Ryan running out of time at Mar City

After a profit warning and the loss of a director the company risks being expelled from Aim

Mar City, which builds prefab housing, is evangelical about the benefits of ready-made modules thatcan be put to immediate use. But what a shame that the company itself so urgently needs a prefabboard of directors.

In February Mar City said it needed to beef up its board as one of its two non-executive directorshad quit.

It was almost too late then. It is almost certainly too late now. In February the maker of pop-updwellings issued a profit warning, said it had been too optimistic and booked revenues too early (yes,that old revenue-recognition chestnut) and would have to restate its accounts. It also told investors itwas flip-flopping on the next phase of its strategy for growth.

Yet two months later, there have been no new board appointments, and last week Shore Capital, thecompany's nominated adviser, quit abruptly. The shares, which were £1 plus in January, weresuspended at 36.25p on April 20.

That was the day that Mar City had promised and failed to update the market on the related-partytransaction through which Tony Ryan, the group's [literally] towering founder and chief, and his wifeMaggie, planned to settle a £15m-plus debt to the company. So despite months of negotiation, thedeal, which involves the Ryans transferring property to the public company, is still not sealed.

To cap it all, the group also revealed that Hamilton Anstead, chairman, is jumping. That leaves aboard with the Ryans owning 44 per cent and one non-executive, Professor Alan Birks, who is due toleave at the annual meeting this summer. Mar City's finance director left in December.

Now the builder has a month to convince a new nomad and the Alternative Investment Marketauthorities that its governance is fitting for a public company.

That could take more time than Mar City has, particularly given its history of delays and misseddeadlines. If it misses this one, its shares will be cancelled under Aim rules.

Mr Ryan regrets now that he did not spend more time building the board when in 2011 he becamechief executive of the Aim-quoted shell that became Mar City. The Big Man is right. The company istext book stuff on the pitfalls when a small business lacks strong, independently minded, non-

executive directors who can corral the enthusiasm of the founder and keep him to the corporatetimetable.

A year or so ago, Mar City's prospects looked so different. Then investors held it up as a beacon inan industry where tiddlers have been in steady decline. The Lyons Review of UK housing,commissioned by the Labour party, reckons that in 1977 three-quarters of new houses were built bysmall enterprises. Today, small businesses construct just a quarter of new homes in England andWales and only a handful of small publicly listed housebuilders are left.

Rivals complain about the lack of available funding, but Mar City has some of the UK's topinstitutional investors on its register. That includes Henderson, which took 12 per cent of the groupand put one of its fund managers on the board -- the same Michael Brown who resigned as a directorin February.

Mr Ryan, who first skinned his knees on his father's Birmingham building sites, is convinced of -- andconvincing about -- the competitive advantages of factory-made modules. Four years ago he and hiswife were building low-cost homes in the Midlands, but they had a post-recession epiphany andmoved from Solihull to London to spread the word. He has a vision of 21st-century house buildingbeing all about steel-braced boxes no wider than 4 metres that can be made and kitted out infactories, transported by truck, and slotted into place in a few hours. Prêt-à-porter dwellings aremore eco-friendly and efficient than houses constructed traditionally on site, he points out. There isa lot less snagging. And while, in the past, production costs were high, that is no longer the case.Meanwhile, the bricks, brickies and hod carriers used in traditional house building are in shortsupply and rising in price.

However, the company is ensnared in the same traps that have caught so many predecessors, andinvestors have lost a lot of money. The Ryans' plan to use Mar's public market status to raise money,expand and become one of the UK's bigger housebuilders will not be easy now.

If Mar does manage to appoint a new stock market adviser and avoid being expelled from Aim, itshould see that not as a "topping off" but merely as the start of the process of rebuilding the group'sgovernance and its relations with investors.

kate.burgess@ft.com

Copyright The Financial Times Limited 2015. You may share using our article tools.

Please don't cut articles from FT.com and redistribute by email or post to the web.

http://www.ft.com/cms/s/0/da3f3454-e9c9-11e4-a687-00144feab7de.html?ftcamp=published_links%2Frss%2Fcompanies_construction%2Ffeed%2F%2Fproduct