A believer in permanent evolution, not revolution

Taylor Woodrow's chief executive says getting out of construction would destroy the conglomerate, writes Magnus Grimond

The Trap: to continue to do the same thing and expect a different outcome. This little homily, the sort one might expect from a set of management consultants, sits on John Castle's mantelpiece at the elegant Mayfair offices of Taylor Woodrow. It is not a motto, Mr Castle insists, but three months into his new role as chief executive of the construction to property group, it is clearly a trap he hopes to avoid.

He certainly has a hard act to follow. Colin Parsons, Taylor Woodrow's executive chairman, has built up a formidable reputation during his tenure, knocking into shape a group which was in crisis when he arrived from running its Canadian operations in 1992. In five years, Mr Parsons has turned a pounds 94m loss into profits last year of pounds 67m and has overseen a share price which has more than doubled. It is an impressive turnaround in an industry which has been under the cosh. Even so, given that the group is still making meagre net returns - less than 6 per cent on sales of pounds 1.2bn last year - there is clearly more for Mr Castle to go at.

His strategy, illustrated by some deceptively simple management school diagrams, is permanent evolution, rather than permanent revolution. There is going to be no reinvention of Taylor Woodrow in the way Tarmac and Wimpey reshaped themselves by swapping house-building assets for quarries. Although some would characterise Taylor Woodrow as the conglomerate of the sector, spanning construction, house-building, property and an equipment sales operation, Mr Castle says he has inherited a strong platform in four fairly stable businesses: "There is nothing in any of our sectors where we say, `God, this is so awful we must close it down'."

This cautious approach is understandable, given that Mr Castle is a rare outsider in a company which normally recruits its bosses from within. Indeed, three years at the head of Marley in the early 1990s is the nearest he has been to the building industry, but that was tiles and plastic pipes, rather than bricks and mortar. Otherwise Mr Castle's has been an eclectic career, taking in a period in a technology-transfer-come-venture-capital business, along with Textron of the US and BP.

So he arrives without the sentimental attachment to construction that many in the industry appear to display. But even construction, the sick man of Britain's industrial sector, remains sacrosanct for Mr Castle. Despite years of massive losses or minimal profits, he has quickly arrived at the conclusion that to get out of construction would be to destroy Taylor Woodrow. "It would be a revolutionary change. If we were to think about it, it would have to be done over a very long period of time. I don't see why we shouldn't be able to manage construction just like any other business."

He says it must generate value and it must not fall foul of the Rolls- Royce syndrome - "the view that we are going to build the best aero engine, even if the company goes bust". But to many outsiders, this will look like a platitude to cover the very trap into which the whole industry has fallen, with managements nearly everywhere still wedded to a barely profitable business which is crying out for rationalisation and consolidation.

Under the Castle regime, construction will be stripped down and rebuilt around its "core body of talent" to forge it into a single operation, bringing together the disparate groupings which have grown up over the years. Over time, the reliance on the business will be diluted, so that in five to 10 years Taylor Woodrow will be a housing and property group that dabbles in construction, rather than the other way round, he says. The hope is that in this state, Taylor Woodrow will be able to ride the troughs of the industry without having to resort to marginal business to fill the gaps, as in the past.

Property is another business which does not appear to fit particularly well with a trading group such as Taylor Woodrow. The City measures property companies by their assets and that is difficult when they are mixed in with operations judged on earnings. The group has been running down the investment side of the operation, which tends to be asset based, in favour of the development side, where short-term profit and loss is more important. This evolution will be continued by Mr Castle, who believes property will continue to underpin the group's balance sheet, thereby giving hefty financial backing to bids for big construction projects and contracts under the Government's Private Finance Initiative (PFI).

The PFI is something the construction industry will have to live with, he reckons, and he is encouraged by Labour's enthusiastic adoption of the Tory idea. "I've been very impressed with what they have done. They have cracked in on it good and hard and picked up on issues which were worrying the industry."

Elsewhere, Mr Castle faces fewer problems. The house-building side is riding an upswing in two of its markets, in the UK and California, even if Australia remains in the doldrums, and Greenham Trading, a supplier of everything from hard hats to lavatory paper, chugs along nicely. Certainly he has no illusions that the current housing market buoyancy is anything other than a temporary phenomenon and that, apart from sales to the over 60s, this is a market lacking fundamental growth prospects. What he does believe is that there is no reason Taylor Woodrow's housing arm cannot be run with the same focus on shareholder value as a specialist house- builder.

The "tidying up" phase at Taylor Woodrow will be complete within a year, Mr Castle believes, with another year to see it all shake down. But he recognises that rationalisation will extend beyond the boundaries of the group.

To illustrate his point that there are too many companies operating in the construction industry, he points to the fact that Taylor Woodrow, one of the largest, has a mere 2 per cent market share. The process of consolidation has begun, he says, but in the future it is more likely to come through changes in the way construction is managed and operated, rather than through reductions in the amount of assets deployed. Indeed, once some focus has been put back into Taylor Woodrow's construction operation, it is very likely that he will be seeking to take part in the consolidation process himself through acquisitions.

But while the City remains sceptical about construction, those sunlit uplands look some way off. Mr Castle may have to deploy his skills to their utmost to negotiate the traps that lie ahead.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea