Founder Mark Davey salvaged much of his former business to start again with Kaicer. In the final part of CN’s exclusive interview, he explains why.
In the weeks after Lakesmere’s collapse last November, the anger throughout the supply chain was palpable, as £26m owed to creditors disappeared overnight.
Many subcontractors and suppliers expressed outrage following the cladding specialist’s collapse, with several saying they had been “strung along” in the preceding months, while others suggested the writing had been on the wall since August.
As Lakesmere’s supply chain fumed, its founder Mark Davey was setting up a new company from the ashes.
Kaicer took on former Lakesmere staff and contracts, began trading out of the failed firm’s headquarters in Winchester, and even retained its branding.
Given the uproar among Lakesmere suppliers, some industry observers might question the decision to retain so much of the former business.
But speaking to Mr Davey in his first interview since Lakesmere’s collapse, he predictably offers a far more positive take on the failed firm’s legacy. “There are 25 years of successful history [behind Lakesmere] and the core staff have stayed with the business,” he says.
“I know events were very difficult for so many people, but I think given what the old business achieved and what the new business is achieving, it’s no bad thing that that history still exists.”
At the Winchester office, this history is tangible. The ‘Lakesmere’ sign still adorns the side of the building and the reception glass doors retain the old company logo.
Lakesmere reminders continue inside, with two cabinets filled with awards amassed over its 24 years of trading.
Mr Davey, who ran Lakesmere for 22 of those years before becoming chairman after a management buyout in December 2015, appears to see two versions of his former company: the one that existed up to the MBO, and the one after.
The buyout arose when Mr Davey, having decided to move on from Lakesmere, approached the directors with a proposal to acquire the company and take control of it – a decision he now regrets.
He claims that, following the MBO, the UK business grew too big for the team to handle, with Lakesmere’s regional management structure lacking central guidance. “The events leading up to [Lakesmere’s administration] were gut-wrenching for me,” he says. “It was very emotionally draining. I lost the business I built up.”
A criticism following Lakesmere’s collapse was that communication with the supply chain had been poor during its final months, leaving suppliers unprepared and forcing some owners to use their savings to stay afloat.
To those who suffered, Mr Davey says he is “sympathetic”, adding that he lost more than anyone as an unsecured creditor owed £15m.
He says Kaicer has “tried to help the supply chain wherever possible”, and that the “vast majority” of suppliers supported his move to set up Kaicer after he told them: “If you commit to me, I’ll commit to you.”
Against the backdrop of Lakesmere’s demise, I ask him whether Kaicer is his way of proving to people that Mark Davey can still run a good business. “There’s a lot of emotion in it,” he replies. “What’s driving this is not pride. What’s driving this is the people in the business showing what they can do.”
He adds: “There’s something in my blood, I couldn’t just walk away from that situation. I wanted to ensure the continuity of the business, which is what I tried to do.”
In the day’s after the collapse, Mr Davey approached Lakesmere’s clients directly to offer this continuity. This resulted in Kaicer taking on 120 staff and eight projects from Lakesmere in mid-November, with Mr Davey personally funding work for two weeks until the contracts were formally novated over.
Back to basics
With Kaicer, Mr Davey says he wants to go back to the principles that had made his old firm a success, offering a design-led service tackling complex projects. “It’s the core, being a design and engineering business,” he says. “That’s our USP.”
For now, the company is focusing on building envelope work, specifically metal and glass walls and roofs, with a focus on London, the South-east and the South-west.
Revenue for this year is expected to be between £33m and £35m, and Mr Davey does not see Kaicer growing much beyond a £40m-a-year outfit. “You’re much better to do a sensible amount of work, do it well, please everybody and make a decent return,” he argues.
I suggest his vision for Kaicer is roughly what Lakesmere was a decade ago. “Exactly,” he replies.
To make sure this vision stays intact, Mr Davey intends to take a very hands-on approach. “Being in control is very important,” he says. “We’ve seen it with other businesses where when you lose the centralised control, the regional businesses can make decisions that aren’t necessarily aligned with the business strategy, and mistakes are made. Every contract comes through me.”
Following the collapse of Lakesmere and then cladding outfit Cover Structure in March, Mr Davey believes the building envelope sector is facing a particularly tough time and that firms need to be realistic about what they can do. “You’re paying top dollar for labour and you have to make sure you have the capability and capacity to deliver.”
Aside from cost pressures, there are the high-profile repercussions of the Grenfell Tower fire to deal with. Mr Davey thinks the changes that will emerge from the tragedy and its inquiry will spread beyond cladding, affecting fire suppression systems and internal containment, with new regulations being introduced.
It has been suggested that a nationwide programme of re-cladding will be needed in the wake of Grenfell, which could create a significant bottleneck when combined with existing workloads. Given scarce labour and constraints on materials, such a development has the potential to push up cladding costs.
While he says re-cladding of buildings that have combustible material will “have to happen”, Mr Davey does not think the industry faces a capacity crisis. “The [momentum] has gone out of the construction market a bit,” he says. “I don’t think the market is as strong as it was.”
Aside from necessary changes to Building Regulations, Mr Davey also wants to see construction change its payments culture, with an end to “120-day terms nonsense”.
“I think government legislation is important here, because very often it is only when rules come in that people actually take note and say, ‘Right, I’ve got to do something’.”
Taking the tough option
A number of business owners expressed anger at the former owner starting a new company so soon after Lakesmere’s demise. But it would be hard to accuse him of taking the easy option in setting up Kaicer.
The construction industry has hit a difficult period, as evidenced by rising insolvencies and falling output, and Kaicer is going to have to fight hard in a tough market while dealing with any fallout from Lakesmere’s collapse.
This begs the question: considering he was ready to leave construction when he sold Lakesmere in 2015, why is Mark Davey getting back in now?
“When you go through a very stressful situation it makes you think about yourself and what you want to do,” he says. “What I realised was I didn’t want to leave the industry and I didn’t want to leave the business.”
While his work setting up Kaicer gives a sense of starting over, questions about Lakesmere’s demise remain unanswered.
Mr Davey tells me he has been legally advised not to talk about the period between the MBO and the collapse until the administration is wrapped up, making it hard to understand right now where responsibility for the failure lies.
Until the full details emerge, Mr Davey’s preferred legacy of pre-MBO Lakesmere will be overshadowed by the one that went down with £26m of other people’s money.