CASE STUDY C1.

4 WARDLE STOREYS
When Brian Taylor arrived at the Bernard Wardle company in May 1980, the
situation was desperate. It was losing 300,000 in a good month, 400,000 in a
bad one. The company was on the short road to bankruptcy, he recalls.
In the winter there was no heating oil to heat the offices, managers had to wear
overcoats. In an effort to save money, water was taken from a stream to avoid
paying water rates.
Since 1980 the company, now Wardle Storeys, has been transformed. It has been
called Britains sharpest industrial turnaround. As managing director, Taylor has
transformed large scale losses into sizeable profits. There is heating in the offices, a
Bentley Turbo R outside, and the water rates are paid on time.
Taylor was brought in by Graham Ferguson Lacy, who had paid 6 million for the
ailing plastic sheeting manufacturer earlier in 1980. Lacy, the millionaire
evangelist, entrepreneur and financier, anticipated that Taylor could manage a
turnaround of Wardle within six months.
This optimism quickly gave way to the shock of reality.
Taylor recalls his first day: I arrived at 7.30 on a Tuesday morning and I sat and
went through the latest set of management accounts. By about 10.30 Id come to
the view that it wasnt a matter of how long it would take to turn the company,
around but whether it could be saved. If you set down the figures now you would
decide it was plain crazy to try to save it. Taylors initial view was borne out by a
5 million loss in the sixteen months to the end of March 1981.
Bernard Wardle had previously been relatively successful. It had expanded by
acquisition throughout the Sixties and Seventies. But, in 1980 Wardle Storeys felt
the brunt of the recession that hit the automotive industry.
Taylor provides a forceful insight into the mistakes that were made:
By 1980 it was in a much worse state than anyone realized. It was very clear what
had gone wrong. Some things were internal, self-inflicted injuries. Others were
external over which it had little or no control. It was heavily dependent on the
automotive industry and, in particular, on the British automotive industry. Because
of that, when the industry virtually stopped producing cars in 1980 - 1, volume
obviously got hit very hard. In fact, over 60 per cent of Wardless sales were to the
automotive industry.
Wardles attempts at diversification had also been unsuccessful.
Argues Taylor:
It could have reorganized in good times and cut down the number of production
facilities much earlier. It need not have gone off on some of its diversification
projects with borrowed money. Wardle had gone into a plastic bottle company in
Holland which was losing a lot of money. It also had a noise insulation business,
which really had very little value.
Wardle had also diversified into garden and leisure products with little
understanding of those markets. It fully equipped itself with expensive overheads

before the sales materialized. As most of the products were manufactured outside
the company, margins were wafer thin.
These problems were worsened by speculative, long-term agreements for raw
materials, which the company had entered into. Wardle had a large forward
commitment to raw materials stock, which it had agreed to buy at prices which
were higher than the market rate and at volumes larger than the company could
generate.
Management had, in effect, gambled on raw material prices and inflation.
Taylor sums up:
There were enough stupid mistakes for a large company to make and hit trouble.
For a very small company, it really was wrong, and an almost successful attempt at
suicide.
Solving the problems was a challenging task. Taylor closed the factories at
Caernarvon and Blackburn, as well as the companys head office at Knutsford.
It was clear what had to be done: some of the factories had to be taken out, the
head count had to be reduced very fast, some of the products we had to get out of,
and we had to get rid of the Dutch subsidiary, he says.
The discipline of managing an ailing company provided a valuable lesson for Taylor:
Running a business for cash gives you a different approach to life
altogether and its one most managers are not used to.
But it wasnt just a dynamic life-saving operation. The long-term survival of the
company was the real challenge, claims Taylor:
We couldnt just say, cut it all back and thats that. Within eighteen months or two
years the whole thing would have drifted down a bit further.
By 1982 Wardle was breaking even, but had substantial borrowings to contend with.
Taylor realized that future growth into profitability depended on overcoming this
difficulty. He recalls:
The borrowings were huge. New money needed to be brought, in and the only way I
could think of was to do a buyout.
In fact, the idea of a management buyout had materialized towards the end of
1981. It was not until October 1982 that it went ahead. The buyout from parent
company NCC Energy was financed by a consortium of leading institutions and the
Wardle management team. Taylor himself put in 70,000.
Not surprisingly it was difficult to convince institutions that a company, which had
been spectacularly unsuccessful just two years previously, was now a worthwhile
investment. Says Taylor:
We had only shown that we could save a business from ruin. We hadnt shown that
we could make it successful. It was the early days of buyouts and many people
wanted proof positive that you could produce gold bricks out of cucumbers. Lots of
institutions threw us out.
It didnt help that Wardle was in an unfashionable business, such as pvc sheet
production. But the buyout team had some cards in its hands.

