Mount Anvil’s chairman reveals how the housebuilder beat the recession
The UK’s volume housebuilders saw business fall off a cliff after the financial crash in 2008, with the notable exception of Berkeley, and only began to recover in the last six months or so. What’s more smaller housebuilders are continuing to feel the squeeze. But one medium-sized London-based firm has been operating under the radar, slowly growing its business through the downturn. It may not be a household name, but Mount Anvil has consistently produced the goods.
“We’ve been making six figure profits throughout the recession,” says Killian Hurley, Mount Anvil’s co-founder and executive chairman. We had a nice mix of sites in the right locations and then we also had a number of housing association jobs, which aren’t the most profitable, but from a cash flow perspective were super. But the key thing was having the right sites in the right locations, which for us is central London. If you get the location right, you really have to eff it up not to make money.”
Mount Anvil’s results for 2012, published at the end of April, confirmed the company’s winning streak. Turnover was £108m, up from £90.5m in 2011, with pre-tax profits of £10.1m up from £2m. The company also reported that it completed 480 homes last year, up from 165 in 2011, including the redevelopment of charity Action for Children’s former HQ in Highbury and the Central Square and Seward Street developments in Clerkenwell. At the end of the year, Mount Anvil was working on just short of 1000 homes in the capital, making the firm a significant player in the London residential property market. And with every volume housebuilder, from Redrow and Crest Nicholson to Barratt, making a major play in London, what’s the secret to succeeding in such a crowded market?
Keeping a tight rein
Mount Anvil’s strategy involves focusing on desirable sites in central London boroughs - not the sort of prime sites favoured by the Candy brothers in Knightsbridge and Mayfair, rather the fringes of the City and Westminster. According to Hurley, whose quiet Irish cadences can be gently hypnotic, the strategy is also focused on steady growth, never overreaching in terms of debt and minimising risk as much as possible. “We use the phrase ‘controlled profitable growth’ and the other variation of that is ‘maximise profit while minimising risk’,” he says. “We’re never afraid to sell too early. Some developers find that difficult and that’s fine - they have their own business models and they’re far bigger than us. But our little business is about that controlled profitable growth.”
You drive a hard bargain, push people really hard, but you do what you say you’re going to do
Mount Anvil is still relatively unusual in that it acts as both developer and main contractor, a business model that goes right back to the company’s early nineties roots. According to Hurley, one of the key benefits of the model is that having in-house construction expertise allows the company to consider taking over stalled schemes safe in the knowledge that they have considered all the construction risks. This is most clearly illustrated, Hurley says, in Mount Anvil’s joint acquisition of the stalled Eagle House development on City Road to the north-west of the City. The acquisition was made with with Morgan Stanley and Area Property Partners, which he describes as a “transformational partner”. Designed by Farrells, the partially constructed tower development includes plans for 276 homes, including 206 for private sale, as well as 6,312m2 of commercial space. “We were able to go in there and take an educated view on what the real risks were,” says Hurley. “We were able to call on the best consultants, but then also rely on our own expertise. That’s where that mix of developer contractor is really key for us.”
Hurley adds that the contractor-developer model also allows Mount Anvil to keep a tight rein on costs and makes it easier for the firm to manage reputational risks. “With the scale of schemes we’re looking at you could be three years in development, so the spec you’ve thought about at the start of year one will not be the spec you’re going to put in at year three,” he says. “The ability to change that at base costs as opposed to paying a contractor makes a big difference. And follow-up customer care is very important as well. So we get full visibility of our customers’ experience before they buy and after they buy. And when we get it wrong we can put it right very quickly.”
Mount Anvil’s long-term outlook is also reflected in its attitude to its supply chain. Hurley says he will always be tough when it comes to negotiating a price, but that once agreed the price is fixed and Mount Anvil will pay on time. This, he argues, engenders a mutual respect between contractor and subcontractor, which makes it easier - and cheaper - to deal with problems. “You drive a hard bargain, push people really hard, but you do what you say you’re going to do,” says Hurley. “And this comes back to a respect thing. If you earn people’s respect then when you have a problem you can go to your subbie and they say ‘yep, no problem, I’ll help you out’.”
This relationship is also important, Hurley argues, in ensuring the quality of the finished product and ultimately securing Mount Anvil’s reputation as a quality developer. “I was asked 25 years ago, ‘what’s the purpose of a business’, and being a chartered accountant I said a return on capital and all this other bullshit stuff,” he says. “And this fella said ‘no, the purpose of a business is to create a customer because if you’ve no customer you’ve no business’. Keeping that customer then is very important and the subbie plays an important part in that because you don’t have people on site supervising every day of the week so we need the right subbies with the right ethos who will do that for us.”
If we’re doing six to 10 schemes we can control that. As you get bigger it becomes more difficult
However, despite Mount Anvil’s impressive growth record, Hurley says that there are limits to his ambitions for the size of the company. He aspires to build about 500 homes a year over the next five years, all in central London boroughs, no more, no less. So, considering that the company delivered 480 homes in 2012, the company is just about where Hurley wants it to be - any bigger and he would worry that he would begin to lose control.
“This is why we don’t want to be the biggest developer in central London - it’s far too complex and we’re not bright enough for that,” jokes Hurley. “If we’re doing six to 10 schemes we can control that. As you get bigger it becomes more difficult. For us it’s about quality and our position in the market.
We’re seeing an increasing number of people coming back and buying from us a second and a third time. It’s about the quality. We’re certainly not the cheapest - we don’t want to be the cheapest - and we don’t have to be the biggest.”