The chap on the left is the grand wizard who created Mears, the firm that never stops growing. The one on the right has six months to learn how to cast the same spell.
As they Pose for their photographs, the differing personalities of the two Mears executives couldn’t be more apparent. Bob Holt, 50, the man on the left of the page, is the chairman and current chief executive. He is a model of professionalism: he stares unblinking into the photographer’s lens. And then there’s Stuart Black, 40, who was installed as chief operating officer and chief executive designate last week. He finds that his feet do not reach the floor when he sits back in his chair, and produces a high-pitched chuckle when asked not to smile for the camera.
Holt bought the social housing repair and maintenance business in February 1996. Before that he was managing director of the maintenance arm of support services group Mitie and back in the 1980s he had been finance director of ADT, the security company run by former Conservative party treasurer Michael Ashcroft.
In October of 1996 Holt listed Mears on the alternative investment market, the junior stock exchange. It grew by an average of 42% a year for the following eight years, and was named AIM company of the year for 2003. Its turnover for 2004 is estimated at £170m, most of which comes from the repair and maintenance sector where local authorities and housing associations outsource work.
Leaning forward, Holt declares: “I’m not short on confidence, as you can gather. We’ve never let the City down; we’ve never disappointed. I always do the right thing for shareholders, as I’m the largest of them with 10%.”
Given that record, Black says, “sometimes I wonder why they needed me …” He giggles, before supplying the necessary justification: “Bob’s a strong personality. He’s got a range of interests inside and outside the business. He knows that Mears has got to have more dedicated support than he’s got time for.”
Holt holds four other directorships at listed companies. About a year ago, Mears undertook a strategic review, which concluded that it needed to strengthen its board if it was to grow at the same rate. Black’s name was recommended on the strength of his work at support services group Mouchel Parkman, where he was business development director.
I always do the right thing for shareholders
Councils are trying to get through a £19bn backlog of housing repairs to meet the government’s Decent Homes Standard, and the scale of the task has led them to look for increasingly complex long-term deals with fewer suppliers. Black looked like the man to tackle this because he had worked on complicated outsourcing contracts for Mouchel Parkman, including gas and waste strategy work. If this proves to be the case, Mears could move from being the market leader closely pursued by the likes of Kier and Connaught to market hegemon.
Modestly, Black declines to confirm when he is likely to become chief executive. “I’ll just wait and see,” he says. Holt, though, confirms Black will get the title in six to nine months; until then he will be touring the UK, learning about the market and his employees.
What he has learned so far is that although the outsourced social housing maintenance is worth £6bn, it is fragmented – the top 10 players account for only £1bn of work. It is, therefore, ripe for the taking. Black wants the group to be turning over £750m in four to five years and Holt envisages a listing on the FTSE 250 in about the same time.
Mears needs to act quickly, as other support services groups will soon realise what they are missing: “I’m rather surprised some of the larger guys – Serco, Capita – have not taken a major footprint. One reason we’ve outperformed expectations, is that we’ve very, very little major competition,” says Holt.
It may be that firms are put off by the idea of working on rundown estates filled with difficult tenants. Black says that, until recently, Mears’ most valuable framework was in fact in leafy Richmond, Surrey, on a contract worth £12m a year. Holt, by contrast, is happy to acknowledge that Mears’ bread and butter work is in poorer communities. He says a business can only be successful if it considers the needs of the average customer: “Remember the environment – we are working in some very interesting areas, where people have not necessarily been treated well. It’s about treating them with respect … Everybody says things like that, but we really do it.”
Sometimes I wonder why they need me ...
Both men are clear on Mears’ future markets. That £19bn backlog applies only to England. “The market in England is big enough for now, but markets in Wales and Scotland will open up – we might lobby with councils about this.”
Holt last week met with the Welsh Housing Federation and the Chartered Institute of Housing Cymru: “We were looking at how they will address their own £4bn backlog. Only one of the 22 authorities in Wales uses an outsourcing partnership-type of approach.”
Holt’s concern is always with the future. Why does Mears need Black? It doesn’t, at the moment: “Stuart is not here because he is needed today; he is here before we need him so he is ready for when we do.”
After the interview, Black hops off the chair and rushes off to catch the next train from Euston to Manchester to continue his tour of Mears’ regional activities. Holt moves on to a corporate meeting at Mears’ broker. Two very different people; one very similar ambition.
Mears at a glance
Status AIM-listed since October 1996.
Share value when listed 10p
Share value at close of business on 17 November 194p
Turnover (12 months to 31 December 2003) £112.3m
Pre-tax profit £4.8m
Number of employees 2000, about 200 of these have been transferred from local authorities upon award of contracts. Most contracts are second or third generation, meaning they were taken over from other contractors. So relatively few staff have actually transferred from the public sector
Work Conducts 650,000 repairs a year and maintains 250,000 public sector homes for more than 50 local authorities
Miscellaneous Subsidiaries include a decorating business, an IT support specialist and a transport company
Mears: the SWOT analysis
Stuart Black Focus on service; really simple, effective ideas – for example, when Mears goes into a community to upgrade the housing, we put mobile hotels in the street, so that people can cook, watch television and so on during the day.
Bob Holt Highly committed workforce – staff turnover is extremely low.
Robert Sanders, analyst at Arbuthnot It's cash generative with a strong balance sheet.
SB I don't know – I keep looking.
BH The management team – some have not worked at this size of company before.
RS Lack of white-collar skills to complement blue-collar skills.
SB The market size – there's a lot of market to go for.
BH The market is as yet pretty much untouched.
RS Local government bodies are increasing the range of services they buy in.
SB Bigger organisations coming into the market place – I can see different types of support services groups, not just contractors. For example, Atkins, Mouchel Parkman and Capita.
BH The overconfidence of the existing management team – maybe it won't recognise the opportunities available.
RS Major PFI contractors move downmarket and kill prices.