So farewell to Erinaceous, possibly the most bizarrely named company in the construction sector: the hedgehog has finally curled into a ball and rolled out of the door.
Not too surprising given that it has debts of more than £220m and has been losing key staff ever since chief executive Neil Bellis and his sister-in-law Lucy Cummings packed their bags last year with tidy pay-offs for the mess they had created.
But what does the final collapse into administration of the one-stop-shop Erinaceous model mean for the wider industry? To judge from the reactions of senior figures at a couple of rival consultants this week, not much. One described Bellis’ amassing of 27 firms in a little over seven years as “madness” and added that he would normally allow three years to bed in a new acquisition. Another said he had looked at buying bits of it but walked away when it became clear that making the deal pay would be problematic. Significantly neither said they had come up against Erinaceous when bidding for work.
Despite the fact that Erinaceous’ share price has plunged 99% over the past 18 months, there are still some businesses worth salvaging from the wreck. Companies such as JR Nolan are prudently taking steps to remove themselves from administration as quickly as possible. We wish them well.
Erinaceous might just have been saved had it not been for the credit crunch. However, that’s unlikely. The company was built on a property bubble, and once this began to deflate it was always likely that a firm which felt that 100% gearing was a sensible business strategy would disappear with it.
Why did Ian Sutcliffe go?
Ian Sutcliffe’s sudden departure as UK managing director of Taylor Wimpey to head office developer Segro has raised eyebrows across the property world (see page 24). Sutcliffe took up his post after last July’s £5bn merger between Taylor Woodrow and George Wimpey. Since then its share price has dropped 43% to 165.5p, as Taylor Wimpey has paid for its exposure to the US housing market, which contributed to a £19.5m pre-tax loss in 2007. Sutcliffe also recently admitted that he regretted the way Taylor Wimpey had demanded a 5% cut in suppliers’ invoices. So on the face of it, perhaps the signs were all pointing to the exit, although there is no suggestion that he was sacked.
He may be playing a different game, however. Although Segro is also being hit by the credit crunch, the value of its Continental European portfolio last year grew 6.2% to £933m in 2007 and contributed to an adjusted pre-tax profit of £153.7m. With Barratt looking to offload Wilson Bowden Developments for an estimated £250m, could Segro be a buyer?
Stuart Macdonald, deputy editor