‘We’ve got a very good business here now’
Monday, September 17, 2018
Like many general commercial printers, Gemini Print Group has faced its fair share of challenges over the past decade.
The fallout from the 2008 financial crisis, the collapse of Paperlinx, the Brexit vote, and diminishing margins have hit the entire industry. But when you throw into the mix being put into special measures by its bank in 2010 and the death of its founder shortly afterwards, then it’s probably fair to say that it hasn’t been the luckiest of businesses.
So, it’s hardly surprising that the simple fact that the business is still here is probably group managing director Steve Cropper’s proudest achievement to date.
However, after steadying the ship and leading an MBO two years ago at the circa-£18m business, which has a multi-unit main site in Shoreham-on-Sea, West Sussex along with a 30-staff production site in Bristol and sales offices in London and Newcastle, he’s set his sights firmly on growth and diversification. And with plans starting to bear fruit, it’s very likely that his proudest achievements are probably yet to come.
Darryl Danielli My usual opener is how did you get into print, so that seems a good place to start.
Steve Cropper I think this is my 32nd year. I started as a van driver.
With the business?
With the business.
And that was your very first job?
In print. I started when the company had about six employees, it was called Kraft Paper Products back then. And in a small company you get to do everything, one day you will be in the camera room for 10 hours shooting negatives and then stripping them, if I wasn’t doing that I was driving the van, if I wasn’t doing that I was working in finishing.
So, you were pretty much working across the business then?
Certainly, up until we moved over here, which was 25 years ago.
When did the business change its name to Gemini then?
Probably around four or five years after that.
Was it acquired?
No, it was just a name change really.
So, did you develop through the business via a production route rather than sales?
I was always in production, I suppose initially as an admin person really, but as I developed I moved into the print room and then became production director and then in mid 1990s, I think it was when I was 27, I was made a [company] director.
How big was the business then?
Probably £3m or £4m.
So, it had grown a fair amount then?
Well, I’ll give you a brief history: Gemini merged with a company called Blackburn Print [in 1990] and we moved to these premises, which were Blackburn’s [in Shoreham-by-Sea], so growth accelerated very quickly after that.
Who owned the business back then?
Nigel Holmes and Alan Blackburn. Blackburns was at the forefront of the old Scitex, so they would manipulate holiday images for companies and remove the skyscrapers or building sites from the brochure photos. We moved over when they had one press, but their main business was pre-press and we came with more press than pre-press and we shared the same unit. As the years progressed and we grew we’ve taken on more units on the estate.
So you have quite a few other sites?
Well, we have eight units on this site, but we only have one other manufacturing facility and that’s in Bristol.
Was that an acquisition?
With the Blackburn merger, there was a company – Parkway I think it was at the time, in Bristol – and they were owned by [Alan] Blackburn’s business partner [Scottish entrepreneur and former Motherwell FC owner] John Boyle. After Gemini and Blackburn Print merged, probably six months later Alan wanted to step out. John was his partner at Parkway, but he admitted he knew nothing about print, he was an investor, so he offered it to Nigel and that was what became Gemini West. But it’s now branded simply as Gemini Print as we’re all one company now. To be honest, the ancient history of the business is probably less important that the past seven or eight years.
Did something big happen?
You could say that: the financial crisis. In 2010, RBS like all banks at the time, were looking at their IF [invoice financing] lines and we had £750,000 available to draw down and they put us into like a high intensity...
…like special measures?
Exactly. They effectively withdraw funding from us over the Christmas period, literally on the final day before we broke up. So, Nigel and me had to come in to make sure wages were being covered. Looking back now though, I think part of the reason RBS made that decision was because Nigel was a very autocratic owner. He was old school and [before the financial crisis] could pick up the telephone and secure £2m of credit just like that. So, when he had, what he thought, were snotty-nosed little bankers coming along telling him that they wanted to see his forecasts and budgets, he felt he didn’t need to do that. So, in the months before they pulled, there had clearly been some bad interactions between Nigel and the bank – to the point where RBS withdrew.
