Profile: Streets ahead of the game: Tony Pidgley of Berkeley Group grew up in a railway carriage, writes Heather Connon. But his instinct for the housing market is unerring

Click to follow
The Independent Online
JOHN RITBLAT, chairman of British Land, may have grabbed the headlines, but George Soros discovered Tony Pidgley first. In January the now-legendary financier disclosed that his Quantum Fund had a 3.19 per cent stake in Berkeley Group, the upmarket house-builder co-founded and still run by Pidgley.

The acquisition followed a breakfast meeting at which Soros and Pidgley discussed Berkeley's strategy and Pidgeley gave his views on the prospects for the housing market.

What Soros found was a man who sounds as much like a street trader as a chief executive, but whose company has dramatically outperformed such household names as Wimpey and Taylor Woodrow in the five years since the housing slump took hold; a man who makes a virtue of going against the herd, but who has proved to be one of the best readers of the housing market. In short, he discovered what many British investors have known for some time: Berkeley Group is one of the class acts of the housing industry.

Pidgley attributes his success to a combination of 'street knowledge' and the professionalism that he learnt at Crest Nicholson, his first independent - and, apart from Berkeley, only - employer. The street knowledge is a result of his unconventional background, described with great gusto in a radio interview earlier this year, but which - in the interests of portraying Berkeley as a public company, run by a team of professional managers rather than an entrepreneurial poor-boy-made-good - he now prefers to play down.

A Barnardo boy, he was adopted at the age of four by travellers and lived in a railway carriage. His first introduction to the need to pay attention to costs was when he was deputed to drain the radiators of the family's lorries last thing at night and refill them the following morning, to save money on anti-freeze. And he first discovered the joys of trading at the age of 10, when he bought a sow and made profits on selling her piglets.

His adoptive father could neither read nor write and Pidgley's literary skills (albeit, he admits, only half-formed) made him the blue-eyed boy. But educated or not, the accounting lessons he learned at his father's knee taught him almost as much about company finances as any formal tuition could.

'He always used to carry a little book. It was very simple,' he said. It had three columns: A, B and C. In column A, his father would record what he paid for something - say a horse. In column B, he would write the value of offers he turned down for the animal. In the final column, he put the price he eventually sold for.

'I asked him once what (column B) meant and he said 'Well that horse now owes us pounds 12, because that's what we've turned down.' The profit was measured not against what his father had paid, but the value of the offers he refused.

That graphic illustration of the risks of holding out for a better offer may explain Pidgley's skill in reading the housing market in 1988, when it soared to undreamt-of peaks. Unlike practically every other house-builder, Berkeley did not believe the good times would go on forever, and instead of rushing to buy land at inflated prices, it took the decision to cut its land holdings.

'We don't know why the rest didn't see it,' said Pidgley. 'House-builders weren't making money, they were printing it. We were selling houses and their prices were going up in leaps and bounds. Just because you sell gobstoppers one week at more than three times what they're worth, you wouldn't go out and buy four years' supply, would you?'

Astute though Pidgley undoubtedly was, Berkeley's reputation for having bucked the housing slump has assumed slightly mythical proportions. True, he quickly realised - pace his father's book - that there was little point in holding out in the hope of selling its houses at better prices. The important thing was to get the cash into the business. But Berkeley is a trader which has traditionally held low land stocks, so cutting its holdings largely meant speeding up the disposal of houses which were already built - a rather easier task than getting rid of long landbanks built up in the expectation of growth which did not materialise.

Berkeley still did not escape the recession unscathed. Like many of its rivals, it was fooled into believing the market had turned in 1991, and it asked shareholders for pounds 44m, partly to buy land, only to see prices continue tumbling. Although the pounds 3.6m provision against housing land during the recession is far lower than that of its rivals, the fact that it made just pounds 5.2m trading profits from housing on pounds 196.5m of sales in 1990 and 1991 shows that it was selling houses at far lower prices than it had hoped when it bought the land.

