Castle builds on success
Article Date: May 11 2006
While the start-up phase of a company’s life can be make or break, the next step in the evolution of a growing business can be even tougher. Breakthrough Clinic gives one company at a crossroads of expansion the chance to gain free advice on the possibilities for growth from an expert business adviser.
Company history
Castle Contracting is a civil engineering contractor specialising in structural repairs, founded on a shoestring by Alistair Ogilvy and his wife Karen in 1994. Based near Edinburgh, it’s become a thriving enterprise, employing about 50 people and undertaking a variety of contracting work, including structural repairs to the external envelope of buildings and also civil engineering projects such as bridges. Major undertakings include a £1 million contract for Kingston Bridge in Glasgow and one at £2.25 million for Tay Bridge in Dundee. Turnover for 2005 was £3.75 million and figures for 2006 are expected to hit £5 million.
Alistair has extensive experience in contracting, having previously launched the Middle Eastern operation for what became contracting giant Cementation Foundations Skanska. When a colleague left to set up his own company in London, Resin Bonded Repairs, he asked Alistair to join him to handle the firm’s contracts in Scotland.
‘It was a tough decision,’ recalls Alistair, ‘which Karen and I deliberated for at least six months. We had two kids just about to start school, so it was an important crossroads at a crucial time.’
The family took the plunge and at the end of 1984 set up RBR Scotland. ‘It was the first time I’d ever lived or worked in Scotland,’ Alistair points out.
‘Our clients were local councils and large industrial companies such as BP and Shell, as well as property managers and, of course, main contractors for whom we became subcontractors.’
The opportunity arose to acquire a Manchester-based company, which manufactured overcladding panels for use in old building restoration. ‘Although it was a manufacturing company, not a contracting company, it was a good fit with our existing business,’ says Alistair, ‘so we acquired the firm, which became a subsidiary of RBR Scotland.’
Sadly, this didn’t work out as well as hoped. ‘The manufacturing subsidiary was one of a number of contractors working for Euro Disney that got caught up in project delays,’ recalls Alistair. ‘We pulled out all the stops to get the job done but then ended up in a wrangle over payment, which hit us hard. That, coupled with a pay dispute on another large project, meant the cash cow that was RBR Scotland couldn’t continue to fund the problems of the subsidiary.’
At the end of 1993, the subsidiary went bust, taking the parent company with it.
‘It was an unfortunate affair but we learnt some important lessons from it,’ reconciles Alistair.
Alistair and Karen bounced back to form Castle Contracting at the beginning of 1994. ‘We remortgaged the house and set up in the spare bedroom.’
It was a brave move, but their previous experience came in handy. Key members of the team from RBR Scotland were keen to join Castle and previous suppliers and customers were happy to continue working with Alistair through his new company. His contacts in the industry proved invaluable at bringing in business, helping put Castle on a sure footing upon which it has been building ever since.
Current challenges
Four years ago, Castle branched out from servicing building repair contracts into work on civil engineering structures such as bridges. These civil contracts are large projects and tend to be long-term, several years in some cases, whereas Castle’s building contracts are higher margin but shorter-term. The expansion into civil work gives two complementary areas of service that provide an important balance and security.
Alistair says, ‘One of the lessons of our experience with RBR Scotland was that because most contracts were short, the volume of work fluctuated from month to month, and if several contracts ended at once you experienced a huge drop in revenue. These peaks and troughs play havoc with cash flow and so forth, so we’ve taken steps to iron them out, and continue to do so. And to manage risk still further, we don’t want Castle to be dependent upon one type of customer or one area of work.’
To this end, Alistair has undertaken a review of the business and the market and plans to develop Castle into a group of specialist civil engineering operations, each one focusing on a particular area. These will either be set up as divisions of Castle or as separate companies. Each will be managed and partially owned by an individual or group who have expert knowledge in that specialism. These outfits will manage the contracting process while the main company undertakes the administration and other general business functions.
Because Castle finds there is often an overlap between one specialist civil engineering contracting process and another, by combining these offerings the company hopes to gain significant competitive advantage. The challenge is to develop this business model to address issues such as recruiting and retaining key personnel, tax issues, share ownership and transfer. These developments will also need to be financed, which adds another layer of complexity to these strategic considerations.
