Braintree manufacturer gets a makeover following £770k management buy-out
A Braintree manufacturer that makes stylish shopfittings for a host of High Street fashion stores has itself been the subject of a makeover following a £770k management buy-out.
Selbix, which supplies bespoke retail fixtures and fittings for Next, Laura Ashley, Arcadia Group, Select, Muji and Moss Bros among others, plans to increase turnover by at least 50 per cent over the next few years and dramatically improve operating margins.
The deal was financed by Lloyds TSB Corporate’s Cambridge team led by Mike Denning.
The company was formed in 1992, performing particularly well throughout the 90s as Selbix built up its impressive customer portfolio and expanded its own service offering. But since the turn of the new Millennium, Selbix has by its own admission “stagnated” somewhat and the new team feels that it can give the required impetus to take the company to the next level.
New FD Amin Dedhar said: “The new team brings much needed external influence, which is already giving the company a new zest. It also brings a new perspective to the company’s ambitions and vision and a capability for strategically planning the future.”
Ownership had been concentrated in the hands of former MD Mick Pedder with three minority holders. The recent restructuring has seen two new incoming shareholders and seen the company buy out the majority shareholder for £770k and a three-year consultancy contract.
The new team comprises Amin Dedhar as FD, Nigel Rees as sales & marketing director and Robert Painter, the new MD; all three hold around 30 per cent of the shares.
There are also two minority shareholders remaining from the previous regime – production director Mick Dobson and operations director John Reeve.
The key challenges identified by the new team, according to Dedhar, are the retention of Selbix’s existing client base following the MBO, the eradication of inefficiencies to improve margins, the very real and growing spectre of competition from China and eastern Europe and tightening legislation, which affects some of the company’s operational processes.
Dedhar and his team were adamant that the MBO was structured in such a way as to allow some investment in key areas of the business.
“There has been very little investment in the company for the past few years and it had therefore become a bit stagnant. We foresee some modest investment in plant and machinery, some physical growth of production capacity and possibly the creation of a new joinery capability.”
Turnover had remained at a relatively constant £5.5m over recent years although, according to Dedhar, loose control was eating into margins. “We foresee turnover between £5m and £5.5m in this first year following the MBO but fully intend to improve the operating margins to ensure profitability.
“Our five-year feasibility projections looked for growth to £7.5m over five years but in reality our ambitions are somewhat higher.”
The company runs its manufacturing operation out of five factory units on Springwood Industrial Estate in Braintree, with floorspace totalling around 45,000 sq ft.
This side of the business employs about 75 and comprises its saw shop, cutting of metal tubes/rods to length; the sheet metal shop involved in laser cutting and the like; the precision machining workshop; the stainless steel shop; and assembly & dispatch.
The company also operates a warehouse and distribution operation in Thetford on behalf of its largest customer. This operates out of five leasehold units, employs 10 and occupies around 35,000 sq ft.
The main planks of the Lloyds TSB Corporate finance package were loans to the pension funds of the three new majority shareholders, enabling them to buy the company’s freeholds which, in turn, generated liquidity to pay out the previous majority holder.
In addition, the company retained a previous invoice discounting facility and has been granted a new facility against its plant & machinery. Lloyds TSB Corporate is currently putting in a final tranche of loan funding against personal guarantees from the principle directors.
Dedhar said: “Lloyds TSB was faced with what was essentially a restructuring of previous exposure but on a significantly higher gearing. Bearing in mind the lacklustre performance of the company over the last few years, we had to put a persuasive case to Lloyds TSB to put its faith in the ability of the new team to make it work.”
Dedhar believes the faith shown by Lloyds TSB Corporate, with whom the company has banked for 14 years, was key to the deal.
He said: “Lloyds TSB Corporate has been absolutely fantastic. Its knowledge of the company obviously helped.
“It approached the new team with a mindset which showed a desire and determination to enable the MBO to happen and has shown great faith in what it feels the new team can achieve.
“We had a very similarly priced alternative offer from another major bank but the structure and covenants they wanted to apply seemed quite restrictive and gave the impression of an underlying caution, perhaps even reluctance.
“Bearing in mind that in business one can never be totally sure what’s round the corner, we wanted a bank that conveyed positivity and a real desire to support us.”