But I guess it probably wasn’t that uncommon, entrepreneurial business owners of his generation were probably used to relationship banking, but that changed after the crisis?
True. And he was always like that, bless him, he could just pick up the phone run through some numbers from the back of a fag packet and didn’t really need to do anything else to get what he wanted. He was the same when it came to buying companies. He would buy a company and then keep the same people running it, and then after two or three months he would send me in to find out what was wrong and why it wasn’t making any money. We bought one company in Hastings, I realised what was wrong in 48 hours and came back, wrote my report up highlighting what we need to change and he then got the guy in and said, ‘Steve’s written this about you, what do you think’. Thanks Nigel. But that was kind of his style.
Different to yours then?
[Laughs] But it taught that me that you need to be transparent in business. If the bank or a supplier wants information, they want it for a reason, they’re under pressure their end. So, it’s only right that you give them the information that gives them the confidence to lend or offer credit. But back to then though, Nigel did have the foresight to talk to other bankers and had another one up his sleeve. So when RBS pulled funding and appointed Grant Thornton [to advise] in January , which meant every cheque had to go through them, while it was a fraught few weeks, we knew we could get through it. It seemed bizarre, though, as we [technically] had £750,000 available to us with the bank through the invoices we could draw against. Trust me, I would love to have that kind of availability in the run-up to Christmas these days [laughs].
It must have been a stressful time?
Well, come late February Nigel had a heart attack, a large one, and he was in hospital from then until he passed away in July.
That must have been awful. Was he majority shareholder at the time?
He owned 51%, with John Boyle having 49%. John had never really been involved with the company though – he would probably fly down once a year, take Nigel out to lunch, talk about how well business was doing and that was it.
Here’s your dividend, thank you.
I guess. He was a very successful entrepreneur with lots of investments.
Was he more an investor than someone running businesses then?
No, he ran businesses too. His main thing was building Direct Holidays and selling it to Airtours [in the late 1990s] for around £78m. John, to be fair to him, was incredibly supportive. In the January, he cancelled his holiday and helped Nigel with the banks. In the period after Nigel’s heart attack, we undertook a review of the group’s businesses, because we needed that transparency.
And with Nigel in hospital, I suppose, with his management style a lot of the knowledge of the business was stuck in hospital too?
Before he had the heart attack I never really had the chance to have input or help manage the other businesses, it was always from afar, and he would then work with the other businesses and just say ‘Steve says you need to do this or that’ but I could never get directly involved.
So, you were the managing director of the main [Shoreham-on-Sea] site, but there were other people running the other sites – you just played the role of the bad guy, without ever getting close to the other businesses?
That’s a one way to put it. Anyway, we then started to look at the other businesses and what was going on. I spent a lot of time up at Heathfield, we had a plant up there called Quentin Press and it was losing money quite badly. We stemmed the losses, and after six months it was going the right way but it was still a drain on the top company [Gemini], so we made the difficult decision to close it in October 2011.
Was the complicated structure of the business back then masking the unprofitable parts because you didn’t have the visibility?
Yes. Let’s just say that money coming up from the top company was funding the unprofitable parts.
And I suppose that’s not that uncommon when a company has an entrepreneurial owner who controls everything and no-one else has the group-wide visibility?
Exactly. And that was why we made the collective decision that I would spend my time across all of the businesses and do a review and see where we ended up.
So, what happened after Nigel passed away? Did John buy the remaining stake in the business?
He did eventually, between Nigel and John there was a ‘put and call’ scenario. So, it wasn’t easy. John was also in the mind of why should he buy this, as it was going through a period of uncertainty. I also had to go to court to get a ad colligenda bona that allowed me to become the secretary of the company and then approach John to see if he wanted to buy the company. He said yes, so I had to get an independent valuation and then distribute the funds to Nigel’s estate. Although it wasn’t quite as easy as that probably makes it sound. It took around nine months.
