A streamlined Westerly sails on, earlier models having foundered on the rocks. By Geoffrey Foster.
"Now, what a ship was christened, so let her stay," cautioned Long John Silver. Old Rob Louis Stevenson was fully capable of inventing seamanlike flummery by the page, of course. Nevertheless, the belief that it can only bring bad luck to change the name of a ship is (or was) an authentic piece of nautical superstition. Who knows, perhaps there's truth in it. But what the folklore doesn't tell us is whether better luck can be had by not changing names.
Take the name Westerly. Something more than a dozen years ago, privately-owned Westerly Marine Construction was probably the biggest boatbuilder in Europe, and certainly one of the best known. Westerly yachts, with their characteristic bulky cabin tops and anchors sticking out over the front end, were instantly recognisable all round the British coast: Stubby little sailing cruisers, but big enough to take the family to France for along weekend, or to spend a summer fortnight exploring the Dutch waterways. They were worthy, middle-market products in a luxury trade where the sky's the limit, the Ford Granadas of the 1970s sailing scene.
At its peak, the company was turning out such boats at the rate of 1,000 a year. But this first Westerly foundered in the great storms of the early' 80s recession. Five months later, in 1982, a Birmingham-based mini-conglomerate called Centreway Industries bought the wreck from the receiver. Under this new ownership the business was quite rapidly restored to something approaching its former size and significance - in the UK market anyway. In a legal sense, of course, the Centreway subsidiary was not the same company as its predecessor. The management, too, was entirely changed. But the same boats continued to be built, using the same moulds and methods, in the same factories - on the industrial estate at Waterlooville, Hampshire, a few miles inland from Portsmouth - by many of the same workers. In due course new designs were ordered, from the same naval architects. The boats were getting bigger and/or faster, and a little more stylish, but they were unquestionably Westerlys. And the company was called Westerly Yachts.
It's said - another bit of folklore - that lightning never strikes in the same place twice. Yet almost exactly 12 months ago, and just over nine years from the date of its launch, Westerly Mark II became a casualty of the present recession. It was almost a re-run of the earlier tragedy. Once again, the simple explanation was the almost total disappearance of buyers of luxury goods. The same bank, Barclays, appointed a receiver. The receiver himself, Peter Padmore of Price Waterhouse, already knew Westerly well. This was not the only occasion that Padmore has returned to a company although it doesn't happen often, he says. "After the first time, the management usually learn how to avoid it."
However, subsidiary mangements have only limited control over events of this kind. In any case, the 74 managers of Westerly Mark II were not around (or were not in management positions) when Westerly Mark I went down. These are the men who now have the task of keeping Padmore and his kind at a distance, by ensuring that Westerly Mark III stays wells clear of the rocks. For Westerly sails on. It was relaunched a second time - reverting to a private company - via a management buyout (strictly a buy-in, since the former managers had already lost their jobs) last September.
The receiver had little doubt, either the first time or the second, that the business could be sold as a going concern. In 1982 it attracted a large number of potential purchasers. Nine years on, there was still a lot of interest. But in the end there were barely a couple of serious bidders, and the prize went to Edwin Paul, managing director of Westerly Yachts during its last years under Centreway control, and two colleagues, production director John Hinton and Welshman Peter Thomas in charge of sales. County NatWest made the salvage operation possible, and the Bank of Scotland provided additional buoyancy.
Naturally the marque had to be preserved. As Eddie Paul points out, getting on for 10,000 people now own Westerlys, which means there's a lot of mileage to be had from customers trading-up. Paul, a 42-year old accountant who is normally the most modest and unassuming of managers, believes that Westerly is still 'one of the three best names' in British yachting. All right, but is there any reason to suppose that its luck is due to take a turn for the better? After all, the basics haven't changed: boatbuilding remains a luxury goods industry, notoriously susceptible to seasonal and cyclical economic variations, so who could be confident that Westerly Mark III, properly called Westerly Yacht Construction, is not fated to go the same way as its predecessor and succumb in the next trough - or even in this one?
Quietly, Paul elaborates on why he thinks the later, at least, will not happen. The buy-out, he says, created a golden opportunity for changing the "philosophy" of the company, by dramatically lowering the cost base. Westerly Yachts used to occupy nearly a dozen buildings, most of them scattered about the Waterlooville estate although there was also a factory far away in Penryn. The Cornish unit was the first to go when orders showed signs of drying up. But the properties currently belonging to Westerly III - for which it paid less than book value - are rather fewer than went into receivership with Westerly II.
"We didn't take the office block or the stores," explains Paul. Office accommodation has been squeezed into a tiny space above the joinery works. The stores moved into one end of the assembly area, where the joinery is slotted into GRP hulls that have been laid up by hand in an adjacent building. The drawing office occupies a separate corner of assembly. The upholstery unit, too, has been found a home within the main factory.
