Privately owned Miller Group came to public notice with a protracted battle to buy Cala. That bid failed but the firm has a lot of hungry money. So how did a privately owned, family firm come by all that cash?
In a staidly traditional office, incongruous in the heart of London’s groovy ad-land, Keith Miller seems homesick for the more austere environment of his home city. ”The advantage of having a base in Edinburgh is that you don’t get too carried away with what’s happening in the South-east,” the Miller Group chief executive says. “It gives you a helpful sense of perspective. We can go back up to Scotland and put a wet towel on our heads.”

A taste for cold towels and the bracing Edinburgh air could explain why they do things differently at Miller Group. Whether in office design or the construction business itself, the 2000-strong company is not one to follow fashion.

It ignores the current trend for consolidation by running a business with five strands: construction, civil engineering, housebuilding, commercial property and the UK’s largest coal-mining contractor. It is a private company, whereas most of its competitors in the Building top 50 are fixed in the unwavering spotlight of a stock exchange listing. It is family-owned, at a time when the construction dynasties of Laings and Shepherds are, on the whole, bowing out. And it enjoys its privacy, appreciating the freedom to manoeuvre and shield its plans from analysts and journalists.

At least it did until early this year, when Miller announced that the company viewed acquisitions for its housebuilding and property businesses as its twin motors of growth. There followed a £69m retail property acquisition, the unsuccessful – and very public – battle to take over Cala, and last month’s £23m offer to buy Newcastle-based 500-unit-a-year housebuilder Cussins Group.

All this activity has been accompanied by the sort of press attention that must have had 50-year-old Miller reaching for his favourite wet towel. Asked if he has enjoyed having a higher profile, he remarks dryly: “It’s not a question of enjoyment; it just goes with the territory.” But with further acquisitions in the offing, the company and chief executive will remain in the limelight – and, as many in the industry believe, deservedly so.

Looks good in black

Miller Group is in the minority of construction companies that have remained in the black over the past five years. Thanks to careful husbandry of its profit – amounting last year to £14.8m before tax on a turnover of £365.7m – and shareholders’ funds, Miller Group has up to £100m to spend in pursuit of “consistent earnings growth and adding shareholder value”. Family trusts and Miller Group employees will be the beneficiaries, and outside investors will have to look on in envy.

Miller himself appears as cautious and buttoned-up as the way he likes to run the company. However, a colleague from a rival firm believes that this conceals a surprising degree of passion: “He’s very keen to make his mark on Miller, and to put it up there in the industry. He’s very tough, very ambitious and very hardworking.” Another industry observer describes him as “very professional; a clear thinker with a good-quality business”.

As Miller explains, the group’s entrance on the corporate stage was prompted by a strategic review that highlighted how cash generated by contracting could be best turned to profit elsewhere – namely in the 1100-unit housebuilding and commercial property arms.

“Although we will get better contracting margins as we extend partnering, there isn’t the same potential for earnings. There’s a limit to how much profit growth you can get without an acquisition and taking on additional risk,” he explains.

The deals Miller opted for were a failed bid for Glasgow-based property company City Site Estates, followed by the successful acquisition of the Co-operative Retail Society’s 49 retail sites for £69m. In April, Miller moved on to Scottish housebuilder Cala, which was defended by managers intent on a buyout. Miller lost the tussle when a technicality in the bid document prevented it from raising its offer price above that of the MBO team.

Miller only wants to spend as long on the subject as he deems polite. Did he feel frustrated when Cala slipped out of his hands? “That’s history now.” What did he say to the adviser responsible for the document? “It’s history now,” he repeats. “You can’t be successful in everything. You’ve just got to get more right than you get wrong.”

That Miller fits in well with the company that his uncle grew from his grandfather’s one-man architectural practice is hardly surprising. Growing up in the Miller family meant spending holidays and weekends on site – “We thought it was what you did on a Sunday.” He joined the company in 1975, after a year at Wimpey, a masters from Glasgow University and a degree in building from Heriot-Watt. He started in the mining division, then progressed through Miller Developments before being appointed group chief executive in 1994.

He describes his role as a well-travelled one, involving spending three days a week away from Miller’s Murrayfield headquarters on visits to offices and sites throughout the country. There, his input is chiefly in evaluating new opportunities. He certainly seems to have the stamina for these weekly marathons, mentioning yacht-racing, climbing and “ski-mountaineering” as his pastimes. But he discusses them reluctantly, rebuffing non-business questions with “I don’t think your readers are interested in that.”

Even if he is keen to move on from Cala, Miller acknowledges that the experience did have benefits. “We’re now much more widely known as a company that has growth ambitions. We’re able to see a greater number of opportunities than otherwise.” These include sites and property portfolios, as well as corporate acquisitions. The likelihood is that with part of the war-chest remaining, there will be more deals to come.

Embracing PFI and squeezing margins

Meanwhile, the construction business – which, Miller stresses, looks to its sister property arm for only 10% of its workload – is embracing partnering and the private finance initiative. It has several health schemes on the go, including Edinburgh Royal Infirmary and is awaiting a decision on Glasgow’s £1bn PFI schools contract. Miller hopes the construction business will grow organically by squeezing better margins out of contracts.

One way he hopes to do this is by harnessing IT, seen as “a real source of competitive advantage” and a target for future investment. “The advantage is to be able to control work in progress, to get real-time information quickly to make fast decisions. When everybody is communicating you cut down on the chance of mistakes,” he says.

One move he seems unlikely to make is to take the company public. Although Miller Group already lives by public standards of corporate governance, the extra regulatory requirements attendant on a listing have little attraction for a company with no need for a cash injection. However, Miller is careful not to rule out the possibility of a flotation at some point in the future. “We don’t need to attract additional equity funding at the moment, although that may change depending on how successful our growth strategy is.”

In fact, Miller appears proud of the company’s status as an outsider in the club of listed, London-based contractors and is keen to preserve it. “It’s a privilege to be private and to have that additional differentiating factor from our competition.” And being privately owned allows the chief executive to say things such as: “We’re lucky we don’t have to conform to short-term fashions.” In other words, it suits the Edinburgh style quite nicely, thank you.

Personal effects

Who’s who in your family? Married with three daughters. Miller declines to give their names “because that’s a different life”. Is there a dream project, real or imaginary, that you’d like to be involved in? No. I haven’t enough time to dream about what might be. What do you do in your spare time? I enjoy watching rugby; I go to all the home games at Murrayfield. I’ve got a 46 ft yacht and I go racing with my daughters as crew. What book are you reading? Business at the Speed of Thought by Bill Gates. Are you a keen Internet surfer? E-mail and the Internet are too time-consuming. My typing skills are poor, so long e-mails are the preserve of my secretary.