‘I have never been so excited about the future’
Monday, March 5, 2018
If bad luck always comes in threes, perhaps the same is true of business turnarounds. Taylor Bloxham group chief executive Robert Lockwood certainly hopes so.
After three significant turnarounds – including two at his current business – he’s firmly setting his sights on growth at the £29m group, now it’s back into delivering profit.
Comprising traditional print outfit Taylor Bloxham, retail POS design and manufacturing arm Instore, storage and fulfilment division FastAnt and the latest creation, direct mail business Mailbox, the group and Lockwood clearly believe in the power of diversification.
But with the firm celebrating its 80th anniversary this year, it sounds like its next stage of growth could hark back to simpler times, when being all things to all people was a strength, not a weakness.
Darryl Danielli How did you get into the industry?
Robert Lockwood I was working for a global stationery company, Acco World. But [in the mid 1990s] I got approached by a head hunter and was asked if I would consider working in the paper industry.
Were you in sales at the time?
No, I was a dyed-in-the-wool management accountant. I ended up working for UK Paper and Merchanting Logistics. It was basically the merchanting and logistics arm of UK Paper, which included Guppy Paper in Romford and the production facilities in Kent. Then UK Paper got acquired by M-real, somewhere along the line Alliance Paper and Classic Paper in London were also acquired, and I became part of the team that merged all three to create Premier Paper.
There was a lot of consolidation going on around that time?
True. But Premier struggled for many years after it was first created, the merger wasn’t successful.
What was your role in the business at the time?
I started out in finance, and then became ‘special projects’, sort of, looking at how we could consolidate bits and pieces and push forward with e-commerce. Just try to be different. But the business struggled to make money; the truth of the matter is that the merger didn’t go well. There were three distinct ‘camps’ in the business, Guppy, Alliance and Classic and they didn’t come together harmoniously, and then they fragmented further as people left. So, we ended up with a very different business from the one we planned.
So almost a pre-cursor to what happened at Paperlinx?
It was. I was talking to the guys at Paperlinx about trying to avoid the pitfalls that we hit. But anyway, after a number of years there was an attempt to revitalise the business, which [in 2004] involved bringing in Martyn Eustace [as chief executive] and Fred Haines [as managing director]. And Martyn wanted me as finance director, so I moved back into a finance role.
So, you were still a chartered accountant then?
I was, I still am a CGMA or whatever it’s called now. But I took the role and we did lots of things – it was great fun. It was difficult because there were a lot of costs and it involved a lot of difficult restructuring, but it meant the business was set very well to take advantage of the market conditions post-crash. We had got the cost base down; we had rationalised the product range.
And you had enough cash, because it was before the crash, to make those changes, I guess?
Well, part of my role was to go to the market, to get the cash. But then it all got very sad.
At the time Antalis had bought M-real and the European Commission told them that, as a result, Antalis had to divest some of its UK business. So, Antalis decided to sell off Premier, they came to us as, the incumbent management team, and asked if we wanted to buy it. We did, so we put together a financial package and then had weirdest experience of my career, when the EU got actively involved in the sale. They flew in someone called a ‘hold separate manager’ who acted as an intermediary between Premier and the rest of Antalis, so that Antalis couldn’t gain any market information or advantage from the sale. And he advised that the sale process wasn’t competitive enough, so Antalis needed to open the bidding. We’d agreed a deal and heads of terms, and he said ‘no, you can’t do that, you need to open it up to more players’.
What were the grounds?
It was the European Union Competition Authority forcing the sale, and it didn’t want unscrupulous sellers to be in a position where they could ruin the business it was selling to get rid of future competition. They wanted a sale process open to more players. The thing that I found harsh was that we had to give full disclosure of our finance deal to any prospective buyer.
As in the MBO team had to share that information? Ordinarily you would never have to do that though, surely?
No, you wouldn’t. That was why it was the weirdest thing I’d ever been through. And I was well aware that Graham Griffiths, who ran Beswick Paper and with whom I had previously worked at Premier, would be an aggressive purchaser, as I’m sure anyone would have been in his position, and that proved to be the case and he successfully purchased the company.
You couldn’t make it up, could you?
No [laughs], but I’ve seen similar situations to that since.
So, when did you join Taylor Bloxham then?
I joined here after Premier was sold, so around 2008, I think.
Was that as a consultant?
No. The business had got itself into a bit of a mess.
