A 10 point mini history for your information:
1. Severn Delta was created in Aug. 2001 as a buy out vehicle but sat dormant as we waded through the various abortive MBO attempts until March 2003, when trading began.
2. We bought the "Consumer Goods" division of BFF Nonwovens, an industrial textiles manufacturer in Bridgwater UK. This was an internal division prior to the buyout. When I say internal I mean fully integrated within the main business. It had never traded independently and was not structured to trade independently using many shared resources e.g. planning, buying, customer services, accounting. In 2002 the turnover of the part we acquired was 1/3 of the whole.
3. The business we acquired mainly supplied UK Supermarkets with contract manufactured wet wipes, cleaning cloths and tumble dryer sheets. It still does although a significant and rapidly growing % of revenue now comes from our Sarah Smith brand.
4. At the time we acquired it the parent company of BFF, Lamont Holdings PLC was in Administrative Receivership, and so therefore was BFF. Something we in our final pre-receivership buy out attempt inadvertently precipitated. It was the main bank's refusal to sanction the sale of 1% of the total assets of Lamont to us that brought the house down.
5. We finally completed the deal on 27th March 2003. The next day we started again. We had 50 people in three locations within the BFF building(e.g. to get from our production zone to our warehouse you had to go outside walk around the building and go back in!) . These now needed to become a new unit, a new company, a new team. We had no computer connection. No email. No fax. The only telephone was an extension on BFF's switchboard. That weekend Martyn installed new servers himself so that we could get back on with the basics of life. In order to give our team a plain simple visible signal of change we painted the walls (with the help of our wives, daughters and my retired in laws.). We hung paintings and stuck company name signs (made on a desktop laminator) on all our zones. So by the following Monday at 6am the factory came back to life with a usable ERP system returned - the same one used at BFF of course with the data history carried across and the first semblance of a new identity and purpose.
6. By this time the business was in trouble. Suppliers withheld credit. We were funded purely by debt (but with less than we needed). Some customers walked away. Productivity was on its knees. In the first 6 months we had 2 floods, 10 days without power and the main union on site had gained national executive approval for a strike ballot. By the end of 2003 we had hit the ceiling of our debt facility and racked up a substantial loss (6 figures, and the first digit was not 1!). But we had started to turn the corner.
7. We started 2004 with sweeping changes. We had already exited two markets and sold a production line. We had started life with a long long tail of small low margin, commodity product customers. We amputated it. Every change we could make to overhead costs without negotiation we imposed. We gave statutory notice on a new contract of employment first and negotiated second. We played tough with our biggest volume customer whilst lining up replacement business on better (i.e. shorter) terms and succeeded in steering the former to the exit while the latter were collectively settling in. Effectively as I have described elsewhere we shrank to survive. The combined effect of the market exits, customer rationalisation and payroll strategies meant that turnover came down but cash flow was transformed. We took a net reduction in head count without making a single role redundant by freezing recruitment as people churned out in protest at the new contract (I'll admit we had not entirely anticipated this!). Tough medicine. But it worked. By Dec 04 we were in net profit after 21 months of trading. This is very much the simple version. Martyn and I sat down in a bar in Amsterdam during a visit to a trade fair in May 2005 and listed more than 50 separate substantive actions we had taken within the first 21 months.
8. So we landed in 2005 in the black and arguably with the worst behind us. This therefore seemed the logical time to move the business into new premises, and this we duly did in Sept 2005. At which point we returned to Turnover growth, and even though we took most of the relocation project costs straight through the books in 05, we still made a modest profit before tax.
9. 2006 was the lull before the (next) storm. We had a 6 month hangover from the move. Lots of small irritable, hard to fix, teething manufacturing issues. On the horizon a black storm. Turnover came up. Profits held but we wondered for how long. By the end of 06 a market that had delivered a 3rd of our revenue up to that point suffered a price collapse. Margin evaporated. We knew it was coming and were working on ways of filling the hole. In 06 I was launching NPD like there was no tomorrow! If enough stuck, I reasoned, if we solved our productivity issues and kept up what by then was an exceptional record in raw material cost engineering maybe we could buck the problem.
10. 2007 was tough. Oddly, given the first 2 years, it felt like the toughest year. We were having a bad time as I had expected but by the middle of the summer I realised it was for entirely different reasons than those I had anticipated. Most of the problems turned out to be self inflicted ratherthan related to the price-collapsed market. It had to be fixed with a structural adjustment. Heads rolled. I gave more responsibility to a smaller core team and kept a very very tight grip on the daily detail until I was confident the problem was fixed. To be honest we have not looked back. 2008 has of course had some choppy waters. The majority of our big volume suppliers are in the Eurozone. A year ago we got 1.4 euros for a GBP now we are lucky to get more than 1.2 (do the maths). But our relentless focus on raw material cost engineering (you can always get it lower - you just haven't worked out how yet), on NPD and on improving productivity and service has served us well so in a tough economic environment we are doing OK. Maybe the crash-crunch-tough-times don't phase me because that is mostly all we have known.
It worries me more when things appear to be going OK, makes me wonder what calamity is just around the corner.
I have learnt that it is wise to take a little paranoia withyour optimism.
Footnote: for the sake of clarity and good order Clive Birnie is Managing Director / CEO and Martyn Shiner is Financial Director / CFO of Severn Delta Ltd. They each own 50% of the company.
Monday, 10 November 2008
A 10 point mini history for your information: