When Andrew Davies was appointed as Wates boss four years ago, the firm’s chairman James Wates said the industry was seeing “positive signs of recovery” post-recession.
For Wates under Mr Davies’ stewardship, this rosy outlook has largely materialised, as the privately owned contractor has reported growing turnover and profit.
But the Wates boss, who spent 28 years at defence giant BAE prior to joining the Surrey-based firm, has now set his sights on a new challenge at a company whose fortunes have been the reverse of Wates’.
And what a challenge it is.
From the relative stability of Wates, Mr Davies has been tempted to take the reins at publicly-listed Carillion, the UK’s second-largest contractor.
To say Carillion has had an annus horribilis would be an understatement. The company’s well-documented woes, after revealing an £845m writedown in July, mean that its share price is still hovering at 46p – even after a 5 per cent rise on today’s news – compared with a year ago, when it was 254p.
To put it in stark terms: Wates has a surplus of £191m cash on its balance sheet, while Carillion’s net debt is currently heading for £850m.
So what will Carillion’s new broom bring to the party?
The quiet man cometh
With his vast experience at BAE, the quietly spoken Mr Davies clearly has the pedigree to make a difference. If the rumours are to be believed, Bovis also came a-knocking at his door earlier this year.
“Tough decisions will be a necessity at Carillion, as turning around a company of this size – with around 48,000 staff worldwide – will not be a quick fix”
During his time at family-owned Wates he wasn’t afraid to make changes, carrying out a strategic review aimed at doubling the firm’s turnover.
He was beaming on stage as he accepted the Judges Supreme Award for Wates at the CN Awards in July.
Tough decisions will be a necessity at Carillion, as turning around a company of this size – with around 48,000 staff worldwide – will not be a quick fix.
As Hargreaves Lansdown analyst George Salmon told Construction News: “Debt will be pushing up towards a billion in the next year and that’s likely to be a dominant feature of the story for the foreseeable future.”
More chapters to come
Interim boss Keith Cochrane has already started with an overhaul of the business – including offloading its UK healthcare unit to Serco for £50m, securing extra credit from lenders and cutting down on its top tier of executives.
But this only feels like the first chapter of the story.
As Carillion chairman Philip Green said today, Mr Davies will “build on the conclusions of the strategic review” and lead the “ongoing transformation of the business”.
Mr Davies is not joining Carillion until next April, when we should have a clearer idea of how the firm is riding out its troubles.
A strong hand on the tiller will be required and Mr Davies will hope he is the man to rise to the challenge.
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