There was never much doubt that Keith Miller would join the family business. But few could have predicted that he would build it up into the biggest privately owned housebuilding, property development and construction company in the country.
Now aged 57, the chief executive of Miller Group remembers his introduction to the Edinburgh company his uncle and father founded in 1934.
“My father always took us round the sites on a Sunday before we went to church. So you got interested in what was going on because he was so interested in it,” he says.
Open and confident in manner, though always intense, he is speaking in the airy boardroom of the group’s two-year-old headquarters at Edinburgh Park, a location for more than 20 companies on the western edge of the Scottish capital. It has been developed by a joint venture between Miller Group and Edinburgh City Council since 1990.
Mr Miller says he was never pressed into joining the business. “I was really just attracted to housebuilding and to construction and engineering. I have a brother and a sister, but none of the rest of the family sought a career in the business.”
Although he attended Loretto, a public school just outside the city, he found it oppressive and left at 16. “I got a bit fed up with the restriction of wearing short trousers at 16 and of being in a public school environment. I needed a bit of freedom from those kinds of constraints,” he says.
He studied for Scottish higher certificates at a local technical college, and went to Heriot-Watt University at 17: “It was a good move. I got on the ladder a little bit sooner. I did a BSc honours in building and then spent a year working with Wimpey.”
Mr Miller later took a postgraduate diploma in management at Glasgow University. A stint at a builders’ merchants and haulage company preceded joining the Miller Group in 1975. He started in the open-cast coalmining business (see below), which the group had moved into during the second world war.
By the time he became group chief executive in 1994, the group was suffering because of diversifications into areas such as large civil engineering, road-building and construction contracts. The previous year, the group had made a pre-tax loss of £12m on turnover of £358m.
Mr Miller says the loss, the first the group had made, “really hurt us”.
It arose from problems with the group’s big contracts. It had appointed its first chief executive from outside the family in 1992, but Mr Miller says the whole board, which he joined in 1976, had supported the strategy of pursuing bigger contracts.
The losses caused by these contracts in 1993 had swamped the modest profit of £3m that housebuilding had made on turnover of £65m. “So it was a huge job to turn it round. We were firefighting, really, for the first few years,” he says.
The big change came in 1995, when a strategic review involving outside consultants assessed the long-term performance of all sectors the group was involved in.
Construction and civil engineering were at the bottom in predictability of earnings and losses, but to everyone’s surprise, housebuilding was near the top.
“I had been brought up with the thought that housebuilding was terribly cash-consumptive – your cash was locked up, it was inflexible.”
In fact, he says: “The reverse is true. It’s a very predictable business. There is a strong demand for the product. There is a shortage of supply. And you are much more in control of your own destiny than if you are in a contracting business.”
When they looked at the data, he says, the lights went on.
But Mr Miller admits: “We had poor management in our housebuilding business at that stage. Although we were selling 600 to 700 a units a year, the average selling price was low, because they were mainly social housing. So we took the view that we had to do acquisitions to expand the business.”
Between 1999 and 2000, the group paid a total of £100m for four housebuilders in north-east England, the west of Scotland, Yorkshire and the East Midlands. In2005, Miller moved from 12th to eighth largest UK builder by volume after paying £262m for Fairclough Homes, which gave it presence in the north-west and south.
While the group has also built up its property development and construction businesses, Mr Miller admits the timing has been particularly good for housebuilding.
“With the benefit of hindsight, it is totally due to the lack of supply. As a country, we still are not building enough houses. We got our evaluation of the fundamentals absolutely right. There was going to be a shortage, and that was a good market to be in.
“We bought more companies than most of the others. We were ahead of the game in making acquisitions. We were more of a consolidator than anyone else,” he says.
Mr Miller, who obtained Fairclough for only a 6 per cent premium to its net asset value, is concerned that recent housebuilding transactions have been at much higher prices.
The group, which has achieved a 26 per cent compound rate of profit growth over the past six years, is next month expected to report pre-tax profits of more than £90m for last year on sales of £1.2bn.
Mr Miller says the group has the “firepower” to make more regional acquisitions, but not just for its own sake: “We’ve got to get value from it.”
He and his family own 88 per cent of the group, but over the past 10 years the rest of the shares have passed to an employee benefit trust.
With none of his children going into the business, Mr Miller says the family is relaxed about ownership of the group moving gradually towards the employees, and seems very willing to acknowledge that his successor will not be a Miller. “Why not? The same criteria apply to anyone doing this job,” he says.
“I’ve grown up with this business, and taken it on to another stage. But there is absolutely no reason why a non-family member should not do that, bearing in mind that they will own some of the shares – and a not insignificant percentage of shares – going forward.”
Strength sought in self-reliance
While housebuilding has proved a spectacular success for Keith Miller, he emphasises the importance of the group’s property development and construction arms.
“We have managed to develop three really good quality businesses – and that was always our mantra: to try to make each of the businesses independent, be respected as market-leading companies in their sectors, and not reliant on other parts of the group.”
The strategic refocusing that started in the mid-1990s involved getting out of civil engineering, plant hire and opencast coalmining. But, curiously, Miller Group is about to resume mining – an industry it had moved into during the second world war, when housebuilding stopped.
Mr Miller says: “Not many people know this about us, but during the 1980s, the majority of the profits of the Miller Group came from coalmining. It was an enormous success for us. For a number of years, we were the largest opencast coal mining contractor in the UK.”
Opencast production was nevertheless steadily declining and the group finally sold its business to Scottish Coal in 2001. However, it retained land at Merthyr Tydfil – recognising its potential – and it is this site that it will now develop.