In the wider world he’s known for his philanthropy and his ownership of Reading Football Club. Here in the world of print, he’s a fascinating and controversial figure, thanks to his ownership of Goodhead Group where he has personally bankrolled the multimillion-pound transformation of web offset wing Benhamgoodheadprint. Why? Sir John Madejski reveals his print vision in this exclusive interview.
Jo Francis: People in the printing industry are fascinated by your huge investment in Benhamgoodheadprint (BGP), and we at PrintWeek think it could well be the largest single investment in a printing company by a private individual anywhere…
Sir John Madejski: [laughs] Do you think I’ll get into Guinness World Records?
Quite possibly. What has driven you to invest so much?
We came to a crossroads several years ago and it was a question of either stick or twist. We’ve got a wonderful workforce at BGP – they’re good souls and work hard, and are very good at what they do. So we had a decision to make – either to walk away and dump mega millions, or invest in the latest technology and carry on. We decided to do the latter.
Do you still think this was the right decision?
Under the expertise of David [Holland, chief executive] and his team we’re getting there and it’s very exciting. In answer to your question, it’s definitely the right thing to have done. Of course, you’ve got the vagaries of the economy, which have not exactly been helpful. But we’re capturing new business all the time. And we have a state-of-the-art facility – I believe we have the best web offset printing works in Europe. It’s a fantastic site, in a great location. We think we’re strategically well placed, with a winning workforce, and a good strong work ethic. We’ve just about got it right and we’re getting there very quickly. It is a bit like owning a PLC I have to say.
In what way?
Well, it’s quite a large thing for someone to own, I suppose, but nevertheless we’re getting there.
So you and your team see opportunities despite the obvious overcapacity in the market you’re in?
The fact is we’ve got the quintessential essence of the right kit, at the right time, in the right place. That’s what does it for me. If we were flogging old kit and trying to make ends meet then I’d despair. The fact is we’ve got the state-of-the-art and that will win through. It’s got to. Whatever anyone else is doing, we can do it better.
With ambitions to hit sales of £100m next year [see boxout] you clearly believe the turnover is there to be gained, but what about the profit that needs to be made in order to get a return on your investment, do you believe that will be possible too?
Absolutely. I think that it’s a dynamic. I think what we’ve done is, we’ve just got on with it and the guys are doing a great job. I’m a positive person who will succeed. It’s probably taken longer than I would like it to, but doesn’t everything? It’s like getting back into the Premier League, that’s taking longer than I’d like, but it’s there for us and we’ll get there.
Your investment in BGP is enormous – it was put at £86m in a recent Telegraph article. Yet your expectation is that this company can be profitable at a level that will service both your debt and the external debt?
I don’t think it’s that much, I don’t know where they got that number from. [David Holland says it is £62m]. It’s all about success at the end of the day in my book, and it’s about keeping jobs and keeping people going. We’ve got close to 600 people working there so it’s essential that we are successful for their benefit and for everybody that’s involved with it. I appreciate it’s going to take a very long time before I get my money back, but once you get into the black you’re motoring along and it’s a different ballpark altogether. I believe in positivity and getting things right. Sometimes they take longer than people expect and sometimes you have to have an act of faith. We are definitely rowing in the right direction and we’re going to get there.
You’re often described as someone who invests for the long-term, so would it be correct to say that Goodhead Group falls into this investment category too?
You’re absolutely right. It’s not short-termism, I’m in it for the long-haul. Everything I’m involved with is about excellence as far as I’m concerned, I’ve got some fantastic companies. Look at this place here [the Madejski Stadium in Reading]. It’s one of the nicest stadiums I’ve been to and I’ve been to every stadium in the country. I believe in that and the people that work for me believe in that, in getting it right and producing excellence, which is what it’s all about. If you do that, then everyone works in a more positive way. It’s great to see and very rewarding, actually.
We’ve been told the business is self-supporting now, that must be pleasing.
Of course. And getting 92 new customers (see boxout) is no mean feat, and shows the progression of the company. Onwards and upwards.
There is constant talk about the need for more consolidation in the web offset market. Do you agree? Do you see yourselves as a consolidator or perhaps a consolidatee?
It’s one of those things that goes round and round. We’re always being contacted because of the kit we’ve got. I think a lot of them [competitors] are very envious of what we have and could see it helping them out. Who knows? There’s nothing really to say on it. You could be sitting here this time last year and saying exactly the same thing. Quite frankly, there’s no point talking about competitors. We do what we do and we do the best we can.
