How billion-dollar builder quadrupled annual revenue
"We don’t just move people around from project to project but let them put down roots." Kiwi-owned builder Naylor Love, known as CEO Rick Herd, has quadrupled annual revenue from $250 million a decade ago to $1 billion today. Despite this, Herd plans to retire early next year and spend more time at his Nelson home and Japanese garden. The firm's growth has been driven by a rising level of professionalism, more skills in the workforce, and the ability to seek early engagement on contracts. Herd credits the company's regional teams to creating regional teams and driving up revenue. However, inflation has taken this growth further, forcing Herd to step down at the end of next March.
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Published : 2 years ago by Anne Gibson in Business
The man known as the billion-dollar boss has overseen a quadrupling of annual revenue at Kiwi-owned builder Naylor Love from $250 million a decade ago to $1 billion today.
But early next year, target="_blank">chief executive Rick Herd will retire, planning to spend more time at his Nelson home and the Japanese garden he’s built, complete with water feature, flowering lotus and maples.
“Yes, $250m to a $1b, that’s right,” acknowledges the boss who lives in Nelson, has a desk in Christchurch but spends much of his time travelling.
While it’s an impressive enough achievement for the decade in which he’s headed the firm, the rate of growth in the past two years alone has been staggering.
In the year to June 30, 2021, Naylor Love was projecting $720m-$750m revenue, so it added another $250m to that in just two years, “due to the scale of a lot of the projects we’re taking on, like Ikea, the big new Fisher & Paykel buildings, data centres, larger hospital work, etc”.
What has been the key to that growth in revenue? Herd cites a rising level of professionalism, more skills in the workforce and the ability to seek early engagement on contracts.
That has enabled the business to take on bigger, more complicated jobs, which has driven up revenue. The $1b was not a target – “in fact, I believed sustainable revenues around $750m to $800m was likely. However, inflation has taken us $1b”.
The collapse of Mainzeal, Fletcher Building exiting high-rise and Hawkins’ sale to Downer opened an opportunity that Herd spotted.
“The Naylor Love model is different from other contractors in that we have established regional teams in all our centres of operation. We don’t just move people around from project to project.
“This allows people to put down roots and spend time with their families and also become part of the local community from a social and business perspective,” he says.
His daughter went to 10 primary schools and he didn’t want to inflict that on other parents in the company.
The builder has scored some of the country’s top jobs, most recently including:
Naylor Love has built far more than that. That list is only recent work, particularly in Auckland and Christchurch.
“We’re now a more sophisticated or professional company,” Herd says. “We can take on more complex work and get involved early, doing design and build these days.”
He acknowledges the joy and satisfaction of winning mega-jobs at a time when the sector is stretched by rising inflation, declining workloads, the labour shortage, material challenges and so much more.
“We’re in the top three,” he says, ranking the biggest builders as Fletcher Construction, then Hawkins (now owned by ASX-listed Downer) and Naylor Love.
But it’s now time for someone else to take over.
“I’m stepping down at the end of next March. The recruitment for the new CEO will start soon. I’m quitting while I’m ahead. I’ve spent more time in a smoko shed than a boardroom. I tend to be a builder’s builder.”
Herd, 66, will have been chief executive for 11 years when he leaves.
Not all has gone well in recent years. The builder was forced to import plasterboard from Australian manufacturing giant Boral during the Gib shortage.
Herd says the business had no other choice because it couldn’t get enough Gib when the crisis hit last year. It paid a 15 per cent premium for Boral over Gib but it was about security of supply rather than price.
Winstone Wallboards’ Gib, which has 94 per cent of the New Zealand plasterboard market, could not meet its obligation to supply clients in this country, Herd complained: “Necessity is the mother of invention.”
Rival builders Fletcher and Hawkins have foreign shareholders, putting Naylor Love in a unique position with its private family control, which includes descendants of the people who founded the company more than a century ago.
Today, the builder is owned by interests of the Naylor, Kempton, Watson, McPherson, Harding, Clayton, Boland and Dickinson families.
The business began as two independent building companies in Dunedin in 1910: WH Naylor and Love Brothers Construction. In 1969 the two merged to form what is today’s enterprise. Builder Chris Naylor, a grandson of founder Hugh Naylor, serves on the company’s board.
In retirement, Herd says he will continue working to advance health and safety measures in the sector, expects to remain involved in construction and might agree to take on project directorships if asked.
“I’m more interested in building things than sitting on boards. But I want to reduce the amount of travelling I do. I want to step back and cut stress and responsibility. I’ll find something, I’m sure.”
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.