It was basically selling proven management capability; and it had a plan, unfulfilled
at the time, to buy a competitor, Storeys Industrial Products.
In the end, Citicorp Venture Capital, Electra Investment Trust, Fountain Capital
Development Fund and the British Rail Pension Fund were sufficiently impressed to
finance the buyout, taking 63 per cent of the equity. If profit targets were met, the
management was then to take over 51 per cent control.
The key to meeting the profit targets was the acquisition of Storeys, which had been
a Turner and Newall subsidiary since 1977. Says Taylor:
It became obvious that if we could put Wardle together with Storeys, we would
have strength of market sector and product type and be able to create a potent
force in the market place which didnt rely too heavily on commodity products. It
was an integral part of the recovery. We were making use of under-utilized capacity
and bringing it up to utilization. It made Wardle less reliant on the automotive sector
and, of course, it also brought in the physical possibility of value added products we
could put into our marketing effort.
Negotiations had been going on simultaneously with the buyout. In February 1983
the deal finally went ahead and Wardle Storeys came into being.
Again the problems were large. Although production, logistical and efficiency
advantages as well as the relatively cheap price made Storeys an attractive
proposition, it, too, was losing money - around 300,000 a month.
The purchase and integration of Storeys cost 4 million. Almost 3 million of this
was spent on redundancy costs - the Lancaster plant was closed and a total of 1,500
jobs were lost. Merger and rationalization took just six months, including the
transfer of technology, product lines, relocation of large machines and
reorganization of transportation. Some of the plant and equipment and most of the
product lines were transferred to the Wardle factories at Earby and Brantham.
The process of recovery reached another landmark in November 1984 when Wardle
Storey returned to the Stock Market with a price tag of 20.4 million. The sale of
seven million shares was heavily oversubscribed and Brian Taylor turned the
70,000 he had borrowed in 1982 to 6.6 million just two years later. He observed
at the time:
The consistent factor had been management style, working for profits and cash,
and now we are going public, for earnings per share.
The most striking feature of the companys recovery has been its financial
management. Taylor previously worked on the turnaround of Wilkinson Matchs
Safety and Protection Division. In six years, return on net assets was raised from
virtually zero to 60 per cent. He believes in good sound old Victoria management
principles and provides a simple management philosophy.
Management is the same as it always has been, he says.
Its just that the aids to management differ. At one time someone ran the East India
company, before there was such things as computers. But they evolved a
management style which was successful. This is no more than the Japanese,

Germans or anybody does. They pay great attention to detail and quality. They
do not chase marvellous strategic concepts all around the sky. They actually get
into the business, and run the hell out of it.
In the half year to the end of February 1988, Wardle Storeys pre-tax profits were up
38 per cent to 7.6 million. Its technical products division almost doubled its
operating profit.
This has been achieved through organic growth and a number of successful
acquisitions. In April 1987 Wardle acquired Weston Hyde Products coated fabrics
business. In June 1986 Wardle acquired RFD, a manufacturer of life-rafts, dinghies
and parachutes. This gave us a wider segment of business interest and got us into
the defence industry, says Taylor.
The only blot on the companys recent record has been the abortive 62 million bid
for Chamberlain Phipps, the shoe components and adhesives company, early in
1987, which cost the company 1.5 million.

Wardle Storeys remains firmly rooted in a traditional manufacturing sector with 35

per cent of its sales being coated fabrics and laminated products with the rest
plastic sheeting. The automotive industry now accounts for 24 per cent of sales with
Wardle making plastic and sound insulation for Jaguar and Rolls Royce, as well as
sun visors for the Ford Sierra. The level of its diversification can be seen in the
nursery market where Wardle is the leading supplier of washable linings for prams
and push chairs to companies such as Mothercare. It is also sells shop awnings, flow
tiles, protective clothing, bath panels, and a range of stationery products.
The company has recently been described as a small version of BTR. Brian Taylor
remains a realist:
It may sound smug and pompous but theres no such thing as yesterdays hero.
Youve got to make it work next year.