The UK arm of Strabag has revealed a timetable for its new building unit to compete for construction tenders.
Its activity in 2024 and 2025 “will be disproportionately geared towards securing new work” rather than delivering its traditional secured backlog in construction services, Strabag UK said in its latest amended full-year accounts for the 2023 calendar year.
Last September, the civils firm announced that it had hired senior ex-employees of the collapsed Buckingham Group to accelerate its plans to enter the building sector.
In its accounts for 2023, it said: “We have invested significant management and staff resources (beyond normal metrics for an established construction business) to prequalify for and tender for the delivery of infrastructure projects.
“This reflects that the company is a new entrant to the market.”
Andrew Dixon, joint managing director of Strabag UK, said the cost of bidding “for [the] next two years or so will be higher than for a mature business, because the margins this investment will eventually generate reflect a substantial return on investment lag. This is the inherent nature of an infrastructure market that has a high cost of entry.”
Strabag UK is a wholly owned subsidiary of Austrian group Strabag AG, which in turn is part of the Strabag SE group of construction firms.
The UK business is part of the SCS joint venture with Costain and Skanska to build a 7.2km HS2 tunnel between Euston and Old Oak Common stations, although this work has been paused.
Despite this delay, Dixon said the firm was “ready and well-placed to grow through carefully selected project acquisitions that provide a balanced risk portfolio and stable returns”.
Strabag UK’s turnover more than doubled in 2023 to £135.1m compared with £76.3m the year before.
This helped it to reverse a £22.3m loss in 2022, with pre-tax profit of £15.9m the following year.
The firm’s construction services headcount almost doubled from 690 to 1,175 employees.
Strabag UK is free of bank loan debt and paid no dividends in 2023.
It had £9.9m of cash in the bank at the end of last year, compared with £6m the previous year.
Following what Dixon described as “significant capital investment”, last year Strabag UK launched production at a new concrete factory in Hartlepool.
The factory currently has two supply orders for concrete tunnel segments to be used on HS2, he said.
“Demand in the UK construction industry in 2024 is expected to remain flat, narrowly avoiding negative growth,” Dixon said.
“Signs of growth are forecast for early 2025 as broader momentum in the UK economy picks up, provided inflation continues to fall and interest rates return to levels that support investment. Growth in all sectors of the built environment is then expected at a rate of about 4 per cent for the medium term.”
Referring to the impending general election, he said that it “may provide a stimulus for higher economic growth, with a renewed focus on renewing the UK’s aging public infrastructure financed through the private sector, which the two main parties support”.
