Contractor revenues plateau
Revenue growth for industrial and nonresidential contractors nationwide plateaued in 1999, ending a two-year period of high double-digit increases. However, profits continued to be strong, according to the 12th annual financial survey conducted by the Construction Financial Management Association (CFMA).
The 2000 survey is based on 1999 financial data from contractor respondents. Revenues for the average industrial and nonresidential contractor respondent amounted to $128 million, a decline of 4 percent from $134 million in the previous year. The 1998 and 1999 surveys indicated that the average respondent's revenue increased 24 percent and 40 percent, respectively. Though revenues leveled off, average gross profits increased slightly. Average gross profit as a percentage of revenue was 5.2 percent, up from 5.0 in the previous year.
"Because the volume has leveled off in some areas of the country, it doesn't mean that the profits aren't there," explains John Metz, partner in charge of the construction industry services group for the accounting firm of Sikich Gardener & Co. LLP, Aurora, Ill., and current chairman of CFMA's accounting and reporting committee, which oversaw the survey.
Contractor confidence in anticipated revenue growth in the current year also has leveled off. "We're expecting another good year, but it doesn't surprise me that no one is expecting a 24 percent increase," says Gordon Marshall, vice president and treasurer of The Pepper Cos., Chicago. Also a member of CFMA's accounting and reporting committee, Metz observes that contractors are becoming less apprehensive about 2001 because they are more confident about the backlog of signed or committed work going into this year.
A new addition to this year's survey is a best-of-class section. "The best-of-class allows contractors to compare themselves to the best," says Metz.
"I find the survey helpful as a way to benchmark my firm's performance," says Marshall, who adds that regional comparisons in the survey are useful.
The 220-page survey is based on 288 responses compiled by PricewaterhouseCoopers and is available for the first time on CD-ROM. Copies are available from CFMA, 29 Emmons Dr., Suite F-50, Princeton, NJ 08540 for $135 for CFMA members and $199 for nonmembers. The association's Web site is www.cfma.org.