Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
Keywords: Invotec, Printed circuit boards
An opportunity taken
If anyone were to write the definitive book of the history of the printed circuit board industry in the United Kingdom it would run to several hundred pages. But it would be a good read. From the beginning the industry has had, and still has, its share of characters, entrepreneurs, people who started up in their garage with some metal buckets, and retired some years later as highly successful PLC owners. It has also seen, in more recent years, the arrival, and fairly swift departure, of venture capitalists from across the pond, who left behind them in their wake further interesting examples of opportunities missed, and opportunities taken. Invotec is a classic example of the latter.
David Jones, the CEO of the Invotec Group (Plate 1), described how it had all taken place. It started back in the 1970s when Forward Circuits was founded; in the 1980s they bought Arnold Electronics in Rugby, and in the mid-90s also bought Central Circuits, based in Telford. In 1996, the Forward Group then bought Exacta Circuits Ltd of Selkirk, a move that was widely seen as a kind of reverse take-over. Exacta was a lot bigger than Forward Circuits with all of its three plants combined, but whilst Exacta had a lot of debt, it also had the volume and the technology.
Plate 1 Invotec's CEO, David Jones
The managing director of Exacta was Derrick Bumpsteed, who then came down to Tamworth to become the managing director of the Forward Group. "Six months after that", said David, "He asked me to come down here to run Forward Circuits. On the first Monday in February I started work at Tamworth. On the Tuesday I was called down to Derrick's office, to be told that they were going to sell the company!"
The Viasystems deal was done at the end of March, which for David meant a lot of presentations, meetings etc. over the space of 6 weeks. Were these people from Viasystems aware of what a circuit board was? Yes, said David, Viasystems owned Berg Connectors, a company they had bought some time before and had made a great success of. True, there were the statutory financiers, accountants and lawyers involved in the purchase of Forward but their CEO had a concept, which was that there ought to be a truly international circuit board company.
His appreciation was that the suppliers to this industry are, typically, huge, as are customers, but the bit in the middle was small and fragmented. So Viasystems were buying up what they considered to be the best in the industry around the world, to create a large international PCB corporation which, they argued, the big companies would have to do business with, they would be such a major player.
The Forward Group, including Exacta, was a good find for Viasystems. Six weeks later they bought ISL. David thinks that if Viasystems had known beforehand that they were going to buy ISL, they would not have bought the Forward Group. Why was that? "Because", said David, "At ISL you had very big manufacturing capacity, high volume, with a new plant being built at the time (North Tyneside), and which, based on average 6-layer board, and given some degree of automation, was a factory that was going to compete with the Far East". It was, at that time, a very attractive operation in comparison to what the Forward Group offered. Exacta was a medium size company compared to ISL, with the smaller satellites of Telford, Tamworth and Rugby, not really the "big time" international scale operation that Viasystems were going for.
After about a year, Viasystems decided that they needed a European Quality director. In fact what the Viasystems President really needed was an assistant and that assistant was to be David Jones. However, it took some time to find someone to replace David, so the appointment was a bit slow to take off. But in the end, Manchester Circuits was closed, the work was transferred to Tamworth and the MD at Manchester came down to the Midlands.
There had been talk, for a long time, about consolidation at Forward Group, and in the end the Rugby factory closed in the summer of 1998. On the other hand, Viasystems were continuing with their plan to become a worldwide player, and had bought up the Ericsson plant at Norkopping, Sweden, Mommers in the Netherlands, and Zincocelere in Italy. Worth noting here that with Zincocelere came TDS in Blackburn, Lancashire. So by now Viasystems were establishing their manufacturing base in three parts of the world, USA Europe and, with the take-over of Kalex, the Far East as well. However, it was becoming apparent to Viasystems that circuit board production alone was not going to be the future.
When Tim Conlon took over as COO, he was talking about Viasystems becoming an EMS company, and foresaw that within 5 years the Viasystems EMS companies would be the Viasystems PCB division's biggest customer. So with the increasing emphasis on ''complete solutions'' they bought up several assembly plants and they bought up the entire key supply and component companies as well.
David explained how the split came about. "It was apparent that the smaller companies such as us were no longer strategically important. They had already labelled the Forward Group, which now included TDS, as the 'Special Products Group' (SPG), which sat well with them; they saw us as a special niche market supplier. But for those of us running the firm it became quite obvious that Viasystems were going to divest themselves of this 'special' group. So, in January 2000 Derrick Bumpsteed and I were in Palm Springs for the annual Sales Conference, and we got into conversation with Viasystems executives about their future plans for the SPG. Their response was 'Make us an offer'. We did. But it was not enough for Viasystems, who decided to sell the group on the open market. In the end, after a series of quite protracted negotiations, we bought the SPG from European PCB Ltd. on 31st August 2001."
There are six directors at Invotec: Derrick Bumpsteed – Chairman; David Jones – CEO; John Ennis – Finance Director, Graham Thomson – Operations; Matthew Bowman – Sales, and a Business Development Manager Andrew Shaw, who knows the PCB industry around the world rather well. How did the customers take to all the changes that took place? Very well, said David, in fact they were probably happier dealing with a smaller competent, customer-friendly group than with a much larger organisation.
Surely the timing of the MBO was a little unfortunate? David agreed. The market has continued to fall and in 2002 sales were down 20 per cent on 2001. So Invotec had to make some cost reductions, an unpleasant business reducing staff levels from 560 to 390. Whilst none of the facilities closed, all were substantially downsized and now they are at a turnover of £23 million against £29 million in 2001. He added that since September they have seen a significant pick-up in volumes, (but not prices!) and there are some positive signs of a recovery in the market. He mentioned that he had attended an industry meeting in Paris recently, at which the French, the German, the Italian and the Benelux regions of electronics manufacturing were represented, and the UK report, although cautious, was far and away the most optimistic of any of them.
