UK: NCP FIGHTS FOR ITS SPACE.

UK: NCP FIGHTS FOR ITS SPACE. - Dingy sites and high prices reinforce car parking's status as a distress purchase. Can NCP's chief executive change the company's poor corporate image - and see off the pretenders to its crown.

by Mike Foster.
Last Updated: 31 Aug 2010

Dingy sites and high prices reinforce car parking's status as a distress purchase. Can NCP's chief executive change the company's poor corporate image - and see off the pretenders to its crown.

Think of Britain's best known corporate brands. NCP is not an appellation which springs immediately to mind - along with, say, Tesco and BP. Yet the newly appointed chief executive of National Car Parks is a fervent believer in branding. Bob Mackenzie loves Heinz baked beans, eats Mars bars and admires Rentokil. And he wants to put NCP, Britain's biggest car park operator - with 580-odd sites - up there among the leaders in public esteem. But Mackenzie knows that the task of boosting NCP's corporate image is not straightforward. 'Car parking is a distress purchase,' he accepts. Motorists required to pay considerable sums just for a parking slot are unlikely to fall in love with the organisation collecting the cash.

NCP has done little up to now to cultivate its corporate image. Several of its ageing multistoreys are in need of a coat of paint, and the keepers of these dingy depositories don't go out of their way for a friendly chat. A customer with an enquiry is liable to be referred to some nameless being at head office. Anyone using the Arlington Street car park, for example, just off London's Piccadilly and round the corner from the Ritz, has to walk past huge rubbish bins, down a ramp shared with moving traffic, and pay £27.30 to leave their vehicle unattended for nine hours.

In fairness, NCP has better designed car parks although many are no less pricey, particularly in the London area. No wonder motorists are apt to cry, 'Too expensive - I wouldn't use one unless my firm was paying'. Mackenzie looks pained at such criticism. 'I know it's difficult for the consumer to understand, but we don't think our prices are too high. We have £370 million tied up in capital employed following a revaluation of properties, and our rate of return on that is only 10%.' Which leads directly to another of Mackenzie's objectives. Having been recruited to NCP by joint-chairmen Ronald Hobson and Sir Donald Gosling, he now has the job of improving its unexciting profit record. After peaking at £60 million in 1990 (on a turnover of £169.5 million) group profits before tax were down to £51.1 million (on £285 million) in the year to last March. (The latest figures showed a marginal improvement on the year before, and would have been 11% up but for a one-off item of £5 million resulting from the cancellation of share options.) But an indifferent five-year profits record need not matter too much, given the strength of the company's cash flow. Shares have been changing hands informally at 470p, or 15 times earnings (indicating a market cap of £555 million), which suggests that the City already has some confidence in NCP.

The depth of that faith could fairly soon be tested. At the same time as he is polishing up the figures, Mackenzie is required to see off the strongest competition that the company has ever faced. And then he must take it to the stock market by 1999. Mackenzie therefore has to perform a juggling act: he needs to improve the image of his car parks without putting up prices to such an extent that the image is made worse. 'That black and yellow NCP sign could be a downside,' remarks a fund manager, 'because it's on car parks in places like London which have a reputation for being expensive. Bob might do better to brand groups of car parks differently.' Mackenzie has no present plans to do anything of the sort. Loss of national identity could undermine the existing brand. Besides, his chairmen might object. But he will probably scrap the umbrella name National Parking Corporation which Gosling and Hobson have raised over the business. Operationally, he has already split the company into regions: London, the South East, the Midlands and the North, leaving head office to handle group finance and strategy. This was done to save money and encourage decision-making down through the group. Mackenzie believes in encouraging staff, and wants to see initiatives trickling down to the level of the individual car park.

He has also opened up to the press. 'Have you got one of these,' he asks, airily handing over the new NCP annual report. Mixing affably with journalists ('Can I call you Mike? Call me Bob'), was not the Gosling-Hobson way. The founders - as they are generally considered - avoided the press, and still do. 'They like their privacy,' says Mackenzie.

