Industrial services company Pyeroy has grown its profits with some huge government contracts, including the Royal Navy’s new aircraft carriers despite the public spending cuts. Christopher Knox caught up with the Gateshead firm’s managing director Hugh Pelham to discover the secrets of its success.

IT’S clear Pyeroy takes pride in its work. Arriving at its offices on the banks of the Tyne, it is hard to miss the paintings of bridges that adorn the walls of its reception, all of which have been commissioned to celebrate some of the firm’s most iconic projects, including work on Tower Bridge in London and the Tyne Bridge.

It is Pyeroy’s ability to attach itself to some of the country’s biggest engineering and maintenance projects that has helped it secure a record forward order book worth £120m.

The company also saw its pre-tax profits increase by £500,000 to £3.5m last year, with its turnover also up 2% to £59.5m.

The firm was founded in 1973 as a protective coatings contracting company, but diversified into other areas during the mid-nineties after the closure of key North East shipyards.

However, that is not to say the firm has moved away from the marine sector, as it is working with Cape of Wakefield to provide £105m of paint and all the scaffolding required for the construction of two 65,000-tonne aircraft carriers for the Royal Navy.

The business is also chasing a number of new markets, particularly in the offshore, petrochemical and pharmaceutical industries, with managing director Hugh Pelham leading the charge.

With a history of securing huge contracts for his previous employers, Pelham is determined to develop new markets for Pyeroy as it faces up to restrictions on Government spending for years to come.

He says: “MoD work is a key part of our business, with around 25% of our contracts stemming from defence. When I joined Pyeroy around eight years ago, the marine business was very busy, but has witnessed a decline as a result of the Government cuts.

“However, our work in this area is secure for the time being thanks to the aircraft carrier project. The fact it represents a source of long-term work for our staff allows us time to pursue new sources of revenue.

“I must say I was concerned that work on the carriers would be scrapped as part of the cuts. However, there are a number of political issues in the world that require a strong defence capability.”

Brought up in Henley-on-Thames, Pelham developed an interest in engineering from an early age. He said: “My dad was a civil engineer growing up, so I was always attracted to that side of things. I remember my earliest ambitions were to be involved in building things.

“This probably stemmed from the fact that I used to play with things like Meccano and Lego growing up. That sounds a bit geeky, I know, so it’s just as well I had an interest in sports as well, including rugby and rowing.”

It is Pelham’s love for rowing that now sees him rubbing shoulders with Olympic royalty as part of the Oxford and Cambridge University Boat Race.

Having built up a strong rowing pedigree as a junior international, Pelham was part of two successful Boat Race crews while at Oxford University, and is still heavily involved in this most English of traditions.

He says: “I read engineering, economics and management at Oxford and did a lot of rowing while I was there. One of my ambitions as a junior international was always to be involved in the Boat Race.

“In fact it was only recently I took part in the Veterans’ Boat Race, which allows previous participants to form a team and compete before the big race.

“This year we were lucky to have four times Olympic gold medal winner Matthew Pinsent on board, who is quite good, as well as Jonny Searle, who won gold in the Barcelona Olympics and Rupert John Obholzer, who won bronze in the 2006 Olympics in Atlanta.

“I can’t claim to be as distinguished, but it was great to be part of such a great crew.”

Away from the office, Pelham also gets his thrills from the world of motor sport and owns a Ginetta racing car, which is used for competitive races.

He said: “Part of the British Touring Car Championships includes the Ginetta G40 Challenge, which sees youngsters compete in a series of races.

“There’s a guy I know in our village whose son is very good at karting so we have supported him in the competition for the last couple of years.

“It’s really good fun. But I don’t think I could compete myself, on account that I’m not the world’s best driver.”

Pelham’s first major career step came with his appointment as graduate engineer at Mowlem Management in London, which was part of construction services company John Mowlem and Company.

He would go on to successfully climb the ladder at John Mowlem over his 11-year tenure at the business which he helped to establish in a number of new markets.

One of his greatest achievements was heading up a new maintenance division, trading as Skillbase, which provided domestic property repairs and installations.

As its divisional director, Pelham helped grow the division’s turnover from zero to £40m in the space of only three years, as well as carry out 40,000 repairs a year at its height.

He says: “When I started at Skillbase we initially had a contract with Direct Line. We then acquired a company, which included work for Commercial Union.

“This then helped us secure a contract with Abbey National, Norwich Union and then Pearl Assurance, so it grew really quickly.

“Setting up and growing that business the way we did is still one of the things I’m most proud of.”

Pelham was offered a job at US-owned automotive and facilities management business Johnson Controls in 2000 following a previous move to the business by one of his fellow directors at John Mowlem.

Although he would spend only two years working for the firm in Portsmouth and London, Pelham nevertheless had a similar impact on the company’s growth.

He said: “A director I used to work for at John Mowlem moved to Johnson Controls and offered me a job there, which I thought would provide me an interesting change of direction.

“It was a totally different business as it offered facilities management services, which included work such as maintaining data centres for IBM or maintaining the property portfolio of Norwich Union.

“I worked there for two years, during which time I successfully secured a number of large contracts, including a £75m contract with Aon to provide facilities management services, and a contract with Norwich Union Life Assurance and Pensions worth £50m.”

The chance to manage his own business would see Pelham join Pyeroy in 2002 as group managing director. However, it was a chance that he nearly passed up on.

“I was approached out of the blue by Pyeroy, and I must admit that I didn’t know the business and almost didn’t go to the interview as I was happy with what I was doing,” he says.

“However, I liked the owner Bob Thompson and was told that I would be given total control of the business as I was replacing the previous managing director Jim Jordon, with Bob remaining as a non-executive chairman.

“I had always wanted to either run a large publicly quoted company or to run a partially owned one, and I ended up with the latter, which I think quite suits me.

“I have a minority share holding in the business, which I acquired 15 months ago, and I don’t see any immediate change in this business model, which I think works well.”

The company has gone through a number of changes over the years as market demand has moved away from the shipyards to areas such as offshore marine and renewables.

However, with some markets witnessing huge increase in competition, Pelham is aware of how difficult it could prove to establish the business in these markets.

He says: “It is true that there is a lot more competition across the board than there was three years ago. The construction market in particular has become extremely challenging and has seen firms that would have traditionally concentrated on that market look elsewhere for work, such as areas like rail.

“Marine is an interesting one for us as on the one hand the Government is spending less money on refurbishing ships, but is pushing ahead with what is a huge aircraft carrier project, which has protected our business in this area.”

The company now employs 1,200 staff, up from around 950 last year, which has allowed it to continue bidding for huge projects, including £2m worth of work to support contracts for Babcock for the refit of the Royal Navy Type 23 frigate HMS Kent at the Rosyth Royal Dockyard.

The firm also recently acquired Ireland-based electrical instrumentation and data communications engineering contractor CEI as well as the scaffolding assets and several running contracts from failed Stockton-on-Tees firm, Spectrum Access Ltd.

Pelham says: “If we just continue to steadily grow over the next five to 10 years and continue to create jobs in a good sustainable fashion, I think that would be a satisfactory achievement.

“It may not sound hugely ambitious, but if in 10 years’ time we employ 2,000 staff and have grown and remained profitable I would be delighted.”