Wates Comes From Pack to Snap Up Two Good Shepherds

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21 May 2015 | Updated 01 January 1970

The Shepherd Group and Wates Group has just today confirmed that they have reached a preliminary agreement on the sale of two of Shepherd Group's Built Environment businesses to Wates Group - the interests involved are Shepherd Engineering Services and Shepherd Facilities Management.

In addition to this, Wates Group would also acquire a significant number of contracts and frameworks from Shepherd Construction Limited.

Last week, ThisWeekinFM reported that the Shepherd Group might want to divest itself of more of its successful businesses (having effectively sold Shepherd Homes). It has now done so. It was well known that there had been jealous eyes looking at Shepherd Engineering Services but it seems that due diligence threw Shepherd Facilities Management into focus. The business, under the stewardship of Noel Clancy and Ian Thomas, has shone - with strong growth and solid margins. It has outshined Shepherd Construction which remains in the doldrums - though it hasn't been seen as the prized Shepherd asset. That title goes to Portakabin - the business most likely to benefit from an injection of sell-off cash.

Wates will clearly set about injection cash into its two acquisitions - which had clearly lacked a bit of TLC from the parent.

When it's a done deal

When concluded, the deal will create a firm much stronger in the construction and property services sector with a distinct engineering services capability. Positive statements from the companies point to:

• Shepherd Construction and Wates Group have complementary geographical footprints across the UK. The combined assets would create an enhanced national contracting business with the scale to capitalise on new opportunities and pursue further growth; 
• Shepherd Engineering Services is a leader in the design and installation of building services solutions, with a strong technical ability and excellent offsite fabrication capabilities; and
• Shepherd Facilities Management is a national facilities management business that would enhance Wates Group's position in the property services sector, adding to the range of services it already provides.

Told you so

The statement continues: Following the sale, Shepherd Group would continue to pursue the Group Board's strategy of focusing future investment on the areas of the Group with significant sustainable development opportunities. In particular, the sale would enable Shepherd Group to further develop the UK and European expansion of its successful Portakabin business.

Andrew Davies, Chief Executive of Wates Group

“The deal would form part of Wates Group’s long-term growth strategy to develop its Construction and Property Services businesses nationwide and build on the success of the company’s recent acquisition strategy. The acquisition of Shepherd Construction’s capability, Shepherd Engineering Services and Shepherd Facilities Management would complement and enhance our existing Construction and Property Services businesses, with access to additional areas of expertise in off-site construction, design for manufacture and assembly operations and expansion in new markets into the North of England. These additions to the Wates Group would complement and enhance our current expertise in the marketplace and allow us to move into new markets and realise our growth plans.”

The transaction is subject to all necessary due diligence being completed. The terms of the proposed deal have not been disclosed.

Previous reporting - Is the Good Shepherd to be Fed to the Wolves

The Shepherd Group has troubled elements and a loyalty to its Construction and Portakabin businesses - so could the organisation be considering selling Shepherd FM to keep the big bad at bay?

The Shepherd Group - which owns Portakabin, Shepherd Homes, Shepherd FM and three engineering elements - has it seems already started to go back on its word not to undermine the successful parts of its operation to support what many see as a failing Shepherd Construction arm. To this end the firm has sold its housing assets in Yorkshire to a major competitor - Galliford Try - this week. These assets will be allocated to Galliford Try's Linden Homes the house builder.

The deal had been on the table for some months...but so too has the rumour that  Shepherd Construction was struggling to turn a worthwhile buck. It's profits are down 40 per cent and its ratio is an alarming £11m from turnover of £686 million.

Shepherd's most recent major milestone was a £15.5m student accommodation block in Newcastle  - not to be sniffed at but not really enough to keep the wolf from the door.

Some commentators are now saying this may just be the start with the Group having to decide which of its seven main operating businesses stays in the flock - and which are disposed of to raise funds to feed that hungry wolf.

Shepherd Homes was performing well but there was a suspicion that its fortunes might change despite the housing boom because it had 'used up' much of its land stock. The engineering elements are a mish-mash of good and bad...Wates had looked at the mechanical & engineering bit but backed-out earlier this year. Engineering Services is in good order - but  are offers on the horizon?

So that leaves Shepherd FM as a more than tasty morsel. Shepherd Group chairman David Williams took the painful decision on Homes and would not shirk at Shepherd FMs disposal in order to finance Portakabin expansion plans and prop-up Construction...though Construction could easily be consumed itself.

If this is the case there would no doubt be a number of potential suitors looking to swoop in on Shepherd FM given an ongoing growth which is reported as 30% year on year. Noel Clancy, Shepherd FM CEO was unavailable for comment when ThisWeekinFM called.

Fitz

Greg Fitzgerald, Executive Chairman of Galliford Try meanwhile was able to point to solid figures in a statement on Wednesday: "Linden Homes, Partnerships and Construction continue to perform well against a background of continuing challenges on the labour supply side in all sectors," he said. Housebuilding saw £982 million of sales reserved, contracted or completed across both Linden Homes and Galliford Try Partnerships. Construction has an order book of £3.3 billion with 83% of next year's revenue secured.

Article written by Brian Shillibeer | Published 21 May 2015

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