CN Specialist Index 2023: Top 10 M&E Contractors

Demand for electric vehicle charging, renewable energy connections, grid improvements and electric heating schemes are providing a good line of work for mechanical and electrical (M&E) specialists. Aggregate revenue among the 10 biggest companies in the sector rose by 13%, from £2.68 billion to £3.04 billion, in this year’s index. Despite this, the average margin is only 1.3 percent.

Big losses at NG Bailey and Enerveo mean the top 10 posted an aggregate pre-tax loss of £13.8m, compared with a pre-tax profit of £5.7m in the index of 2022. The other eight contractors were profitable. Enerveo’s accounts attribute its loss in part to the cost of rebranding and setting up new systems following its acquisition by SSE’s Aurelius Antelope in 2021.

Meanwhile, NG Bailey chief executive David Hurcomb says: “Strategically, we are not chasing turnover – that would be very absurd in this current market. We are now more careful about who our customers are [and checking if] they will be there to pay us at the end of the day”.

The pre-tax loss of £25m in the year to 3 March 2023 at NG Bailey, the second-biggest M&E contractor in this year’s index, was largely attributed to impact of inflation and interest rates on fixed price contracts. It also hit its investment in Britishvolt, the company that had planned an electric vehicle gigafactory near Northumberland before it collapsed in January. Despite this, Hurcomb believes that M&E companies will reap benefits in this field of technology. “The UK absolutely needs to build half a dozen gigafactories [at a] minimum to preserve their auto industry,” he says. “There are one or two places moving forward, and we certainly want to participate. It’s a market that’s going to grow, without a doubt.”

Opportunities in the nuclear power sector present significant growth areas, according to Jonathan Stockton, chief operating officer of NG Bailey, which is behind only Dalkia in the index. The new name at the top of the list was formed after a major consolidation, as last year’s biggest specialist Imtech acquired 10th-ranked Spie and changed its name. When the acquisition was completed in December 2022, CEO Gautier Jacob said the company would continue to focus on “decarbonization solutions.”

The sector was rocked in October 2023 by the administration of last year’s seventh contractor, Michael J Lonsdale, who turned over £191m, according to his final set of accounts. Administrators have not yet explained the reasons for its collapse. “What we’ve seen is that the overall market is quite fragile, from a balance sheet perspective,” says Stockton. He adds that, on the other hand, NG Bailey’s balance sheet is strong.

Hurcomb comments: “Historically, the market is a bit of a fool to take the lowest price and transfer risk; Hopefully, people are waking up to the fact that you can transfer risk, but if the people you’re transferring it to don’t have a balance sheet, then it’s a bit of a waste of time.”

The pair expects further slowdowns in investment decisions in both the public and private sectors
before the next general election, something that, in most workplaces, affects M&E companies later than the rest of the supply chain, as they are among the final transactions on site.

“We’re the last man standing, the Tail-End Charlies,” Hurcomb says. “If the budget is over and the project is late, M&E is inherently risky.”

Notes: Dalkia There are no new accounts since the previous edition; Dalkia combines Imtech and Spie.