The tie maker that slipped a noose from its neck
Paul Rodgers explains how a textiles firm survived to flourish after cash-flow problems brought it to the brink of disaster
Sunday 11 August 1996
The bustle at FT&R's plant in Cwmbran near Newport, South Wales is significant for two reasons. First, it is testament to the durability of Britain's textile industry that Europe's largest tie factory is located in Britain, and not Como, Italy, where 200 silk mills form the backbone of the industry. Second, it illustrates a dramatic comeback story. Just four years ago the firm was on the verge of collapse after a disastrous management buyout.
FT&R has an impressive pedigree. It was founded a century ago this year, not long after the demise of high Victorian collars led young dandies to begin wrapping bright ribbons of silk around their necks. The start of the manufacturing process then would have been very similar to now. Bolts of cloth hand-printed in Como arrive at the factory to be cut diagonally into three odd polygon shapes: one for the wide end, one for the tapering narrow end, and a smaller piece for the yolk that goes around the neck. Material makes up three-quarters of the manufacturing cost, and 40 per cent of the retail sales price.
In the 1960s the company moved from London in search of Welsh development grants and a skilled female workforce - female because men lack the dexterity to handle the delicate material at speed. The owner who made that decision was Harry Culliford, a canny businessman who headed the company for half a century. His decision to retire at the age of 79 and sell to a management buyout team came just at the peak of the market. The price was pounds 3.25m. "Not untypically, he knew not only how to run his company but how and when to sell," says John Mott, the current chief executive.
The most difficult task in the making of a tie is sewing the long seam down the back that unites the silk with the heavier material inside. If it is done incorrectly the tie will twist into an ungraceful shape. A dozen machines, called Libas, costing pounds 70,000 apiece are now used to put in the final row of stitches, but even so it takes six months to train an operator. The three-man buyout team faced an even more difficult task.
The firm's purchase had been made on the back of unrealistic growth projections. "They fell to the temptation of promising more in terms of results over two to three years than they could deliver," says Mr Mott. The problem was exacerbated when one of the executives became terminally ill. The two that remained in the office had little experience in finance. The company remained profitable during the recession but the crunch came in 1992 when FT&R faced a cashflow crisis.
Most ties are not bought by men, which explains why azure and crimson stripes adorn otherwise conservative necks atop grey pinstripe suits. And the women who do buy ties as gifts for their fathers and husbands overwhelmingly do so in the pre-Christmas rush. Many companies scale back production in the off-season and gear up to meet customer demand, but the level of training required in a tie factory makes that uneconomical. FT&R operates year-round, drawing on a line of credit at the end of the summer to tide it through until receipts from retailers start to come in.
Burdened by its heavy debt load, the MBO team found its cash crunch in the summer of 1992 was worse than expected and approached its bank for permission to use its overdraft facility three weeks earlier than usual. While the bank was still dithering, word leaked back to Como. In the tight- knit community of family silk printers rumours spread like wildfire that their biggest customer might be unable to pay its bills. Supplies immediately began to dry up, and supplier credit evaporated. "You can imagine the grapevine there," says Mr Mott. "It became a major crisis of confidence."
When the panic threatened to spread even further, capital investors moved quickly to resolve the crisis, bringing Mr Mott, a company doctor, in from the confectioner Pollards to restore FT&R's reputation. It took three months and was mostly a matter of meeting all the company's trading partners face to face and telling them, realistically, what the firm was going to do. "There isn't one of those groups I can't look in the eye and say that we can do what we say we can do."
Since then Mr Mott and the restructured management team have given FT&R a good shake. On the buying side they have instituted checks to ensure that incoming materials are as advertised, after discovering that some bolts were as much as 5 per cent short.
New Libas have been bought, and a pounds 250,000 investment has been made in computer-aided design equipment. The staff has expanded from 180 to 250, including a boost in the sales staff from eight to 13. Mr Mott also stopped supplying outlets at the lower end of the retail market, while signing deals with high-end customers such as the Victoria & Albert Museum. Low- margin sidelines, such as plush toys, have been dropped. The moves have combined to give FT&R 45 per cent growth in the last four years.
Perhaps most importantly, the venture capitalists, led by NatWest Ventures, have restarted the MBO clock. Usually when they make an investment they aim to get their money out, preferably with a handsome profit, in about five years. FT&R began ticking towards that deadline only after the new management had put the company back on a sound foundation. Mr Mott says the company's future rests on one key factor. "The thing we've earned is credibility," he says. "And it's the one thing we can't put at risk again."
Ties that bind: Frank Theak & Roskilly employs mostly women in its South Wales factory because of their greater dexterity
Photograph by HUW EVANS
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