Wates plans first acquisitions in 110 years

Paul Drechsler, who has a £133m warchest, believes the time is right, despite the fact the family owned group has not made a significant acquisition in its 110-year history.

He said: “We’re focused on strengthening the balance sheet and have options we didn’t have a few years ago. If we spend, it’ll have to be wisely and deliver better value for shareholders than the organic route.”

He denied the company needed to make acquisitions to keep up with the rising number of contractors with a turnover greater than £1bn. “The number of companies in excess of £1bn will be small but it’s customer satisfaction not scale that’s important.”

In 2007, Wates’ turnover grew 10% from £863m to £949m.

Pre-tax profit was down 22%, from £48.5m to £37.7m, owing to an exceptional credit of £17.1m in 2006. Turnover in the construction division was up from £837.6m to £933.8m and pre-tax profit was £39.4m, producing a margin of 4.2%. Drechsler said the figure, higher than the industry norm of 1.9%, was the result of repeat business and close relationships with clients.

He added: “My aspiration is the magic 5% figure by 2012 at the latest. I passionately believe that what we do as an industry is worth a hell of a lot more than 5%.”

He said the group’s strong emphasis on customer satisfaction would help it through the downturn, although the effects had not kicked in yet.

“There is uncertainty in the commercial and retail areas but we are confident that in a slowdown any customer cutting back would cut us last,” he said.

Drechsler said Wates would hit £1bn turnover in 2008 with growth of 10% and that growth in 2009 would be double-digit.