Building on past success

Building on past success

Having grown his enterprise rapidly out of the builders’ yard into a near £20m-a-year firm, a young Leeds entrepreneur is now taking the bold step of entering the helter-skelter world of housing. Andrew Mernin talks to Michael Howard to find out more

While housing market anoraks argue over bubbles and London heat, one thing they all agree on is that Britain needs more affordable homes – and fast. One former advisory body to Whitehall believes 300,000 new homes a year until 2031 are needed to meet current demand. At the last count only 133,650 were being constructed.

The Government continues to push its Help to Buy scheme and promises eased planning and land-selling processes. Labour, meanwhile, says it will ensure 200,000 homes are built per year by 2020, should it return to power. And on the ground, reinvigorated construction firms are busily propping up the economy. Their sector, at the time of writing, is set for its 13th consecutive month of employment growth.

Watching the situation more avidly than most is Michael Howard, an entrepreneur who is about to make his entrance into the unfurling story of the housing crisis. “We see this as our next big challenge and adventure to go on as we look to take advantage of the upturn in the housing market,” he says, as he prepares for the summer launch of his new house building company.

Howard, 37, is the creator of Leeds-based Howard Civil Engineering (HCE), which he has built into a £15m+ turnover enterprise since 2003. Work on the £90m Monks Cross retail development on the edge of York, a £100m billion-litre dairy plant and a new £40m police training centre are among its recent successes. It employs 140 people – swelling beyond 220 when a big project arises – and in recent years has emerged as a truly national entity. But its most crucial milestone, Howard’s wife and young daughter may argue, is that this year the boss was able to switch his phone off on holiday without fear or distraction.

“I was in Florida for the last couple of weeks and I completely switched off,” he says. “The old me would have been sending emails and in contact with the business every day. That’s a sign things are changing even from last year.”

As well as the company’s maturing into a mid-sized structure that affords the boss some downtime, this year marks the group’s diversification into the housing market.
“Initial schemes will be targeted at the first time buyers’ market and we’ve registered with the Help to Buy scheme. We see that as being a fantastic aid to secure customers and sales for the properties.”

Erris Homes is expected to become a £5m-a-year venture by 2017, operating as a sister to Howard’s existing firm, with its first project being a 16-home site in Barnsley.

Erris is also the latest chapter in the accelerated entrepreneurial rise of Howard – who followed his dad onto the construction site as a schoolboy and never wanted to leave.

“My dad worked in the construction industry all his working life so it’s fair to say that I had quite a lot of exposure to it throughout my childhood. Even as early as middle school, when health and safety wasn’t what it is now, I’d be helping my dad out in school holidays and weekends – albeit getting in the way - and that gave me a lot of exposure to the industry.”

He left school at 16 and headed for Leeds College of Building, eventually forging a career as a site engineer after landing a job in Birmingham and, by age 27, was a contracts manager. His career had moved rapidly but there was a lingering itch to achieve more.

“I just felt wherever I’d worked that there was a better way of being more proactive and collaborating with your clients. I felt the only way to prove that was by doing it on my own. I probably always had a desire to create something from nothing myself. I didn’t actually believe I’d go on to achieve it but I think there was always a desire to start up a construction business.”

After dabbling for a few months as a sole trader, the “trigger point” for company formation in 2003 was a £750,000 groundwork and civil engineering contract win for a project in Uttoxeter in Staffordshire.

A tip-off from an old colleague brought the opportunity to his attention and gave him his big break. Such an early victory in business came despite having barely £3,000 in the company’s coffers – and having his garage as an HQ. He quickly took on his first two employees, including his cousin, and added a few temp workers to his roster.

“My ambition and desire definitely outweighed my financial circumstances,” he says. “It was a pretty sparse start-up but I thought what we’re lacking in cash we’ll make up for with endeavour and hard graft.”

Year one turnover hit £700,000, with a healthy £127,000 profit. By the end of year two, he was up to £2.5m turnover and “I suddenly realised we had the potential to build a bona fide business for the long term”.

