Profile: A solid brick in the wall: Tarmac needs clear vision from Neville Simms for the road ahead. Heather Connon reports

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The Independent Online
TUESDAY will be a big day for Neville Simms. He will be fronting his first results meeting since Sir Eric Pountain became non-executive chairman, leaving Simms as undisputed leader of Tarmac. And the City will be watching his performance closely.

So far, it has been prepared to give the chief executive the benefit of the doubt. Tarmac's shares have outperformed the rest of the market by almost 70 per cent since Simms first set out his stall at the interim results meeting last September. Shareholders have been impressed with his promise to cut debt by disposing of peripheral businesses, and to refocus the group on its three core areas - quarry products, housing and construction. Their enthusiasm has hardly wavered despite the expectation that it will make pounds 350m of provisions in its 1992 accounts, which is likely to leave it with a loss of a similar size.

As a quid pro quo for support in the face of such disastrous results, shareholders want to know what happens now. Most of the work Simms has done so far has been easy and obvious: anyone could have diagnosed that Tarmac's problems lay in its excessive borrowings, its overvalued assets and its heavy cost base - all inappropriate for this stage in the cycle.

Simms now has to reassure them that he can go beyond the obvious, that he has a clear vision of where the group should go in the future - and the management skills to take it there.

Although a return to the pounds 350m-plus profits earned in the glory years of the late 1980s is a distant prospect, Tarmac's broker, S G Warburg, estimates the company could make more than pounds 200m by 1996. But it adds: 'To move more positively as yet demands a degree of faith in management and growth strategies and philosophies which has yet to be earned or established.'

Meeting Simms, you see little sign of ruthlessness and aggression, or a strategic vision for the future of the building materials industry. He is open and friendly, with, as he admits, a tendency to talk too much.

And he confesses that his is not a seat-of-the-pants style; he likes to marshal all the facts before taking any decision. 'I like to believe that you can measure 80 per cent of a piece of string and just make a guess at the rest of it.'

The most frequent description of him is 'nice'. But his background is in contracting - he headed Tarmac's construction division for four years before taking over the top job - and as anyone who knows the building industry will testify, you do not get anywhere in contracting by being nice. 'I have no doubt he is the right man for the job,' said Derek Reed, building analyst with Smith New Court. 'He is not complacent, he is a tough fighter, very clever, and has a strong strategic sense.'

Others, however, are still waiting to be convinced. Detractors point to the lack of progress on the disposal of Econowaste, announced months ago, and a key part of the debt-reduction programme, as a sign that he has failed to deliver his promises. And some question whether, as a Tarmac man through and through - he has spent only four years of his 27-year working life outside the group - he has the objectivity to analyse the group's problems.

'The culture of Tarmac is quite extraordinary,' said one adviser who has worked closely with him. 'It is rife with politics, and he finds it difficult. It is a lumbering bureaucracy, with four or five companies below the head office, all of which are run as fiefdoms. His crusade is to bring everything back to the centre - but he is finding it difficult.'

Difficult or not, reining in the divisions has been a key part of his strategy since he took over as chief executive 14 months ago. 'The centre did not believe it was its job to create the strategic path for the divisions, it believed it would grow because the divisions would grow. And it didn't believe it was its job to allocate the financial cake, its job was to bake a financial cake that was big enough to meet the aspirations of the divisions.'

Breaking up the fiefdoms has not been easy. The sound of Tarmac directors complaining loudly has been heard throughout the industry. Already, four directors have gone: Bryan Baker, deputy chairman; Anthony Collins, head of property; Jack Mawdsley, head of quarry products; and Derrick Sims, of building materials.

The new chief executive has also changed the remit of the main board. It no longer considers operating issues - these are covered by the general executive committee, chaired by Simms and attended by the heads of all the divisions - but focuses on strategy.