It still doesn’t sound easy.
And in all that time suppliers, credit insurers everyone needed to know what was happening with the company, so we had to reassure them and beg, borrow, steal favours to keep the business going.
And all that just after coming out of special measures with the bank?
That wasn’t too bad as we had managed to keep that within the business and manage it – to ensure everyone got paid.
It must have been an incredibly tough year though?
We’ve probably had tougher [laughs].
It was quite an experience though. And then after that I had to put Quentin Press into liquidation, which was just awful. It was something I had never done before and was probably the hardest thing I’ve ever had to do, and something I don’t ever want to have to do again. Telling the staff that we had to close the company was just awful.
It does sound like the year from hell.
You could say that. And then in around April 2012 we completed the sale to John. John was an incredibly patient investor though and he knew that we needed investment, so he started to invest in finishing equipment in 2012/2013 and then we put in two [Heidelberg Speedmaster] XLs in 2014.
How big was the company then in around 2010/11?
At its height, it was over £20m. But with one company closing and unravelling the rest, it ended up around £14m. In our last accounts, it was back up to £16m and our run rate this year is £18m.
But presumably more profitable now than when you were at your peak?
That’s hard, because it was a different time and margins have been eroded across the industry.
It certainly sounds more sustainable.
Yes. Absolutely. We’ve also invested £8m over the past five years, prior to that most investment was simply to support the companies, when really we should have been consolidating the business. But Nigel had this vision for satellite companies all over the place. Now, they [the investments] are about growing the business, setting a strategic direction.
Which is presumably when the good news starts?
Well, when did Paperlinx go?
Well, Paperlinx’s largest hub was just up the road [on the same trading estate as Gemini]. So, we could go up at any time of day or night to collect paper, because we had no storage space at the time – they were our warehouse. So, probably 90% of our paper was bought from up the road. So, that April, when Paperlinx went bust, that was hard – we had to find £400,000 of paper a month and we had no credit lines with the other merchants as we hardly used them. But the paper industry came to the fore, people like Antalis and Denmaur really stepped up to help us – but we kept hitting our credit limits because they couldn’t keep up with our usage. At one point I think we were having to pay on 15 days. So that was tough, probably for a year. Stora was really good too and we were buying significant tonnage from them, but we had nowhere to store it at the time – so we would have paper outside under tarpaulins in the middle of winter.
Not exactly ideal then?
It was painful for about year, until some new units were built on the estate and we took one for our paper store. Now we probably have £300,000 of paper onsite at any one time. Looking back there were clearly signs that Paperlinx was in trouble, but I never really knew what credit insurance was before then, never needed to – we never hit a limit. But after Paperlinx I became very aware, and I realised that we needed to be even more accountable.
It goes back to what you said about transparency?
Yes. We had always had a ‘fit for purpose’ financial controller rather than a financial director when Nigel ran the business and one of things we agreed as a board was that we needed a financial director, someone to run the business by numbers. End of. So, we recruited Owen [Jones] in October 2011. His first job was to help me liquidate Quentins. So, we now run the place by numbers, absolutely everything is measured and we have total transparency across the business and Owen has been instrumental in that.
I suppose you had to put all those processes in place after Nigel died?
Absolutely everything. Before that [monthly] management reports were only published after three or four months, and even then Nigel would ask why did I need them.
So, even though you were managing director you didn’t have any access under Nigel?
Not really, I never saw audited accounts up to that point. I was a young director of the company – ‘fit for purpose’ if you like, because he needed someone to sign things off. So, I would be given things to sign, and when I asked what they were, I was just told ‘don’t worry about it, just sign’. It wasn’t until the unfortunate death of Nigel, that we had the auditors come in and they showed me a list of things that were wrong with the accounts. They showed me a list of letters that had been sent to me over the previous six years, and I had never seen any of them. Anyway, that’s all in the past and just another thing we had to deal with at the time.