Enter Michael’s brother Gerard, who left his high flying career as a chartered accountant at Bank of America in London to join as a finance director and all round numbers man in 2005.
“It wasn’t too plush a role, but Gerard coming in was a big turning point and it enabled us to push on to the next level. The way I was running the company probably wasn’t conducive to anyone other than a family member doing that role. I don’t think many chartered accountants would want to sit in a dingy industrial unit doing everything to assist the day-to-day running of the business. Getting someone with that ability was crucial, certainly once the recession kicked in.”

The crash, which hit construction harder than most, reached Howard Civil Engineering when it was around the £6m-a-year mark in 2008/09 and “on the cusp of really starting to reap the rewards of our work”.

“But that all came to a shuddering halt when the housing market shut down and the construction industry really contracted.”

Michael’s role swung from enjoying a “fantastic lifestyle” through the huge rewards of his business, to working tirelessly to protect it.

“Margins were through the floor and the confidence that you would get paid was non-existent. The darkest moment was being left with £340,000 of bad debt after a client went into voluntary administration. We didn’t see a penny of that again.”

But the company survived, and Michael now believes those hard times made the business.

“The recession was perversely probably the best thing to happen to me as a business and the country as a whole. I wish it hadn’t lasted as long but good experiences breed complacency whereas a few bad experiences really make you step up to the plate.

“Anyone can run a business in a boom. When there’s a margin you have to be pretty shoddy to flitter it away.

“In a recession you’re scraping around for little or no margin or trying to be innovative to create margin. That’s the real test.”

The result for Michael’s business is that it now has an “exceptional team” on board which is primed for the return of healthier margins, he says. However tough the recession years may have been, the business has still managed to grow its turnover from £9m at the start of the downturn to £15.2m in its last financial year.

“The hardest thing since the downturn has fundamentally been cash gathering. Without a steady stream of cash coming in, you don’t have a business. So it’s been about empowering the team to recognise the importance of cash gathering and never forgetting it. This focus has been essential to our survival. We were a vulnerable SME at the start of the recession and could have gone the way of thousands of other failed businesses.”

While the company had handled projects from Great Yarmouth to Newcastle, its true arrival as a national outfit came in 2012.

The group outfought firms far bigger than itself to land a £10m-£12m contract for work on Arla Foods’ new £150m dairy at Aylesbury, Buckinghamshire. The facility is billed as the first zero carbon milk processing facility in the world and has a capacity to process and package one billion litres of milk each year.

The deal cemented the firm’s post-recession foundations and continues to serve as a calling card when it bids for large-scale contracts.

“It gave us the security we needed. The next challenge was how we were going to fund it, but I’ve always been quite impulsive and had the attitude that I would find a solution.

“It was our springboard which made us believe we could achieve anything.” In winning such contracts, staff retention has been key, Howard says. “It’s fine to supplement your staff with contractors but what’s not acceptable is winning a contract and thinking ‘we’ll find a project manager and hope for the best’. You have to get your people and culture into every project and you can only do that by having a nucleus of like minded people that you trust.”
While Howard’s new house building entity takes his business empire into a fast growing sector, new opportunities have also been identified in civil engineering.

“Our newest growth markets are reinforced concrete structures and working within the highways sector. We’ve just secured our first Highways Agency project on the A19, worth about £500,000, which is a nice starting point. It’s [an area of work] that’s government backed and has a huge government pot behind it so we see some real opportunities there.

“With concrete structures we’ve made some good progress recently, building a new bridge in Salford and a concrete frame at Sheffield Children’s Hospital. These areas hopefully should enable us to hit £20m turnover in the next two or three years.”

As HCE has grown, so too has the need for Howard to develop his leadership skills. “A lot of my insight and knowledge came as a result of a Goldman Sachs programme with Leeds business school. We were 24/7 busy at the time and I remember sitting in the first lecture thinking ‘I’ve got a million other things that are ten times more important’, but I can’t speak highly enough of how it changed me.”

“I’d like to think in five years time I’ll be working ON all the businesses instead of IN any of them. That’s something for me to address; to change that philosophy I’ve had all my life of ‘do, do, do’ to delegating more.”

Given the freedom enjoyed on his recent jaunt to Disney World, this shift is perhaps already on track. His venture into the challenging world of house building, however, may test his resolve to be more hands off to the absolute limit.