New chief executive outlines ‘do nothing’ plan for 2009 as staff numbers are cut to the bone
Chris Holt, the new chief executive of MJ Gleeson, has said the company will effectively go into hibernation in 2009 while it waits for the market to improve.
Holt, 57 (pictured), was speaking three days after he replaced Paul Wallwork as boss of the housing and regeneration firm.
Wallwork resigned last week after a wave of redundancies cut Gleeson’s headcount from 224 to 50 outside its Powerminster affordable housing business. It had previously cut 400 jobs in 2008, taking the total to 574 over the year.
Holt said: “There will be very little activity in 2009 and where it makes commercial sense we will mothball sites. We hope to see the green shoots of recovery in early 2010.”
He pointed to 2,000 units in Liverpool and Manchester where the company could “turn the tap back on” if demand revived. He said: “It will be a balance between presenting a saleable site and mothballing the rest.”
Holt added that he hoped to sell some of Gleeson’s 3,600 acres of strategic land to housebuilders in the first half of 2009.
As a result of the job cuts, the group will reduce payroll costs to £3.5m compared with £12m in July, and all directors will take a pay cut.
Unlike many of its peers, Gleeson has a positive cash balance – £22m on 30 June – and Holt said this enabled it to shelve its housebuilding operations.
He said: “Our challenge in reacting to this terrible market is to minimise costs and fortunately we have the ability to do that.”
One Gleeson employee said it was a difficult time for staff but people understood the wider problems. They said: “The mood is grim but everyone is aware of the realities. They don’t like the idea of redundancies but the company is behaving with great decorum. At the moment everyone is locked in meetings to decide their fate.”
Riding out the storm
Kevin Cammack looks at the survival options for different construction firms
These are unprecedented times for housebuilders and may increasingly be so for contractors unprotected by frameworks or public sector work. In housebuilding the watchwords have been cost-cutting and cash conservation in order to protect balance sheets. But in truth the velocity of the downturn has left many at the mercy of their lenders, as debt has been slow to decline and companies have faced breaching banking covenants.
For those companies with the luxury of a positive balance sheet, as shown by MJ Gleeson, the option to hunker down and wait out the next 12 months has become increasingly attractive. For smaller groups with a landbank and exposure to residential and commercial work, it is a strategy that, while painful for staff, offers a good chance for survival.
For its bigger housebuilding brethren with national structures to support, land and supply chain relationships to protect and, most importantly, loan commitments to repay, this is an option rarely available: they must trade through the next 12 months as best they can and probably in the knowledge that new equity or finance will be required to pull off an eventual recovery.
Kevin Cammack is a construction analyst at Singer Capital Markets
Go to www.building.co.uk/archive for more on the history of MJ Gleeson