Douglas Friedli meets the chairman of Redrow and Wolves, who wants to create a triangle of enterprise in Wales and England.
Steve Morgan tells a story from
a trip he took to Thailand 20
years ago. There were plenty
of beggars around. But there was also
a man about Morgan’s age with two
stumps for legs. “The guy was on the
side of the road selling chewing gum
and cigarettes,” he says. “I thought
bloody fair play to him. If anybody had
reason to beg, that guy did. But he
was doing his best to make a living.
I bought every bit of chewing gum
he had off him.”
It’s an image that has stayed with Morgan all his life, especially in running the Morgan Foundation Enterpreneur Awards, which are aimed at companies, charities and social enterprises. “That’s what we’re trying to say,” he says. “Have a go, try.”
Sitting on a sofa in his office at Redrow headquarters in Ewloe, Flintshire, Morgan compares life now with the way he started out digging sewers. “There was little or no help or encouragement around when I started Redrow. But in many ways it is harder starting in business today because there is so much red tape and legislation. Society seems to put obstacles in the way of entrepreneurs.”
When Insider visits, Morgan just stepped off a plane from New York. Genial and thoughtful, occasionally using his passport as a prop, he sets out his plan to encourage enterprise across his home patch. It’s roughly a triangle from North Wales, home to Redrow, and Colwyn Bay where he went to high school, across to Liverpool, where he spent his earliest years, down to Wolverhampton, home to his football club.
And he’s keen for charities to develop the enterprise bug. “At the moment we are seeing terrific public sector cuts,” he says. “We’ve had a lot of requests for bail-out funds from charities just over the past few months. The more entrepreneurial and businesslike you are, the more chance you’ve got of your charity or social enterprise thriving. Those who are totally dependent on handouts suddenly find life very tough.”
For him, entrepreneurs are distinguished by their hunger for success and lack of fear rather than qualifications. “A lot of my friends are also successful entrepreneurs,” he says. “I can’t think of one who has a degree. They are always hungry to start their businesses early in life. Having that hunger and drive and not being afraid to have a go.”
Morgan’s reputation for fearlessness was enhanced when he returned to Redrow last year after an absence of nine years. “There were lots of things happening that were beyond the control of the management. But I equally felt the management team in my absence had taken some wrong steps. You could see that they were paying the penalty.”
Morgan still controlled about 8 per cent of Redrow’s shares. “As the shares come crashing down, do you sell out and abandon it? Redrow has always been my baby and I didn’t want to abandon it. Before I knew it, I had about 18 or 19 per cent,” he says.
“I had a phone call from another major shareholder, who asked me point blank if I would go in, so I had 29 per cent and I topped it up a bit to 29.9 per cent. I put the tanks on the lawn and basically came in through the front door.”
Redrow’s front door is just a few miles from the English border, but Morgan is in no doubt that it’s as Welsh as when he set the company up in a bungalow in Rhyl. “If you were starting a housebuilder from afresh, you perhaps wouldn’t pick Wales for geographical reasons as your headquarters,” he says. “But we have resisted the urge to move the headquarters through the years – this is where the heart is.”
Redrow’s share price is lower than it was a year ago. But Morgan believes he’s made a good investment. “We are in tough times, but we have already made big changes to the business. It’s in unrecognisable shape compared with 15 months ago,” he says. “I’ve changed the culture back again to what it used to be.”
Those changes include devolving the business back to Redrow’s regional operations. Rather than getting involved in the details, Ewloe HQ will agree three-year plans and then let local managers work out how to make them happen.
The company’s output has switched from one and two-bedroom flats to family homes, notably the Heritage Collection brand of houses influenced by arts-and-crafts design.
Changing the product mix allows Redrow to raise its average selling price without raising the price of any particular home.
The company has just brought in 30 new sites. New land is rapidly coming through – “it just takes time to go through planning to get the changes you want.”
At the mention of planning, Morgan’s sunny attitude darkens a little. “We are going through a huge hiatus with planning,” he says. “The new government has effectively thrown out the old system in favour of localism. I am no lover of the old system, but they have thrown out the old system before they have brought in the new one. It has left us in complete limbo, which in my view is a bloody nonsense.”
The situation is better in Wales and Scotland, he says, where planning is devolved. But in England: “We’re seeing local authorities up and down the country effectively shutting up shop and not considering applications until the new regime is in place. There are lots of local authorities that are born nimbys by nature, so they just love it.”
His big concern is that the coalition government’s emphasis on local decision-making could mean that it’s much harder to build homes in the south east of England, where demand is greatest. “The places where people want to be are the very same places where the authorities are shutting up shop.”
The exception is London, where Redrow is about to set up its tenth regional office. “London is the one area of the country where planning is a positive,” he adds. “You don’t see anybody protesting against a new development in London. They might protest against the look of it, or the height, but nobody objects to the principle.”
Aside from planning, the one factor holding back development is a shortage of buyers, who are lacking in confidence and having difficulty getting a mortgage. There’s not much Morgan can do about the former, but Redrow is talking to mortgage companies about a transferred equity scheme that could boost demand.
Talks are focused on a system where parents or grandparents could pass on their equity to use as a deposit. Raising a 20 per cent deposit is beyond most prospective buyers in their twenties.
Some bosses might let such schemes use up all their time, but not Morgan, whose office wall is dominated by celebratory pictures ofWolverhampton Wanderers.
Under his ownership, Wolves moved up to the Premier League in 2009 and avoided relegation last season. Morgan, who has put the club on a firm financial base, says the next set of accounts would show the club was now “very profitable”.
Wolves had made a couple of years of trading losses as it spent to gain promotion from the Championship. But he says: “We intend to be profitable going forward. The money will be invested back in the club. I don’t want to waste it making the mistakes that Portsmouth did. It is very important that football clubs are run as businesses. There is common sense coming back to the industry.”
His next big project is a £50m to £60m makeover ofWolves’ ground at Molineux to create more modern facilities and bring fans closer to the pitch. It’s a far cry from the days when as a young Liverpool fan he visited Molineux to watch the reds.
Now there’s no doubt about where his heart lies. “It’s Wolves now, although I still look for the Liverpool result and want them to do well, unless they are playing us.”
Also in: September 2010
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