And in the City, there’s a similar distrust. Housebuilders are the small fry that barely show up on radar screens tuned to multibillion-pound-turnover telecoms and pharmaceuticals multinationals. Their one-dimensional businesses are wide open to the volatile housing market or they have liquidity problems, and they haven’t grasped that the new economy requires them to redefine their businesses. In City-speak, housebuilders are low-rated.
But at least the chief executive of Westbury, winner of this year’s Building Award for Major Housebuilder of the Year, isn’t ducking the issues. Martin Donohue, a long-standing Westbury man and former squaddie, holds his hand up to housebuilders’ tarnished public image, is busily diversifying to suit the City fund managers, and has come up with an ingenious plan to improve quality standards.
“Where the market has thrown us challenges, we should have wit and intelligence to meet them,” he asserts. Under attack on the design and land supply fronts, Donohue believes that housebuilders need to stop reacting defensively. “As an industry, we should be part of the solution, and not allow ourselves to be identified with the problem. We’ve got planning, design and decontamination expertise, and they’re there to be harnessed.”
Donohue has also been quick to heed the City’s call “to demonstrate breadth, and provide added value and services, not just volume”. In an age where traditional definitions of what companies do are breaking down – Prudential sells CDs via its Egg web site and electricity companies sell gas – Westbury has diversified into white goods, carpets and financial services under the year-old “Westbury Direct” brand.
But most of all, Donohue wants to talk about his contribution to the drive to improve quality standards. Westbury’s new Space4 division will manufacture timber-framed wall and floor panels for up to 5000 homes a year. Once craned on to site, the brick skin and the roof are “removed from the critical path”, allowing internal and external trades to work in tandem and the finished product to be completed in eight weeks.
“At the risk of sounding immodest, we think its a step change from what currently occurs,” Donohue boasts. “Space4 will vastly improve precision, finish and quality standard, and provide the customer with an element of choice and individuality in a way the current method makes difficult, if not impossible.” Space4 homes will also exceed the new insulation standards in the revised Part L.
Space4 could even bring interesting social side benefits. Donohue, 54, suggests that factory production can address skills shortages by extending the working life of 50-something tradesmen who would otherwise be lost to the industry. “Older B&Q staff are better at giving you their attention. We won’t quite be the B&Q of housebuilding, but there is an element of that thinking.”
As an industry, we should be part of the solution, and not allow ourselves to be identified with the problem
One City analyst applauds Donohue’s willingness to take Westbury into uncharted territory. “I think he’s much more flexible than some other chief executives, even though he’s a long-standing company man. But with Westbury Direct, and Space4, and a joint arrangement with the University of Warwick (to research ways of eliminating snagging defects), he’s prepared to embrace other things. They take a broader view than just buying land and putting houses on it.”
However, the analyst goes on to raise some criticisms of Westbury’s recent strategy. “They’ve really failed to get into the South-east market, and they’re not in the city centre and regeneration markets, which are the strongest part of the economy.”
Nevertheless, Westbury’s financial performance is bearing up well. Full results for the 4500-unit-a-year housebuilder are due early next month, but the interims were strong: pre-tax profit up 24% to £24.6m, turnover up from £193m to £226m, and operating margins hit 12.4%. The forthcoming results will be Donohue’s fifth as chief executive, the position he achieved after working his way up from buyer in 1972.
Prior to that, Donohue trained at Laing and Costain, and had a four-year stretch in the army. He says he fell for the recruitment posters’ promise of world travel – and indeed served in Germany and Aden – but then adds that he was attracted to the “discipline” of construction. “There was a training regime that was undoubtedly very beneficial,” he says. In comments like this, or his reflections on the advantages of an older workforce, there is a hint of the retired major.
Looking ahead, Donohue predicts that the City will continue to give housebuilders the cold shoulder until they consolidate into larger units. “There’s a strong argument for it, but it’s difficult to see where the drivers come from. Long term, there is a need to establish larger units – the market capitalisations are just too small, they don’t appear on enough fund managers’ screens. Consolidation offers the best hope of a re-rating.”
However, Donohue isn’t volunteering to lead the charge. Although Westbury has made two acquisitions in the past four years – Clarke Homes in 1996 and John Maunders Group in 1998 – the company’s general policy is only to buy something if it’s for sale. “We see ourselves as a player, but I doubt we’d be involved in a hostile takeover.”
Developing Westbury’s e-commerce expertise – both in terms of customer sales and communication, and running supply chains over the Internet – is a more attainable short-term target. In addition, Donohue says: “We’re interested in collaborating in establishing a web site to act as a marketing shop window for the housebuilding industry.”
