Heath Davies: Time marches on for the turnaround king
After giving himself 100 days to sort out the ailing Alterian technology group, the chief executive received some unwelcome attention
Nick Clark is the arts correspondent of The Independent. He joined the newspaper in June 2007, initially reporting on the stock markets. He has covered beats including the City, and technology, media and telecoms and made the switch to arts in December 2011. He has also contributed articles to the sports section.
Thursday 10 November 2011
The clock is ticking. Alterian's new chief executive has set a 100-day deadline to turn the ailing company around, and has bet his job on getting it right. Everything was going to plan until last month and the emergence of an unwelcome bid approach. Welcome to Day 61 of Heath Davies' eventful reign.
Mr Davies is a turnaround specialist who has overseen the acquisition and development of 14 businesses over the past decade. He faces one of his biggest challenges in righting Alterian, a struggling marketing technology group, while fighting off a takeover approach at the same time. He is confident he has the skills to rebuild the Bristol-based group. "I'm good at taking something that is broken and bringing energy to fix it; I have the experience of putting together a plan for a company and restructuring it," he said.
Mr Davies studied civil engineering and a "twist" saw him writing claims programmes. "I seemed to have a natural flair on the computing side," he said. He joined French-listed business IT company Sword Group in 2002. At the time turnover in the UK arm was around €5m and Mr Davies drew up a plan to grow that to €100m in five years.
"The market had come through the dotcom boom. You could definitely see a resurgence at the back end of 2002 in the business-to-business sector," Mr Davies said. It hit the target a year early and raised €150m in debt and equity to expand the software business. As the company looked for opportunities to expand, he even considered buying Alterian, "but it was way too expensive".
He left Sword last December from his role as co-chief executive, after a disagreement over the strategic direction for the company. "It had been a great year, and it was a clean break," he said.
Mr Davies decided he wanted to work at a distressed company and turn it around. "Looking over nine years, what had been successful for me was taking businesses that needed some sort of transformation," he said. "That would mean taking it international, restructuring, right-sizing, or getting in and understanding product strategy."
After exploratory discussions with Xchanging and Iris, the opportunity at Alterian emerged. Alterian, which was founded in 1997 by David Eldridge, Mike Talbot and Tim McCarthy, had run into trouble. In April, Mr Eldridge, the chief executive, quit after a delayed contract forced the company to warn revenues would be 10 per cent lower than expectations. "I take my responsibilities seriously," Mr Eldridge said as he stepped down. The company shocked the market as it warned on profits again nine days later and in the following months the shares plunged by two thirds. Panmure Gordon analyst George O'Connor called the company's recent history: "Two years of pain".
In a short space of time, much has changed. The other founders have since followed Mr Eldridge out of the company, as has the chief financial officer. The chairman and his deputy stepped down at the annual general meeting.
Despite the turmoil, Mr Davies saw a huge opportunity to re-establish Alterian. "When I looked at the company, I saw the intellectual property was solid," he said. "What it had suffered from was a poor integration strategy and investment in opportunistic growth that never materialised. I thought I could add value immediately." He found a company that had lost its focus following a series of bolt-on acquisitions and a message that "was not coherent. I thought: What do these guys actually do now?"
He has set about dividing the operations into three. The web content management provides the software supporting websites for customers including Jaguar Land Rover.
The core business is campaign management and analytics, which analyses market data and makes up about 60 per cent of the company. The group has also developed a social media monitoring tool, which Mr Davies describes as the "sex and sizzle" of the business.
He took over as chief executive on 5 September and set the clock ticking on the 100-day turnaround strategy. "We are in a countdown situation, and I want everyone to be aware of that," Mr Davies said. "We will come out the other end with a new operational model that moves us into a more steady state.
Next year that will be looking at more steady profit and cash and then for 2013 you're back into a revenue growth model." The overhaul will include job losses he said, but added he wanted to be transparent and decisive about the process. "I'm only doing this once. And if I've got it wrong then it's my job not theirs. That's made it clear to everyone."
There was steady progress, until last month. "I anticipated everything that I've seen so far, because I've been through it 14 times, except having a proposed offer coming in."
Translation software group SDL made an indicative 80p per share approach last month, valuing the equity at £50m, which Alterian rejected. SDL now has until 21 November to table a bid or under Takeover Panel rules, will have to walk away. Mr Davies cannot say too much about the deal, for fear of incurring the wrath of the panel. He did talk of his frustration at the timing.
The health of the company will be more apparent with its results, which were brought forward to next week. Mr Davies has big plans to increase Alterian's operations in the US and expand into Asia.
"The centre of gravity has moved from Bristol. The UK provides an excellent platform for stability but not growth," he said. The chief executive concluded: "I believe Alterian is in a very interesting space and it would be great to be independent to exploit that."
The CV: Heath Davies
* Married, one son, two stepchildren. Two grandchildren.
* 1985-1989 Studied civil engineering at the University of Greenwich.
* 1993-1996 Tarmac Plc.
* 1996-2002 Text Solutions.
* 2002-2010 Sword Group, latterly as joint chief executive.
* 2011 Alterian.
* "There isn't much time for hobbies. On the weekend, my family is the priority."
* As a proud Welshman he is still seething over his country's controversial exit from the Rugby World Cup. "I don't want to talk about it."
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