In the way that many companies did around that time, or were there some unique issues?
Bit of both. The business had bought in an interim chief executive to lead a turnaround, and he wanted someone in beside him and I think I had been mentioned in dispatches. So, I met with Robert [Lindop] and he said “this is going to be really bad here”, and I’d just been through a massive turnaround thing with Premier and, well a sort of messy divorce if you like, and then I started thinking, well it can’t be that bad [laughs]. But he was a wise man. And he was right. At the time 80% of what the business did was print and it had never made a redundancy, partly because there was no one equipped in the business to look at how you take people out and get the same throughput with fewer people. In many ways, it was a conceptual thing.
And it was a family business, so it was an emotional thing?
Bruce [Sharpless] bought the business in the 1960s, but he was employed here from shortly after the War, and worked his way up before buying it. And the Sharpless family still own the business.
And his daughter is the executive chairman, is she the most involved of the family members?
April [Moss], yes, she is – I probably meet with her every couple of weeks.
So, she’s fairly hands-off on a day-to-day basis?
Yes, that all came about from when I joined the business as a turnaround.
What sort of mess was it in back then?
Probably losing £800,000 and then some. It was in to all sorts of horrible leases, the bank was running incredibly scared because we had just got into the financial crisis [in 2008] and my first job was to sort out the finances and make sure we had enough cash to keep going and transform the business. Because it’s a great company, and, as a result, people had worked here for ever, so when we looked to downsize we knew it was going to be expensive to do it the right way and treat people fairly. On top of that I had to get rid of the old bank, deal with a new bank – deal with the fact that the bank had put us in special measures. It was an incredibly messy time and if we had panicked then we probably wouldn’t be here today. Because at the end of the process the [new] bank said they weren’t happy with us and wanted us to go somewhere else. Robert was very confident that the turnaround plan would work, but the bank had no track record with us and didn’t share that belief. We believed in it, though, and communicated that.
Was that key? Keeping up communication with the bank?
Absolutely. The one thing a lot of print companies do wrong [when they get into difficulties] is they don’t communicate with their supplier base at the same time. We communicated across the board. When it was happening in 2008 I spoke to all our paper suppliers, told them what was happening, what was going to happen. And we told them that we would share ongoing [financial] information with them, so they could judge by the results, not just by what we were saying. That meant that we managed to keep our credit lines relatively unscathed. We also introduced a lot of new finance – that’s when Close [Brothers Asset Finance] got involved and they have been a good partner ever since. The thing I liked about them was that they understood print and understand the business. We also refinanced with a new bank and we suddenly had a group of people around us that were comfortable about the business and wanted to see us succeed.
A welcome change then?
You could say that. It was certainly healthier and it enabled it us to get through the first hiccup.
What were the strategic changes you made back then, in addition to reducing the cost base?
It was about getting the mindset of the business right – that it was the other activities [beyond commercial print] that had scalability and didn’t require huge investment to grow.
Because by that stage you already had more than just the print business?
FastAnt has been a division of the business since around 2000. It originally started as storage and fulfilment operation in a corner of the factory, after a customer asked us to store something and then as it developed we were able to offer that as a service to people we don’t even print for. For example, the biggest speciality activity at FastAnt now is floor tile sampling, so nothing to do with print.
Has the diversification always worked?
Mostly. We decided strategically to move in that direction as quickly as possible, but we did go down one blind alley.
The publishing business? I was going to ask about that because you bought a couple of magazines in 2011.
We didn’t understand enough and went into that market at totally the wrong time. So, we spent two-and-a-half years trying to support a publishing operation and then decided it wasn’t for us. We sold it to the management, for not a lot of value.
Because it wasn’t scalable?
It wasn’t and it wasn’t just a financial drain it was becoming a management distraction. I probably spent more time looking at that than I did the rest of the business. But after that blind alley, we then started to look at our bread and butter and that’s when we decided we needed a point-of-sale offering. I believe that when you look at where you want to go as a business, you should look at markets and customers – there are too many printers that start by buying a new machine.
And then looking at how they can fill it with work?
Yes. When I joined Taylor Bloxham, we had a KBA Karat that we hardly used, it was the Betamax of early digital, we had bought it because the production guy said it was a great machine. It may well have been, but you always have to start with what the customer wants and remember that you’re selling a product. So, if a customer wants a product then you have a market. So, what we did with POS is identify a demand, we didn’t know a lot about it at the time to be honest, but one of the things I’ve always tried to do is bring in the right people. People that can drive the business forward for the next 20 years, people that are entrepreneurial, that have business sense and a sense about what makes money. So that they’re not one dimensional, whether that be sales, production, whatever.
