While he continues to lead Mears to further growth, a shock government decision has hit Bob Holt’s company hard. He talks to Growthbusiness about Mears’ first profit warning, his relationship with the City and why he is tapping into the energy sector.

It can be the trickiest of all business relationships to balance: a public company and its relationship with the government, especially when the latter is both a customer and all-powerful regulator.

After nearly three decades in the services sector, the relationship is one Bob Holt, founder and chairman of social housing and domiciliary care giant Mears, has learnt to master, but that doesn’t mean there still aren’t surprises.

One of those surprises came in October, when climate change and energy minister Greg Barker shocked the market by announcing sudden changes to the government’s feed-in tariff (FIT) scheme. Barker announced that the FIT subsidies, which are paid to businesses for producing renewable energy with solar photovoltaic (PV) panels, would be cut by more than half this December – five months earlier than expected.

Solar investment plans halted

The decision forced many businesses to halt their solar investment plans, including Mears, which had been preparing a new revenue stream with the creation of a solar panel installation unit.

For Holt, the announcement was ‘extremely frustrating’, not only because it resulted in the immediate scrapping of the unit, but also because it forced the company he has led for 20 years to issue its first profits warning.

‘We had put in infrastructure, we surveyed lots of properties, we had a department working on it, but it just stopped,’ Holt explains.

‘After the decision, it became no longer productive for them [our customers] to do anything in solar. It effectively stopped that day. We had the option of sitting around and waiting for a potential upturn to come from our customer base, but we tend to do most things differently here, and we decided to say, “well stuff it, let’s write it off”.

‘The sad part for me was that it was the first ever profits warning and downgrade that I have had in 16 years. That for me was the real frustration and disappointment, but sometimes these things don’t go to plan.’

The company, which repairs and maintains social housing and also provides care in people’s homes on behalf of local authorities, has since reported that costs associated with the scrapped solar division are likely to dent operating profits by about £2.8 million. Another £2 million spent on site set-up, system design and installation is to be written off.

Holt’s grievance isn’t the fact the subsidy was cut, a move that had been expected for some time, but the lack of warning from Westminster.

‘Let’s be clear, the original tariff at 42p was much too high anyway,’ Holt explains. ‘I think everybody saw it as a win-win situation, it was great payback, but it was the suddenness of the change [that surprised me].

‘They [the government] had highlighted the change as being in April next year, and everyone was geared up to work very, very hard in the last three months of 2011 and the first three months of 2012 to actually get the projects put in before the feed-in tariff reduced – there was a mad panic to do that – but the fact it was literally stopped, not quite overnight, but very suddenly, was a major problem.’

Sunny outlook for Solar Energy

Despite the setback, Holt believes there is a market for Mears in solar energy.

‘It is right in our space,’ he explains. ‘We are the country’s largest repairer and maintainer of social housing so we control about 500,000 roofs of social housing throughout the country. It would be idiotic of us not to do it.’

Holt acquired a controlling stake in Mears in the early 1990s. He has been chairman since the company floated on AIM in October 1996 and was chief executive until 2005. He returned as CEO in January 2007 after incumbent Stuart Black resigned, but left the post again in November 2010 to make way for David Miles.

Revenue has grown from £12 million at the time of listing to £524 million last year, while pre-tax profits stand at £16.4 million. The company boasts an order book of £2.7 billion, and announced in November new social housing work worth £109 million.

Holt sees no reason why growth won’t continue in the outsourcing sector despite the government’s well-publicised austerity drive. He says there are still large contracts coming out to tender, and Mears is confident of winning a ‘fair share’.

Yes minister

In dealing with government bureaucrats, Holts insists he sees ‘no difference’ between public and private sector workforces, although he points out that he doesn’t regularly deal with Westminster.

‘There are some incredibly professional local authorities, and there are some that are not a professional as others,’ he says, ‘but we’ve always tried to be at the top end of any market that we’re in and we have to work with them to achieve that.’

In terms of managing the ever-growing company, Holt reveals that Mears is a ‘very easy business to run’ at the macro level, but ‘very difficult’ at the micro level.

He explains, ‘We have 13,000 people, so the business needs logistical management. It is also response-based, so there are emergency type scenarios every day, and these calls can be here and there given that we have 221 offices and locations. It’s not an easy business.’

The City can be harsh too, even to successful companies. During the rise of competitors Connaught and Rok, Holt recalls analysts being critical of Mears’ growth. Then, after Connaught collapsed in September last year and Rok followed suit ten weeks later, Mears was downgraded, despite Holt insisting the company was ‘very financially secure’.

City critics

He elaborates on the episode, ‘Clearly, there has been uncertainly due to the demise of Connaught and Rok. They were fairly new market entrants into our sector and we tended to be fairly critical about how they went out and tried to grow their businesses.

‘We did not follow the pack, we let them get on with it, but it was deeply frustrating to us as a public company because we had lots of very smart folk in the City poking sticks at us, asking us why we weren’t growing as fast as others. Anybody who knows me in the City, knows what my response to those people was.

‘Sadly, and I do mean sadly, we were proven right. [The collapses] gave us no benefit whatsoever – it’s had the effect of putting the whole sector in jeopardy – because of idiots who went out to build businesses to line their own pockets. We tend not to do that here. We built a long-term model.’

Asked whether he has a ‘love-hate relationship’ with the City, he smiles before replying: ‘I tend to have a less of a relationship with the City now than I ever have in the past.’

Then he adds, ‘What is my relationship with the City? Marmite, I would say. I would think people respect what my business has done, but they prefer not to be reminded of it in the brutal way I often do remind them.

‘But forget me, I’m irrelevant. The traffic of this business is phenomenal. It became the most successful flotation on AIM ever because it was the most successful flotation on AIM. If anyone wants to challenge us, send them around here to the office and we’ll have a chat about it because we are fiercely proud of what we have done.’

It’s obvious Holt will continue to inject the same passion for growing businesses into his two new ventures, energy consultancy Inspired Energy and business support services group Green Compliance. He is chairman of both companies and plans to assist on a non-executive basis.

Inspired Energy power play

Of the two, he is particularly bullish about Inspired Energy, for which he recently steered a £3.34 million fundraising. Headed by co-founder Janet Thornton, Inspired advises clients on how to maximise energy efficiency. The Lancashire-based company joined AIM last month in a £10 million listing after reversing into the cash shell Finemore Energy. The deal attracted support from Shore Capital, ISIS Equity Partners and Octopus Investments.

Holt sees energy, particularly energy efficiency, as a growth area that he wants to tap into. He enthuses, ‘Energy is going to be interesting, because we are certainly going to grow Inspired. We are going to look at acquisitions in that space, but I am not sure where that business could be. It could definitely be significantly bigger than it is today in 12 or 18 months time.’

While the 57-year-old admits to spending more of his time recently at a house in Burgundy, France, or in South Africa where his foundation manages a number of orphanages, he remains committed to Mears for the near future.

‘I’ll be around as long as the guys want me,’ he says. ‘If they want me to go today I’ll go today, as long as they want me around I’ll stay. The great thing here is that this is a business that the City expects to make £30 million next year – it’s not bad from nothing is it? It was nothing when we bought it.’

Bob Holt’s Vital Statistics

Date of birth: 1954
Place of birth: Littleborough, Lancashire
Family: Divorced, three sons
Hobbies: Owns a second home in Burgundy, France
Best business decision: Hire good-quality people who you can’t afford

See also: Bob Holt from Mears to Mfuse – The CEO of one of AIM’s biggest success stories talks about leadership, survival in a recession, and why he’s confident about the future.