Keller’s chief executive Alain Michaelis has told Construction News he believes Carillion’s collapse shows the danger of having “too much cost base” with subcontractors “whose work you don’t understand”.
Describing Carillion’s demise as a validation of Keller’s business model, the CEO warned against “straying too far your core”.
Mr Michaelis said he believed certain firms could succeed with a model in which they played an “integrator” role, bringing in the necessary specialists to complete projects.
However, he stressed that Keller would maintain its approach of having predominantly in-house specialisms.
“There are lots of Carillion lessons, but clearly one of them is doing what you know how to do and not straying too far from your core, and not having too much of a cost base tied up with subcontractors whose work you don’t understand,” he said.
“We’ve always been very careful as a specialist subcontractor to do all of our work; there’s relatively little subcontractor content. We don’t outsource vast swathes of our content.
“We think that’s a validation of our [model] which is: stay close to your core and then do it on a broad base around the world, rather than to do a lot of things and be an integrator.”
Mr Michaelis was speaking as the firm revealed it was preparing for a “challenging” year in its UK operations after revenue in the region declined during 2017.
“Clearly Carillion issues have been pretty dominant in the market, but we’ve been unaffected by that because we’d not had a lot of business with Carillion in the period leading up to their liquidation,” he said.
“Commercial development in London is quiet and we will desperately need the infrastructure stuff to take off, HS2 and the like. It’s an OK position for us in the UK without being stellar.
Despite being a UK-based firm, most of Keller’s work is overseas – something that Mr Michaelis told CN was unlikely to change.
“UK for us is important, but it’s not a dominant market,” he said.
Mr Michaelis said that being UK-based but working largely abroad meant the reverse was true last year. “In 2017 we’ve had some currency benefits; in 2018 we’re expecting some currency headwinds.”
The Keller chief told CN the business would continue “prowling” in search of potential acquisitions and that he hoped to conclude the purchase of Moretrench in by the end of the first quarter.
“We continue to be prowling, we look around the world for the right sort of quality, but we don’t really do that many unless we’re really comfortable with the management,” he said.