Since floating on the AIM market in last year, Eatonfield has reengineered its processes and strategy to reflect its ethos as a socially responsible employer, housebuilder and commercial developer.
By John O'Hanlon
Rob Lloyd founded Eatonfield in 1998, after a 24 year career in the property industry culminated in his appointment in 1997 as Managing Director of the Manchester property developers UK Land. He came out of that company with some equity, he says, and a strong desire to create a company on his own account, trading in land, adding value and finding sites as he had been in the past: “But I wanted to follow a more diverse strategy involving residential, retail and commercial developments, and build an integrated team around me.” This vision has been largely realised over the intervening nine years, especially since its successful flotation on the AIM market, which raised £15 million.
With its headquarters in Mold, Flintshire, Eatonfield has naturally enough focused most of its land acquisition and development in Wales and the North-West of England; however it is now moving into other areas. Until recently Eatonfield tended to move into selected pockets of Wales, such as Cardiganshire, buying sites that were in-between. Maybe too small for the really large national housebuilders but too large for the local builders to handle.
This was a niche that the company’s housebuilding team could make its own, though Lloyd does not underestimate the problems, especially when it comes to planning. “It takes a long time to get planning permission: where you used to reckon around six months from submission to a decision it can now take up to two years for all the flood zone research, traffic management planning, ground contamination reports and the like to be considered.”
This means that developers have to take a longer-term approach, and have plenty of ongoing projects if they are to maintain operating cash flow.
The ability to grow
The AIM flotation last November enabled Eatonfield to invest in larger sites than had been possible before – sites like the 24 acre Bookham technology site at Paignton in Devon, which it acquired at the time of the flotation and has just sold again for £10 million. “We had always been actively buying sites,” Lloyd explains, “but we got to the point where there were many more opportunities to buy than we were able to act on. As its sole owner there was only so much equity I could put into the business. But when we floated on AIM that not only enabled me to take out some of the money I had already put in but also to go for the larger sites like Paignton. It is just as much work to develop a small site as a large one – all the planning hoops I mentioned still have to be jumped through!”
That, then, was the practical effect of the IPO. However in reality it marked the group’s transition from a loose confederation of businesses into a PLC focused on profitability and adding shareholder value. To guide the company through that process, of which nobody had any previous experience, it was joined at this critical moment by Terry Carroll, who as well as having been treasurer of Halifax Building Society had, as Finance Director, prepared National & Provincial for a prospective £860m flotation.
Carroll quickly decided that he could work with the board of Eatonfield and took on the challenge with enthusiasm. “It felt as if I was coming home to where I want to be for the rest of my career,” he says. He likens the process of floating a company on the AIM market to the way Piggott won the 1976 Derby on a fine horse that had to be ridden just right. “He held Empery back till the crucial moment, then moved up through the field. When he hit the front with only 100 yards to go he could not be stopped. You can be a small company like this without contemporary processes, but if you engage the whole organisation you can go from the back of the field to the front.”
Mature systems
The lack of what he calls contemporary processes was soon addressed. For example the land acquisition and project meetings were held separately and between them took up to four hours a week as every project was reviewed, Carroll says. “We put in a pipeline process for land acquisition and development as a single issue, and as a result found that we could deal with them in a fortnightly meeting that takes no more than 45 minutes – that is because it now only considers the cases where something may be going wrong.”
By the beginning of the group’s new financial year on July 1 it will have in place robust HR and people processing systems, business planning and budgeting, proper management accounting and a proper training and development programme – all things Terry Carroll considers de rigueur for a leading edge company. “We have moved on from a Sage Line 50 accounting system to Pegasus Opera, we have done all the annual appraisals for the first time, and we are hot to trot!”
A five year rolling strategic plan (formulated in February by Rob Lloyd, Terry Carroll and the two non-executive directors Sir Leslie Young and Suki Kalirai) now concentrates the mind of the business, essential in a market where competition makes it quite difficult to achieve return on investment of 20 percent on residential projects and 25 percent on commercial. Finding the sites is not so hard, says Rob Lloyd: “We have extensive contacts and often have the opportunity to buy sites before they come onto the open market. People now have confidence in our brand – we have to cherry-pick the opportunities that present themselves. We have to be very focused in terms of decision making and make sure we have an exit route planned for every investment.”
Sustainable development
The business model, he says, is to look for brownfield sites and identify alternative uses, often residential, where there are opportunities to advance the company’s sustainable development credentials. “We are a credible eco-friendly housebuilder. We are responding to the government commitment to sustainability and we want to be at the leading edge of that. We see it as a competitive advantage, not just on the building side but also on the planning side. If we say we are doing an eco friendly development the planners look more kindly on that.”
People are prepared to pay a premium for an eco-friendly house, he points out, and for the purchaser return on that investment may not take that long. “When we build a four bedroom detached house, the buyer is looking at heating bills of £150 a year. We have adopted a policy that complies with UK Eco Homes standards, using timber frames, sustainable, natural materials, insulated floors, walls and roofs, and heat provided by geothermal pumps.” Add ‘grey’ water recycling, rain harvesting, solar panels and wind turbines where appropriate, and you are looking at a house that is very economical to run.
This is one example of giving customers what they want. Another, on the commercial side, is to develop small, flexible units, for which demand is increasing, over large units which may be harder to sell or let. “We would never put up a large commercial ‘shed’ unless it was built to order and pre-let. Commercial customers don’t want ten or 20 year leases now – that is why we have seen the growth of serviced offices. Our strategy going forward will be to develop small parks in strategic areas.”
Saving in the land bank
With a land bank sufficient to meet its needs for the next five years at least, Eatonfield can devote itself to its key and unique skill, which is master planning for either commercial or residential development or a mixture of the two. The house building division is a major growth area with some 16 sites under development in 2007/8, and looking forward Rob Lloyd sees a great deal of potential in developments specifically aimed at the over 55s, with a high level of services at the centre and bungalow type accommodation on the periphery.
His enthusiasm for these retirement villages is quite understandable – they make compelling commercial sense, are unlikely to be refused planning permission, and fit well with a company that has a powerful social conscience. Recently more than half the entire Eatonfield staff took part, for charity, in the Chester half marathon.