Haymills moves into top gear with £140m turnover

Haymills' turnover has jumped by 40% and should reach £140m this financial year (12 months to 31 March 2007), with pre-tax profit reaching more than £2m. Turnover in 2008 is forecast to be still higher, at £175m.

Julian Brandon, Haymills' managing director, believes Haymills' rising figures are the result of the new management strategy introduced at the time of the management buy-out (MBO) two years ago.

"I said at that time that our minimum long-term target was 10% annual growth in turnover and 20% profit growth," said Brandon. "We've exceeded those figures - and comfortably," he added.

"The final MBO payment is due in 2008. Thanks to the deal we were able to make with Haymills' former shareholders, we have no venture capitalist on board so we control our own destiny."

Haymills operates in London and East Anglia. Since Brandon arrived, there has been a push for long-term relationships with clients. "It's slow burn," he said, "but 80% of our turnover is now repeat business and 66% of it is either negotiated or is won in two-stage tendering.

"Prior to the MBO, repeat business - outside our East Anglia division, that is - was less than 20% of turnover." Within the Haymills group, the East Anglia wing was ahead of the rest, with a repeat business figure of 50% to 75%.

The downside of two-stage tendering is that there can be so many delays. "Before, we quickly moved from 'first knowledge' to being on site, but now we live the client's pain and a 12-month gestation is not unusual," said Brandon.

However, the upside is that Haymills is enjoying an improved one-in-three win rate, far better than the typical one-in-six scenario still suffered in competitive bidding situations.

Warner M&E, a specialist division based in Ipswich and accounting for 10% of Haymills' group turnover, is back on its feet. Two years ago, it was loss-making and lacked direction. It was thrown in almost for free when the MBO's deal was under discussion. Today, with a new leader in Andrew Harper, Warner M&E is making money.

Calculating a creditable profit
For a contractor's stated pre-tax profit to have credibility, it should match the group's cash movement during the year, said Julian Brandon, managing director of Haymills.

Haymills takes a prudent line on profit recognition. "We recognise zero profit on a contract until about 50% of the way through the build process," reports Brandon. "Even if we are on track to make £1m, we still ignore it.

"Only once a project is 75% complete would we recognise the profit element in our year-end figures as we know then that there are not many surprises coming. Right now, we have £2m of profits that have not yet been taken, as a result of us using our robust rule on profit recognition."

Since the MBO, profits have been used to pay back to the previous shareholders and to reduce the shortfall in Haymills' final salary pension fund. From a figure of £6m at that time, the deficit is now down to £2m.

[Contract Journal, 7th Feburary 2007, p11]