Would it be fair to describe the ‘old’ business as a production focused company before the turnaround?
I think so. It’s one of those things, a bit like pulling a brick with an elastic. You say you want to be sales focused and you repeat it over and over again and still the organisation doesn’t move, and then suddenly it starts moving slowly – and then it’s ‘whoosh’, you’re really moving. I would say in the past two years, we have become more sales focused than we were in the preceding seven or eight. It’s that dramatic, if you have a team of people, including sales people, that are production focused – until you change something it’s really hard. So, we worked hard training people and on changing the DNA of the business with new people.
Is that since you became chief executive, in 2016?
In the intervening years, when you were finance director, was it growing quite steadily?
The print business was slowly growing, the POS business was growing and FastAnt was ticking over. A lot of the focus was print and it sucked in lots of management time; it’s a capital-intensive business after all. Don’t get me wrong, it’s still very important to us, but it’s now only around 40% and it’s not going to be what makes the difference to us as a company in the next 10 years, doing it right will, but I don’t see us becoming a supersize print company. Print will always be an important component of what we do, but previously everyone [the management team] came from a print background, so everyone was overly focused on that.
But even you came from a paper background, so it must have been hard for you to switch focus?
You say that, but I learned very quickly that the paper business is about doing a deal on a transaction, so you must make money on each transaction and you have to understand the dynamics of the deal. If you’re selling 100 tonnes of paper, you have to understand how you make money on that. So, if you’re a merchant, you’re not product led, you’re sales led. It’s all about the customer, a paper merchanting business is about warehousing excellence and sales excellence.
Because the merchant down the road is selling the exact same product as you, essentially?
Exactly. So, you must be sales focused.
It’s quite unusual for someone from a finance background to have such a strong sales focus though, surely?
I’m not so sure, its practicing what I preach really – in that for the business to grow then the management team can’t be one dimensional in their focus.
But how did you becoming chief executive come about?
Chris [Bowen, CEO at the time] decided to leave for personal reasons and the shareholders asked me, and it was something I was very keen to do. We had been coasting for a while though, after the initial turnaround, so the first thing I did was sort out the finances and sort out the business, because the losses were starting to rack up in print again. We’d pulled out the DM operation from FastAnt, in P&L terms, and the losses were racking up there too. We also made some bad decisions, in hindsight, on some of the business we had taken on. In the year 2016 a business that had sales of £2m [DM], managed to lose £400,000 and print lost the thick end of £1m. It could have been curtains, the bank got jittery, as we knew they would. So, when I took charge, I sat down with the team and set out how we were going to turn things around. We’d done it once, so we knew we could do it again.
But how did you get into that position again? Did the business sleepwalk into it?
It did, I suppose. For various reasons we wanted to grow the print business, and as a result we took on a lot of work that wasn’t right for us. So, the print business grew by over £1.5m, topping out at around £17.5m as a component of what we sell, but went from break-even to losing a million at the same time.
The old ‘turnover vanity, profit sanity’?
Yes. So, we had to adjust quickly. But you can’t cherry pick your customers overnight if you want to maintain a solid reputation.
So, you started to share the information and strategy with suppliers again?
We had to, because I know what it’s like to be on the other side of the desk. Back then if I had to make a decision on a customer, if I didn’t have that information then I would be conservative and withdraw credit. So, we talked to people about what we were doing. We refinanced to enable us to make some changes and plug the gap in our cashflow while we refocused on expanding the other areas. So, until August, Instore, where we’re sitting now, used to share a facility with direct mail, it now has its own site. It was ticking over at about £4m a year. This year in our financial year to September, I’ll be disappointed if it doesn’t get to £10m.
That’s pretty amazing growth?
It’s a design-led operation, so we don’t look at something to see if we can manufacture it. We look at it from what the client wants, and if they want something we can’t manufacture, we find someone that can.
And if you can produce it you do?
Of course. But it’s more like project management; first and foremost we want to understand the clients’ needs. This whole [Instore] business started out like that, we didn’t start by investing in kit, we invested in people and sub-contracted production. And then when a product type got to a critical mass, we invested in the required kit.
