Milne tops directors’ pay table in Building’s annual league

Scottish entrepreneur Stewart Milne is the highest paid director in construction for the second year running, having taken home more than £5m in 2005 – £1.3m more than the previous year.

Milne is the chief executive and chairman of Scotland-based Stewart Milne Group, which has construction, housebuilding, development and timber frame divisions. He founded the group in 1975, making a turnover of £1m in its first year. Today its turnover is £217m, with pre-tax profit of £20m.

The company’s target is to double turnover by 2010, much of which will be driven by the expansion of its housebuilding division into England over the next two years.

The news is revealed in Building’s Top 150 Contractors and Housebuilders supplement, which is published with this week’s magazine. It also shows that housebuilder Berkeley is the most financially rewarding place to work, with the average employee receiving £65,300 last year, up from £52,900 in 2004.

This marks a return to the top spot for Berkeley, having slipped to third last year. Tony Pidgley, Berkeley founder and group managing director, said that the increase in pay was a result of becoming a more specialist organisation – following a restructuring, its core focus is on urban regeneration developments in south-east England.

Pidgley said: “We are now a smaller organisation, which has an imbalance of more senior people. Small is beautiful – we have more value in fewer people.”

It also emerged that contractors have gradually managed to increase their average operating margin over the past 10 years. This has become increasingly important, as problem contracts have helped to bring down contractors that have not made enough profit from other projects to absorb the hit.

The average margin in 1995 was just 0.8%, but rose to 2.25% last year.

Small is beautiful – we now have more value in fewer people

Tony Pidgley, Berkeley

However, the average margin has not been pushed up by large contractors, rather by smaller businesses that have used their separate niches to charge greater premiums. This year, Dawn Group and Marshall Holdings topped the league, both having margins of 11%. In the top 150 by turnover, they were only 109th and 101st respectively.

Last year, the highest margin was 7.6%, achieved by Southern Electric Contracting. This year it slipped to sixth with an operating margin of 6.9%.

In third place by margin was Apollo London with 9.4%, 105th by turnover with £130.4m. Gary Couch, Apollo chief executive, said this was achieved through low overheads and making the most of its resources. He said: “We tend not to have non-revenue-generating services, the fluffy bits.”

Amec was again the biggest company in the sector with a turnover of £4.943bn, narrowly ahead of Balfour Beatty with £4.938bn (although Balfour Beatty is the largest by market capitalisation). The top seven retained their places from last year, with Taylor Woodrow, Bovis Lend Lease, Wimpey, Barratt and Persimmon making up the list.

Amec is unlikely to retain top spot next year, however, as it is looking increasingly inevitable that the company will demerge later in the year, into an oil and processes business and a UK infrastructure firm.

Housebuilders dominated the top 150 by pre-tax profit, with the top 13 making the bulk of their money from that sector. Persimmon was number one with a pre-tax profit of £495.4m, nearly £85m ahead of second-placed Taylor Woodrow.

At number 14, Bovis Lend Lease was the highest-placed contractor with £77.5m. Having topped the turnover league, Amec could only trail in 35th with £25.4m pre-tax profit, down from 15th place last year.