What shape are you in for 2009 and out beyond that?
The current orderbook runs to £250m and that’s slightly ahead of last year so yes, we’re on track for 2009.
Beyond that, we’ve budgeted for the same turnover and pre-tax profit in 2010 as for 2009 and we’ve already got £100m of that 2010 turnover booked.
Do you have net cash?
Yes, Imtech is strong financially, both at the parent group level in Holland and in each of the various businesses. Looking at the UK’s independent M&E players, then we’re up there in the Top 3, in terms of financial strength, along with NG Bailey and Tommy Clarke.
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The financial status of both main contractors and construction clients has gone up the agenda. We’re not quizzed closely face to face, so I assume people have already gathered information on us from the likes of Dun & Bradstreet.
There are reports of calls for guarantees.
And there are such calls, yes and the parent company is now asked for a guarantee on occasions, usually triggered by the size of the contract. With us, the call surfaces at jobs with a value of ВЈ12m-ВЈ15m.
By contrast, two years ago no-one would ask such a question at all at our scale of operations.
Imtech’s group policy is not to take cash out of its subsidiaries as they want us to be strong and that pays off when financial questions are asked. You might have noticed that Imtech has grown rapidly in the recent past, especially in the UK, but that was without taking on debt or overtrading but mainly through both organic growth and strategic acquisitions.
Do you use credit insurance?
There’s no need for it. We do a risk analysis before taking on projects as all competent businesses would do. You only have to look at a group like Laing O’Rourke, for example, and you’ll see they are very strong, so work for them is a zero risk.
Do credit insurance providers offer cover on you then?
I’ve no idea as it’s simply not an issue.
I do know that supply chain subcontractors are pleased to work for Imtech as they know they get paid on time.
Is Imtech being squeezed by the banks?
No – we have net cash so financially we’re independent and strongly rated.
That’s a big positive and it will get bigger going forward as more companies will go under the cosh: some will make the mistake of buying work, thus putting them at risk of going down and even if they don’t, once they have become unstable they will struggle to get on bid lists.
What can you say about the pressures on margins?
The pressures have changed: a year ago they were different.
Then, for M&E subcontractors there was risk on the escalation of prices for metal, particularly steel and copper. Let’s say you were bidding £5m for work that contained a figure of £250,000 for the steel content. There was a risk that when you came to order up the materials, perhaps one year after putting in your bid, the cost could have jumped to £500,000.
That meant you had to price in ВЈ250,000 for the steel and another ВЈ250,000 for the risk of an increase. Today that worry has gone and so the amount we price in for risk is zero.
But in its place we have a new risk – today there is uncertainty on the financial strength of some clients and also of some contractors you work for.
London property developers have stopped altogether and no-one can be sure when they’ll start again. That sector accounted for 10%-15% of our turnover, but no more than that, and as we’re holding turnover overall you can see that means we’re still going well in schools, in work for London Underground and in other sectors that are holding up.
With contractors it’s the smaller ones that pose the risk. At the top end, the likes of Laing O’Rourke, Balfour Beatty, Wates and Miller, for example, are as strong now as they were a year ago.
How are Imtech’s high profile projects progressing?
We won the recommendation as mechanical subcontractor on the Olympic stadium and we’ve now started on that. It’s a two-stage tender that was bid competitively and both the client and Sir Robert McAlpine, the main contractor, were involved in selecting us to go forward.
It’s not as complex as the Arsenal stadium which Sir Robert also built.
Also, we delivered the mechanical subcontract on White City for Westfield and thanks to that going well we’re now in the same position on Westfield’s £1bn Stratford development which is starting now. It’s a two-year project. Also two-stage, the final figure is not formalised yet. There are no delays – in fact we’re ahead right now.
Is the economic downturn bringing back competitive tendering?
Educated clients still prefer two-stage as they are looking for value for money and that is not always the same as accepting the cheapest bid. These people are sticking to what has delivered them value in the past.
What is happening with wages?
If you’re hiring on the market then it’s certainly less competitive and you can get a better quality person at a fair price – I’m talking here of skills such as engineers, site supervisors and project managers.
That said, if a company is facing a squeeze and one of a team of 10 has to go, then it’s the worst one of the 10 who ends up out there on the jobs market as the best guys are the last one to be let go.
On top of that, good people are more inclined to stay where they are right now.
For senior people we don’t advertise, we use a head-hunter.
You do see good guys working for your clients but you can’t pinch them – you’ve got to respect your clients.
We’re still heavily involved in training as this is our preferred route.
How long will the recession last?
It’s not going to be short. My best case scenario envisages that towards the end of this year things will start to level out. In the last recession a lot of good people were lost to the construction industry and many firms cut back on training. I hope neither of these things happen this time.
What is happening to your supply chain?
Imtech needs to protect its supply chain – as do other contractors. Imtech’s big objective this year is to drive out inefficiencies in our business and we’re working on this in conjunction with our supply chain subcontractors.
There is a lot of waste in the industry, a result of a huge amount of inefficiency, and our big focus in 2009 is going to be on this.
Some of our supply chain firms have been with us for 10-14 years and we’re working now to help them.
Your supply chain lists will be shortened?
Yes. Some are long and others are short, very short. Imtech’s London operation is the biggest, with a turnover of £75m-£80m a year, and its supply chain contains 60 subcontractors. That number will fall to 30.
We’re also talking to our materials providers on things such as resource management.
Sixteen years ago, in the last recession, you were managing director of Kentz when it went bust. You were aged 45 at the time and without a job. How did you pick yourself up after that?
Yes 45 and no job – and on top of that Kentz’s final salary pension scheme was sucked down, leaving us with only 20% of our anticipated entitlement.
That’s when I started Meica with two colleagues which was the first block in what is now the Imtech group.
There were eight of us in all and we started from zero and built up a business with a ВЈ250m-a-year turnover from a standing start.
I was driving a ВЈ3,000 Jaguar and, like all the others, I had a mortgage to cover. But we were all pleased to have a job and were prepared to work hard.
The first award was a £9,500 job for Trollope & Colls – part of what was Trafalgar House – and we were working at Madame Tussauds.
That recession took out the weaker players – could this one do the same?
Yes, that’s why Imtech’s financial strength should be a growing advantage over the coming 12 months and onwards.
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