Dan Labbad: Aussie Rules

When Lend Lease’s Australian board announced back in April that Dan Labbad was to oversee its UK construction business, there were more than a few eyebrows raised in the British building industry. It wasn’t just that the move, under which Labbad was given control of all of Lend Lease’s operations in the Europe, Middle East and Africa, was a big step up for a mere 38-year-old. It also appeared to many to cast doubt over the future direction of one of Britain’s best known contractors.

Here was a construction business, struggling like many with recession, essentially coming under the control of a man known best for property development.

At the very least, the fact that Sydney-born Labbad was chosen was interpreted as a sign that Lend Lease’s Australian chiefs wanted more influence over their sometimes wayward UK contractor.

The speculation over Bovis’ future that accompanied the move intensified in the following weeks. A string of high-level departures, including Nick Pollard, Bovis’ chief executive, compounded the impression that the business was at a crossroads. There was also deepening anxiety over its position in the market, particularly over its exposure to the commercial sector.

Until this point, Labbad has remained silent on Bovis’ strategic direction. Now, however, he is ready to explain his thinking about where it goes next - and why its future is secure in his hands.

Labbad trained as a civil engineer, but rose to power with Lend Lease. He became head of its European development arm in February 2009 and headed its UK retail and communities business for three years before that. However, he actually began his career with the company working in construction for Bovis in Australia. He believes that this breadth of experience allows him to bring a broad perspective to Bovis. “I know what clients are looking for, but at the same time I’m a builder at heart. That’s effectively where I grew up - it’s in my DNA. I don’t want to be self-righteous about it, but I think having that combination of skills can add some value in the way we look at the business.”

Looking at the business is something Labbad has been doing a lot of over recent weeks. He has begun a strategic review of its operations, and says that by early next year he will have a clear view of which sectors the company will target. The last time the business went through this kind of assessment was a year ago, under Pollard. The conclusions were that the company should target infrastructure markets including rail, energy from waste and nuclear (though that last suggestion is one from which the company distanced itself after it turned out that Lend Lease was none too keen on the sector).

So why are we having another review now? “Effectively we’re reviewing everything that came out of last year’s strategy and looking at how the market has changed,” says Labbad. “Although market conditions haven’t improved, the dynamics are different to a year ago.”

Labbad says the company will continue to work in its “core” sectors of commercial, residential and education, but is re-examining where else it wants to ply its trade. “Obviously we’re exploring things like infrastructure,” he says. “We’re already in energy from waste and we expect to continue to be involved in that sector. We’re reviewing other sectors as they move forward.”

What this means is that the future is too uncertain to support multi-year plans. Instead Labbad wants Bovis to be able to fight a war of manoeuvre: it has to be able to react faster than its competitors to changes in the market. “Like all businesses - and I’m not just talking about Bovis, but Lend Lease, and every other property business in the market - if we think we can sit and be as we were two or three years ago and expect to be successful in the same way we were then, we’re kidding ourselves. We need to look at the signals we’re getting from the market, how they’re changing and what clients are expecting.”

One such signal is the government’s localism agenda. “There’s no doubt that we’re going to be working with councils a lot more than we do at the moment. We’re going to need to change the way we operate in order to access those opportunities.”

Overall, Labbad says that his goal is to “ensure that Bovis Lend Lease maintains its position as one of the UK industry’s best constructors”, which to him means it
needs to be “number one or two” in the sector. He realises that this position may not be cemented overnight. “I don’t set my timeframes on three months or six months - it’s a two- or three-year horizon. And every decision we’re making goes towards it.”

Of course, that goal is made more challenging by the aforementioned fact that the government and the wider market is in a state of flux, “and we have to adjust ourselves to that”. Unsurprisingly, the firm’s financial performance cannot be predicted with any confidence: all he says is that it will “hold our own”.

In his view, the scale of the cuts outlined in the CSR last week are necessary “as the country needs to work through this as quickly as possible”, but the implications for a contractor are obvious. The 60% cut to capital spending in the education sector is particularly worrying, despite the fact that Bovis made it onto the academies framework when it was renewed last year.

However, Labbad is unfazed. “It’s not going to be a market of silver bullet opportunities. We’re going to have to work with different partners in different ways to help unlock opportunities, and I think there is a huge requirement nationally for education infrastructure regardless of the position that the government has taken on Building Schools for the Future.”

