Wates is taking a “real interest" in improving its offsite manufacturing capability to emulate Laing O’Rourke, according to its CEO, who declined to comment on the group’s links with an acquisition of part of Shepherd Building Group.
Speaking to Construction News after Wates revealed its 2014 results, Andrew Davies said improving the group’s design capability was a strategic goal for 2015 and that it was watching Laing O’Rourke’s Design for Manufacture and Assembly efforts with interest.
He said: "Laing O’Rourke are very out there strategically, it’s very innovative and interesting what they’re doing.
"We all do it to a certain extent but they really are out there as leaders in this sector and we watch what they’re doing with real interest."
Wates brought group design director Andrew Barraclough to the business from Hok in 2014.
Mr Davies said its investment priorities in 2015 included the affordable housing sector, its internal IT capabilities, and improving the design effort within its construction business.
He said: “We are looking at all opportunities to improve on and offsite construction manufacturing.
“We’re quite taken by the need to improve our design capability hence the reason for recruiting Andrew Barraclough into the business."
Mr Davies declined to comment on talks between Wates and Shepherd over a possible acquisition of Shepherd’s contracting businesses.
In November last year, Wates expanded its response maintenance business with the acquisition of £30m-turnover company Purchase Group, with sources saying further acquisitions are on the radar in 2015.
Mr Davies said: “Wates had nothing to say last week and we have no comment on that now. As far as we’re concerned it’s a non-issue."
On possible acquisitions, he said: “Purchase Group brought great capabilities and geographical spread in reactive maintenance, an area where we wanted to develop.
“That type of capability acquisition is very much on our radar and we will be looking at those opportunities when they come along."
The group will not be bidding for new contracts in Abu Dhabi, choosing to “manage its obligations in Abu Dhabi out" with its focus on the UK.
The company brought in Terry O’Connor in August 2014 to “identify new and adjacent markets", including in rail and roads.
Mr O’Connor departed the group in January, but Mr Davies insisted Wates was continuing to look at the civils infrastructure sectors for possible expansion.
However he admitted it was not the main focus for the group at present.
He said: “Terry joined to do a piece of work for us on a short-term contract so that was fine and we were very pleased with that piece of work he did.
“It remains at the forefront of our thinking as an opportunity, but it’s one of a number and we’ll continue to monitor it closely.
“[Infrastructure] is an area that is quite aligned to Wates’ skillset, but not at the heart of Wates existing skillset, so we would have to look at how we expand that either through acquisition or organic growth.
“We have a number of opportunities and we have to decide the prioritisation of those.
“Infrastructure is part of an interesting growth area aligned to Wates’ capabilities and skills, but it’s a question of focus and at the moment we are focusing on absorbing the Purchase Group in our reactive maintenance business."
On JVs, Mr Davies said that while the group currently doesn’t tend to JV in its construction business as a reflection of market needs, it operated successful JVs in development and would examine JV opportunities on a case by case basis.
He said he had not been approached by any Chinese contractors looking to JV on projects.
On profit and margins being broadly flat, he said: “It reflects two things; one is the general trading conditions in the supply chain; secondly it reflects our prudent profit taking.
“As the turnover increases we wouldn’t expect to deliver some of the profits until we get to the back end of projects, till we’ve retired some risks in long term contracts.
“That’s not unexpected and we would hope that profit will come through in the coming year."
The group invested £25m in its residential developments business and £5m on a specific property acquisition is Islington, London, for Wates’ Needspace business and other portfolio investments.
He said the group also invested in strengthening its BIM and design capabilities.
Listed contractors have consistently reported problem contracts dragging down profits and margins in the last year, but Mr Davies insisted the group hadn’t seen major losses on any one project.
He said: “In a portfolio the size of ours you will have variability in performance but I think we enter 2015 in pretty robust shape in terms of our programmes. You can never be complacent in the contracting business, you have to keep on top of it, but we have no significant [problem jobs].
“We have put time and effort into our systems and processes this year to try and eliminate poor performance when we can and I think these results reflect that.
Of the firm’s aspiration to become a £2bn-turnover business, he added: “We want to continue to build our order book on framework positions and focus heavily on quality work, we are being very careful how we build our preconstruction efforts so we can build good quality margins going forward."
Original link - CN Plus