Gosling and Hobson did not, in fact, found NCP. It was a visionary, Col Freddie Lucas, who launched the company in 1931. But it was Hobson who saw the potential in car parking after the second world war. Gosling, then a trainee surveyor with Westminster City Council, helped him to get planning permission for a car park in Red Lion Square, Holborn. Trade was not brisk at the start, even at the equivalent of 7.5p a day with some free washes thrown in. But Gosling and Hobson persevered in building their own network until 1957 when it merged with NCP.

They were lucky in the early days, since they had few rivals. Councils and developers happily handed their parking headaches over to NCP which, once it had acquired permission to operate from a site, was able to use the Landlord and Tenant Act to stake a more permanent claim. Some landlords had to negotiate with NCP in order to redevelop their sites. Hobson was generally amenable - as long as NCP could operate an adjoining car park.

Hobson is a low-profile individual often accused of being obsessively secretive, although NCP's annual report is a model of disclosure - when you can get hold of it. Gosling is a very different type. Although only slightly less wary of the press, he's an extrovert, a socialite who took a resignation knighthood (which Hobson refused) from Harold Wilson in 1976, and went on to cultivate the Tories. Gosling's ability to charm local authorities, site owners, the great and the good, has been as important to NCP's development as has Hobson's grasp of detail.

Gradually, with the eager assistance of Mackenzie's predecessor Gordon Layton, Gosling and Hobson tightened their grip on the car parking business. Some property and hotel developments they carried out themselves. They established a stranglehold on parking rights at airports, such as Heathrow and Gatwick. British Airports Authority could find few other reliable companies to operate their car parks. The records are full of the names of failed operators who paid too much for sites, got ripped off by staff and failed to attract the expected business. NCP managed to win the best contracts and buy up a selection of its more dangerous competitors.

In the early 1970s financier Charles Gordon, with his institutionally-backed Spey Investments bought a 50% stake in NCP. The holding was unravelled when Spey got into trouble, but Gosling himself learned to mix with fund managers. He later gained backing from several of them and the company's strength continued to grow. Today, Mackenzie says, '67% of our car parking is on a freehold or lease extending over 60 years'.

During the 1980s, however, one rival operator became a thorn in the market leader's flesh. Europarks, run by Steven Tucker, was remarkably successful at winning parking rights from NCP - at Heathrow and elsewhere. 'NCP got as obsessed with us as Lord King did with Richard Branson,' says one ex-Europarks man. In the end, NCP acquired Europarks for a reported £4.5 million, but before then Layton had grown so suspicious that he retained a security firm, KAS Enterprises, to investigate his rival's methods. KAS infiltrated Europarks' premises and searched its filing cabinets, and even hired a personal assistant to worm her way into Tucker's office.

No damning evidence was ever found, and it was Layton and company who found themselves in the dock. The court decided that Europarks had not been harmed commercially, and in 1993, following a lengthy case, Layton and the KAS team were found innocent. Nevertheless, the publicity surrounding the affair had been damaging. The image of car parking is bad enough at the best of times and jealous rivals now had a stick with which to beat NCP. 'The case did dent our image,' concedes Mackenzie.

The Europarks case coincided with recession, which brought a reduction in season ticket sales, lower margins and less lucrative property deals - and hence the fall-off in profits. In fact, NCP's profits from parking and the motor trade have declined only modestly in the five years from 1990, from £34.8 million (on £121.7 million) to £33.6 million (on £155.9 million). At the same time new rivals have appeared, mainly from abroad, which NCP has little chance of taking over. They include APCOA (headquartered in Germany), Euro Car Parks (run by Tucker's brother Barry), Central Parking System of the US, Sureway (backed by France's Generale des Eaux) and Granada. The property company Town Centre Securities, Town & City Parking of Scotland and First Parking, backed by 3i, are strong in the active second division.

