2009 review
Improved financial performance
The Infrastructure Services division continued to perform strongly during 2009, achieving revenue of £770m (2008: £799m) and increasing operating profit by 19% to £17.1m (2008: £14.4m). The increase in operating margin to 2.2% (2008: 1.8%) resulted from an improved mix of more profitable contracts as a result of better contract selection within the division.
Key sector wins continue
Although the division saw reductions in new orders and significant price competition during 2009, it responded well and continued to secure high profile frameworks and projects in its core sectors of water, energy and transport. These significant wins included the £250m Severn Trent AMP5 phase of water treatment upgrades, a further £35m of project work at Heathrow Airport and the upgrade to the A1 from Dishforth to Barton in North Yorkshire (division's share valued at £105m). Following the year end the division also achieved financial close on the £417m Lee Tunnel project for Thames Water, with its share of the project valued at £209m. In the energy sector the division was successful with the award of preferred partner to deliver the £500m, ten year infrastructure alliance with E.ON Central Networks.
Progress with major projects
Infrastructure Services made significant progress on the £445m joint venture for the M74 Completion Project, currently Scotland's largest infrastructure scheme, as well as continuing to advance the £336m improvement scheme in joint venture on the M1. The division also built on its reputation as a leading joint venture partner, being successful on Network Rail's multi-asset enhancement framework and positioning itself to bid for major project opportunities including Crossrail and the second Forth Crossing in Scotland. It also worked alongside Morgan Ashurst on a comprehensive refurbishment of Paddington Rail Station and the infrastructure enabling works for the RAF Valley project in Anglesey.
High quality integrated services
Infrastructure Services' vision is to build a sustainable competitive advantage through providing a high quality integrated service. In 2009, the division enhanced its integrated service offering by extending its mechanical and electrical capability on tunnelling projects such as the Croydon cable tunnel and the Belfast sewerage project. In addition, the launch of the Perfect Delivery quality programme will help it to further differentiate itself by focusing on exceptional delivery across all its operations.
Outlook
Secured work for 2010
The division's forward order book at the start of the year stood at £1.1bn (2008: £1.4bn). In addition, the division is at preferred bidder stage on a further £0.6bn of contracts. The delay in commencement of key projects combined with new regulatory periods in the water and electric sectors will see revenue fall in 2010, but it is expected to recover in 2011 and beyond. The division has been more selective in its approach to the latest cycle of bidding in the utilities sector, with a particular focus on its gas and electric expertise as well as longer-cycle frameworks in the water sector. It also continues to bid for significant opportunities in civil engineering and tunnelling projects where it holds a market leading position.
Well placed for long-term growth
The infrastructure market offers the division significant growth opportunities in the medium and long-term in its target sectors of transport, energy and water. For example, the Government's determination to improve the country's infrastructure and to make the UK a low carbon economy is likely to drive significant investment in projects such as Crossrail and in programmes for managed motorways, power generation, waste and renewable projects and the electrification of the rail network. Infrastructure Services' integrated service offering and depth of engineering expertise place it in an excellent position to capitalise on these opportunities.
BelowMorgan EST
Client
Transport Scotland and
Glasgow City Council
Location
Glasgow, Scotland
View of the largest mobile crane in Europe lifting steel beams for the first spans of the Eastbound link viaduct at the M74 completion project near Glasgow. This is Scotland's largest current infrastructure project and is being delivered through a joint venture. The project will deliver greatly improved transport links through Glasgow carrying an estimated 20,000 vehicles each day.
BelowMorgan EST
Client
Severn Trent Water
Location
Birmingham, Midlands
View of the complex piping and pumping installation at the new Frankley Water Treatment Plant near Birmingham. When completed the plant will treat and supply drinking water for Birmingham and the surrounding area, which it receives from the Elan Valley in Wales. The plant uses cutting edge filtration technology to remove impurities from the water supply.
