Birse Group PLC

Humber Road
Barton-on-Humber,
North Lincolnshire DN18 5BW
United Kingdom
Telephone: +44 01652 63322244 0161 486 9191
Fax: +44 01652 633360
Web site: http://www.birse.co.uk

Public Company
Incorporated: 1970
Employees: 1,227
Sales: £332.87 million ($631.80 million) (2005)
Stock Exchanges: London
Ticker Symbol: BIE
NAIC: 237990 Other Heavy and Civil Engineering Construction; 236115 New Single-Family Housing Construction (Except Operative Builders); 237110 Water and Sewer Line and Related Structures Construction; 237310 Highway, Street, and Bridge Construction; 531190 Lessors of Other Real Estate Property; 531210 Offices of Real Estate Agents and Brokers; 532412 Construction, Mining and Forestry Machinery and Equipment Rental and Leasing; 551112 Offices of Other Holding Companies

Birse Group PLC is a major U.K. construction company operating primarily in the civil engineering and public works sectors and focused especially on the northern England region. The company acts as a holding company for a number of more or less autonomous subsidiaries operating in specific construction sectors. Civil Engineering remains the group's dominant activity, accounting for nearly 70 percent of total revenues, which were £332.87 million ($630 million) in the company's 2005 fiscal year. The company's civil engineering activities are guided by Birse Civils Limited (Birse CL), which operates on a national basis and represents one of the oldest parts of the company's activities. Other components of the group's civil engineering division include Birse Metro, which is an important contractor for the London Underground, as well as other public transport infrastructure projects, and Birse Rail, which acts as a contractor for U.K. railroad projects. Into the mid-2000s, Birse has been restructuring its building and construction division, exiting a number of underperforming sectors, such as home building, where the company did not have the scale to compete on a national level. Birse's Building division contributed 18 percent to group turnover in 2005. The company's third major division is its Process Engineering, operating in the water systems and water and waste treatment sectors, and adding 12 percent to the group's turnover. Other Birse operations include plant and equipment hire. Birse Group is listed on the London Stock Exchange, and is led by Chairman Peter G. Watson.

FOUNDING A CIVIL ENGINEERING GROUP IN THE 1970S

Peter Birse founded the construction company bearing his name in 1970 in Barton-on-Humber. Civil engineering played a major role in the group's growth from the start. Through the 1970s, the company focused especially on public works projects for local and regional authorities. By the beginning of the 1980s, Birse had built the company into a major player in the northern region's construction market. Birse launched the company on a national expansion in the 1980s, in part by forming partnerships with other construction groups. An example of this was a joint venture project formed with the Farr Group in the early 1980s to build a section of the London M25 motorway, which opened in 1985. Nonetheless, the company remained primarily a regionally focused group: the company's well-developed knowledge of its local markets was considered a strength.

During the 1980s, Birse also extended its operations to include water and waste treatment systems, and similar process engineering projects. The company again sought out partnerships for these operations, notably through a joint venture formed with fellow contractor ACER. Birse also developed its own plant and equipment hire wing, BPH. By the end of the 1980s, Birse had become an important "junior league" building contractor. The company's annual revenues also grew strongly, multiplying by more than three times from the early 1980s to nearly £200 million by 1989. The company's profits grew strongly during this time as well, multiplying by some 500 percent. As a smaller player, Birse's primary focus remained on contracts ranging up to a maximum of £50 million.

Birse went public in 1989, listing its shares on the London Stock Exchange in September of that year. The public offering brought in a major shareholder and partner, Bilfinger & Berger, based in Germany. The partnership with the larger construction group enabled Birse to begin competing for larger contracts of more than £50 million for the first time. The company also began an aggressive push to triple its revenues into the early 1990s, including a major expansion of its road-building operations in the United Kingdom.

Yet the collapse of the British construction sector in the late 1980s, and the long economic slump that followed, soon brought Birse into difficulties. The company faced trouble on various fronts. On one hand, the drop in new construction meant fewer contracts for Birse. On the other hand, many of its clients were struggling; in 1991, for example, the company was forced to write off more than £500,000 in bad debts from two private property developers. The following year, Birse lost one of its largest contracts at the time, when the development consortium behind it was forced into bankruptcy. By 1992, Birse itself had slipped into losses.

A NICER APPROACH IN THE 1990S

Birse managed to return to profitability in 1995. Yet the recession era had marked the company in more ways than one. Already considered a tough contractor in the 1980s, the company developed a reputation as one of the industry's most aggressive by the mid-1990s, not only toward its subcontractors, but also toward its clients in an effort to meet ambitious expansion targets. Yet the commitment to that expansion during the difficult economic period brought about a shift in the group's management culture. As one company executive told The Times : "We expanded at a bad time. This wasn't a fun industry to be in at that time. The business had evolved into something we didn't want it to be. What I think brought the problem to Peter Birse's attention was when we started to lose customers who had been with us for many years, and people started leaving the company after just a few months."

Birse added: "Slowly, imperceptibly (the business) was starting to operate in an aggressive and confrontational way. There was fear in the workforce as the new style began to bite." By the mid-1990s, Birse recognized that he needed to take action to revitalize the company he founded. Birse hired a team of industrial psychologists, or "performance coaches," to intervene, bringing a series of training sessions in an effort to reinvent the company's culture. Birse himself made headlines by offering a public apology to the company's clients and subcontractors, as well as to its employees.