That said, it has managed to stay in profit throughout the recession, and while less clear-sighted rivals have shrunk in size, it plans to build 1,200 homes this year, more than double the number sold in 1989.

A brash, almost aggressive style makes Pidgley too rich for some people's tastes; others, however, find his openness and liveliness appealing. Now 45, he got involved in house-building soon after leaving school, aged 15 and with no formal qualifications. The lack of a formal education is still one of his biggest regrets. 'There is no doubt about it, they (his colleagues) knocked the rough spots off me in the early days.'

A short spell in the family business did not work out and he set up on his own, cleaning cars, mowing lawns, cutting hedges - virtually anything for money. That evolved into P & J Haulage and Plant Hire, which specialised in site clearance and demolition.

Crest Nicholson, one of his customers, let him an office for pounds 3 a week, and when he was there doing the books on Saturdays he met Crest's founder, Brian Skinner. He liked what he saw and offered Pidgley pounds 1m, ostensibly for his business but actually to get his skills into the company. Two weeks later, aged just 21, Pidgley was asked to be Crest's building director and given a seat on the main board.

He would possibly still be there today but for a disagreement with David Donne, Crest's chairman. 'It was suggested I was a maverick,' said Pidgley - a description which clearly amuses him as much as it offends. Donne suggested that rather than humouring mavericks 'you take them outside and shoot them'.

So Pidgley left and Jim Farrer - a co-founder of Crest - resigned in sympathy. Together, they decided to set up on their own and Berkeley Group was born.

The first business plan, drawn up to persuade Barclays Bank to give a pounds 150,000 loan facility, was unequivocal. 'What is our aim?' the first sentence asked. 'Our aim is to make money.' They very nearly didn't. Having secured Barclays' support, they bought their first plot of land and built a house with brass doorknobs, a patio, landscaped front and rear garden - 'all the things that builders didn't do'. They then sat back and waited for the queue of buyers.

The queues came, but went away again almost as quickly when they discovered that, as had been done at Crest, the house was timber-framed. Pidgley and Farrer were convinced that timber frames were just as good as bricks, but prospective buyers, who heard a hollow sound when they knocked on the walls, were unconvinced. 'We had to sell it, as we couldn't do the next one until we did.' Eventually it did go. But Berkeley never built another timber-framed house.

That taught Pidgley the lesson of staying close to the customer. At Crest, the directors rarely visited the sites. 'We didn't know the resistance there was in the market-place to timber frames. We forgot about the grassroots.' He has not forgotten again. Although the group's operations have expanded well beyond its Home Counties roots, he still visits the sites regularly - going to the 'coal face' as he describes it.

Pidgley and Farrer, who retired as an executive director last April and is now life president, may have built the company, but Pidgley is determined that it is not a one-man band. Nor will it be a family business. Although his son worked for the company for three years - and now has his own housebuilding operation - Pidgley would not have wanted him to join Berkeley permanently.

There is little doubt, however, that he remains its driving force - although analysts point to excellent managers surrounding him, such as Paul Read, once finance director, now commercial director; John Jacobs, who has overall charge of the residential business; and David Jackson, head of the James Crosby group which Berkeley bought two years ago.

The City would be happier, however, if Berkeley had brought in an independent chairman to succeed Farrer, rather than choosing Graham Roper who, although undoubtedly able, is the same age as Pidgley and has been with the group for 12 years. Last year's appointment of Terry Upsall, former head of Beazer's housing business and a widely respected figure in the industry, as a non-executive has dispelled much of the concern.

'He (Pidgley) is someone who speaks his mind,' said one person who knows him well. 'He debates furiously and he respects you if you hold your ground.' This interview only went ahead when the writer argued furiously against Pidgley's decision to cancel it because of displeasure with other newspapers.

His motivation is not money (although with a 6.5 per cent stake in a business worth more than pounds 300m, he has little reason to worry about it) as much as winning. 'That's the whole game, isn't it?'

(Photograph omitted)

Comments