noting, that very few contracts have been awarded to companies that are not involved in alliances. This has also added to the intense competition as companies have jockeyed for the right partners to deliver AMP6 programmes and beyond. T otal combined contractor sales have risen from £26.23bn to £29.62bn – but total net profit has more than halved, from £1.5bn to £602M. That is according to the new The Leaders 2015 Index, the only indicator and fascinating insight into how contractors in the water sector are faring based on their financial performance between 2009 and 2013. The index also reveals that return on capital has fallen steadily from 41% to just 13%. That is still a good return. The biggest surprise highlighted by the index is the rise in net assets, indicating that perhaps contractors have been investing for future growth, rather than take the profits. Of course, with the high return on capital, they could afford that investment. "It is an interesting thought that companies missing out on AMP6 work could be locked out for the next five, ten even 15 years, in some cases. Not a wel- come thought for those companies where the water sector forms a major part of their business"

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