Europe’s little pocket of built-environment sunshine

17 May 2013 0 Comments

17 May 2013

By Aarni Heiskanen in Helsinki

The leading Finnish construction industry magazine, Rakennuslehti, published its annual “Biggest Companies” issue on 3 May.

In addition to the extensive tables with key financial figures, there are also revealing industry and company analyses.

Last year’s leading theme for big contractors was the securing of profitability. They had two ways to do it: cost cutting and extensive risk analyses of projects that were out for bidding.

The contractors seem to have succeeded, as their profitability increased even though the volume of construction decreased slightly.

Of the 30 biggest construction companies, two-thirds improved their profitability.

The biggest construction company in Finland is YIT, with a turnover of €4.7 billion.

Another Finland-based firm, Lemminkäinen, came in second with €2.2 billion, followed by NCC and Skanska.

The companies YIT and Lemminkäinen were the only companies on the list with a turnover of over €1 billion.

The 50th company had a turnover €15.5 million, which demonstrates how small players most of the local contractors are.

Finnish design and consulting firms don’t play in the big leagues either. The 50th firm on the consultants’ list earns €2.3 million.

Only the top 19 had turnovers of more than €10 million.

Pöyry is in the lead, with €192.5 million, 4% less than in the previous year.

Nordic Sweco and Ramboll groups both had more than €100 million in revenues from their Finnish companies.

One of the more interesting figures, when it comes to consultants, is how much they have billed per employee.

The variation is huge: from €220,000 down to €71,000 per employee, and company size does not seem to correlate with these figures.

Net billing of designers and consultants increased 5% in 2012.

CEO salaries of Finland’s biggest AEC firms are trending up but, earning €1.4 million, Kone’s Matti Alahuhta is in a class of his own (Credit: KONE)

The EBITDA margin (Earnings Before Interest, Taxes, Depreciation, and Amortization) of the 10 most profitable architectural and engineering firms varied from 24% to 36%.

Contractors did not perform as well. The top performer’s margin in this category was 28%, and the tenth collected 13.6% – although that’s much higher than contractors’ margins elsewhere, notably the UK.

The CEOs of the biggest Finnish AEC firms (architecture, engineering and construction) should be happy with the progress of their personal earnings.

Their collective incomes increased by more than 9% in 2013, which is significantly better than the average wage earner’s 3.5%.

However, the rise was not distributed evenly; every other CEO earned less than in the previous year.

The top ten CEOs earned over €500,000, with KONE’s Matti Alahuhta in his own class, at €1.4 million.

Finnish economy magazine, Talouselämä, published results of the annual employer image study.

T-media had asked over 24,000 students and employees with university degrees about their opinions on 105 employers in 33 industries.

An AEC company, Ramboll, was the fifth ‘most interesting’ employer, which is quite extraordinary, considering that the winner was Rovio Entertainment, best known for their addictive game, Angry Birds.

How do the Finnish AEC companies see their immediate future?

Rakennuslehti asked over 300 companies how their revenues and profitability will change compared to last year.

The overall picture is quite optimistic. Most confident are residential developers and architects.

This is good news in the gloominess that seems to dominate discussion in Europe and even in Finland these days.

Finland’s AEC sector may be small but, at the moment, it’s rather beautiful.

Aarni Heiskanen is the managing partner of AE Partners