Business Success Comes Through a Box at Loftus Rd!

Telegraph

The quiet tech giant that's found success for UK plc
One was a CEO for Land Rover, the other a boss at JCB. Together they have turned Edwards into a key part of British manufacturing.

By Andrew Cave
Published: 7:08PM BST 03 Jul 2010

Despite the gloom surrounding British industry, there are still UK companies with commanding global market shares. In Cambridge, ARM Holdings is the world's biggest microchip designer; while Malmesbury, in Wiltshire, houses the research and development hub of Dyson, the world's biggest vacuum cleaner manufacturer.

It might sound a little less sexy, but in Crawley, West Sussex, Edwards controls nearly 50pc of the global market for vacuum pumps used in the semi-conductor industry. It is a vital part of the manufacturing process and one of the most important elements of the technology industry.


If you've never heard of the business, you're far from alone, perhaps because of its history buried within BOC Group, the gases company acquired by Germany's Linde in 2006. Yet, that's changing.

Now owned by private equity groups CCMP Capital and Unitas Capital, Edwards caused a stir last month by hiring British industrial heavyweights Matthew Taylor, previously managing director of Land Rover and chief executive of excavators group JCB, and former Jaguar Land Rover chief executive David Smith.

Taylor joined as chief executive, recruiting Smith as chief financial officer over a lamb and beer lunch in an executive box at London football club QPR.
Edwards might seem a step down for both of them but the company, founded in south London in 1919, has an impressive record – 500,000 pumps installed worldwide and 40,000 corporate customers including Samsung and LG.

About 50pc of its products go into the semi-conductor manufacturing processes. Then there are applications in flat panel and light-emitting diode (LED) displays, solar panels, scientific instruments such as mass spectrometers and processes in the chemical, pharmaceutical, oil, gas, steel and power industries.

The company's vacuum technology creates a low-pressure environment that's cleaner and more controllable than atmospheric pressure, enabling critical processes to be as effective as possible.

"We can create emptier vacuums than those that exist in space," adds Taylor. "We take one atmosphere of pressure, which is essentially what's around you all the time, and reduce it 1bn times.

"David and I come from a background of working with brands and seeing how much further you can take them to get to a wider audience and strengthen their offering. When you have such a strong starting point as we have here, the opportunity is huge."

Smith, 49, agrees. "There are two or three things that are really going to change economies over the next 10 or 20 years," he says. "The emergence of the BRIC [Brazil, Russia, India, China] markets is a big factor. Then there's the change in innovation and technology and the environmental and sustainability agenda. Edwards is right in the middle of all those things.

"A lot of the growth we're seeing is in Asia, while the technology applications are fascinating. Whether they're in LEDs, the next stage of biotechnology and nano-technology or battery developments for vehicles, they all require low-vacuum systems to produce the parts."

Edwards is coming out of a tough period, due to a slump in the semi-conductor industry that resulted in turnover falling from £510m to £371m last year, when earnings before interest, taxation, depreciation and amortisation dropped from £71.9m to £21.6m.

Its private equity owners have taken action, refinancing the business, selling non-core operations and announcing plans to move most of the operations of its vacuum pump factories in Burgess Hill and Shoreham, West Sussex, to South Korea and the Czech Republic by the end of next year. "Those decisions were based on cost and quality factors," says Taylor. "It was difficult to be competitive here in the UK."

He says that Edwards will keep its more specialised toxic gases abatement systems business in Clevedon, Somerset, its electronic systems in Eastbourne and all its UK research and development operations. The company has 890 staff in Britain and 2,800 globally.

Business is recovering, with first-quarter revenues up 67pc to more than £130m. "The second quarter will be better and we think we will have good results throughout this year," says Smith. "The market for phones, laptops and next-generation displays is exploding, so the big semiconductor manufacturers are making huge investments in capacity, which falls through to us as well."

When a sustained recovery comes, Edwards' private equity owners may want to cash in through a flotation or trade sale.

"That's something they'll look at over the coming months," says Taylor, "but the key driver and the reason we were brought in is that the company has restructured and thrived but also has huge potential. That's why they're looking at it as a longer-term investment."

The pair are used to long-term corporate careers. Taylor joined Ford in 1985 and spent 21 years there, becoming managing director of its Land Rover operations in 2002. He more than doubled the division's revenues, making it one of the most profitable areas of Ford and achieving profits of more than £600m before joining JCB in 2006.

Smith, 49, grew up in the West Midlands and joined Ford straight from university, spending 25 years in finance and strategy roles. He rose to be Jaguar Land Rover chief financial officer after the marques were merged and then served as European chief financial officer for Ford and its Premier Automotive group before steering through Ford's sale of Jaguar Land Rover to Indian conglomerate Tata in 2008.

When that deal completed, he stayed with the business that had been sold, working as chief financial officer and then chief executive of Jaguar Land Rover for Tata.

However, within months of the acquisition completing, the car maker was hit hard by the financial crisis at a time when it was trying to get financing in place.

"With demand collapsing around the globe, we had to react incredibly quickly with some very difficult decisions," says Smith.

The results included production shutdowns, four-day weeks, changes in terms and conditions and 2,500 redundancies. Smith also presided over ultimately inconclusive negotiations with the Government over potential financing.

Then, in September 2009, Jaguar Land Rover announced plans to close one of its two West Midlands car factories by the middle of this decade.

Smith left in January, citing a wish for a change of career direction.

He says: "At Jaguar and Land Rover, we have left a good legacy and you have two British brands that are developing great new technology and products that can hold their face against anything that the German or Japanese competition can provide. I'm very proud of that achievement."

Does he think Britain will still be making cars to the same extent in 20 years' time? "I do," he says carefully, "but there will be further consolidation in numbers of plants."

Taylor believes British manufacturers can supply global markets very profitably if they have the skill base and the right people, though he wants Government help through training and development initiatives and an overall industrial strategy.

"There's a future here but it's got to be nurtured," he says. "In Germany, there's government commitment to having outstanding engineers. Young people studying engineering at university know they can come out with the right degree and end up with a job for life.

"I don't think young people coming through in engineering in Britain feel that today. It's a cultural and attitudinal issue as well as a need for specific support. It's not just needing tax relief. It's more than that."

www.telegraph.co.uk/finance/newsbysector/industry/7869878/The-quiet-tech-giant-thats-found-success-for-UK-plc.html