Chief executive Tim Hough intends to establish Miller Homes as a 5000-unit business after ‘troublesome' buy
Top ten housebuilder Miller Homes plans to build 4000 units this year and to grow that figure to 5000 within the next five years. It intends to meet that target by increasing output at its regional offices, but Tim Hough, Miller Homes' chief executive, says the firm may make another purchase to achieve its objective.
It is only five months since the company acquired Fairclough Homes, the UK arm of US housebuilder Centex Corporation, for 264m.
Although the for-sale sign had been firmly planted in the front garden of the £270m-turnover Fairclough Homes, it caused some surprise that Miller, the housebuilding arm of privately-owned Miller Group, was the buyer. The Scottish group had never bought a company of that size before, and the housebuilding division had not made an acquisition for five years. Yet the move was a logical one for Miller, giving it added geographical strength, particularly in the Home Counties where it lacked real presence.
The company started the year by announcing a new regional structure for the combined business. Fairclough's St Albans office remains virtually untouched, becoming a new division for Miller under the leadership of Richard Sarraff, a former regional managing director of Fairclough.
Nick Smith, another regional boss, becomes head of Miller's north-west operation, and Fairclough's land acquisition and plot conveyancing team has been retained.
Inevitably, there have been some redundancies. About 140 jobs have been cut, although the opinion among fellow housebuilders is that Miller has done the job more cleanly than some of its rivals.
Hough, though, describes the acquisition and integration process as having been "troublesome and difficult". He says: "I was glad to have my Christmas holiday. We were involved in the Fairclough acquisition from April, and from July we were in a one-to-one situation. It took up nine months of last year and our recent trading statement indicates the results will be okay."
The trading statement issued in January indicated that operating margins remained at the 2004 level of 15%. It also suggested that the annual cost savings from the merger would be about £15m.
The Fairclough name has all but disappeared, but the best ideas from the business are being integrated into Miller's operations. Hough says Fairclough's culture was a factor in the acquisition. He says: "If they hadn't fitted we'd have thought twice. We could see that they were on a similar journey to us."
I was glad to have my Christmas holiday. We were involved in the Fairclough acquisition from April
Tim Hough, chief executive, Miller Homes
Hough's objective for the next 12 months is simple: he wants Miller to deliver the planned 4000 completions, with every region firing on all cylinders to give the business its 13th year of successive growth in profit. In his view the housing market looks steady and, with the restructuring more or less complete, the business is making a fresh start for 2006.
Further acquisitions may be on the cards but they won't be happening imminently, says Hough: "We've had tremendous support from the shareholders and now we have to bed down. We can look at it in another year's time."
Miller is looking to acquire, or grow organically, in the South-west and South-east, although finding buy-able housebuilders may not be so easy next time round, as Hough admits.
The firm was recently named preferred bidder on a housing market renewal programme in Salford, and it is planning to set up an affordable housing arm on the back of this success.
That doesn't mean that the company will be going into off-site manufacturing ventures in a big way or setting up its own low-cost home ownership initiatives, as other big names in the industry are doing. Hough takes a more cautious line: "There are initiatives emerging from the government now and we'd seek to do some - we've got a role to play as a producer of homes."
He also takes a cautious view on the package of proposals announced by the government in December, including the planning gain supplement and the proposed update of PPG3, which are aimed at delivering 50,000 more
homes by 2016. "You have to give the government credit for being committed to housing, but the question is whether the policies will deliver their stated aim. The key constraint is land availability," he says. Still, Fairclough's healthy 6493-unit landbank should help keep Miller on track to deliver.