As chief executive of family-owned NG Bailey, David Hurcomb has a heavy weight on his shoulders – securing the future for generations of Baileys to come
According to David Hurcomb, running a family-owned company can be as stressful as being on the board of a plc with a turnover above £5bn. And he should know.
The new chief executive of M&E specialist contractor NG Bailey swapped a seat on the board at Carillion, where he spent four and a half years, to become interim chief executive of interiors firm Havelock Europa in April 2010 before starting his current job last September.
Sitting in his new office in NG Bailey’s east London offices, Hurcomb reveals that during the interview process, he was told he would be responsible for steering the firm through tough economic times and for ensuring - in the words of the family council - that he “built a stronger business for the as-yet unborn generation of Baileys”. No pressure there, then …
Work to be done
NG Bailey has suffered as much as any construction company over the past two years, with a drop in turnover from more than £600m in 2009 to £464m in 2010. But the group did report a £13.5m profit following a revaluation of its investment portfolio and thanks to improved global markets over the past 12 months, investments have contributed a £6.7m profit - in contrast to the £6.7m loss suffered the year before.
Despite predictions of a tough six months ahead for the industry, Hurcomb says he jumped at the chance to join and run the firm: “NG Bailey is one of the blue blood names left in the industry,” he explains. “And there aren’t that many left these days. There are the likes of McAlpine but many others have disappeared. NG Bailey is a great brand and a great name. That’s what attracted me.”
He adds that working for a smaller firm allows him the luxury of time to really focus on, and get to know, the business: “Let’s be honest,” he says. “Having to manage your share price, daily or weekly, is a nightmare. That’s the big difference between what we do and a plc, where you are being scrutinised. It’s much better having shareholders, real people, sat in front of you, rather than institutions who come [into] meetings [and] after 30 seconds, head off to the next one.”
NG Bailey is one of the blue blood names left in the industry. And there aren’t that many left. That’s what attracted me
There are three family members in the business: Carl Bailey, sustainability director, his cousin Martin Bailey, chief safety and innovation officer, and Richard Bailey, Martin’s father, who sits on the board. Hurcomb likes this, as it shows the family is keen to be involved in the running of the firm, rather than looking to sell to the highest bidder at the earliest opportunity. David gets together with the family, as shareholders, three times a year to update them on the company’s performance.
Taking the business forward
So how does Hurcomb propose to steer NG Bailey through the rest of the downturn? The group has moved from a pre-tax loss of £10.8m in 2009, to a profit of £19.9m in 2010. But this is unlikely to continue. Downward pressure on gross margins will have an adverse effect on profitability for the year ended 2011 - although Hurcom can’t be any more specific than that for now. He adds, though, that a strong balance sheet of £88m for the year provides some good news. “We are completing contracts won at good margins but we are replacing them with contracts won in a new environment, with margins that are pretty skinny.
“Providing contracts are low risk, we can live with skinny margins for a couple of years, but long-term nobody can do that. We have breathed in as the market has breathed in.”
When will they be able to breathe out again? Not for a while, says Hurcomb. “The private sector is at the bottom of its cycle and the public sector has another 18 months to two years of coming down before it bottoms out,” he says. “I think the low point for the construction sector will be the back end of 2012 and it will recover in 2013.”
Despite having cash in the bank, he won’t be making any acquisitions because there are just no bargains around. “At least for the next 18 months acquisitions are not part of our agenda. We might look at bolt-ons in a couple of years but there is still a lot of overpriced stuff out there.”
So another way to grow the business will need to be found as the economy recovers. There is a plan in place and it involves growing NG Bailey’s rail division. It is now a small part of the group, with a turnover of only about £20m, but the target is to increase this to £70m in the next four years.
Hurcomb also has big plans for Bailey Off-site. This part of the business has been revved up over the last three years, thanks to a £4.2m investment and the opening of a 56,000ft2 factory. Hurcomb says that the reduction of cost, CO2 emissions, noise levels and labour on site all add to the argument to increase focus on this part of the business.
Thinking long term
Not being a listed plc is NG Bailey’s strength, says Hurcomb: “[The family] understand the cyclical nature of the UK construction market and they are prepared to invest in the troughs to reap the benefits on the way up. Rather than a plc - where you have to meet profits figures every six months, which is very difficult. They’re informed shareholders who value the long-term return.”
It’s obvious in the next year or two profits may not hit levels seen in the boom. But, at this rate, NG Bailey is likely to be around for another 90 years. It’s just that by then there will be someone else at the helm, looking out for yet more future generations of the family.
David Hurcomb took on the role of chief executive at NG Bailey after his predecessor, Mark Andrews, left the firm suddenly in October 2009 after five years at the company. CEO Chris Newton became acting chief executive immediately after his departure. Andrews left two months after describing the group’s results as “bitter-sweet”. He has since claimed it was “always part of the plan” to leave so quickly and declined to answer questions at the time on whether he resigned or was serving a notice period.