Shaw & Co launches its latest ‘Shaw Report’ which takes an annual view of debt and M&A activity in the Property and Construction industry.
Shaw & Co, the specialist corporate finance advisory firm, has launched the latest of its in-depth annual industry reports that offer SME business leaders a powerful 12-month overview of a given sector as well as a benchmarking tool with which to aid their decision making.
This latest ‘Shaw Report’ covers the UK Property and Construction (P&C) industry and segments 3,088 SMEs with earnings of over £1m by size and subsector – including Building & Construction Services; Property; and Real Estate Activities – to track their performance, profitability, debt levels, borrowing capacity and M&A activity.
Just 6% of the 3,088 companies analysed achieve an Ebitda over £20m, but they account for 79% of total turnover in the P&C industry. The industry is dominated by a small number of large companies, and barriers to entry exist for companies to compete for larger projects. As margins are being squeezed by rising raw material and energy costs, smaller players need to find ways to reduce operating costs by becoming more efficient.
Regardless of company size, companies across all industry sub-sectors have seen an increase in average Ebitda margin over the past 12 months varying between 11% and 22%. Profitability in the Real Estate subsector is nearly double the other sub-sectors, suggesting this is a more attractive space to operate in.
Over the past 12 months, businesses have been deleveraging with government assisted loans such as CBILS being quickly repaid following the initial free year. Debt to Ebitda levels have therefore fallen year-on-year, giving businesses the scope to borrow to fund growth. Nevertheless, total industry debt by sub-sector has remained static over the last year suggesting lenders remain cautious as the industry continues to face rising input costs, labour and supply chain issues. Businesses with Ebitda of £5m+ carry higher multiples of short-term and long-term debt compared to smaller businesses. More profitable businesses are also often multi-banked and able to take advantage of greater borrowing opportunities. Smaller businesses should therefore look at the alternative lending market to fund growth.
There has been a high level of M&A activity within the P&C industry, with 151 deals concluded in the past year, 83% of which were with UK buyers. This bounce back in activity is largely due to deals being put on hold due to the pandemic. Also, the longer-term commercial rationale for deals remains intact. However, headwinds are already manifesting themselves with the increase in inflation and significant geopolitical uncertainty. Confidence is key to dealmaking, so business owners who wish to sell are advised to initiate the process this year, rather than waiting until 2023.
Rick Martignetti, Manager - Business Funding at Shaw & Co and editor of the report, said: “We are very pleased to have launched our first ever annual sector report dedicated to the Property & Construction industry. We hope that this tool will help SME business owners to benchmark their own and their peers’ performance and will provide them with a tool to assist in their decision-making process. Ultimately, our goal is to provide these SME business owners with free access to the same market intelligence as larger blue-chip corporates, who benefit from investment banking advisers. This report will also provide them with valuable insight regarding their relative creditworthiness and attractiveness from an M&A point of view.”
A full copy of the report is available here.
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