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High margins wizard

Amey has become the new force to be reckoned with in infrastructure management. Antony Oliver talks to chief executive Mel Ewell about what’s behind the firm’s recent successes.

If there is a magic formula to Amey’s recent string of successful infrastructure management deals across the UK, chief executive Mel Ewell is keeping it to himself.

But clearly the firm is doing something right. So far this year it has picked up around 90 major contracts across central and local government, adding £4bn to its order book.

These deals include the £2.5bn Birmingham highway maintenance PFI, the Highways Agency’s Area 9 MAC and North East TechMAC and Network Rail’s Civil Examination Framework Agreement (CEFA). Most recently it won Network Rail’s high output track renewals contract worth around £250M over five years.

“I have had it put to me that there is someone in the market buying the work,” Ewell says with a smile. “Well the easy way to counter that is to look at the margins we are delivering. Clearly we are a margin enhancing business in comparison to everybody else.”

This year the firm will turn over in excess of £1.5bn and, he says, will make in round numbers about £100M net profit. This is all the more remarkable given that just six years ago the firm was rumoured to be close to going under.

Having steered Amey through its sale to Spanish parent Ferrovial in 2003, Ewell has devoted the last six years to repositioning the firm away from low−value, high−volume contracting towards a more lucrative world of infrastructure management.

Mel Ewell CV

Today Amey chief executive and

executive director on the Amey

board.

2003 Became chief executive and

guided Amey through its sale to

Ferrovial.

2001 Joined Amey as group

operations director

1999 Appointed managing

director of ADI Group, a provider of

outsourced aviation services. Led

merger of UK operations after ADI

was bought by Securicor.

1998 Returned to the UK as

managing director of TNT

International, UK and Ireland.

1995 Moved to Amsterdam to

lead on key corporate account

development.

1990 Joined TNT International.

Started career at shipping company

United States Lines before moving

to Rank Xerox.

Studied geography at Kingston

University

 

The strategy has grown out of Amey’s so−called “Future Ready” programme, which overhauled and set out the firm’s new thinking about how it takes its products to market and then delivers them.

“The basis of this programme was the whole ‘One Amey’ concept and the idea that we can come to market with an end−toend solution,” he says. “It took a bit of launching and a while for it to get traction, but what you are seeing over the last few months is that strategy really starting to bite.”

The purchase of Owen Williams in 2006 took Amey into consulting and Ewell points out that at the time many in the market thought he was crazy. But today this 400 staff, £40M turnover purchase forms the heart of its 2,000 strong £200M consulting arm which in turn is central to Amey’s integrated service offering.

Amey’s new purpose−built international design hub opens in Birmingham on 24 November and will house 750 design engineers and create up to 500 jobs in the next two to three years.

“The whole concept of our end−to−end service is the ability to flex our product and service,” Ewell explains, emphasising the firm’s service orientated culture.

“I don’t want to be the biggest but I do want to be the best and I do want to sell a differentiated product.”

Mel Ewell, Amey

“Mostly our competition works in a market with high volume, high competition, little differentiation and so low profit or they are niche players,” he says. “I don’t want to be the biggest but I do want to be the best and I do want to sell a differentiated product.”

This distinctness from others in the market is very importantto Ewell who points out that, “without being arrogant” his only real competition is with his customer needs.

“I don’t stand up and say we are any better than anyone else,” he explains. “But I would stand up and say that we are trying very hard to drive efficiencies in through our one service capability and culturally have the right attitudes as part of the solution.”

Having an in−house design capability, logistics and facilities management expertise is critical and means that Amey is able to remove many of the contractual interfaces and so offer its clients better and more cost effective solutions.

Public sector work will keep coming

It is a recipe that public sector clients have embraced. Amey now looks after infrastructure assets for many local authorities including Hampshire, Buckinghamshire, Hertfordshire, Cumbria, North Lanarkshire, Clackmannanshire and Scottish Borders (see box).

Public sector work is an area in which he expects to win even more work going forward, particularly as the recession bites and public funding starts to dry up.

Engagement with the private sector will, says Ewell, be vital for local authorities in the future. And it will, he adds, introduce best practice, investment, skills and access to a broader range of finance.

“Public sector spending won’t turn off,” he insists. “Budgets will be curtailed, of that there is no doubt. But going forward the new normal is ‘with less do more’. All public sector departments are saying ‘how do I provide the same level of service with less money?’ That to my mind is an opportunity and one that we should grasp.”

Ewell’s background in distribution taught him that, in business, standing still means going backward. The key he says is to keep reinventing yourself, bring new products to market and work hard with your customers to find news

He says that the structure of the construction industry is such that change does take longer but says that the fact that an organisation like Amey is doing well is an indication that the market is moving.

“There is a cultural change going on − today there has got to be far more collaborative working going on,” he says. “For providers to deliver innovative change you have got to have suppliers who are open and transparent about what their objectives are. This economic downturn is going to force people to behave more that way.”

Having the will, drive and constitution to make this cultural change is, he says, a constant battle for everyone, particularly in a recession. Things that have been custom and practice for years have to be challenged and that, he adds, takes a certain degree of bravery

“The key is to get your product right, get it sold right and deliver it.”

Mel Ewell, Amey

“Just because there are recessionary pressures I don’t think you should compromise on protecting people, or watch your margins erode because you are chasing volume, or suddenly say ‘I’m not going to win any work for the next two years,’” he says. “The key is to get your product right, get it sold right and deliver it.”

He is clear that PFI will continue to play a major role in public infrastructure going forward and is confident that the Birmingham highways deal for which Amey is currently preferred bidder will be wrapped up by the end of the year or early in 2010.

“There is still a need to bring projects through using private sector skills and private sector finance,” he says, pointing out that since the M25 widening PFI deal went through, liquidity had returned to the market.

“Is there an opportunity in the recession for all of us − central and local government and the private sector − to keep on pushing the boundaries to find better, cheaper and faster ways of procuring? Yes.”

The outcome of next year’s General Election will, he says, probably make little difference to Amey’s potential workload since any new government will have to balance the need for public services with tight budget constraints.

“There is money − there’s just less of it,” he says. “So it’s about how you prioritise and how you spend more efficiently. You cannot stop maintenance of the motorway network.”

All of which plays into Amey’s hands very nicely and presents the firm with continued new opportunities for growth.

“The opportunity for us is to maintain our margins, grow our top line and get economy of scale to drive more efficiency into the products and services for customers,” he says. “In my three−to−five−year business plan the market opportunity is there for substantial growth. We have to be cognisant that there is a recession on but to us it speaks as much about opportunity as threat.”

LOCAL AUTHORITY clients

  • Hampshire highways
  • Buckinghamshire transport services
  • CentralBedfordshire and
  • Bedford Borough highways
  • Hertfordshire highways
  • Cumbria highways
  • NorthLanarkshire highways
  • Clackmannanshire highways
  • Scottish Borders highways
  • Plymouth highways
  • TfLNorthLondon
  • Norfolk Street Lighting
  • Hereford highways
  • Walsall street Lighting
  • Northampton schools
  • Bradford schools
  • Liverpool Speke School
  • Birmingham street lighting
  • Calderdale highways
  • Halton highways
  • Manchester street lighting
  • York street lighting
  • Renfrewshire schools

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