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Core values

NCE CONTRACTORS FILE - Nuttall had a strong 2004 thanks to a loyal workforce and an unwavering focus on what it does best - civil engineering. Chairman and chief executive Peter Brooks gave a rare interview to Andrew Bolton.

Over the last 10 years most major contractors have pursued a range of initiatives in the name of bigger profits and faster growth.

This has been characterised by aggressive but not always successful moves into facilities management, rail maintenance, private finance initiative work and overseas expansion.

Others have rebranded themselves as construction service providers. They downplay their involvement in the messy, often low margin world of contracting, highlighting instead their project management skills.

The results have been mixed.

Some, like Jarvis, have gone to the brink of collapse while others like Laing have lost their independence in takeovers.

Nuttall is one contractor to have avoided fashionable growth initiatives and their pitfalls, and concentrated on delivering civil engineering projects and has reaped rewards as a consequence. While the profitability of its competitors has see-sawed, it has consistently delivered steady margins of over 4%.

'If you look at the last 10 years our average margin is 4.3%. We don't claim this to be exhausting the potential in the market, but we have been able to achieve this on a year on year basis, ' says chairman and chief executive Peter Brooks.

Last year was no exception.

Pre-tax profits from civil engineering were £20.3M compared to £19.4M in 2003, while turnover increased to £492M from £441M, generating margins of 4.1%.

The secret is in taking a long term view of the contracting market and avoiding the temptation to seek quick wins in the name of short term profit growth. 'We're not here for one year's good results, we are part of a group and the group is interested in the long term, ' says Brooks.

Nuttall is owned by Dutch contracting conglomerate Royal BAM, which last year produced profits of E179.4M (£119.6M) on turnover of E7.5bn (£5bn).

Its owners do not put it under the same pressure to produce year on year profit growth as those major contractors who are listed on the London Stock Exchange. He says Dutch investors take a longer term view on contracting returns than their UK counterparts and this helps.

Nuttall is lucky in that it can draw support in the form of finance, know-how, people and equipment from Royal BAM. This complements its own in-house capabilities and help it bid for large projects alone or in joint venture with other contractors.

'Marine work has always been one of our strong suits and we have access to a lot of equipment in Holland, ' says Brooks.

Brooks also says that Nuttall's established presence in the British construction market is the business's biggest asset, especially as the barriers to entry are high. 'You can't put together a civil engineering business quickly, it takes time to build teams, ' he says.

This brings him onto another of Nuttall's strengths - its loyal and well qualified workforce ranging from teams of engineers to its 1,200 directly employed tradesmen.

'We have the lowest staff turnover in our sector and we try to create an environment where people want to stay, get job satisfaction and have the opportunity to realise their ambitions, ' says Brooks.

Training is key. Nuttall has well established training programmes for staff at all levels and has held Investors in People status since 1998.

The contractor also places a strong emphasis on retaining its focus on civil engineering, giving employees the chance to get involved in stimulating, challenging projects like the Tinsley viaduct strengthening on the M1 (NCE 27 March 2003) or the complex and large scale work it carried out in the area north of King's Cross on the Channel Tunnel Rail Link's contract 103.

Brooks also emphasises the importance of giving staff the confidence to innovate and take on challenging work in the knowledge that they are supported from head office. 'If you create the right environment where people feel secure you will see the entrepreneurial spirit come out, ' he says.

There are also opportunities for people to work abroad.

Nuttall does not have a huge international presence, but does some work in Africa and the Middle East. A team from its specialist foundations subsidiary Ritchies has also recently returned from Russia.

But Nuttall's British based operation is its main strength.

'The stability of the business lies the regional base in the UK, ' says Brooks. 'The key factors are the stability of the management team and the fact that people stay with us.' The regional base is also complemented by a special projects organisation, which takes on the most challenging work, but also fill gaps in capacity if one of Nuttall's regional offices is overloaded.

Nuttall is active in most areas of civil engineering, although the biggest chunk of its workload last year was in roads and rail renewals, which generated turnover of £123M and £149M respectively.

The longer term approach to contracting has also helped it deal better than some with changes in the civils market. In highways, for example, many contractors saw the Highways Agency's move to early contractor involvement (ECI) as a signal that work would come through more quickly.

Brooks is philosophical about the fact that contractors have got involved in ECI schemes only to find that the projects have progressed through planning inquiries only to sit in ministers' in-trays for 18 months or more.

Sometimes long serving, loyal workforces can present problems for companies, which find it hard to replace highly valued senior employees after they retire.

Brooks is unconcerned about this happening at Nuttall.

'People stay with us, but we've grown and staff numbers have grown, ' he says. Most of the company's senior appointments are internal, with most heads of department - except the finance director - drawn from the ranks of experienced project managers.

Brooks believes that Nuttall's desire to concentrate exclusively on civil engineering has strong attractions, for employees and clients who are looking to work with a strong, stable predictable business.

'Our whole philosophy is about focusing on doing what we say we do, which is civil engineering.

We are not taking the business in any other direction than to deliver for our stakeholders and also our people, ' he says.

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