Business Enquirer Issue 114 | Merit | Construction | June'23

CONSTRUCTION’S CRUNCH POINT MERIT

CONSTRUCTION’S CRUNCH POINT

And the life-saving offsite construction company revolutionising the industry

Berwick Hospital - Artist's Impression

“Everyone is fed up with the construction industry,” said Merit CEO, Tony Wells.

A strong sentiment, but you can’t deny the facts behind Tony’s opinion, this is a global phenomenon; The World Economic forum’s critical assessment of construction published in 2016 noted ‘This unimpressive track record can be attributed to various internal and external challenges: the persistent fragmentation of the industry’ and ‘in the face of such challenges, the industry is almost under a moral obligation to transform’.

In the UK, the lack of investment is notable with the construction industry flagging behind when it comes to Industry 4.0, with only 0.48% of GDP spent on research and development across the sector in the UK.

MERIT

“Construction is restricting the UK’s GDP growth, and it needs disrupting,” he continued.

Is Merit the company to do it? It’s certainly taking strides, spending 6% of its total sales on R & D.

NEWTON

PROJECT DIRECTED BY: GLEN

ARTICLE WRITTEN BY: LAURA

WATLING

Since joining Merit in 2002, Tony has been focussed on developing the business, with his strategy seeing the company grow from an annual turnover of £2 million to £50 million in his first five years.

In 2015 he realised that Merit’s strategy would require significant reinvention to achieve its vision.

“We’re now totally focussed on disruptive innovation. Our fundamental aim is to generate profit to self-fund our innovation R&D, expansion investment and business development. Merit is attempting to turn

the construction industry’s fragmented site-based business model on its head,” he said.

A Fully Integrated Approach

With its HQ and offsite manufacturing facility based in Northumberland, UK (and two offices in London and Glasgow), Merit is a fully integrated design, manufacturing, build, and validate, turnkey service.

Merit delivers buildings in an entirely unique manner through advanced 4D BIM modelling technology, with a commitment to sustainability. Its buildings are designed to be zero carbon enabled for direct emissions with a BREEAM Excellent rating as standard, with the ability to upgrade to Outstanding.

Distinct to Merit, it is the only company to provide a complete CSA/MEP vertically integrated BIM model all in one.

“We work with our clients to solve facility design challenges in new and efficient ways,” explained Tony, “designs are optimised for improved health and safety, reduced running costs and with direct zero carbon emissions in operation”.

Merit has a library of flexible and scalable designs to suit a range of applications, saving clients significant time and money whilst providing a right-first-time, prevalidated MHRA, GMP or FDA approved facility.

The business has invested into research to benchmark traditional construction models and completely rethought how hi-tech facilities should be designed and built.

“Developing our own offsite techniques, with advanced 4D BIM modelling and other digital technologies, we have taken our manufacturing processes and products to the next level,” said Tony.

Manufactured in Merit’s 270,000ft² factory, completed buildings or module sections can be transported globally.

MERIT

Merit delivers the UK's first CAR-T cell manufacturing facility for Autolus Therapeutics

Merit's UltraPODs arriving on site at CPI GMP, Darlington

With a focus on delivering projects through digital industrialised construction techniques, Merit spends time and effort on front-end design and schedule management. This enables its pre-assembled modules to go into manufacture early for every project, saving customers valuable time and ultimately money.

“Merit’s approach is to develop industrialised construction techniques and products to drive increased productivity and transform the way construction projects are delivered. Industrialised construction offers faster project delivery, reduced costs and carbon emissions,” explained Tony.

Finally, Merit’s performance driven and cost saving model has an integrated compliance validation service, able to certify HVAC and other building service installations to GMP, MHRA, FDA and bespoke client requirements.

Merit’s product offering includes its own UltraPOD® and FLEXI POD® solutions. Whilst these products are used across a wide range of industries, it has found particular success in healthcare, pharmaceutical, bioscience, battery manufacture and semiconductor industries.

Both products deliver projects with 75-92% Pre-Manufactured Value in around half the time of a traditional design and build process.

Time for Reinvention

Whilst the construction industry has seen a positive recovery post-pandemic, it is still facing important challenges such as rising costs and a weaker economy. Cost effective and sustainably forward businesses like Merit are crucial to the development of the UK.

Ensuring its longevity, Merit’s CEO’s focus is on ensuring it meets the growing technological and sustainable expectations of its customers, with a vision to double its revenue and profits annually.

Tony Wells

“We are hungry for growth, but it is key to be patient and focus on growing the business EBITDA first,” said Tony.

Amongst its plans is continued digitisation, CNC, and robotic manufacturing implementation.