In the past, property has been both a bane and a blessing to Westerly. The original company in its 1970s heyday, finding itself with a million pounds in the bank, used the money to buy the freeholds of its factories. It seemed the sensible thing, to provide a bulwark against hard times. As it happened, these were just around the corner, and harder than anyone ever dreamed. VAT at 25% had killed the UK market stone dead. Without shortening sail immediately - a crucial mistake - management laid a course for the Continent, intending to make good with exports. But then a soaring pound ruined the vital German market for British yachts. In the end redundancy payments cost a million pounds, which the company had to borrow from the bank, using the properties as security ... So ended chapter one.
Naturally, as a subsidiary of Centreway Industries, Westerly II could not expect to exercise full control over its properties: these had to serve as security for wider interest. Nor does a subsidiary management have any right to its own profits. In Westerly's little group, which encompassed shoe manufacture, metal pressings, industrial rubber products and motor distribution, boatbuilding was the main profits generator in the boom years up to 1989. (Indeed, the group was renamed Westerly plc.) "Some of the others were trading unprofitably before we were," laments Paul. But the end result was the same. The rest went into administration too.
The Bank of Scotland has a first charge on such properties as now belong to Westerly III. But these days management is less alarmed about how to find the interest on its borrowings, because of the way the entire cost structure has shrivelled. Whereas Westerly II at one time had 420 names on the payroll (and Westerly I boasted a complement of 700), Mark III employs just 80. And only half of these have any job security: the others are on one week's notice.
The design for the new streamlined Westerly was conceived last summer, after Paul had been fired along with just about everybody else. It had been clear that the company was in trouble ever since the Southampton Boat Show the previous September. Southampton is the big event in the boatbuilders' calendar (Earl's Court, in January, merely provides a top up), and on year brought in orders for 100 boats - more than a third of Westerly II annual sales total. In 1990, orders taken at Southampton reached only half the forecast. Soon the redundancies began in earnest, accompanied by heavy discounting of boats held in stock.
In four months the payroll came down to 160. the marketing director was among the casualties. Then, in mid May, Paul took a phone call instructing him to sack the remaining employees and close the business down. Only Hinton plus the materials manager and a small handful of workers stayed on to dispose of the stock. Paul still insist that "it was the wrong decision". But the following week the business was in receivership anyway. and Padmore very soon decided to recommence production - finishing off boats for customers who had already paid their deposits - in order to have something worthwhile to sell.
Languishing at home, with neither income nor compensation, Eddie Paul resolved to make a bid for his former company. He admits, engagingly, that he had "no idea how these things work", and he scarcely expected to succeed. But he lined up Thomas, the sales manager, and Hinton, who was at that time completing boats for the receiver and showing prospective purchasers over the factory, and drafted a business plan. The central assumption was that Westerly should be viable "at substantially lower volumes that at any time in the last 10 years".
Even in the boom times Westerly had never succeeded in attracting enough orders to keep the workforce busy all year round. Hence the need to build for stock. But until 1990 sufficient orders were always collected in the course of the year to absorb the stock. And since volume normally translated into profits, management was for ever striving for increased production. Paul pays tribute to his predecessor as MD, David Rubin. "A lot of good influences came from him" - touching product specification, quality, computerised production control, etc. However, Rubin's determination to push the company into powerboats (as well as sailboats) in the "80s was, Paul argues, a costly mistake, and one which was brought about largely by pursuit of volume.
Westerly III had the capacity to build 300 boats a year. Here the word "boat" needs qualification. The company worked in "factored units," an FU (sorry, but that's the terminology) being equivalent to a 32-footer, a very popular size for cruising boat. Today's average Westerly is bigger than in the past, and at £180,000 excluding VAT a 48-footer (admittedly the top end of the range) costs 3.5 times as much as a 32, ie equals 3.5 FUs. On this basis, which is still in use, Westerly III has a capacity of 180FUs. But the plan envisages that the company should do better than break even if it can sell and build just 60 "boats". and there is to be no more building for stock.
The plan was still a rough draft when Paul and Co, chanced upon Per Howard-Jones, a consultant who, having successfully led an MBO himself, has since specialised in advising other aspiring buyers-out. Howard-Jones revised the plan to make it, he says, "a selling document", and sold it to Country NatWest. By mid September the deal was done. County provided £1.35 million for the principal assets. Including jigs and tools and other bits and pieces, plus the Westerly name, the total cost came to £2.2 million.
County, with £2 million of mixed equity and loan to protect, made Howard-Jones its boardroom representative, and asked its own deputy chairman, Creighton Redman, to be Westerly's chairman. (Redman insists that he is an "independent" chairman who brings "grey hairs" to the party). The Bank of Scotland put up £700,000 by way of a term loan, plus an overdraft facility. If the management trio contrive to make best use of all the resources now available to them, the ratchet allows that they could end up owning 42% of the company.
The Southampton Boat Show opened with the ink scarcely dry on the agreement, which was too soon for comfort. But at the London show in January Westerly sold 30 boats. The first year's target of 60 was almost in the bag. (Thomas's own target, he say, is "more like 90" so as to create an order book.) Next year the company could need to sell twice as many boats to get a full turn on the ratchet, and 160 in 1994. That should bring in revenues approaching £10 million, and - if the ambitious productivity objectives are also realised - over £900,000 of profit. In 1989, by comparison, Westerly II made £800,000 of pre-tax profit on sales of £13.8 million.