A bit worrying though?
And, in some respects, as difficult as all those things were at the time, they kick started the programme of improving the business and making sure it was well run and much more transparent. It meant that we could open our doors to anyone, institutions, suppliers, who needed to know the financial side of things. And over the past five or so years, opening up to them, speaking to them, letting them into Gemini and working with them as a partner, not just a supplier or lender, has got us though the tough times over the years. Like Brexit.
Hang on, have there been any good times?
[Laughs] I’ll get to those, it’s not all doom and gloom!
The good thing is that we got through all of what’s happened. Then next was Brexit. The first three months of 2016 things were looking really good, and me and Owen thought this might be our first good year with no drama. Then the Brexit vote came along, I didn’t really care either way, but I just wanted stability...
…understandably after the previous few years.
So, I wanted us to stay in. Prior to the vote, we had a run rate of £75,000 a day across the group. Literally the day after the vote it was £15,000 and that was the pattern for weeks. So, we had to make a decision at that time buy turnover, almost at any cost, just to keep the IF lines turning and ensure we were in business.
Presumably, that was a short-term fix though?
Of course, we put a plan together and flew up to Scotland to see John and present it to him – essentially what we needed to do with the business, where we were going to go and the last fundamental point was asking John what was he going to do – because we needed more investment. I had the bit between my teeth. But during the presentation, he gave me and Chris Pennison...
Chris came into to do a review of the business around three years ago. He has a manufacturing background and he’s one of John’s advisers. He had been working with us for around 18 months [at the time]. John is a really nice, pleasant, enthusiastic guy, but during the presentation he was tearing strips out of Chris and myself and I just couldn’t figure out what was going on. At the end of it he said that we had given him all the answers he needed and he told us that he was planning to retire a year later and we needed to organise an MBO or he was going to sell the business. He then told us to go into next room, come up with a figure and he wanted the number sorted before we went out for lunch.
I was shell shocked. I flew up that morning to sort out some new investment and flew home that evening having just orchestrated an MBO. Without actually knowing how I would. This was in November 2016.
You kept that quiet?
We wanted to really. John was sitting there – our multimillionaire guardian angel – and that had really helped us get though some of the tough times. So, if it got around that he was coming out of the business, what would people think? So, we kept it low key. Don’t get me wrong, all the key partners were kept fully informed.
Learning the lessons from the past.
Absolutely. John was really good too, once we agreed the money he then gave us a year’s grace to start paying it back in monthly instalments so that we didn’t overburden the business. I couldn’t be more grateful to him for the way he handled that, it also enabled me to come back here and speak to all the directors and ask them if they wanted to be part of it.
Who else was in the MBO team?
Owen, Rob [Page, the managing director of the Bristol business], Matt [Cooper production director], Nick [Gwynne, sales director], Chris [Pennison, chairman] and Andrew [Lapping, non-executive director. Since then, Julie Beard [digital director] has become a board member and shareholder and Mark Tulley, sales director is also on the board.
I’m still trying to get my head around the fact you only had a few hours to agree a price for the business?
I think we went back two or three times that day, but we agreed.
And he’s not involved anymore?
No, but he’s still interested and has been a great mentor. He came down around two months ago and wanted to see the new press, he’s still enthused by what we’re doing. And I’ll never forget that if he hadn’t stepped in [in 2011] then 140 people would have lost their jobs. Not just then to be fair, there was a period when it felt like we would get through one challenge and then ‘bang’ something else would come along.
You must have learned a hell of lot in that period though?
And the tough times are all behind you now, plain sailing, post MBO?
In comparison. We had a new press come in last year, brilliant press [10-colour Heidelberg Speedmaster XL 105], we got it secondhand from Exel, they did really well. But it was due in July/August as we identified that as the best time. But it didn’t come in until September/October, our busiest period, the other press was being decommissioned and then over October/November we had to reverse all the finishing equipment we had moved to make room. Matt and myself are pretty good at planning, but it knocked us both for six – it didn’t quite get to the point where I had to cancel my wedding, but I nearly had to cancel my honeymoon.
