The venture capitalist who this week sold the name of collapsed contractor James Longley to Kier for 拢1 believes other small regional firms are about to go into receivership or sell out to the regional operations of their national rivals.
Mike Gurner, a director of venture capital firm Postern and former chairman of Longley, said that small firms did not have the balance sheet strengths to take on big jobs. 鈥淔rankly, businesses like this have not got the cash resources, so if they take a hit, they can鈥檛 handle it,鈥� he said. Longley, based in Crawley, West Sussex, had a turnover of 拢38.5m in 1998.
Kier, which is poised to buy the firm, is in negotiations over six of its contracts totalling about 拢7m. It said it intends to take on 45 of Longley鈥檚 160 staff and site operatives.
Longley鈥檚 collapse was precipitated by a loss of several million on a 拢35m football stand it was building for Chelsea FC. Gurner, whose firm took over after the football project, said: 鈥淚t was the Chelsea contract that brought it to its knees; we took over a hell of a mess.鈥�
Longley went into administrative receivership last month. This followed losses of 拢3.6m in 1998 compared with a profit of 拢511 000 in 1997.
Businesses like this have not got the cash resources, so if they take a hit, they can鈥檛 handle it
Mike Gurner
Gurner said the trend for design-and-build work had hit smaller contractors hard. 鈥淭he industry has got a lot worse for firms like Longley,鈥� he said. 鈥淭imes are very busy but under design-and-build, contractors are taking on too much risk and margins are not what they were 12 years ago.鈥�
Gurner said Postern had lost about 拢300 000 because of its 92% stake in Longley. He predicted a spate of consolidation as smaller firms were swallowed up by larger players such as Kier.
Richard Side, deputy managing director of 拢600m-turnover Kier Regional, said he expected to reduce Longley鈥檚 sales to 拢7-8m and to integrate the firm into Kier鈥檚 Wallis subsidiary, which has a turnover of 拢70-拢75m. Longley marketing director Graham Todd will become general manager. Chief executive Alan Mackinnon has left.
Established in the 1860s, Longley was one of the country鈥檚 oldest family firms. Side said: 鈥淚t is a classic story of a good old family firm that didn鈥檛 really adjust to the recession and has been mortally wounded. It has been staggering along for some time.鈥�
Its collapse follows that of a number of other high-profile smaller firms in the past nine months, including CJ Sims, Porter Builders and Fearnley.