The financial part of me, looks at everything from a cash return basis: if I do this and it’s going to cost me ‘X’, how much cash will it generate?
Across all the businesses?
Because you’ve spent quite a lot over the past 18 months?
We have, I was totting it up the other day and it frightened me [laughs]. The majority of that though, because I swapped out old assets for new, has minimal impact in terms of cashflow. Because if I was spending £20,000 a month on old press X in terms of finance and maintenance, and a new more productive machine only costs £25,000 a month then we as a business only need to be £5,000 a month better off for it to make sense. The reason we buy kit is not vanity though, it has to have a bottom line impact. I apply that dogma across the business.
So, is the business out of the woods again now?
Absolutely. Print went from losing the thick end of a million in 2016, to making a profit on the same scale in 2017. Take Direct Mail as a benchmark, so in 2016 it lost £400,000 on £2m sales, last year it had £3m sales, and made a small profit, this year the target is £3.6m, because with that on the same asset base it should make a good return. If you speak to the DM team they’ll tell you they want to hit £4m or even £5m next year, but that’s the benefit of having an entrepreneurial team.
That’s quite a turnaround though, given the size of the business, to go from significant losses to a healthy profit in 12 months?
Yes it is, but it’s a lot of hard work from a lot of a people who followed a framework we set them that showed what they needed to do to hit a profit. It really is about the whole team doing their bit. It did mean that a lot of people went out of the direct workforce in print, we changed a big component of the direct mail team in terms of management and production, and we pushed very hard on Instore to rapidly increase sales.
In terms of group growth, so there’s Taylor Bloxham, FastAnt, Instore and Mailbox – but they’re very separate, each having their own facility, whereas other organisations, with varying degrees of success, have moved to a group sales model – is that something you’ve looked at?
By keeping them separate, you get the buy-in and ownership from the teams that ‘this is a business’ and then people really want to make it succeed. That said, the group sell is going to become an increasingly important part of what we do, and I’ve got a team beavering away looking at how we can achieve that and offer it in a coherent way, with a compelling offer based on best in class across all the sectors we serve. Talk to me about it in six-months [laughs].
What about M&A to drive growth?
We looked at it a while ago, but didn’t feel an appetite for it. Partly because of the ownership structure of most businesses of say £5m to £12m; the owners have a number in their minds in terms of value and it’s not always realistic or attractive. So, my view is very much let’s get the right people and build a business organically, it’s a lower cost of acquisition.
And lower risk?
Precisely, you shouldn’t be embarrassed to make a wrong decision, but you don’t want to be in a position where you have to live with it. That was the lesson from our foray into publishing.
What have been the key things you’ve learned in your career?
Bring everything back to a financial decision, it’s what makes the world work. Don’t be afraid to invest in the best people. Never be too intimidated to employ people smarter than you.
What was the one thing that had the biggest impact on you?
I had a bit of an epiphany earlier in my career, when I was working at Finnish-owned paper company they actually sent a psychologist to work with us as part of a 360-degree assessment of the management team. At the time, I used to get very frustrated with the sales and marketing people, I used to do the classic withering financial destruction of them in meetings, because they never had a grasp of the numbers. Ultimately that had a negative impact as it discouraged people from bringing things forward. So, they had a programme for all the senior execs and mine was focused on learning how to be better able to deal with sales and marketing people.
And now you love sales and marketing?
I do, and it proved to me the value of getting the right training and the right trainers. The impact can be incredible.
Now turnaround 2.0 is complete though, what are your plans for the group now?
I’ve got ambitions for this group to be perpetually financially stable. We’re back in profit now, but we need to have the right blend in the business to give it that stability. I want print again to be a positive contributor to the business, I know the guys in print have felt under the cosh in recent years because of market challenges, but we’ve invested in new machinery to enable them to do that. And, of course to achieve a coherent group sales offering, rather than just a marketing tag for it. If I can do that in the next three or four years I’ll be happy.
You seem happy now though?
I have to be honest, I’ve never been as excited about the future as I am right now.
Are you looking at adding any new strings to the business’s bow?
We are looking a number of new sectors we’ve never been active in before.
Can you be specific?
Of course, I’m just not allowed to. I wanted to talk about them, but the team said I can’t.
In, which case now’s probably a good place to stop – before you say too much.
One final question, if a business gets into difficulties, what advice would you offer?
Go hard, go fast and talk to people.