Tier one contractor McLaren missed its £1bn turnover target last year, despite almost doubling its profit and margin.
Group pre-tax profit in the year to 31 July 2024 totalled £11.9m compared with £6.3m the year before, although turnover fell by 4 per cent to £924m.
The latest revenue total was still 23 per cent higher than 2021/22 (£751.6m) and 71 per cent higher than the 2020/21 figure of £541m.
And despite the latest turnover decrease, McLaren’s higher profit meant the firm’s margin broadened from 0.7 to 1.3 per cent.
In accounts released this morning (5 February), group chief executive Paul Heather said the results were “in line with expectations” as the construction industry regained stability after “challenging market conditions” in previous years.
McLaren was the 23rd largest UK contractor in the most recent CN100 rankings, and Heather predicted last year that the firm would join the £1bn-turnover club in 2023/24.
Speaking to Construction News about the latest results, he attributed the slight shortfall in revenue to project delays rather than lost business opportunities.
“Some of the preconstruction service agreements we had in place were due to convert into lump sum prices, but these took longer than expected and moved into the following trading year,” he explained.
“Additionally, some residential schemes were impacted by the Building Safety Act and gateway two requirements, affecting timing.
“However, none of this work has disappeared, and we anticipate exceeding £1.1bn in turnover for 2024/25.”
Group chairman Kevin Taylor said that repeat business remained a cornerstone of McLaren’s strategy, with 74 per cent of turnover in the latest accounts coming from long-standing clients such as Landsec, British Land and Argent.
Major contract wins in the year included the £200m refurbishment at Thirty High in London for Landsec (pictured) and the £132m refurbishment and repurposing of 318 Oxford Street for Publica Properties Ltd.
The contractor said these wins helped pave the way for the creation of a new construction management division in August 2024.
Heather credited the near-doubling of McLaren’s pre-tax profit to a proactive approach to inflation management and supply chain coordination.
“Working closely with our supply chain allowed us to lock down design and pricing at the earliest possible stage, preventing cost escalation. Additionally, our overheads remain lean, ensuring we maintain competitive profit margins,” Heather said.
Taylor noted that previous financial years were impacted by Covid-related challenges and hyperinflation, but those headwinds had now largely subsided. “The business has stabilised, and our disciplined approach to cost control is paying dividends,” he added.
Net cash reserves fell from £92.8m to £67.3m and the firm paid no dividends.
McLaren held no bank loans, and it was able to halve the amount it owed suppliers in retentions from £27.9m to £13.2m.
The firm’s average monthly staff headcount stood at 912 employees, up from 861 the year before.
Looking ahead, McLaren is targeting expansion into new regions and sectors. Heather said that the new Yorkshire & North East division, which was set up in 2023/24, “will contribute significantly to revenue growth”.
Data centres and regeneration projects are seen as key growth areas. “We now have a place on 22 frameworks, giving us greater access to public sector work. Data centres are an increasingly important sector for us, and our regeneration division is securing major contracts, including the £100m-plus recladding of the Chalcots Estate [in Camden, London],” said Taylor.
Healthcare is another important sector for McLaren. It highlighted the completion in late 2024 of an upgrade at the Queen Elizabeth Hospital for Lewisham & Greenwich NHS Trust.
This completion “positions McLaren well as the government confirms funding for the New Hospital Programme and Private Finance Initiative investors start the process of handing back hospitals as contracts expire”, the contractor stated.
Despite its strong position, McLaren acknowledges potential industry challenges. “There are always economic uncertainties, and we’re closely monitoring inflationary pressures and public sector spending,” Heather said.
The rise in employers’ national insurance contributions from this April is “something we have to manage, but it will impact budgets across the sector”, Taylor added.
McLaren is also keeping a watchful eye on the life sciences market.
Heather said activity has slowed here. “We were expecting more opportunities in this space, but some projects appear to be on hold due to cost concerns. However, we remain committed to the sector,” he said.
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Ben Vogel