Profile: Long live Eric the Blue: Sir Eric Pountain's Thatcherite faith remains unshaken as he makes his exit from Tarmac. Nick Gilbert reports
Sunday 06 December 1992
Now the company's links with the Tories it has always supported are under scrutiny. The company is mired in controversy over the pounds 100m-plus dowry it is receiving to take the projects division of the Property Services Agency, which oversees government contracts to companies such as Tarmac, off the Government's hands.
' It's good for the PSA and good for Tarmac too,' says Sir Eric. 'People may think it's a rip-off, but we won it by tender.'
Shortly before Margaret Thatcher's 1979 victory, Sir Eric took over as Tarmac's chief executive. The company was in trouble and valued on the stock market at less than pounds 100m. At the height of the Eighties boom, when Tarmac was building (and selling) 13,000 houses a year, the company was worth well over pounds 2bn.
It was and is one of the largest contributors to Tory party funds. After the Falklands victory, Tarmac got the job of building the new Port Stanley runway. When Cecil Parkinson resigned from the Cabinet over the Sara Keays affair, Sir Eric found him a job as a non-executive director. In 1987 Sir Eric was Businessman of the Year.
'He was one of the greatest success stories of British industry, not just the construction business,' says Graeme Odgers, the next chairman of the Monopolies and Mergers Commission, who worked for Sir Eric in the go-go years at Tarmac.
Then base rates hit 15 per cent and the recession began. Housing, the engine which powered the group, contributing up to half of profits, stalled as prices fell. Tarmac's expensively acquired landbank remains an albatross round Sir Eric's neck.
Shares in Tarmac, one of the most visible victims of the building recession, are now just 94p, against 378p at one time. The company is now valued at less than pounds 700m. Profits, which in 1988 were a shade under pounds 400m, have evaporated, and in the first half of this year Tarmac recorded a pounds 15m loss. And some reckon BTR or Hanson are ready to strike with a takeover bid.
Sir Eric is, however, a survivor. At the Court of King Eric, Tarmac was a decentralised feudal operation, with competing barons in charge of housebuilding, quarrying, building products and other divisions. Earlier this year the crown slipped, but he did not, unlike many other company chiefs whose performance has upset City institutional shareholders, lose his head completely.
Day-to-day responsibilities have gone to Neville Simms, the Baron from the Black Stuff who ran civil engineering, but Sir Eric remains chairman and will leave in his own good time, probably next year, when he hits 60.
Unlike other top Tories, he has even survived torture by the tabloids. Two years ago, Sir Eric's name cropped up in the divorce of Christine Levine, a director of James Beattie, the Wolverhampton department store group he chaired. The blonde Ms Levine said they met to play Scrabble. Sir Eric firmly denied any dalliance and remains married to Joan, his wife of 32 years.
They live in a splendid Georgian home, Edial House near Lichfield, where Sir Eric, an excellent shot, can bang away at the wildlife. The acreage also came in handy for the other blondes in his life - Haflinger horses (known for flaxen manes and tails) which he used to breed and show. He earns pounds 313,000 a year, but apart from a modest house in Minorca Sir Eric reckons his lifestyle is anything but flash.
His graceful and gradual exit from Tarmac is largely due to his immense personal charm and the fact that Tarmac at least still pays some kind of dividend. It is hard to find a personal enemy. Even Robin Martin, a former Tarmac chairman, who publicly sniped at the company's fall from grace at the annual shareholders' meeting a few months ago, likes the man.
'Eric is very charming; firm and ruthless when necessary, but he has a certain humility as well,' says Mr Martin. 'When I recruited him we needed someone who knew all about housebuilding, and we got the right man.'
In order to get him, Tarmac took over John McLean, a Wolverhampton housebuilder Sir Eric had helped to put on the map. He collected around pounds 500,000 - a large sum in 1973 - in Tarmac shares and has kept most of them.
'Eric was a marvellous boss and a great personal leader,' Mr Odgers recalls. 'He set high-wire standards - targets which were achievable, but only with excellent performance.'
But Sir Eric fell from the highwire and made plenty of mistakes. His initial strategy seemed sound enough. He made Tarmac unique - a combination of a building company, like Wimpey, and a building materials company, like Redland or RMC. Tarmac did everything from quarrying stone to making bricks, building houses and making roofing products. The civil engineering division handles the big stuff, including the Channel tunnel, and is heavily reliant on government contracts for roads, bridges, prisons and defence establishments.
Sir Eric also took the company on a huge spending spree in the US, investing around pounds 600m.
He was a true believer. 'Eric chose to invest in the supposed Thatcher-Reagan supply-side miracle, taking Tarmac's huge profits and over-committing it to expansion,' says one of Tarmac's sternest critics, Jamie Stevenson, an analyst with Kleinwort Benson Securities. 'He ignored Europe, unlike Redland and RMC, which invested on the Continent and have done far better.' Tarmac has been forced to cut back on its US operations.
But it was housebuilding that made and lost Tarmac its fortune and battered Sir Eric's reputation. To the last he believed Thatcherite dogma and failed to see the danger signs. Even when interest rates began their rise, Tarmac went on building houses in great numbers while others were retrenching. Compounding the mistake, Sir Eric mishandled the City by failing to signal early enough the damage Tarmac was suffering.
'I've done nothing to be ashamed of,' he says. 'And I don't think I would do anything differently, except perhaps I would have stopped investing in 1988-89, so we could have entered the recession with cash and not debt.'
Like Baroness Thatcher, Sir Eric has a tendency to blame chancellors. 'All the talk of green shoots proved misplaced,' he observes, rather late in the day. 'I've been in housebuilding all my life, and have never seen anything like this recession. We were used to a downturn of say two years, but not one lasting four. And nobody has seen house prices collapsing like this before.'
But if he is disillusioned he does not show it, and he has not followed British Airways by cutting the Tory party contribution, even after a body blow earlier this year.
In order to cut capacity and trim costs in building materials, Sir Eric came up with one seeming master stroke - a proposed joint venture with Steetley. This time the Government failed to help out. In February the deal was referred to the Monopolies and Mergers Commission, and Redland took over Steetley. A crestfallen Sir Eric gave up hands-on control of Tarmac.
The court is now run differently. The executive jet has gone and the bosses must now use the company helicopter. But landing huge building contracts is still a people business, where entertaining goes with the territory. Tarmac retains a villa in the South of France and a large house in Scotland.
But the Simms regime will be different, with the new man in day-to- day charge taking power back to the centre from the baronies. The business is being cut back to three core operations - housing, quarrying and construction - and working capital is being trimmed to generate cash and reduce debt.
Sir Eric remains a born optimist. 'Tarmac will bounce back and housing will take the lead just as before.'
When he does leave Tarmac, he will not be bored. He has a clutch of non-executive directorships - chairman of the Midlands metal-basher IMI and James Beattie, a director of the Midland Bank - and is looking for more. He has just become a non- executive director of United Newspapers, run by Lord Stevens, who has been under heavy pressure from City institutions to recruit some new blood to the boardroom.
Meanwhile Sir Eric is faithful to Tarmac to the last. He has recently bought more shares and now holds well over a million. Is he betting on the recovery he foresees - or a takeover bid?
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