What was the delay?
It was from a failed business in Italy, but the insolvency process there is very complex so it just took a lot longer than any of us planned. But we got through it. January and February were a little quiet, but since March though, we just keep breaking records, and I’m really looking forward to this month because September is always a busy month anyway, so if we keep the trend up it should be really good. And we’re doing lots of really positive things.
When do you catch a breath though?
We took on two reps plus six staff at Bristol after Kingsdown went down, and that’s been very good for us. People might have questioned years ago why we kept Bristol going, it was losing anything between £75,000 and £100,000 a year, but it was feeding the top company £750,000 in sales, so the cost of a rep would be that value. And, to be honest, after having to close Quentins down, I was damn sure I was going to make Bristol work. There are some really good people there, and since Rob [Page, managing director] joined the business has dramatically changed. I think the Kingsdown people joining was the last piece of their puzzle. So, it’s a double win, not only is the site now profitable, but its generating even more sales for the top company [the Shoreham-on-Sea site] too.
So, the business has certainly turned the corner then?
Absolutely. One of the other positives is that we have also branched out into other areas. Two things have shocked me: the success of digital in Bristol and the growth of the promotional merchandise business. Managed document solutions is an opportunity for us too, where we look at our clients, ask what they’re doing with this, how are they doing that and identifying areas where we can help them – basically trying to understand their businesses better so that we can look at new areas where we might be able to help them.
That’s interesting, because I guess what you’re talking about is the lead supplier model – which a lot of the big groups are adopting?
It’s about understanding our clients better, finding out what their challenges are and seeing if we can help them with them, because it might be easy for us, but very hard for them.
So, what’s next?
Growth and investment. We’re reviewing our MIS, looking at web-to-print. I want to plug our skills gap too, and finding people can be difficult here, so the alternative is investing in new technology that enables the people we have to do more. Large-format is another area I’m looking at dipping our toe in. I’ve got a shopping list spec’d, I know what I want to do. But on the flip side I would also look at a company that could benefit from investment, so look for a business with the existing skills that needs a bit of love and would benefit from us giving them quite a bit of turnover.
Buying another company?
Possibly. I’ve started to look down that route. We’ve got a very good business here now. I wouldn’t say the market has got any easier, but looking on what’s going on here I’m pretty confident, we’re in a strong position now, rather than flying by the seat of our pants like we had been for the past six or seven years.
So, you’ve been through a period of turbulence, probably more than most, learned a lot and you’ve now got the solid foundations from which to build on?
I would say an important part of that is that over the past three or four years I’ve also surrounded myself with good people in key areas. People that challenge me and the business, and that’s important to me. I want to be tested. We’re more professional now than we have ever been.
You mentioned earlier that you you’ve learned a lot, is there anything you would have done differently?
Other than wipe out the last seven years you mean?
To be fair that wasn’t of your making though.
I probably would have got more involved with sales earlier. Coming from a production background I always saw sales from afar. But a couple of years ago I moved to sit in the middle of the sales team for around 18 months, just to give me a better understanding and break down the ‘them and us’ culture in the business. Now everyone sits together and works together. Truth be told though, looking back at everything I probably don’t know what I did right and what I did wrong, but we’re still here. We’ve had some hard paper rounds in our time, but we’re still here. John, and Nigel, to be fair, taught me that we are the custodians of 160 people’s lives – and if we fail, it hurts a lot of people. I don’t want to fail.
But you’ve come out the other side now, the business is growing.
Looking at the positives you’re absolutely right, we’re in a good place now. But our auditors think we should be a case study on all the things that can go wrong. But we’re still here and I plan for us to be here for another 30-40 years.
Last question then: what advice would you give you younger self if you could go back in time?
Believe in myself. After everything we’ve been through, I certainly do now.