I must ask you about the return of Colin Rosser [Goodhead co-founder and former chief executive officer, who was dismissed from the group in 1993] as a non-executive director. We could never have predicted that happening.
Neither could I!
How did that come about and what does he bring to the party now?
Because of his past involvement with the company, he still knows a lot of the workforce. He’s got ink on his fingers and I thought it’d be nice to have him back. I think it’s good. He’s a sophisticated guy, and to me he brings a lot of common sense to the party and he’s very passionate about the business. A lot of water’s gone under the bridge. I’m a publisher, not a printer so having someone like Colin on board who’s inherently a printer, is quite a good move.
Your chief executive David Holland is the architect of what has been a very expensive exercise for you – more expensive than you might have envisaged. Yet you’ve kept faith when some shareholders would have lost patience by now. Why?
If I didn’t believe in the concept, the determination and the integrity of the workforce then I would have probably thought again, but I’m a very positive person and I believe in what we’re achieving. I don’t really want to go there, because we know what we’re achieving and we know where we are. We’re looking forward to great times ahead.
So the business really has turned the corner as far as you’re concerned?
Yes, we’ve been through the pain and now we’re coming out the other side and the future’s good. The other thing is that the industry has woken up to the fact that we’re a powerful force, whereas before I don’t think there was the confidence there. When you embark upon the scale of things we’ve done, it is very onerous and darned difficult keeping the status quo. I think in some ways we might have had a bit of slippage during that time, but we’ve come through that now; we’ve been through all that and now we have a bespoke plant that is totally up to the minute. Those that care to come down and see us are impressed. It really is very impressive when you walk through the door. When I go to BGP for board meetings it takes my breath away just going there, and I think people appreciate that. It gives them the confidence to come back to us whether they are large customers or small companies.
The projection is that the company will be in profit by the turn of the year, what sort of money do you think this company can make for you?
It’s a bit of a vulgar thing to talk about. Once we get it into profit it will stay in profit and the profits will start growing. My ambition is to see it work and everyone is focused on that. The rest will follow.
But the margins most printers are making in the market you’re in are quite dismal, if they’re making any money at all. That must be a concern from an owner’s point-of-view?
Indeed, but what keeps my faith and judgment is the fact that we have the best kit and the best opportunity. And in my book that will win through. So that’s why we’re sticking with it, and why I’m in there for the long-haul. We embarked on this new enterprise about four years ago and are determined to see it through. Obviously it hasn’t been easy going. It’s been very tough, but nevertheless we are getting there and that’s what it’s all about. I’ve got very great admiration and respect for the determined and very fine people at Goodhead. You don’t just gamble with 500-600 people’s livelihoods. We’re there for the long-haul and that’s something we’re proud of. Here we are, manufacturing in the UK in 2010 and we need all the help we can get because it’s good for the country and there’s too much pessimism. We want positivity not negativity, because that is what’s going to be the cream on top of the cream.
Do you expect the new government to be more helpful to business owners such as yourself than the last?
It’s too early to say. You’re not a very wise person if you comment on anything to do with this coalition yet. What I will say is that I believe in the power of common sense, and I do think there’s far too much red tape, health and safety legislation and political correctness, and it’s eroding the very fabric of our country. Let’s start living again and taking chances, because if you don’t, you kill everything. You can’t keep clobbering the power-makers and entrepreneurs of this country. Keep clobbering us and we’ll give up. I don’t need to be doing any of this – I could quite easily go and live on an island in the sun – but no thanks. I’m putting my money where my mouth is in all sorts of businesses, keeping people employed and greasing the economic wheels of the country.
Talking of greasing the wheels, in the BBC fly-on-the-wall documentary about you that was broadcast last year, you said: I’ve got companies burning cash like there’s no tomorrow – huge, huge, sums of money. Is the situation worse or better today than it was then?
Things are certainly much better as far as I’m concerned. We’re winning through.
It does seem to be a critical period though. You’re in breach of banking covenants at some of your companies and at Sackville Properties there are covenants coming up at the beginning of July that you have to renegotiate.
Anybody in property is in the same boat. We’re talking about a large portfolio of property that is producing very good income. It’s not a basket case, it’s just a question of renegotiating that covenant which is standard procedure. It’s not as if we’ve got a load of sheds that are empty and losing value. We’re servicing the debt so it’s not a problem.
