UK: THE RISE AND RISE OF TRINITY.

UK: THE RISE AND RISE OF TRINITY. - The engineers who run Trinity have focused on three niche markets - buses, fire engines and dustcarts - which is why the company has been hiring, not firing, and wheeling itself into position as a European market leade

by Jim Levi.
Last Updated: 31 Aug 2010

The engineers who run Trinity have focused on three niche markets - buses, fire engines and dustcarts - which is why the company has been hiring, not firing, and wheeling itself into position as a European market leader.

When the Conservatives came to power in 1979, more than 90% of all buses on our roads were made in Britain. A series of political moves in the early 1980s, which in themselves may have been perfectly valid, nevertheless led to a collapse in demand. The removal of a 50% government bus grant to local authorities over three years, the deregulation of bus routes and the privatisation of National Bus combined to destabilise the bus market completely. Only last year did demand begin to recover, as for the first time in 10 years, more buses were registered on Britain's roads than in the previous year.

At the beginning of the 1980s three companies - British Leyland (61%), Laird (21%) and Dennis (10%) - shared most of the market between them. The challenge from imports was puny. But as demand collapsed, Laird shut down its operations and Leyland's bus interests were bought by Volvo and virtually closed down. As a result, by 1990, the market was dominated by imports which took 80% of total sales.

Another depressingly everyday story of the British economy? Well, up to a point. But this time there appears to be a happy ending in the making. Little Dennis, a minnow among monsters in the vehicle manufacturing market and the sole indigenous supplier of buses, had by 1990 managed to raise its share of the market by 19%. It has since increased that share to more than 55% - effectively rolling back the tide of imports. Geoff Hollyhead, chairman of Trinity Holdings, the umbrella company which owns the Dennis marque, declares proudly, 'We now put more buses on British roads that Volvo, DAF, Scania and MAN put together.' Written against the sombre background of the Leyland-DAF commercial vehicle operation, the story of Trinity is a classic case study of business success.

It is success brought about by focusing solely on the niche markets it knows best: buses, fire engines, refuse carts and other specialist equipment such as towing vehicles for aircraft.

If the story of Dennis buses is impressive, there is a tale of almost equal force in the less glamorous market for refuse collection. Again in the past three years the Dennis share of the dustcart market has risen from 15% to 45%. The Dennis name is synonymous with fire engines and in Guildford the company is now just two years away from celebrating its centenary year. It retains 50% of the fire engine market and now the reputation of the brand name in fire engines has begun to apply as much in the markets for buses, coaches and refuse vehicles. 'We were always strong in fire engines,' Hollyhead says. 'We simply saw no intrinsic reason why we should not do as well in the other markets we serve.' Stephen Burton, who runs the Guildford plant, explains why there is none of the robotics and hi-tech manufacture there. 'The volumes of production are simply not there to justify it,' he says. 'As we only produce 1,000 units a year, the hi-tech is in the design of the product and the proving of it - not in the manufacture. Our job is to design the performance in and then clip it together in as little time as possible.' While the group has established market leadership in the UK in all its key areas, Trinity is also now beginning to perform strongly in export markets. It expects some 40% of output will go abroad this year.

Hollyhead is a bluff, fast-talking West Midlands engineer who, in his twenties, had a spell with Boeing in Seattle and another three-year stint as a management consultant before being made managing director of the Dennis dustcart operation in Warwick some 20 years ago. Until the beginning of 1989 his Trinity outfit was the engineering arm of Hestair, a conglomerate built up by David Hargreaves. In the 1980s, Hargreaves stumbled on a real winner in the shape of SOS, an employment bureau which ended up providing 80% of Hestair's profits. Inevitably the financial community pressed Hargreaves to sell the plodding engineering interests. Hollyhead quickly put together a £27 million management buyout and Trinity was born.

The track record since shows the power of an MBO to motivate management and workforce for success. Trinity has now become the leading manufacturer of its range of specialist vehicles in Europe, having doubled output over a four-year period. Hollyhead says sales are now running at an annual rate of £120 million a year compared with £57 million at the time of the buyout. The current year sales budget is for £140 million.

The performance of the biggest division of the group - Dennis Specialist Vehicles in Guildford - shows that productivity gains since the MBO have been profound. Margins have almost trebled to 6.5%, sales per employee have risen by 20%, and profits per employee have quadrupled. The Guildford factory is that very rare thing in British industry these days: a manufacturing unit which has even increased its workforce by 30% in the past two years of recession. In the group as a whole there are now some 1,200 employees, 800 of whom own Trinity shares.

The head office in Coventry is a shining example to would-be empire builders everywhere. Only three people work here: Hollyhead, his finance director Brendan Geary and Ruth Knowles, who is secretary to both men and the company accountant. The business is now structured into five autonomous divisions each with its own board. Geary and Hollyhead have seats on all of them.

Trinity's profits for the year just ended are expected to top £8.5 million compared with less than £3.9 million at the time of the buyout. This progress has been achieved against a background of generally weak demand in the markets where it operates. Future impetus will owe more than a little to some astute purchases of three businesses from receivership. Last year, for example, Trinity bought Carmichael, a maker of airport crash tenders, for £900,000. 'In the nine months we have had it we have built an order book worth £10 million,' Hollyhead says. 'It should make a profit of £350,000.' There has been a similar rapid turnround for another receivership buy: Reliance Mercury, a maker of airport towing units.