Labbad, through his experience with Lend Lease, is obviously well placed to comment on the state of the private sector market. He says that there are “some movements in prime commercial space”, which is positive news for a contractor with a track record of working for companies such as Stanhope, Land Securities and British Land. However, he warns that in general, the market looks set for an 18-month to two-year continuation of the downturn. “Obviously from a speculative development perspective outside of prime commercial it is tough, and that’s because the banks aren’t anywhere to be seen just yet. But,” he adds, “I do expect that coming out of 2011 and 2012 we’re going to see movement in that space and the opportunity now is to reassemble skills and be ready to take that on.”

Labbad believes that the spending cuts will hit the North and Scotland hardest. There has been much talk over how tough Bovis is finding it in the North, particularly since Tony Lenehan, the former head of UK North, departed earlier this month, after which the English and Welsh operations were united under Julian Daniel, the former head of UK South.

Labbad says: “I think [the UK North division] is certainly challenged more than any other core part of our original businesses, but in saying that there are a number of areas, like waste and several smaller areas, where we are picking up work. But I don’t think the fact it’s more challenged relates specifically to Bovis - it’s a national phenomenon.” He is also adamant that Bovis is committed to its northern offices. “There’s no doubt the market will recover, it’s just a matter of when. From our perspective, it’s about holding out until it does.”

Lenehan’s departure was, of course, only one of a number of recent senior management exits from the firm. The most high-profile was that of Pollard; his departure was confirmed in June, six weeks after Labbad’s role was announced. “I don’t know what was said in the market, but the agreement was amicable,” says Labbad.

Pollard will not be replaced directly, but the company is looking for a managing director to report to Labbad. He initially refuses to be drawn on a timeframe, saying “I’m keen not to jump for the sake of jumping”, although he says later that the focus “for the next six months” is securing the right managing director. “There won’t be any other short-term changes to the management team.”

Labbad says he is not worried that Bovis has lost several well-established staff over a short period of time. “We’ve had to re-look at what was the right management structure for the organisation,” he says. “As a senior management team, we knew that we had to rationalise to move forward as there just wasn’t the scale in the market that there had been. I don’t think anybody was under the illusion we could continue in the way that we were given the amount that the market has come off.” Labbad will not be drawn on whether Bovis will make further redundancies lower down in the company, saying only: “I do expect the market to be tough. It’s going to be and we just need to wear through that.”

The other element to Lend Lease’s UK restructuring that has set tongues racing is the relationship between the parent company and its UK business. Labbad says: “I think this has been represented in the market in the wrong way. It comes across that my role is to integrate the business, whereas it is to ensure that each business is operating in its own right successfully.” In that regard, he has set a target for Bovis to do 20-30% of its work for Lend Lease, with the remainder for external clients, and wants to quash any thought of Bovis becoming nothing more than Lend Lease’s in-house builder. “It’s important from my perspective that Bovis maintains an independence because it keeps the organisation sharp, and ensures that we’re balanced.”

At the same time, he recognises that there are advantages to the companies working together on complex projects - pointing to the 2012 athletes’ village and to Ravensbourne College at Greenwich. He adds that he expects Bovis to be involved in the second stage of Lend Lease’s Stratford development, and its £1.5bn renewal of the Elephant & Castle in south London.

But what of the much publicised tensions between parent company and subsidiary over business strategy? “There’s always healthy tension between businesses; it doesn’t matter which one you work for in which sector.” He pauses. “At times, that has got a little bit, what would I say, a little bit more than I would like. But I would say that it gets reported externally a lot more than it actually is. From my perspective, I expect all of our businesses to operate independently and together as necessary. We need to bring the best of this business to clients, and how we’re structured internally is a secondary consideration.”

Labbad is also keen to emphasise the benefits that the Australian parent brings the contractor. “We are in a good position globally. Firstly we have little debt relative to a lot of our contemporaries, and secondly a core part of our business is operating in one of the only Western markets that is buoyant. That’s a huge advantage, because if there’s a further downshift in this [the UK] market we have ample opportunity to withstand it.”

Despite the difficulties in the UK sector, however, Labbad is adamant that Lend Lease is committed to the region. “There’s always been a lot of talk about whether we are or we aren’t - we absolutely are. Otherwise I wouldn’t be here,” he adds, narrowing his eyes. “I wouldn’t waste my time.”