So you can carry on funding the businesses that need funding?
Absolutely, yes. We’ve got many assets that are still producing revenue. Malaysian Motor Trader is one of them, this [Madejski Stadium] is another, the Royal Palm Hotel in the Galapagos… that’s the only five-star hotel in the Galapagos Islands.
You do have a very diverse portfolio of interests, which of them consumes you most?
My favourite company is probably Clearview Traffic – we make special road studs that are basically the sequel to cat’s eyes. They light up the road ahead.
And what about your vision for the future of Goodhead?
From my point of view, I think we’re going to attract a myriad of really good customers, on account of who we are and what we are.
THE TRUSTED LIEUTENANT: David Holland, Goodhead Group chief executive
Jo Francis: You say the future profitability of BGP is based around a volume model, what sort of volume are you talking about?
David Holland: Turnover is currently about £70m, but the added value is up a lot higher. We are anticipating £90m in this financial year and that would make us a profitable business. At £90m we will be making money.
A £100m turnover figure has been predicted for 2011 – that’s a lot of additional sales. Where is it coming from?
Many small victories – 92 new customers this year alone.
What sort of customers are they?
It’s a mixture – magazine publishers, cataloguers, retail and directories. Two-thirds of that work is contractual. It’s mainly coming from other printers. Our market share has been growing steadily whereas the market as a whole of course has not.
Winning the Radio Times contract has been mentioned as one of your ambitions, is that correct?
Well, I handled the Radio Times for over a decade. They would have to change their trim size slightly, and it’s pretty well tied up with Polestar at the moment.
Do you anticipate that a competitor will fail and allow you to gain such a large chunk of new business?
Our long-term plan always assumed supply and demand would come more into balance, because over a period of time it has to. It isn’t based on such-and-such company falling off a cliff. We have our views about people’s strengths and weaknesses, but we’re only really interested in our own model.
When we look at the market you’re in, this mythical supply and demand balance has been talked about for more than a decade but never seems to materialise…
When I worked for BPCC, we weren’t the most successful, but I can remember us making well over £20m bottom line. I think, for example, that St Ives had many years of success and I think they were like us at one time – when Lord Gavron made all those investments he took a similar initiative, albeit his was a network of companies and ours is one big web offset company.
And the level of sales you anticipate can be achieved with the factory you have?
We can probably achieve around £120m, depending on the amount of paper supplied.
You do have rather a large team of people now for the size of company. Are they paying for themselves?
It’s not an unreasonable sales and marketing cost in terms of the revenue growth we’re looking at. They are people who are there to bring in new revenue.
Can you elaborate on the business being self-supporting now?
We’ve got to the stage now where we are cashflow positive, and have been EBITDA positive for the past seven-to-eight months. The next step is becoming ‘positive positive’ so we are not fighting to pay the wages.
The accounts to May 2009 were filed very late. Why?
It’s partly my fault because I hadn’t signed one of the copies. We’re planning to do all three companies [for the year ending May 2010] by September this year. We’ve also been preparing another budget to put against previous forecasts, so that we can show that what we’re saying is robust. Which it is. Our projections have been looked at by third parties. I think it makes the publication of the results and what goes around it more robust because obviously a lot of people are watching us. We set out on a five-year plan, and what we’ve just published is the second of the five years, because for two years we were digging things up and putting things in, so we were actually producing at half the level we need to in order to make the model work. But we’re through that now. We’ve halved our deficit in the year to May 2010, next year we expect to eliminate that deficit and I believe we will.
You certainly have an impressive print site, but isn’t it an anomaly that the bindery is located elsewhere?
It might be up the road, but having a separate centre of excellence is quite an advantage, as opposed to the opposite. We’ve got one of the biggest binders in the country – 40 stations – and if that’s full up we can have 120 tonnes of printed paper around it being bound. It’s 12 miles away, it’s not the end of the earth.
And what’s your vision for BGP?
A lot of the things we’re putting in place are to do with being a world-class business. We are working very hard to put the building blocks down for that to happen, and of course it doesn’t happen overnight. For example, I think we’re the only printer in Europe that’s a member of the British Quality Foundation. We’re also twinned with Nissan, who are a byword for world-class manufacturing. So it’s a very strong aspiration. As people become more aware of our quality and what we do, then the quality of our work mix will improve and give us more opportunities. Through time that will develop, but first things first. At the moment, it’s let’s get there first.