NCP enjoys better margins than its competitors. APCOA's British profits in 1994 were just £1.4 million pre-tax on sales of £22.8 million. But a willingness to take management contracts of three, five and seven years is allowing rivals to win business which might have gone to NCP a few years back, and on better terms. These days, clients - local authorities, airports, hospitals - are playing one operator off against another. 'If there are any lessons to learn from our rivals, we'll learn them,' says Mackenzie. But it's hard to see how NCP can avoid losing some of its car parks as leases run out.

NCP is currently having to spend more money on car park security - a matter of special concern to the public and the police. (Ultra-safe robotised car parks are being introduced by operators such as Skyparks.) Margins are threatened from other quarters too: like out-of-town developments with free parking which are sucking the life out of certain towns. In Bristol, for example, the council plans to slash NCP's three-hour rate of £2.30 at the Parkway multistorey, in an attempt to attract business back into the city. Much the same is happening at Brighton. 'We're negotiating with NCP about replacing its lease on the Churchill shopping centre with a management contract,' says David Paine of Standard Life, which owns the centre. 'We want to improve the car park design, and have more control over price. To us, a car park is a means of bringing in shoppers.' Mackenzie's public stance is conciliatory: 'I'm always happy to talk about a volume problem. I don't like to see even a quarter of a car park empty. Remember that every ticket we sell goes right to the bottom line. It's much more important than the extra bit of margin you might get by pushing a price up. There's no doubt that out-of-town development has hit places like Sheffield, where we have to accept value reduction. But we can't let the high street die. We will happily participate in any development which helps it.' Clearly, Mackenzie has an ample helping of problems on his plate. It may be to his advantage that he comes to the car parking business with an outsider's eye, but also an informed one. And he has long wanted to be a strategist. This was denied him in his previous job at BET, where he was finance director. ('Bob did wonders for our financial systems,' says a former colleague. 'But he never got the say on corporate strategy which he deserved.') Last year he was keen to see parts of BET spun off, but the idea was blocked. In frustration, he joined up with Prudential Venture Managers to negotiate the purchase of NCP.

The deal fell through. 'There was £50 million between us,' says a PruVen source. 'There was more to it than that,' according to Mackenzie. 'The talks may well have gone on too long.' Anyway, Gosling and Hobson soon realised that Mackenzie could just as well work for them. Having missed out on something in the region of £600 million, they kept control of the company, with Mackenzie as CEO, and paid themselves and other shareholders £185 million by way of compensation. The two men jointly were already reckoned to be worth around £450 million.

Mackenzie has other arrows to his bow besides the car parks. He hopes to boost returns via property sales. NCP runs the Green Flag rescue service, a competitor to the AA. Green Flag, whose profits were static at £11 million in 1995, was once earmarked for possible disposal but now looks set to stay part of the group. (It's a sponsor of the England football team.) The company also has a small coaching division which could have a place in 'park and ride' schemes, although Mackenzie is not keen because of the heavy council subsidies such schemes tend to require.

So car parking remains absolutely core. NCP would like to bring more capacity on-stream, particularly in London, if only the councils were more cooperative. But Mackenzie does not believe cheap car parks are the key to a town centre's prosperity. City centres need prime facilities first, he says, complemented by secure, well-located car parks. Pressure on prices charged to shoppers might then be balanced by charging commuters more.

NCP can still take advantage of its size to finance infrastructure and property schemes promoted by others, and which give it the right to operate associated car parks. A recent development along these lines was the decision to help finance the newly completed Euro-Hub air terminal in Birmingham. A 21% NCP shareholding makes its own return as well as bringing 25 years of parking rights. 'We are prepared to look at financing different schemes in the same way,' says Mackenzie. 'We might look at cinema-related schemes, for example.' Nevertheless, NCP's development programme in the UK is likely to remain restrained. Expansion into Europe or the US is 'possible', but on the whole it looks as if strategy for the future will be much like that which made the company so successful in the past. 'We've just picked up 40 health service contracts from an operator who had to sell,' relates Mackenzie with satisfaction. But in the existing, highly competitive market, it could be ever more difficult to find exciting opportunities which satisfy NCP's strict investment criteria.

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