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Managers producing more heat than light should mind the GAP

IN the world of business, you come across a fair volume of hot air and corporate jargon, and a great deal of general management nonsense.

So it is always refreshing to hear from people who know their business inside out and tell it as it is, without recourse to rubbish about change being the only constant, or synergies, or baffling claims about how some cost-cutting programme or other will actually improve the quality of the product or service.

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It was therefore good this week to catch up with GAP Group joint managing director Douglas Anderson and chairman Danny O'Neil. At the plant and tool hire company's low-profile head office in Carrick Street, a brick building overshadowed by the gleaming glass-and-metal office blocks of Glasgow's international financial services district, the pair talked about what GAP was doing and how it was faring in financial terms.

The family business is doing well. It achieved a 61 per cent hike in annual profits to a record £13.5 million in the year to March 31 on the back of a surge in turnover through the £100 million mark. It is now planning a major expansion in central London, with the opening of a dozen, predominantly tool-hire depots from which it expects to derive annual turnover of about £25 million within five years.

GAP raised its workforce from 995 to 1102 in the year to March. It is now at nearly 1200, with Mr Anderson expecting numbers to increase by 100 to 150 per year from here.

This is a business which stayed in the black throughout the worst economic downturn in living memory, in spite of the impact of the recession on the UK construction sector.

Mr Anderson, whose father Gordon founded the business in 1969, is not a man for corporate jargon, even if he has felt the need to describe a new division which will hire out portable toilets as "welfare services".

In his business development role, he has proved astute at spotting what with the benefit of hindsight might look like obvious opportunities, and GAP is already reaping the rewards.

Two standalone divisions set up in recent years to specialise in "non-mechanical" equipment such as crowd-control barriers and safety fencing and in lifting kit together contributed about one-fifth of GAP's profits in the year to March.

Mr Anderson, who has been running GAP with brother Iain since 1988, makes it sound so simple, stating: "Eighty per cent of the business in these new divisions is coming from existing customers. We have them. Why would they not hire off us?"

He also paints the picture of GAP as a firm focused on its people. GAP was this month named employer of the year by Construction News.

Mr O'Neil highlights the fact that GAP derives the majority of its business from the public sector, utilities and water companies, with its kit used in big infrastructure projects. This business mix helped the company through the downturn, although GAP is now also benefiting from the upturn in housebuilding and other private sector construction activity.

Mr Anderson, happy with GAP's business mix, declares: "It is difficult to see an end to the requirement for new infrastructure. Why would that change? People demand more and more and more in their lives from infrastructure. It is difficult to see it going any way other than up."

Continuing with his simple truths, he says of GAP's push in London: "There is just so much happening down there - so much business."

He notes GAP's diversification of its product range, which also includes moves into hiring out equipment for events such as the Commonwealth Games and surveying and safety kit, follows a quarter-century of grafting away to make the firm a UK national player in the plant and tool hire sector.

This is clearly a tale in which patience and a long-term view, made possible by GAP's family ownership, have been crucial. Mr Anderson reckons GAP is the fifth-largest player in its sector in the UK with a market share of about four per cent.

And, to lead its charge into new areas, GAP has ensured it has hired the right people. Highlighting the expertise of the person hired for the new welfare services division, Mr Anderson says: "You have never found someone so enthusiastic about toilets."

Grinning, he talks about how he has waited years to see the benefits of economies of scale. These are certainly evident now. GAP's 61 per cent leap in annual profits was achieved on the back of a 21 per cent rise in turnover to a fresh record of £118.4 million.

Again making it sound easy, Mr Anderson observes: "Once you reach a level and your costs are covered, if you can do more revenue and keep your costs under control, a huge proportion of it drops to the bottom line."

Interestingly, in the days when he was building up the investment house which became Britannic Asset Management, Mr O'Neil made his undoubted success in this role sound easy. Again, he had a focus on getting the right people, and concentrating on the basics, in this case investment performance, with this approach attracting big inflows of client money.

He had a good number of years in which he was given the autonomy and financial backing needed to build this fund management operation by its owners. Sadly, subsequent changes of ownership have seen the Glasgow investment operation built by Mr O'Neil lose its autonomy. This Ignis business has now been taken over by Standard Life Investments, but SLI, with its own very significant expertise, is clearly buying the business mainly for its assets rather than its people.

Nonetheless, the successes achieved by Mr Anderson and Mr O'Neil show what can be done under the right ownership, with a bit of common sense, patience, and an awareness that a business is nothing without its people.

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