CFMA 2021 Construction Financial Benchmarker

The 2021 CFMA survey used results from 1,284 companies to create financial benchmarks for construction companies to compare and evaluate financial performance to remain competitive. The information requested from companies consisted of financial results for the year end 2020.

Of the companies surveyed, those in Specialty Trade produced the highest response rate, followed by Industrial & Nonresidential, and Highway/Heavy(Exhibit 1). Most companies that responded were S corporations and private companies (71%). Slightly less than half acted in a subcontractor compacity, followed by general/prime contractors (those who self-perform over 20%) and then companies that self-perform less 20% of their construction work (Exhibit 1).

Exhibit 1: Surveyed companies

Most companies received the Paycheck Protection Program (PPP) loans to assist with the difficulties of the COVID-19 pandemic. PPP loans were included in other income if forgiven or if the company used the grant approach. More than half of those who applied had received at least partial forgiveness by year end. The PPP loans likely attributed to some monetary relief for construction companies.  

Overall, both the return on assets (ROA) and return on equity (ROE) showed increases from prior year, with ROA having its highest rate since 2010 (Exhibit 2). From the data collected the number of days to collect accounts receivable improved and days to liquidate trade payables improved (Exhibit 2). Additionally, the average net income before tax margin was over 6% for most companies. PPP loans forgiven or recognized under the grant method contributed to approximately 2% of bottom-line profitability. Sales remained mostly stagnant with the largest change being a slight decline in the smallest companies by total sales. There was also a 6% decrease in backlog from the prior year.

The Best-in-Class companies, the top 25% of contractors, outperformed the typical company information noted above. They had significantly higher ROA and ROE (Exhibit 2), less debt, and a more stable fixed asset ratio. Additionally, their employee productivity and gross profit per employee were higher, as were gross profit margin and net income after tax margin (13%).

Exhibit 2: Ratios

Industrial and nonresidential

From the Industrial and nonresidential companies information, 90% of them were privately owned businesses with 7% being owned by an employee stock ownership plan (ESOP). Those operating under a general/prime contractor made up 50% and those primarily operating in a construction management capacity made up 38%. Almost all revenue was derived from commercial and industrial building construction followed by industrial building construction (Exhibit 3). Most of these companies are headquartered in the Southwest with the Midwest close behind (Exhibit 3). Industrial and nonresidential companies were the most successful at using assets to generate more sales than assets. Additionally, they maintained their leverage ratio, which was higher than the other categories.

Exhibit 3: Industrial & nonresidential Results

Specialty trade

Specialty trade were mostly subcontractors (88%). ROA, ROE, and net income before tax were slightly higher than the overall average (Exhibit 4). These companies also maintained a steady leverage ratio that was slightly higher than heavy/highway companies and were also slightly more successful at using assets to produce sales over assets than heavy/highway.

Exhibit 4: Specialty trade results

Heavy/highway

Heavy/highway were mostly general/prime subcontractors (77%) and had almost half their revenue come from highway, street, and bridge construction and slightly over a quarter from other heavy and civil engineering constructions. Net income before taxes was higher than prior year and the overall average. ROA was higher than prior year and matched the overall average while ROE was lower than the overall (Exhibit 5).

Exhibit 5: Heavy/highway

Conclusion

To compare a company’s financial performance with the results, use the Construction Financial Benchmarker (www.financialbenchmarker.com) provided by the CFMA or ask one of our experienced professionals.