Delayed work gives Pearce £50m boost

Pearce Group is in line to enjoy a £50m surge in turnover to £200m this year. The upturn is the result of delayed work from the previous year now coming forward.
Pearce is finding the £500,000 to £1m contract sector to be the most rewarding, with the group's chief executive John Rackstraw describing the £1m to £4m sector as a tougher one to make decent margins in.
Rebranding has seen the former divisional names of Pearce Construction and Pearce Retail and Leisure being dropped, with all operations now working under the banner of Pearce Group. This has resulted in redundancies as a result of 'de-layering' at senior management level.
Pearce emerged from the Crest Nicholson group in January 2003 as the result of a management buy-out (MBO). "Generally we've done well since the buy-out - although despite your plans they are never quite what gets delivered," Rackstraw said.
"I see the next year as extremely exciting for the group. Year one was our honeymoon, while the current year can be summarised as involving hard work and change implementation.
"Next year we will start to build the business up. We're not chasing expansion. In fact there will be a slight fall in turnover as this year's jump, from the previous figure of £150m to £200m, is the result of delayed projects coming back on line."
Rackstraw said better construction companies are currently achieving out-turn margins of over 2%, while their struggling rivals are running in the 1% to 1.5% band.
This year Pearce will fall short of the 2% margin figure due to a £2m investment in IT (see p5), coupled with the fact that some projects dating back to the time of the buy-out are making "less than they told us at the time", according to Rackstraw.
Restructuring has also led to redundancy costs and there has been the further cost of the group's rebranding.
The MBO was led by a team of two: Rackstraw and group finance director Tim Lee. At the time, Rackstraw headed up Pearce Retail, the most successful of the six divisions within the group.
The initial MBO plan was for Rackstraw and Lee to take on Pearce Retail only. However an all-or-nothing scenario prevented that. As a result "there was a job to do," said Rackstraw.
"Construction businesses are not valued highly and various venture capital groups were only interested in the retail and leisure divisions.
"But we got rid of the venture capitalists and a debt-only deal evolved. Some of our liabilities were underwritten by Crest. We only had to borrow money for three minutes, in fact, and we've not had to borrow since."
Selling housing land in Evesham generated some cash. The Midlands division, which had not made money for a while, was closed and another business based in Barnstaple, with a £14m turnover, was sold to its management.