“As part of our business growth we have plans to develop our manufacturing facility further. We have strategies in place for the automation of our production system and ISA95 strategy,” shared Tony.

Merit is committed to delivering sustainable buildings, and to ensure it is ahead of the curve proactively designs in Revit.

“Using Revit, Merit will soon be able to calculate Scope 3 emissions, which will take our offering to the next level,” said Tony.

Merit is on the path to achieving its 2030 targets well ahead of schedule, and will then seek to improve its sustainable methods even further.

“The industry needs to go further, faster,” Tony remarked, “utilising an activity-based carbon analysis of the design choices is just one of the methods we will be researching”.

Growth Mindset

With its focus on bringing innovative, disruptive methods to the construction industry, it’s vital that Merit has the right colleagues on board.

Whilst the sector on a whole is seeing a decline in available workforce, Merit is pushing boundaries in its recruitment approach too.

“Because our technique is both software and technology driven, we see value in employing trainable staff over those that have had years of experience in traditional construction methods,” explained Tony.

Currently, the business employs 330 people, 87 of which are recent graduates and a further 20 are in Merit’s

apprenticeship programme.

With its growth mindset instilled across the business, employee levels for Merit have tripled since its pre-pandemic figures. And the trend matches in its turnover too.

In 2021 the business annual sales reached £40 million, with a record year in 2022 seeing Merit’s overall revenues climb by 44% to over £60 million (and its EBITDA rise by 374% to £4,570,521).

Now, with its strategy in full flow, the business is forecasting sales of £90 million by the close of the 22/23 financial year.

Thanks to its profitability growth and generation of free cash, it has been able to make significant investment in its facilities, opening a new office in 2020, and a second manufacturing facility midpandemic.

“The new manufacturing site has enabled us to double our capacity, and we’re aiming to continue to develop and grow further,” Tony shared.

The company is currently expanding the facilities with a further 44,000sqft double height extension. This will provide capability to assemble products up to 2-storeys high enabling precommissioning before delivery and for clients to see and sign-off their facilities before installation.

Life-saving Projects

The Group’s subsidiary Merit Health is focussed on providing a superior solution to building healthcare facilities quicker, at a lower cost, and with zero carbon emissions in operation.

The offering is ideal for any facilities with requirements for superior infection control and high containment (including biocontainment), such as advanced therapies, theatres, bioscience manufacture and laboratories.

Recent projects in this field included completion of the UK’s first Messenger

British Antarctic Survey M&E installation for Halley VI research station.

RNA vaccine manufacturing facility for CPI in Darlington. The project was completed in 30 weeks, around half the time compared to traditional construction.

At the end of 2022, Merit also completed phase one of the UK’s first CAR-T cell manufacturing facility based in Stevenage for Autolus Therapeutics.

The project saw £66 million invested into the development, which utilised Merit’s FLEXI POD® hybrid solution; comprising aspects of modern methods of construction for the shell and core, and an offsite manufactured fit out facilitated through a Pre-Assembled Module (PAM) and POD strategy.

Merit’s commitment to driving measurable improvement for sustainability means the facility has been designed to EPC A/ BREEAM Excellent rating, with scope 1 net zero carbon enabled using air source heat pumps, heat recovery systems, and 5D BIM technology to reduce waste and give fixed price cost certainty.

The phase one completion of the facility saw the handover of Grade C cleanrooms to Autolus, enabling them to transition seamlessly into their next phase of growth.

“The Autolus Therapeutics project was delivered in 17 months, three years faster than the biotech industry standard of around five years,” explained Tony, “being able to complete these projects wellahead of time is vital in bringing life-saving advanced therapies to the UK, which it is in urgent need of”.

Once launched, the facility is expected to process 2,000 treatments annually and will create 400 new jobs in Stevenage.

“We are very proud to have been able to deploy our unique industrialised construction methods to deliver this vital facility in record time. Productivity is an issue in traditional construction methods, but our approach means projects are delivered more quickly and, crucially, more sustainably.”

Continuing its work in this field, Merit has also embarked on a £45m expansion project for Piramal's Antibody Drug Conjugate manufacturing facility at Grangemouth.

With Tony’s growth-mindset at the helm, a growing, innovation-driven team, and a hunger to lead the construction sector’s Industry 4.0, the outlook for Merit is strong.

“As we continue to refine our products with a clear focus on innovation and automation, we are confident of maintaining our current growth path and winning further strategically important projects,” said Tony, “We’re investing in people, apprentices, technology, and factories, to underpin future demand. We are also helping inward investment back to the UK where life science companies are choosing us over overseas competitors”.

www.merit.co.uk

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