FK Group chief Francis Keenan talks exclusively to Construction News about ‘sexy sheds’, European competition, doubling turnover and technological trailblazing.
“Reputation is everything,” Francis Keenan tells me – a sentiment that, for FK Group, is far more than just a soundbite.
Having taken over as chief executive two years ago, Mr Keenan has seen FK’s standing in the market continue to grow, with the building envelope firm involved in some of Manchester’s highest-profile projects. This burgeoning reputation has helped drive turnover from £43m to more than £82m in the past three years alone.
So where does the company, having posted this record turnover in its most recent results, go next?
Mr Keenan joined the family business, started by his father Francis Keenan Sr, in 2001. The first thing that becomes clear as we meet at FK’s head office in Altrincham, south Manchester, is that the 39-year-old is used to leading his business from the front.
Throughout the course of our conversation it’s sometimes hard to stop him talking, as he races through what he wants to see in the industry, what it takes to be a successful specialist contractor, and how FK Group tried to tackle everything the recession threw at it.
But such high energy levels are entirely necessary, as the 39-year-old admits he’s “100 per cent” hands-on with his business. “I’m a surveyor by trade so it’s hard to let the numbers go,” he says.
Part of the reason he is so hands-on with the business – he says he looks at every single tender – is because of the select number of clients the firm works with.
FK Group Tomorrow Building MediaCity Bowmer and Kirkland
“We still have relationships up and down the chain, and for me that’s what differentiates us from a lot of businesses – if something goes wrong, people can ring me,” he says.
FK has worked on some of the North-west’s most high-profile commercial and residential jobs: both 1 and 2 St Peter’s Square with Carillion and Laing O’Rourke; the Tomorrow Building in MediaCity with Bowmer & Kirkland; and some of the UK’s largest industrial shed developments with McLaren.
Mr Keenan says the group’s strategy has been low-risk, with the company focusing on a core of main contractor clients that now represents around 85 per cent of its total work.
Though pre-tax profit slipped to £2.5m in its latest results, down from £3.2m the previous year, Mr Keenan denies the strategy is overly cautious, arguing instead that it’s precisely what’s kept the firm in business – particularly after pipelines plummeted during the recession.
He attributes the slight downturn in profit to a heavy investment programme across the business, with the company opening an office in London’s Shoreditch for a newly created design team, while regional offices have expanded in Birmingham, Doncaster and Newport.
Globally, the firm has also cemented its position in the United Arab Emirates, turning over between £8m and £10m from its Dubai office – leading Mr Keenan to eye further expansion in Qatar and Oman if the right projects come along.
“We’ll be concentrating on the industrial and infrastructure sectors,” he says, with FK already working on Al Maktoum International Airport in Dubai. “I’m not doing a skyscraper on a beach. But there’s a lot of work coming through for the 2020 Expo and to be honest we’re struggling to cope with the [amount of] tenders.”
“If you go into big unitised glazing you’ll have four firms on your tender list, and that’s pretty much it”
He also highlights heavy investment in technology over the past year, with the firm becoming the first building envelope contractor to achieve BSI certification BIM Level 2 (see box). This ambitious approach might seem at odds with a more risk-free attitude towards tendering. But Mr Keenan maintains that the company is unlikely to chase work outside of its traditional core clients and partners.
“We want to do jobs right,” he says. “That’s why we’ll look at something [and say], ‘You could make more money working for Lendlease on a big tower, but is it more risky?’ Potentially. So are we better off sticking to the people we know? I’d say so.”
A burning platform
Mr Keenan admits his passion for adopting new technology across the group is partly driven by the current state of the industry.
“In 5-10 years we’re going to struggle to get lads that get up at five in the morning, drive down the country in a van and nail sheets on,” he says. “They just don’t want to do it. [But] if you say you’re a digital engineer, it’s like an entirely different industry, and that’s where we’ve got to go.”
To facilitate this, Mr Keenan has ensured all new apprentices across the business – which currently number 20 – are not just trained in the basics but also fully understand design principles.
“If you’re a surveyor you can pick up estimating; if you’re a site manager you can understand the numbers, and you understand how everything comes together. But the one thing you won’t understand is how to move that mouse and create a detail, and how the design really works. We are really keen on doing that [training], and it’s the burning platform for the roofing and cladding industry.”
And while he admits the expense has been significant, Mr Keenan hopes the firm can reap the benefits in the coming financial year, with a focus on making the interface between onsite and offsite teams more efficient.
“[It’s important] to link IT to site in terms of the snagging information and how we share that. We need to be updating in real time what’s actually happening on the detail. The guys are altering it on their iPads on site, and that’s being fed back into the office and is immediately updated in the model.
“The next thing is to roll that out across all our projects.”
Part of the reason for this, he says, is a perception in the UK market that European firms are the go-to subcontractors for larger jobs – not just in London, but also major commercial and resi jobs outside the capital. “If you go into big unitised glazing and you’ve got a big scheme, you’ll have Permasteelisa, Yuanda, Gartners and Lindner on your tender list – and that’s pretty much it,” he says.
