Interview: Mark Davey

Moments into our interview Mark Davey, managing director of cladding firm Lakesmere, shapes his hand into a gun to shoot me in the midriff: “Pow! I’ll come and get you!” he says jovially. We both laugh. I should explain: we’ve agreed in advance that this interview will focus on Lakesmere, the firm he’s grown from a management buyout from contractor Walcon in 1993 to become the UK’s largest independent cladding firm, rather than him personally. His marketing team has explained Davey doesn’t want the article to be “an ego trip”. The shot to the gut is a reminder we have a deal.

Thankfully, there’s an interesting story to tell about Lakesmere. The Winchester-based firm - which designs, manufactures and installs metal and glass cladding in the UK and Middle East - has defied economic gravity to grow nearly five-fold during a decade dominated by a deep recession. Its expansion accelerated last year. In its latest set of accounts for the year to 31 January 2014, the firm grew 61% to post turnover of £86.3m and grew pre-tax profit 81% to £1.1m.

In Lakesmere’s bolthole London office overlooking London Bridge, Davey explains how the firm has managed to pull off this rapid expansion, and how it is attempting to keep a lid on its prices as the once recession-ravaged cladding sector rapidly heats back up. In a specialist sector dominated by massive European product-makers, he also sets out Lakesmere’s plans to expand further and become an export business in the longer term - the kind of ambition likely to please the government, whose construction industrial strategy makes export growth a key priority. Also, despite Davey’s best efforts to keep a low profile, we get an insight into what makes him tick, too.

Thriving in a recession

Lakesmere grew every year of the downturn bar one, growing by 14% per annum on average between 2006 and this year. Davey attributes this performance to three bold decisions - bidding and securing three London 2012 Olympics projects, expanding in the Middle East and acquiring rival McMullen Facades in 2012. “The secret has been seeing the opportunities the recession offered us and for better or worse taking advantage of them,” he says.

We’re very proud to be the biggest UK-based manufacturer and not being part of a continental group

Davey admits the firm was “very nervous” about bidding for London 2012 Olympics work “after the Wembley saga”. But Lakesmere bid and won roles on the Olympic Park Aquatics Centre, Energy Centre and Media Centre. This ultimately proved a godsend. “When the recession hit, we were very fortunate we’d secured long-term projects such as the Olympics at the top of the market,” Davey explains. Launching in the Middle East in 2006 also paid off. “We were able to use our [UK] resources to service this international work when work started drying up at home,” Davey says. Lakesmere chose to launch in Saudi Arabia and Oman, two “less mature” markets that were “less negatively impacted by the crash” than their frothy neighbouring UAE cities of Dubai and Abu Dhabi.

In 2012 Lakesmere acquired struggling Belfast-based 129-strong glass facade manufacturer and contractor McMullen Facades through a pre-pack administration. He characterises the deal as “taking a punt” after a “couple of weeks of due diligence on the back of a fag packet”. Davey felt he had no choice but to go down the pre-pack route. “I honestly feel it would have disappeared had we not done it,” he says.
Davey says the McMullen acquisition has resulted in a “step change”, transforming Lakesmere into the UK’s largest facade manufacturer for the “complete building envelope”. Crucially, McMullen’s glass manufacturing capabilities in Belfast allow Lakesmere to do large unitised projects on major schemes “to compete with the continentals”.

Lakesmere is set to grow again this year to £95-100m turnover and may hit £120m within two years, according to Davey. In the UK, Davey sees the recovery as “quite strong”, with “major projects emerging in cities like Birmingham, Manchester, Leeds and Liverpool, adding to the already strong London and South-east market”.

He also has high hopes for the Middle East. “The cities in Saudi remind me of Dubai 20 years ago,” he says. Major UK projects currently on its books include cladding jobs at three Crossrail stations, the National Graphene Institute in Manchester, Berkeley’s Battersea Reach in London and the extension of the NEC Arena in Birmingham. Its largest project is in the Middle East - cladding a new passenger terminal for King Abdulaziz airport in Jeddah, Saudi Arabia - which is more than 60% complete.

Combating the continentals

The specialist cladding sector in the UK is unusual in being dominated by major continental European firms, including Italy-based Permasteelisa and Germany-based Lindner, which have developed large market share in the UK through acquisitions. Chinese cladding contractors Yuanda and Far East Global have also entered the market in the last few years, attempting to undercut more established competitors by utilising their large scale, cheap manufacturing capabilities back in China. In the meantime, according to Lakesmere’s own calculations, the UK has lost £100m in cladding capacity for every year of the recession due to business failures. How is Lakesmere managing to compete with these global giants?

Davey says Lakesmere’s foreign rivals are partly “playing in a different market” for the largest schemes, such as London skyscrapers. But where they do tender against each other, Lakesmere can compete, he says.

“Clients will find we are competitive because we have local production [cutting transport costs],” he says. With clients putting an increased emphasis on pricing certainty as the market heats up, putting trades like cladding in short supply, one of the ways Lakesmere is responding to this is by investing in its production facilities. The firm is investing £2m in a new metal cladding factory in Winchester, allowing it to “take full control of our supply chain” and produce more off-site manufactured products. This investment should help clients have “confidence in fixed-price projects,” Davey says.

In terms of Lakesmere’s costs, he says, “I don’t expect to see major cost inflation […] Probably by 3-5% over the next year.”

He urges “early involvement” in projects to guarantee price security: “One of the ways in which we’re securing price levels for our customers is by early involvement and [getting] early commitment to use us. By doing that we’re able to guarantee to our customer a certain price level. If one leaves it six months down the line [the client] may not be able to get their guarantee.”

Davey sees being independent as a differentiator in the UK market: “We’re very proud to be the biggest UK-based manufacturer and not being part of a continental group.” Longer term, Lakesmere wants to take on its continental rivals at their own game by becoming an exporter. “We want to create a UK firm that exports,” Davey says. “It’s a part of the vision.”

So what makes Davey tick? There’s a clue in what he keeps on his desk. “I’ve got a list on my desk of all the firms that have gone bust in this [cladding] sector,” he says. “It keeps you focused on fear of failure and on how important success is to everyone connected with the firm. It reminds you how easy it is to fail if you don’t know what you’re doing.” Undoubtedly buoyed by Lakesmere’s success, Davey claims he enjoys “every day” at the office, “I don’t have bad days,” he adds. “Where we are today and the journey we’ve been on to get here has been fantastic. It’s been incredibly enjoyable and I’d recommend it to anyone.”