St Modwen's £200m war chest: With open arms

’We’re going to be extremely busy over the next few months,” says St Modwen’s head of construction Steve Burke. “Extremely busy tendering.” Three words that will be music to contractors’ ears.

But it doesn’t stop there - these opportunities are up for grabs across the whole of the UK and are worth between £150m-£200m over the next six months alone.
The sheer volume of work available through St Modwen can be explained, in part, by the storming few weeks the regeneration specialist and developer has just had. First there was the news that its half year results for the six months to 31 May - due out next month - will come in at the high end of expectations. This is based against the backdrop of a £121m turnover figure last year that St Modwen aims to beat this year.

Then it was revealed that the group has secured planning for almost 3,000 homes on three sites in and around London. “We have worked hard over the last two years to take sites through planning, carrying out remediation and infrastructure works,” explains Burke sitting in St Modwen’s Birmingham-based head offices. “That has meant we have been able to put together a lot of pre-lets and pre-sales so we are now looking at an order book growing in front of us.”

For those who fancy getting in on some of this developer’s hard-earned fortune, there is good and bad news. The good news is that Burke doesn’t believe in having a closed door policy, and fresh blood is encouraged to apply. The bad news is that against the backdrop of the public sector work cull, competition will be tough. But Burke knows what he is looking for and explains how to get to the top of his list.

Background

Apart from the size of its cheque book, there are other noteworthy reasons to work with St Modwen. First, there’s the fact that it has a deep-rooted understanding of the world of contractors - no surprise given that a large section of this regeneration specialist used to be one. Part of the group started off life as Clarke Construction, which was where Burke began his career before moving on to work for Balfour Beatty and then to St Modwen after it had acquired most of Clarke in the early nineties. “We understand how difficult contracting is,” says Burke. “We understand how much hard work goes into delivering a building, and, because of our roots, we have so much respect for the contracting world.”

Then there are the firm’s key sectors. Across the UK, the firm’s work can be loosely divided into residential, heritage, town centre schemes, business parks and distribution and industrial parks. Burke explains why this sector split results in a more “cradle to grave” approach to development than others: “We have a huge portfolio of land that requires remediation and bringing to development,” he explains. “Our brownfield sites differentiate us from other clients. We have been working on these for around
15-20 years and they take us towards being the UK’s leading regeneration specialist.”

Where is the work?

So, onto the crucial stuff - where to find that £200m worth of work. For anyone not based in London there is the added bonus that the opportunities are spread across the UK in a number of sectors rather than being focused in the South (see box below).

The hottest area is residential: “We have a JV with Persimmon that is bringing seven sites with in excess of 2,000 houses over a four-five year period,” says Burke. “Supermarket-led retail is also doing well but specialist manufacturing and regional offices and industrial are still pretty hard.”

Burke adds that although the work load beyond the next six months looks “choppy”, he is confident the group will continue developing. “It’s not the even pipeline we would have seen a few years ago,” he concedes. “But we have some opportunities for large-scale schemes such as a second campus at Swansea University - the first phase of that would be £200m.”

He also draws comfort from the fact that 50% of the group’s property is income earning - about £45m a year comes in from this side of the business: “It’s a great security to us,” he says. “It underpins all the exciting things we do in development.”

No closed shop

Burke is quick to add that while, like most developers, St Modwen tends to gravitate towards who it knows, this doesn’t mean there is no room for newcomers: “We keep our tender list restricted to four and we like to stick with people who have a good reputation,” he says. “But we don’t run a closed shop. We have a big range of projects of different sizes and types so we would encourage as many contractors to work with us as possible - as long as they have a stable financial background and a strong skills base that suits what we’re looking for.”

And what are those skills exactly? Burke explains that lots of the group’s projects are remediation or infrastructure-led so he expects his supply chain members to be au fait with the way these schemes work. Another thing that impresses him is a visible management team: “The management team has a very hands on approach here,” he explains. “And we like to see the same from our contractors. We like to know we can see the management, get to know them.”

And if you want work, all you have to do is pick up the phone. “We are very approachable here. We all have mobile phones and we don’t hide those numbers.”

The future

While Burke is optimistic about St Modwen’s future, he fears for the industry: “The real risk to businesses, and contractors in particular, will come when things turn around and we see subbies prices and materials costs going up. This could result in a lot of conflict as things can no longer be delivered for the agreed price. We need to make sure this doesn’t happen.”

And the solution? “Honesty. Honesty between clients and supply chain.” Asked how realistic that is, Burke smiles but doesn’t answer. Instead he has a message for the industry: “There is life after the recession,” he says. “Everyone just has to be prepared to work extremely hard to enjoy it.”