He also notes more European companies coming into the UK to work on major developments – Czech firm Structal has begun expanding into the UK by working with Moda Living, for example.
Europe vs UK?
Though some clients and main contractors will argue they pick European firms due to their design credentials, Mr Keenan vehemently disagrees.
“It’s nothing to do with design,” he argues. “We’ve got a couple of factories and fabricators that we use, and they are equally as good as those guys. But [European firms] are cheaper. They’ve got bigger factories set up to do it, the manufacturing and productivity base is better, and they’ve got the big exchange rate that they can bring it in on.”
FK Group office Altincham
Despite this apparent disadvantage, FK is working on one of Manchester’s biggest projects: the £700m Middlewood Locks scheme with Chinese contractor BCEGI, having previously been involved with the company’s first job in the UK at Airport City.
With FK’s focus on repeat business, it might seem a no-brainer that it would be lining up to work on Gary Neville’s controversial St Michael’s scheme, which has signed up BCEGI as main contractor – but Mr Keenan shakes his head.
“It’s a nice-looking scheme, don’t get me wrong, but I wouldn’t want to go near that. I know some people can dot around and chase the higher money and go wherever the prize projects are, but I’d rather have a steady and consistent view of the pipeline that’ll make a better return, rather than chase the glamour projects.”
“ Sheds aren’t exactly sexy, but [McLaren at Tilbury Docks] is the sexiest shed you’re going to get”
He even admits a willingness to take a hit on margin if the project is a long-term one with tried and tested clients. “We might be getting squeezed a bit, but we’d back that horse as opposed to [chasing] a couple of extra per cent elsewhere but that [we might not win].”
Accordingly, Mr Keenan describes the year ahead as one of consolidation. “If you go up to £120m, £130m [turnover], which is the next jump for us, would I have the ability as chief exec to know those projects and know where the risks are? I don’t think so.”
The tender process in FK is very structured, with comprehensive planning through each and every bid the group submits to make sure all risk can be accounted for.
Alongside PRS, offices, stadia and retail, Mr Keenan says the industrial shed market remains a core focus, having worked closely with contractors and clients including McLaren and Peel.
The company is currently working on a 600,000 sq ft project with McLaren at Tilbury Docks for client Amazon – one of the largest in the country. “Sheds aren’t exactly sexy, but that is the sexiest shed you’re going to get, and probably the most expensive.”
The focus on both large and small sheds helps keep the business ticking over, he adds, with the pipeline and turnaround more short-term than some of the major office and PRS developments in its order book.
“As of 1 April, we’ll know roughly when they’re going to come in – usually January to March next year. So they’ll be in the offing, but they won’t be given the nod. What that gives us is a short gestation period and a very quick turnover, but a low profit number for sheds. Your facades stuff you know about three years in advance – you spend a year estimating it, a year designing it and a year-and-a-half on site.”
FK Group Next warehouse Doncaster
Mr Keenan says the difference between two of FK’s busiest sectors has been part of its mantra to do “more with less”.
“We have seven estimators for an £85m business – that’s not a massive amount. And some of those complex PRS schemes take a lot of time to estimate. So you’re almost better off picking the ones you’re going to go for and really targeting those, rather than spreading yourself too thin.”
“Manchester is a big city but I think the North-west is actually quite a close community when it comes to construction”
He adds that even in the world of logistics, where industrial sheds have been springing up all over the country, the market in terms of clients and main contractors is relatively small. “In your big sheds, there’s about five or six key architects, five or six engineers, five or six subcontractors and five or six main contractors [in the market].”
Likewise, in the world of commercial and residential in the North-west, Mr Keenan says it’s a small world. “Manchester is a big city but I think the North-west is actually quite a close community when it comes to construction, and that’s why reputation is everything,” he says. “That’s why if you ask why we aren’t making hay while the sun shines [by bidding for jobs with new clients] – it takes one bad job to lose that 40-year reputation.”
So what next for this 40-year-old company? Does FK rest on its laurels or take the next step to turn over £100m or more?
While its chief executive won’t be drawn on financial targets and preaches a focus on consolidating its strong market position, he hints at further investment in technology following the roll-out of BIM Level 2 across the business.
Though coy on the nature of this investment, he becomes more animated when discussing offsite manufacturing – a sign of what’s to come for the business.
But he warns that, unless businesses can work together, the full adoption of offsite manufacturing may be some way off. “You need a developer that’s going to give you a chance and be open book with you – one that’s going to share the upside. They need to know that, if they can get 15,000 units a year [built], will they get something out of it? Otherwise it’s not going to work.”
He adds there is a “fine tipping point” to get the schemes to work, arguing that while larger investments – such as L&G’s £50m investment into an offsite manufacturing factory in Leeds – grab the headlines, more firms will look to do things on a smaller scale.
“At the moment you’ve got a developer on its own, a main contractor in the middle, and the manufacturer. You need people getting together to deliver it.”
It’s when talking about new technologies that Mr Keenan’s passion for the construction industry really shines through – that to make the industry better, technology needs to be at the forefront.
It might seem to be at odds with his low-risk approach to traditional construction and winning tenders in the business – but the combination of the two has proven a strong marriage thus far.