The collapse of specialist contractor Bierrum last autumn shocked its employees.But a group of its engineers proved quick to rescue the company's 76-year-old reputation.
David Hayward reports
SEPTEMBER 22 last year proved a turbulent Monday for engineer Gary Eastman.As technical director for specialist concrete contractor Bierrum, Mr Eastman knew the long-established company had a serious cash-flow crisis.
A deal with Birmingham contractor North Midland to buy the ailing firm outright had been 'finalised, bar the signatures' the previous Friday.His day was dominated by thoughts of plans for the rescued company.
Until exactly 5pm, that is. Suddenly it was all off.North Midland had changed its mind and instead Bierrum's banker Barclays had taken centre stage, demanding immediate return of 'substantial' loans.
As Mr Eastman drove home that night he knew that his 39-year employment contract and the company that had provided it were both about to collapse.
Bank support was withdrawn the following morning, receivers arrived within days and by the week's end Mr Eastman was redundant, along with all 175 other employees, and contemplating early retirement.
Bierrum, the 76-year-old designer and builder of more chimneys and cooling towers than any other UK company, had gone bust.
Fast forward to earlier this month.Three jet-lagged but smiling engineers - 40 per cent of the workforce of newly formed Bierrum International - return to Heathrow from Australia, clutching a £1 million contract from a Sydney steelworks for repairs to three of its chimneys.
Adding this prize to the £300,000 of contracts already won, including silo construction in Bahrain, and managing director Mr Eastman remains confident of a first-year turnover approaching £2.5 million. Bierrum, or at least its name, has risen from the ashes.
'Lean, mean and sticking firmly to our core skills' is how Mr Eastman sums up his business plan for Bierrum International - the company he set up earlier this year with just six of his fellow engineers from the old firm.
Financial backing from the new parent group Feuerfestbau Beteiligungs GmbH, a major multi-disciplinary German refractory linings contractor, allowed Mr Eastman and his team to buy the Bierrum name, its intellectual rights and crucial patented jumpform equipment.
Operating in the UK as a largely independent subsidiary of its owner, the new Bierrum is already making inroads into its core market: design, construction and maintenance of concrete chimneys, cooling towers and storage silos.
But the German giant boasts a 20-strong network of other subsidiaries throughout Europe, Asia and South America, servicing mainly power and chemical industries.Tapping into these local resources is a vital part of Mr Eastman's target to be truly international, and tenders are already sitting on the desks of potential clients in Spain, Italy, Portugal and Saudi Arabia.
Also part of his business plan is an annual £5 million turnover within two years, though workload size is considered less vital than profitability.
'If we stick to minimum overheads and maximise use of our in-house skills, we hope to achieve 4 per cent profit rates in five years - double that achieved by the previous company, ' claims Mr Eastman.
He believes it was the combination of insufficient cash flow to generate working capital and diversification from the contractor's core market that led to the demise of the company he had joined straight from school. For most of this time Bierrum had thrived on being the leading, and then the only, UK company that could service concrete chimneys and cooling towers from cradle to grave.
But the decline in the UK power sector in the late 1990s, which had been Bierrum's main client base, led the company to restructure and diversify.The Bierrum family, until then still dominant in this privately owned firm, stood back to allow a new accountant-led management team to steer the company into more general construction work.
Turnover soared, notching £19 million in 2002, but profitability remained low in an increasingly competitive market place.The loss of over £1 million on two troublesome contracts helped to drop the company into a financial pit from which it could only be rescued by a buy-out or major cash injection.
The need for additional works during the design and construction of foundations for a Slough power station ended in a lost adjudication.
Overnight devaluation of the Turkish Lira, the currency in which most of the cost of a local cooling tower project was to be paid, accelerated the financial fall.
'We were not losing money overall, but equally we were not creating enough working capital to fund the growth in turnover and it proved a classic cash-flow failure, ' recalls Mr Eastman.'We should have sold the company when it had a healthy order book, but lost the opportunity by not advertising that we were up for sale.'
North Midland Contractors seemed to provide a way out. It may not have been a perfect fit, but it was keen to inject life-saving cash. Its dramatic eleventh-hour pull-out left the entire company shocked and redundant.
For Mr Eastman despondency proved short-lived and after a weekend of mixed emotions he and fellow former business development director Bob Sutton were emailing each other with the skeleton of a new business plan (see box).
'In hindsight we could never have continued as we were, but this was a firm we loved, so we just had to have a go at rescuing what it had created over the decades, ' says Mr Sutton.
The pair chose the new team carefully.'We wanted our company to be managed by people who talk the language of the business we are in, ' insists Mr Eastman. So they selected five other Bierrum engineers.
Today he is optimistic that the accountant will soon be bookkeeping only Bierrum International money, rather than its new owner's start-up injection of funds.
'Our parent company has offered us essential financial security and a worldwide network of local subsidiaries we can partner with, ' says Mr Eastman.'But we hope to be financially independent within a year.'
A recent upturn in the UK power sector, plus the company's planned longer-term attack on the £100 million US chimney and cooling tower market, leaves its managing director confident of turning hope into reality.
Hermann Hoffmeister, a senior manager with Feuerfestbau Beteiligungs and now also a director of Bierrum International, shares that optimism.'The old company had a long-established international reputation for quality, ' he says.'The new team will offer us an excellent fit with our group, especially in the niche cooling tower market.
'You can see in their eyes an enthusiasm for the business they know so well and I am confident they will soon be standing on their own again financially.'