Paul Sellars, the éminence grise at Montpellier is making progress slowly, patiently and profitably. Leslie Copeland reports

Peter Gyllenhammer, the Swedish serial investor and asset stripper, is routinely cast as the main player at Montpellier, the once troubled housebuilder that has morphed into a unique, profitable construction firm.

But wizened investors know that the éminence grise at Montpellier is Paul Sellars, the group managing director and self-styled corporate 'mechanic' whose day-to-day husbandry over the past six years has proved just as invaluable as Gyllenhammer's financial and intellectual muscle.

Married with two children, Sellers was living a relatively problem-free life, beavering away in the calm corporate environs of Berkeley Homes, when he got an invite to join what was then called YJ Lovell in 1997.

He joined as finance director, a perfect position from which to view the size of the task ahead of him, as YJL was in tremendous financial difficulty.

'YJ Lovell had interests and assets all over the globe, £100 million of debts, debilitating preference shareholders and obscure joint ventures and off-balance sheet liabilities.'

'It was a very risky project to take on – akin to risking all on red on the roulette table – but we were determined to make progress slowly, patiently and profitably.'

Gyllenhammer provided the initial cash to satisfy the preference shareholders and, with the support of the bank, a plan was hatched to sell many of the non-core land, property and assets, and off-load YJL's Spanish and US interests.

'We wanted to radically reduce debt and create value by bringing forward the construction businesses and selling off property. There has been no rush and no panic – we still have a few US assets. Peter has provided many of the ideas – all I have tried to do is implement them.'

Despite the reticence to talk up his role, it is patently obvious that Montpellier's transformation owes a lot to his managerial input, as only a strong manager could steer this ship.

This is because, although shorn of all its debt, Montpellier is still a complex entity. It is a 'mini-conglomerate,' a peculiar 80s throwback of a business which Sellars himself admits is 'an unusual beast'.

'What we have now are three divisions – Construction, Investment and Property – all of which complement each other. Our last results, showing sales of £202 million and profits of £3.4 million, should alert you to the potential of what we have.'

The construction side, to which many businesses have been added over the years, consists of 15 different companies across the UK.

Says Sellars, 'we have put together the construction arm in a very cost-conscious way, concentrating always on asset- rich, undervalued ventures. If you look at our purchase of Britannia in 1999, we kept the construction division and sold off the concrete flooring, group HQ and other bits and pieces. We got our acquisition costs back.'

The order book held by the diverse businesses sits at £530 million, with the focus at present on public sector work.

'We have shifted out of private sectors and into the public domain. But, as I learnt from my time at Berkeley Homes – and am learning at Clubhaus [the listed golfing company where he sits as non-executive director] – regardless of where you operate, the key to business is getting the risk right. I go around all the businesses to ensure every project has got its financial plan right and its margins right – then I proceed to the actual construction risks.'

As for the group's property trading arm, it ticks over nicely. 'The goal is to convert property from our existing portfolio into cash – quite simple really,'

says Sellars.

More intriguing perhaps is Montpellier's investment division, which came of age last year following the purchase of corporate finance specialist Union Investment Management.

Montpellier owns substantial stakes in a range of listed companies including Walker Greenbank (25.6 per cent), Jarvis Porter (26.6 per cent), Cape (29.4 per cent) and Quadnetics (6.7 per cent).

'We took the view early on that the cash we make from construction we would invest in an investment division. Our choices are quite simple. We back undervalued, asset-rich, niche businesses. It's fair to say that we look at an array of unusual and turnaround situations.'

The group initially just builds up a small, important stake (up to around six per cent) and then gets into conversations with management. 'If we are encouraged', says Sellars 'we will up our stake to 29 per cent

and beyond.'

Just recently, Montpellier completed the purchase of boilers, central heating and furniture specialist Bullough, a company where it had built up a 29 per cent stake. Sellars initially offered 12p per share, a 100 per cent premium to the prevailing market price. This was rejected by Bullough's independent directors, but when the bid was upped to 14p (£7.5 million), they recommended the offer.

Says Sellars, 'this deal, the first one led by Union Investment, is illustrative of how we do business. We were never aggressive and never believed we could actually run the venture ourselves. But we were keen on control and worked with existing management to affect a satisfactory outcome for us and Bullough.'

As for the future, Sellars is fixed on one task: 'to do things better and to make more money for us and our shareholders.

'Only in the last year have we had security. We are now very positive about the short-term and the long-term project. We will keep up the momentum. I am sure that Peter [Gyllenhammer] will continue to come up with new ideas. For myself, I will do what I do best – remaining very critical and constantly asking why we're doing what we're doing.'