Says Brendan Gearey: 'We can give these new businesses some strategic backing - helping them concentrate on new product design and development. In the case of Reliance that had been sadly lacking in recent years because it is a company which has been through a number of changes of ownership. Throughout that period its owners have always been looking to sell it rather than concentrating on developing its core product.' The financial community is naturally well pleased with Trinity's progress. Merchant bankers Baring Brothers floated Trinity on the stock market last autumn and the company now has a market value of more than £90 million compared with the buyout price of £27 million.

Trinity is run by engineers who recognise the importance of product innovation. More significantly it is run by a three-man team - Hollyhead, Stephen Burton, and Richard Owen - all of similar age and outlook and all having worked together for at least 10 years.

The seeds of current strong performance were sown in 1977 when Hollyhead and Owen launched the Phoenix dustcart. Phoenix, in Hollyhead's words, 'revolutionised refuse vehicle design'. Instead of churning the refuse continuously, the Phoenix compacted it as and when an operator pressed a button. It saved fuel, wear and tear and meant a local authority could manage with a smaller fleet because there was less down time for maintenance. Richard Owen remembers the launch of the Phoenix at the annual Waste Management Exhibition in Torquay. 'The sales director of Shelvoke, who was then market leader, came up to me and told me it would never catch on,' he says. But Phoenix has continuously increased market share ever since and rivals were forced to follow.

Last August Trinity bought what was left of Shelvoke from the receiver.

Hollyhead has never forgotten the lesson of the Phoenix. 'If you look at the cornerstone of our success it is product innovation,' he says. 'That is how we have achieved such growth and penetration in such a depressed market place. 'The process starts at the design phase when designers are told to come up with unique selling points. 'You have to give the customers a reason to buy,' Hollyhead stresses. 'You have to show that your product will give the client an ability to make better profits, either by reducing their costs, increasing their through-put, or else raising their sales.' One of the keys to the firm's success in buses, for example, is the Dart. This is a 40-60 passenger single deck bus. In developing the Dart, Trinity went back to first principles, cherry picking the best engines, gear boxes and axles from world suppliers such as Cummins, Allison and GKN. It then installed these components in a new kind of frame which allowed luggage to be placed under the chassis instead of between the chassis and the body. 'We produced a bus which was a ton-and-a-half lighter than the competition,' Hollyhead explains. 'Its capital cost was 10 to 15% lower than any of the competition, and fuel savings could be as much as £4,000 a year - enough to pay for the capital cost of the vehicle over 15 years.' Last year the Dart accounted for more than 40% of all UK bus sales and has become the biggest-selling bus in Europe. A larger version, the Lance, launched a year ago is already outselling all other equivalent models. 'Both the driver and the passengers like the new design,' Hollyhead claims. 'Every time London Bus has put the Dart on a new route they have increased the profit-ability of that route.' A similar radical re-design took place in fire engines, although Dennis has always dominated the market. Again, using a space frame chassis it produced the Rapier model which is about five feet lower than previous designs. Again there is a reduction in weight which has the effect of making acceleration from a standing start to 40 mph almost twice as fast as rival Mercedes and Volvo models. The lower centre of gravity of the Rapier also makes cornering easier and faster.

Trinity did not rest on its laurels with regard to dustcarts either. It has built on the success of the Phoenix body by designing a chassis and cab to provide much easier entry for the cab crew. By pushing the engine back along the chassis, designers were able to create a cab with one step access for the crew instead of the usual four.

Dustcarts are a typical niche market for a vehicle manufacturer: it is not worth the big volume producers taking it seriously. That leaves the market wide open to a specialist like Trinity. 'We are the only company in Europe, possibly in the world, that designs a refuse vehicle from the ground up,' Hollyhead says. 'Our rivals take a standard commercial vehicle chassis, buy in a cab, and the bin-lifting equipment. We are the only people who offer the entire vehicle.' Providing the complete vehicle is also a feature of its bus manufacture. While Guildford assembles the chassis for different models, the customer can select a body from any number of body builders, including Duple Metsec, part of the Trinity stable. Duple Metsec is a unique company designing complete bus kits. Usually they are shipped and assembled locally in third world markets such as Hong Kong and Mozambique.

Over the next three to five years Trinity expects the UK demand for buses and refuse vehicles to recover from their exceptionally depressed levels of the past few years. At the same time the group is attempting to sustain growth by supplying more of its products into the European market. 'You will already find our dustcarts running around in Holland, Belgium and the Scandinavian markets,' Hollyhead says. 'We are just entering France and Germany.' Richard Owen points out how the Phoenix body has given the company a foot in the door in a number of Continental markets. 'We started five years ago, taking in a new country in Europe every other year. For our dustcart bodies we now have market penetration in those markets of between 25% and 30%. We started moving in on Germany two years ago. Because of the single market we see Europe as all upside potential.' Hollyhead can see market potential in Eastern Europe, too. A deal has been struck with the transport authorities in Warsaw where they will assemble buses with Dennis chassis and Metsec kits in Poland and sell them, not only in Poland, but in other Eastern European countries. But he is not confining himself to those markets. Since the MBO, there have been three modest acquisitions from receivers. But takeover activity was restrained by bankers who backed the MBO. Now that Trinity is quoted and free of debt, 'more strategic' acquisitions are likely. 'Our expertise is specialist niche engineering marketplaces,' he says. 'They all happen to be on wheels at present, but that is not a prerequisite. What is required is a small to medium-sized market to aim at where product innovation leads to increased market share and where we would have control of the sale of the end product.' Stephen Burton, who worked for eight years at the old Leyland Bus and Truck division before going to Dennis, says that 'pulling for Britain is part of our motivation. We are all engineers and we all believe in what we are doing. We have seen manufacturing decline and take a back seat in this country. If we approach the subject professionally, I see no reason why Britain cannot make it again.

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