Birse, 56, voiced his complaint in February when the company reported a £1.8m sixth-month pre-tax loss.
But Birse’s new chief executive, Peter Watson, has insisted that contracting remains the company’s core business and that he wants to turn around Birse’s fortunes by winning repeat work with heavyweight clients.
Watson, 49, who has been a non-executive director since 1995, took the reins at the company last week as it reported that full-year profit to 30 April fell 58% to £2.2m. Turnover for the year at £358m was also down – £86m lower than the previous year.
The company vows to steer clear of smaller jobs, low-margin work and “unfair” clients. “We are getting close to a new breed of client – the sort who you can make a profit with and who are willing to put shortlists together,” said John Elders, managing director of construction at the company.
He cited the Ministry of Defence, Railtrack and London Underground as examples.
“Our unique selling point will be ‘build it right and build it once’,” said Elders. “Clients want certainty of price, certainty of completion date, and for their buildings to be defect-free. We can also move fast because we are not a massive monolithic organisation.” Whereas some contractors have sought to avoid variable workloads by winning facilities management-type contracts in recent years, Birse has bucked the trend by remaining committed to pure contracting. The company is convinced that opportunities will increase as more companies move away from it.
But one analyst said: “It’s a case of dumb and dumber really. They have no analytic or strategic arguments as to why the rest of the building industry is wrong and they are right. If good old contracting is so good, why is their turnover down £86m?” Watson, the new chief executive, is a chartered accountant with a background in management consultancy. The City welcomed his appointment – Birse’s share price lifted 16% on the day of the announcement. But he faces an uphill struggle to convince the City he can return the business to its successes of old.
And analysts are sceptical as to whether Peter Birse, who has been with the company for three decades and is retaining his 20% stake, will happily let someone else run the business. “Birse is a tough Scotsman who can mix it with the best of them,” said one. “It’s hard to believe he won’t have an influence,” said another.
Under Birse, the company has changed its spots from hard-nosed contractor to, in recent years, a more friendly business. Watson plans to continue with the change: “It’s not about being a fluffy bunny, it’s about being fair and honest but getting paid for it,” he said.
Despite taking a turnover hit, second-half earnings were aided by £3.6m of property disposals. The sale of investment property at Epping, Essex for £5.1m, which came after the year end, will boost the next half-yearly figures.
Broker Cazenove predicted a pre-tax profit of £4m for Birse in 2000 and £6.5m in 2001.