That makes the position of two of the remaining main board directors seem anomalous: Sam Pickstock, head of the housing division, and Ian McPherson, head of the US business, are the only remaining sectoral directors. Under the old regime, Pickstock was allowed virtually limitless freedom to expand the housing business. The cost of that is now painfully clear, in the high debt burden - largely taken on to finance land purchases - and the pounds 60m provisions likely to be required in 1992.

Some observers cite Pickstock's continued presence on the main board as evidence that Simms is not ruthless enough to make the changes believed necessary by City analysts; others say Pickstock tried to tackle Simms head-on. The latter looks more likely, given the reorganisation of the housing division announced this year.

As well as cutting the size of the housing division, partly to release cash from the business, Simms also appointed three divisional directors who report directly to the executive committee. 'Pickstock's power has effectively been reduced,' said one analyst.

His role has been further undermined by the key appointment made by Simms: John Lovering, former corporate development director and finance director of Sears, who was brought in as chief operating officer in March.

Simms's explanation was that Tarmac was too large for him and Terry Mason, the finance director, to handle on their own. He was keen on the idea of a triumvirate, and believed that bringing in an outsider with fresh ideas could benefit the group. To others, it looks as if Simms has appointed someone else to do some of the dirty work for him.

Despite the changes which have taken place since his appointment, Simms insists there was no power struggle, or boardroom coup, to get rid of Sir Eric - indeed, he insists, Sir Eric chose him as his successor. 'There was such a strong feeling that something had to happen, that deciding what had to happen wasn't as difficult as you might imagine.'

Simms's position as head of the construction division - virtually the only Tarmac business which was still increasing profits - made him the most obvious choice.

His credentials were impeccable. In the year before he took over, the division made pre-tax profit of pounds 23.2m. When he left, it had more than doubled to pounds 51.7m. To an extent, this was luck - his term of office coincided with the greatest building boom since the Second World War, and rivals such as AMEC and Taylor Woodrow managed similar feats. But Simms seems to have managed to avoid taking on the kind of disastrous contracts that have marred the recent results of some competitors.

'What he is is a very level-headed, very hard-working, straightforward contractor,' said one analyst who knows him well. 'And unlike some of his peers, he appears to have managed the risk / reward ratio well.'

Simms would not be unhappy with that description. Born in 1945 in Scotland, he spent his primary school years following his naval officer father on various postings around the country, before opting for boarding-school in Exeter when his father's postings took him abroad.

He decided in his mid-teens that he wanted to be a civil engineer. 'I remember in Karachi (where his father was posted at the time) I met someone who worked for Cementation out there. I thought, 'This looks like a good sort of lifestyle' - I've never managed to find it again, mind you.'

That ambition took him to King's College, Durham, now Newcastle University, where he graduated in 1966 with a first and the prize for coming equal first in applied science. On graduating, he returned to Scotland to join Ove Arup - where he built a steel-framed house in St Andrews and a church with a crab-shaped roof at Glenrothes, Fife - before deciding to broaden his experience by joining A M Carmichael, which was building a hydro-electric dam.

A year after he joined, Carmichael went into liquidation - leaving Simms with a pounds 59 pay-off ('I never could quite work out what it was for') and a job with Tarmac, which took over some of the contracts. His first significant job there - where, as he describes it, he 'broke cover' - was building the A road by the Clyde at Greenock; a small job, but one he could run himself.

The philosophy he developed then - 'What's important in this world is getting in charge of things' - has changed little since. When he joined the main Tarmac board in 1988, he says: 'I looked around me and, in my view, it was quite possible, quite probable, that I could take over from Pountain.' And he adds: 'I can't bear to see anyone else get there before me, I can't bear to be beaten.'

He says he took the job with a clear idea of what was needed, 'bearing in mind that the group was not sensibly controlled or sensibly run', but admits that the actions taken so far have been the easy part. The signs are that the next part, although difficult, will be less traumatic for the Tarmac barons.

'In the next phase, you do need people's co-operation. That's when you need ideas to evolve in the business. Sure, there's the leader, who has to take the responsibility on occasion for choosing between two options of similar merit. But what you should now be doing is bringing consensus back again.'

(Photograph omitted)

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