A recently released report by the Housing Industry Association (HIA) in conjunction with Cordell Information has found that construction giant Lend Lease (ASX: LLC) was awarded construction contracts in engineering construction and non-residential building sectors worth $2.4 billion in the year ending March 2013.
In total the report found that "Australia's largest 100 construction contractors and non-residential builders were awarded contracts for construction work worth $35.8 billion" to March 2013, with the largest 100 firms representing around 26% of the total $178.8 billion of construction work done. Of particular note, the value of construction work was up 12.7% for the year.
Interestingly in second, third and fourth place were privately owned companies, while fifth spot went to Leighton Holdings' (ASX: LEI) subsidiary Theiss, which won contracts worth $1.4 billion.
Lend Lease can thank government spending for much of its business, with the HIA-Cordell report finding that around $1.9 billion of the $2.4 billion in contracts won were for community building projects, particularly health sector-related. The company also won around $400 million in commercial building contracts.
While the results excluded direct mining construction work, mining related work was tallied and continued to be an important contributor. It would appear that contractors such as Lend Lease — which has a diversified portfolio of projects both in terms of regions (substantial international operations) and industries including residential, commercial, industrial and resources — have been better placed to handle the fall out from the slowdown in the resource sector.
Other contractors, for example, Downer EDI (ASX: DOW) and UGL (ASX: UGL), as well as Leighton, have revenues more heavily weighted towards the resource sector. The effect of this exposure is evident in the share price performance of each company over the past five years. Lend Lease has kept pace with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) with both gaining just over 11%, meanwhile Downer's share price is down 29%, UGL's nearly 36% and Leighton's 53.5%.
Foolish takeaway
The dramatic sell off in mining and mining related stocks earlier in the year would appear to have led to many companies being 'oversold.' The jump in the share prices of a number of profitable construction and contractor stocks since June is a reminder to investors of the importance of not simply following the crowd.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
