Greg Fitzgerald is the man brought back to revive ailing housebuilder Bovis Homes, and he has some home truths for business...
It was a phone call on his way to the dentist back in March that first gave Greg Fitzgerald an inkling something was up. The West Country man was at home in Devon, four months retired from Galliford Try, the housebuilder he led for a decade, and — truth be told — probably missing the action.
He’d been following the struggles of Bovis Homes, whose boss had been sacked after a profit warning. His old firm and another builder, Redrow, were circling. The call was from a Bovis shareholder whom he knew from his Galliford days. They chatted for a couple of minutes and then it came: what did he say to Bovis when they’d offered him the chief executive’s job? It was the first Fitzgerald heard of it. “I said, ‘that’s a funny question because they haven’t asked me and, in any case, I would have said no because I’m relatively happy with what I’m doing’.”
A couple of hours later, another Bovis investor phoned and asked the same thing — and “went berserk” when he gave the same reply, Fitzgerald remembers. But in his heart of hearts, he knew the answer was really “I’d love to do it” — and by the time Bovis’s headhunters and chairman Ian Tyler called up a few days later, the 52-year-old’s mind was virtually made up anyway. He was back in the game.
So began a Red Adair mission to turn around a firm that had somehow contrived to louse up one of the biggest housebuilding boons ever: the Government’s Help to Buy scheme, which has been pumping publicly backed loans at buyers since 2013. Bovis’s rash dash for growth left a litany of shoddy homes, £3000 “bungs” to get people to move into unfinished houses, sprawling Facebook protest groups and even a sit-in at one office by an angry buyer. The century-old brand was getting pasted in the press too, with a “Bovis and Butthead” headline in the Sun a particular lowlight.
Fitzgerald, who meets me at a show home on a Bovis site on the outskirts of Reading, says it’s a tribute to the sales teams that they managed to shift anything at all through the crisis.
He points out of the window: “If you had been walking to this show home, say, that house there on the corner would have said ‘don’t buy Bovis, they’re crap’. A lot of the houses would have had banners up, saying ‘don’t buy here’.”
He’s now seven months into delivering a dose of common-sense medicine: slowing down the too-ambitious growth plans and getting customers back onside, cutting costs and returning cash to the long-suffering shareholders through special dividends.
He has stuck more than £3 million of his own money in as skin in the game and since he joined, the shares are up more than 30% as the City bets on his ability to turn the business around.
The analysts are fans as they know he can deliver although he says he’s “not a Plc man”. They say he’s fond of a laugh as well and wont to drop the odd joke slide into his presentations.
As somebody who’s been around building sites for 35 years, he’s an likeable, sweary leader: in his view, lifting morale is just as important as improving the numbers, as the strategy under previous boss David Ritchie left staff with a near-impossible job.
All housebuilders “call in Anneka Rice” to boost completions before the end of reporting periods but Bovis had been “taking it to another level”, he says, now sitting on the sofa in the show home’s living room. Subcontractors were being asked to work under intolerable conditions to keep up the numbers. Unsurprisingly, the quality suffered and — in a market crying out for tradesmen — they voted with their feet.
“People were working their bollocks off to try and get things done and leaving. We had a churn rate of 62% for site managers last year. Why did the site managers leave? The same reason as the subbies. Who wants to come to work and fail? It was never going to work.” December 2016 was the crescendo, and Ritchie — an accountant who declined to defend his record for this piece — was finally ousted shortly after.
Employing his charisma to win back the subbies was one of Fitzgerald’s first tasks: it helps if you can talk the language of the building site. But for a man who’s made a lot of money in housebuilding, he only got into the industry by a complete fluke.
He was born in Barry, South Wales, but the family followed his Royal Navy warrant officer father to Singapore, Ports-mouth, Plymouth and Dartmouth, settling in Devon at the age of four. After leaving school in Torquay at 16 with three O-levels, he hit a job market blighted by recession 12 months after Margaret Thatcher took office.
A grim year washing dishes at a hotel in Dartmouth ensued, until the head chef mentioned that his brother-in-law was looking for an apprentice estimator at a local construction firm, Midas, under the Youth Training Scheme. After finding out what an estimator actually was, Fitzgerald started off as the tea boy but threw himself into his exams like a “maniac” because “I knew what the other side was like”. When he turned down the chance to follow his father into the Navy as a radio operator, his path was set. It was a small firm but opportunities were plentiful and Fitzgerald kept up the manic pace.
At just 28, the boss Len Lewis — a mentor and friend to this day — asked him to set up a housebuilding arm, and gave him 15% of the equity. At first, he was doubtful; he thought housebuilding was for “pansies” and the market in 1992 was on its knees. But by 1997, he’d sold the business to Galliford for £5 million and repeated the trick a couple of years later with another housebuilder, Gerald Wood Homes.
Swiftly afterwards, Fitzgerald became head of Galliford’s housebuilding arm, and took the top job in 2005. A self-confessed “deal junkie”, he swelled its construction arm, then in pre-crash 2007 spent £244 million on Linden Homes. The big bet that paid off in 2009 was a £125 million rights issue to snap up housing land at the bottom of the market and go for growth.
He had made a big call but knew the advent of Help to Buy in 2013 would allow the rest of the industry to catch up. “Everybody is going to be bloody good in a minute,” he thought. But ask him about the morals of housebuilders trousering massive profits — and chief executives big bonuses — off the back of a public subsidy scheme and there’s refreshing honesty. “I get it,” he says.
He’d make builders pay a levy on Help to Buy revenues to be “part of the club”, with the funds pumped into affordable housing. He’d also gradually taper the loans available and cut the scope of it (“why do you need any help from the Government if you’re buying a £600,000 house?”) as well as — more controversially — limiting the pay of bosses like himself to a multiple of the average employee’s wage to stop chief executives “taking the piss”.
If you think that sounds like a turkey voting for Christmas, you’d be right. Fitzgerald — whose wife Judy is the buyer for their local food bank in Newton Abbot — is desperate to pay more tax.
“If you’re in the ‘rich bastard’ category [like me], I need to be hit more. I’m concerned what a Labour government could do for this country, and I think there is a prospect of Labour getting in. The Government needs to be saying to me, ‘your big house, Greg — you’re paying £3600 council tax, and I think should be paying six or 7k’... I’m shaking your hand right now.” Fitzgerald is on a package of more than £3 million but admits corporate pay is a “huge thing” at the moment, and thinks the “divide has got a bit too big”.
Bovis investors reckon he’s worth the money — and he’s not about to take a pay cut — but he adds: “I think tax needs to be going up for the higher earners like me — and all those people who’ll be saying ‘I don’t agree with that’ should be careful what they wish for.”
It’s a characteristically blunt message from the builder that should make his fellow FTSE bosses — and the business community at large — shudder and pause to reflect.