The Prater principle: Michael Prater interview

Michael Prater joined the family roofing business in Deptford at just 15. He’s now 66, while the firm, which he has run for the past three decades, turns 60 next month. It is fair to say that neither of them is exactly slowing up with age.

Prater (Ltd) came top in Building’s ranking of UK envelope specialists in November, with turnover of £65m and jobs such as Arsenal’s Emirates stadium and the Heathrow T4 extension under its belt. It has recently won work on the Olympic stadium, velodrome and media centre, as well as three PFI hospitals, has £6.5m in the bank and is set to take about £5m in profit from 2009.

Prater (Michael), meanwhile, is busy plotting the company’s international expansion and appears to have absolutely no plans to retire. And he still works out twice a week.

Not that this story comes without a health warning. Like everywhere else, the company’s margins are down (by about 5%). But it has seen off three previous recessions, as well as an extremely close brush with its own mortality. The south London outsider, which started out in the fifties laying mastic asphalt to waterproof roofs, basements and water tanks, has become one of the great survivors. Here’s how it was done …

Back when it was set up by Michael’s chemist father Fred, the firm was a one-man operation. Michael, whose accent still gives away his Deptford roots, says with one of his frequent smiles: “I remember my father working seven days a week and we had very few holidays. But after 10 years, he had 60 or 70 people working for him.”

The teenage Michael was anxious to join the firm. He started “working on his knees”, as mastic asphalters described their work in those days. After three years, he spent a year working for a manufacturer in order to “learn about the product”. He says that through it all, “the best thing was that I learned about people; people are important to me”.

Michael then returned to Prater and has “done just about every job in the firm”. He became managing director in his mid-30s and took over operations, while his father kept control of the financials until his retirement 15 years ago. Around this time he realised the firm needed to evolve. “High performance felts were developing and that was putting mastic asphalt under pressure so we needed to offer both.” In the mid-seventies “single ply was becoming popular with architects so we added a third product”.

Michael learned the importance of diversification early. In the recession of the mid-seventies mastic asphalters were struck by both a lack of contracts and several very cold winters. “A lot of firms that only did roofs went under at that time. We had basement and internal flooring jobs and that is the only reason we survived.”

In the early eighties, Prater added yet more strings to its bow, going into built-up metal systems, composite and rain screens, and becoming a Kalzip installer.

But then, in 1996, a single waterproofing job almost brought the whole lot crashing down. The company agreed to work for a glass contractor – “something we would never normally do” – on the Bluewater shopping centre rather than the main contractor Bovis Lend Lease. The glass firm, English Architectural Glazing, went into liquidation owing Prater a catastrophic £1m. “Our turnover was only £18m at that time,” Michael says, “and we certainly did not have enough liquidity to cover the debt.”

It was better to be honest with people, so I met every single managing director in my supply chain and they all cut me some slack

It was a “terrifying” time for Michael but he decided to be upfront with the bank and with all the firms in the supply chain in a desperate bid to gain time to pay off debts and get paid for anything it was owed. “I felt it was better to be honest with people, so I met every single managing director in my supply chain and, to a man, they all cut me some slack. The bank agreed to support me, too. And we traded out of it.”

The firm brought in stringent financial controls after this near miss. “Since then we have always insured our debt, we always have cash in the bank [hence the present £6.5m hoard] and we fund our working capital ourselves.” The firm also refuses to take a job unless it can get credit insurance – which means it tends only to work with the big contractors.

Three days of each month all staff running projects throughout the UK come to Prater’s head office to do cost valuations and discuss the progress and programme of each project. Tendering is also tightly controlled. “We have had projects that haven’t gone well and it’s usually because we got the estimating wrong,” Michael says. “Now, we’ll receive a tender and hold a meeting to discuss it, then we’ll have a mid-tender meeting while we’re working on it and then a final review of the tender – all four departments [estimating, design, operations and commercial] get involved.”

Despite this conscientious approach, the 2009 turnover of £65m will be flat at best this year. To address this the firm has frozen salaries and made a handful of redundancies among its now 200-strong staff, although 130 of its workers are subcontractors, so can be dropped at no cost if necessary. Prater has also negotiated fixed prices for the coming months with aluminium suppliers. As a result he’s confident operating profit will be on a par this year with last year’s £5m.

Profit will also be helped by the fact that the firm has been manufacturing its own curtain walling sections, windows and doors at its new glass fabricating plant in Thurrock, Essex since December, which, Michael says, will cut costs. It has also been fabricating its own light gauge metal since acquiring a factory in Crowborough, Essex, from Kingspan two years ago.

However, Michael is under no illusions: “There simply is not the volume of work and margins are lower. People who don’t have their financials straight will go bust.” The company is dealing with its own 5% drop in margins through a mixture of strict financial controls, cost-cutting and investment.

Prater’s next goal is to expand the business overseas, taking turnover, he says, to £120m in five years – by which time he’ll be 71. There is a succession plan in place – a decade ago Prater relinquished his 100% ownership of the business. Now he is the major shareholder, with managing director Tony Birbeck and finance director Richard Davis owning the second largest stakes, and the other five directors holding smaller stakes. Birbeck and Davis are earmarked to run the firm one day, but Michael appears to have no plans to quit. It seems that Prater (Ltd) and Prater (Michael) will continue to grow old together for a while longer yet.

My favourite things

Blowup, a film directed by Michelangelo Antonioni in 1966: “That was my era, the sixties …”
Chelsea FC “My father took me to my first Chelsea game when I was five.”
Skiing “I go at least once a year. In March I’ll be in Les Gets, near Geneva.”
Birdwatching “I’m a bit of a twitcher. I’ve got a house in Suffolk and I love to go for long walks.”
Family He has a wife, two daughters and six grandchildren