The customers of Invotec Group are predominantly in the UK and mainland Europe, and overall the Group manufactures 30 per cent for export.
Invotec Blackburn (Plate 2) plant exports up to 50 per cent of manufacturing volume, mainly to Scandinavia, some to Germany, and even some double-sided boards to China (!). End-users are in the telecom and industrial systems sectors with some instrumentation and a little automotive.
Plate 2 Invotec's Blackburn plant
Invotec Tamworth (Plate 3) is a low-volume high technology plant, specialising in exotics with flex and flex-rigid capability, with the typical customers being in the military, aerospace and defence industries, plus some very sophisticated broadcasting electronic equipment manufacturers. Invotec has now obtained approval from two major French electronic manufacturers, and are also moving into other European markets. "We can't do really high volume", said David, "We don't try to compete with the reel-to-reel guys on flex, but we genuinely believe that there is a need for a company like Tamworth. Military and aerospace work never goes offshore, and also there are a lot of multinationals who, whilst they send their volume work to the Far East, need their prototype work done locally".
Plate 3 Tamworth is a low-volume high technology plant
Invotec Telford (Plate 4) is a small-volume, medium technology company with 95 per cent of sales in the UK. They, in common with both Tamworth and Blackburn, specialise in fast turnaround (24-48 h), their customers are usually small UK electronics companies who want small batches with extremely good customer service, lots of TLC! They make good products at good price, not the cheapest but the customer service is excellent.
Plate 4 Invotec Telford is a small-volume, medium technology company
Customer loyalty; does it have a part to play in the modern age? Whilst Invotec have single source agreements with several customers, buyers are always under pressure to get the best price they can, so there is always the hard commercial reality that creeps in. But out of Blackburn, he says, they can compete with any other UK manufacturer, assuming we are on a level playing field. "If people undercut us, then I am pretty sure they're losing money", he said.
Invotec had a less than immaculate conception and a difficult time after birth – do they have any plans to expand? When the conditions are right, yes, said David. Do they import? No, not at all. There is no long-term advantage in that, if we cannot compete with the Far East then that is a fact. When times are good the small-medium volumes are not attractive to the Far East manufacturers, and both geography and culture differences have an impact as well.
What has been the impact of all the changes upon the staff? David explained how they had launched something called "Project Endeavour". "After about a year it became obvious that we had not paid enough attention to the needs and aspirations of our employees, especially in Tamworth. We had concentrated on getting the business going and keeping it going, and the people on the shop floor had been neglected. As a result morale was low. So we called in the Business School at UMIST, they sent a couple of people down to talk to us, and they spent some days here interviewing the whole staff, and it became obvious that we needed to have an improvement programme covering an understanding of the market place, better communication, a complete knowledge of the entire manufacturing process – from RFQ to tooling, then the process flow of shopfloor manufacture. We formed a steering group, run by John Ennis, and it was all called Project Endeavour after a name suggested by a member of our staff. Everyone at Tamworth has now had basic quality tools and techniques training and on the shopfloor we have projects in all the manufacturing cells on things such as waste management, improving workflow, etc. It is all about empowerment, and all about involvement."
What is the age of the workforce? We have a nice balance, David said, with, some edging towards retirement but with lots of younger members of staff nowadays. Skilled process engineers we can attract, also experienced managers, but our semi-skilled people are ones that we have trained ourselves.
What of David Jones the man? Born and raised in Oxford, and apprenticed to what was then British Leyland as a mechanical engineer, David was sponsored to do a sandwich degree course, and after graduation worked in the R&D section of the Cowley Body plant between 1966 and 1971, stress testing new car bodies. At a time when the British car industry was committing mass suicide, David left and joined Flymo in Co. Durham as quality manager; it was the start of a new life. He was with Flymo for 6 highly interesting years, and then moved to Stadium Limited, who made crash helmets, but who were also big in plastic moulding. Stadium were located in Enfield, Middlesex, but were moving to Hartlepool, so no need to relocate, happily as it turned out. David recalls "Stadium had another company in the group, an electronics company in Walsall, who used something called a double-sided printed circuit board. I remember being intrigued about how you could plate through holes, and indeed the whole concept of interconnect." After Stadium came Thorn Lighting for awhile, then he was headhunted by Exacta. "Then I really got to know what PCBs were all about. I was shown around the Selkirk plant and I was totally baffled!" That was in 1990, when he started as Quality Director, and became Operations Director 1 year later.
When David is not thinking about circuit boards, he plays golf, and, with a handicap of 18, probably rather well, too. Darlington is still his home, for various reasons. His son and daughter both live in and around Bristol, so David said, "I can see a situation arising when, at about the time I retire, we shall then move down south and I shall finally live near where I used to work!"
David still supports Oxford United, out of loyalty, a rare virtue these days. He leads a very full life, and says that business is both fascinating and addictive. What is his vision for Invotec? "I see us returning to a lot more export business out of Tamworth in particular, we want to attack the mainland European market as there are some great opportunities there. Blackburn can expand when the market picks up, a low-volume, high- technology, medium size UK PCB company can certainly provide good quality work for the European PCB market place, and we can also compete as a whole in the medium volume medium technology arena as well."
At this point it seemed a good time to leave. David was off to supervise the arrangements for the following day, during which a team from British Aerospace Rochester were to arrive to present a prestigious Supplier Excellence Award to Invotec.
Given the affection in which David and his colleagues hold the company and their huge experience in so many aspects of the PCB business, this is hardly surprising, really.