Although greeted with some skepticism, Birse's cultural turnaround appeared to be working into the second half of the 1990s. The change in culture enabled the company to focus its efforts on developing more open and efficient partnerships, slashing costs by some 20 percent or more. The company also instituted a shift in its operations, de-emphasizing its road-building work in order to boost the share of building construction in its turnover to some 70 percent before the end of the decade. As part of that effort, the company sold off its small, money-losing housing division in 1995.

COMPANY PERSPECTIVES

Birse Group plc is the ultimate parent company of a group of companies whose principle activities comprise construction, plant hire and related services. Its strategy is: "to leverage a group of construction related autonomous businesses each focused on the customer and its core competencies, operating safely and self funded, run by directors who think and behave like owners."

This effort paid off, for example, with the winning of a contract to build an extension for a hospital in Anlaby. Yet the company's primary growth remained in the civil engineering sector. In 1999, for example, the company won a bid to build Wessex Water's new sewage treatment plant in Bridport. The company also won a contract to build a materials recovery and energy center at the Port Talbot waste treatment plant in 2001.

CIVIL ENGINEERING FOCUS IN THE 2000S

Peter Birse's retirement in 2001 brought a new management team into place, led by Chairman Peter G. Watson. The company now redeveloped its strategy for the 2000s, focusing its operations more tightly on its strong civil engineering component. In 2002, the company underwent a corporate restructuring, creating three primary divisions: Civil Engineering, Process Engineering (including water and wastewater treatment), and Construction. As part of that restructuring the company created three new autonomously operating subsidiaries, Birse Build, Birse CL, and Birse Process. These were further broken down into subsidiaries targeting dedicated markets, such as Birse Metro and Birse Rail, operating in the subway and railroad markets, respectively, under Birse CL.

By the mid-2000s, the company's civil engineering operations had clearly taken the lead in the group's continued growth. The company decided to refocus itself around a civil engineering core, selling off part of its troubled, money-losing Birse Build subsidiary. As part of that effort, the company also reduced Birse Build's geographic focus, eliminating its southern England and Midlands region operations to concentrate on its northern England home base. Birse also sold off some of its other noncore operations, such as The Cabin Company, a leading provider of onsite cabins and accommodations.

Birse's civil engineering business in the meantime continued to enjoy growth. In December 2005, for example, the company won its bid for a £3.4 million road improvement contract for the M20 highway. After more than 25 years, Birse remained a prominent name in the British construction sector.

PRINCIPAL SUBSIDIARIES

Birse Civils Ltd.; Birse Construction Limited; Birse Water Limited; Birse Rail Limited; Birse Metro Limited; Birse Process Engineering Limited; Birse Build Limited; Birse Stadia Limited; Birse Properties Limited; BPH Limited; Birse Group Services Limited; IT Incorporated Limited; Minerva Creative Solutions Limited; New Start Ventures Limited.

PRINCIPAL COMPETITORS

AMEC PLC; Balfour Beatty PLC; Taylor Woodrow PLC; George Wimpey PLC; Mowlem PLC; Laing O'Rourke PLC; Foster Wheeler Ltd.; Tarmac Ltd.; Interserve PLC; Morgan Sindall PLC; Skanska Construction Group Ltd.; Alfred McAlpine PLC.

KEY DATES

1970:

Peter Birse founds Birse Group, with a focus on the civil engineering sector.

1989:

Birse goes public with a listing on the London Stock Exchange.

1995:

After several years of losses, Birse becomes profitable.

1997:

Peter Birse apologizes for the company's aggressiveness and institutes a companywide corporate culture change.

2001:

Peter Birse retires.

2002:

The company restructures, creating three primary subsidiaries, Birse CL, Birse Build, and Birse Process.

2005:

The company focuses on civil engineering, selling off parts of Birse Build, which is also refocused on the northern England region.

FURTHER READING

"Birse Civils Awarded £3.4m Motorway Contract," Contract Journal, December 1, 2005.

"Birse Gets Nose in Front to Take Sewage Odour-Reduction Work," Contract Journal, November 9, 2005, p. 8.

"Civil Engineering Saves Birse's Bacon," Contract Journal, July 9, 2003, p. 7.

Cowing, Emma, "Birse Shares Rocket As Founder Bows Out," Scotsman, August 17, 2001, p. 2.

Dearlove, Des, "When the Snarling Had to Stop," The Times, June 18, 1998, p. 6.

Goddard, Andrea, "Birse Shares Climb As Litigation Ends," Financial Times, February 26, 2004, p. 28.

Leitch, John, "Birse Moves into the Black," Contract Journal, July 10, 2002, p. 9.

―――――――, "Birse on Defensive Over Cash Shortage Rumours," Contract Journal, November 28, 2001, p. 3.

McCormick, Helen, "On Track for Growth," Contract Journal, September 1, 2005, p. 28.

O'Brien, James, "Birse Can Build on a Strong First Half," Birmingham Post, December 12, 2003, p. 21.

Tyler, Richard, "Birse Sees Records Fall—Good and Bad," Birmingham Post, July 4, 2003, p. 21.

White, Dominic, "Bugs Bunny, Mr. Blobby and the Caring Side of Builders," Daily Telegraph, August 17, 2001.