Willmott Dixon goes hybrid to offset public sector cuts

Willmott Dixon is transforming itself into a hybrid contractor and developer in an attempt to combat the downturn.

Speaking at the release of the company’s results for the year ended 31 December 2009, Rick Willmott (pictured), the group chief executive, saidthe profit contribution from private development would grow from les than 10% to 40% within five-to-seven years.

“We will become a different company in five years. Half our profit will come from contracting but the other half will come from mixed-use development and support services,” said Willmott.

At present, the group earns 80% of its £18m profit in contracting, but it has been hit by the cuts in public sector spending, particularly in the education sector, which provides about 45% of its £1bn turnover. “That’s a big old lump to fill,” said Willmott.

He added: “We’re prepared for five years of pretty tough times. I think 2009 was as good as it’s going to be for the company for a while.”

His comments echoed those of prime minister David Cameron, who this week warned that the country must prepare for “painful and unavoidable cuts” ahead of the emergency budget on 22 June.

In relation to cuts to BSF work, which has underpinned the company’s growth in recent years, Willmott said he was confident that projects at preferred bidder stage would go ahead, but he had not received any categorical assurances from local authorities.

He said the prospect of more school maintenance work as capital spending fell would not plug the gap as it would be in the “sub-£10m bracket”.

The firm’s move into mixed-use urban regeneration follows a £250m win this week for a retail, residential and office scheme in Woking, in joint venture with developer Carisbrooke.

Willmott said the company would also act as a “fully fledged developer”, focusing on “complicated urban mixed-use schemes” because it was work that other firms shied away from as such deals were not easy to get off the ground.

The firm is looking to bolster its development team with a handful of key appointments.

“Our strong cash position enables us to do it. What we will do is to add a layer of development expertise to our experience in managing these schemes,” said Willmott.

In 2009, the company boosted turnover 68% from £592.4m to £999m. This was the result of the integration of social housing arm Inspace, which contributed £260m. With Inspace stripped out, the turnover growth was 25%. Inspace floated in May 2005 before being taken back in house in January 2008 for £148m.

Pre-tax profit was up 52% from £12m to £18.1m and shareholder funds grew from £31m to £137.6m.

In addition to development, Willmott said social housing would bolster the company’s results in future years.

He said 2012 would be the year when the real impact of the downturn would be felt. “Things will be sick from 2012 onwards,” he said.