UK: OUT OF THE ROUGH.

UK: OUT OF THE ROUGH. - Lawn-mower maker Ransomes is slowly emerging from the darkest period in its history - decades of neglect, misjudgment and extravagance which left it burdened by debt and almost ready for the scrapheap.

by Matthew Lynn.
Last Updated: 31 Aug 2010

Lawn-mower maker Ransomes is slowly emerging from the darkest period in its history - decades of neglect, misjudgment and extravagance which left it burdened by debt and almost ready for the scrapheap.

Every revolution leaves pockets of resistance: isolated communities which, for one reason or another, carry on with old, traditional practices long after they have been forgotten elsewhere. For industrial anthropologists, one example is Ransomes, the lawn-mower manufacturer nestling in the suburbs of Ipswich. To step into its plant is to step back in time, back into a pre-Thatcherite world of decaying and ugly factories, of poor management, and of fine old commercial dynasties humbled by world competition.

The place stretches as far as the eye can see. A vast, aircraft hangar of a building, looking as if it hasn't seen a lick of paint since the beginning of the century, lies next to a stout, redbrick head office. Inside, men in oil-soaked overalls gather around lathes, tooling out components, then passing them on to colleagues for the assembly of strange-looking green contraptions. There is little sign of mechanisation, nor of modernisation. 'Any colour you like, so long as its green,' jests the chief executive as he wanders past.

The sheer size of the place is evidence enough that the last five decades or so have not been kind to this place. At one stage some 10,000 people worked here, at the existing plant, and at another across the road, now shut down and redeveloped as a shopping-centre (a small sign of the '80s catching up with this forgotten community). It's like a wizened old creature whose body has shrunk too far to fit its skin. The folds and creases, the bagginess of the place are a mark of the toll age has taken - and of how little rejuvenation there has been.

Ransomes is a company with a long history. It was in at the beginning of the industrial revolution, founded by Robert Ransome, who began as an iron-founder with capital of £200 in Ipswich in 1789. In 1803, a patent was taken out for the chilled cast-iron ploughshare, an implement still widely used today, and one that turned out to be the foundation of the company's fortunes. By the end of the first decade of the 19th century, ploughs were being exported to Canada and South Africa. By 1832, Ransomes had manufactured the world's first lawn mower, a boon to gardeners, who had previously had to trim their lawns with scythes - skilled and time-consuming work which had restricted lawns to the houses of the very rich. The English love-affair with neatly trimmed lawns could now begin, and none would profit from it as handsomely as Ransomes. The company was an exhibitor at the Great Exhibition at Crystal Palace in 1851, and through the 19th century developed its lawn-mower business, while at the same time becoming one of the leading producers of mechanised farm equipment.

History counts for very little in business, however. Today Ransomes is a very different kind of company. Its workforce has shrunk, it is burdened down by massive debts, and it is barely profitable. Blinking slightly, it is starting to emerge from the darkness of its history, and cast its eye onto the glimmering lights of the modern world.

'It was pretty frightening,' recalls group chief executive Peter Wilson, of his first reaction to the place when he was drafted into control in November 1993. 'We were surprised at how far downhill it had gone. There was total depression here.' Neglect, misjudgment and extravagance, the three greatest sins that can beset any enterprise, accounted for a major part of its downfall. All through the 1970s and 1980s the factories in Britain were left to their own devices, producing traditional machines, with a traditional British disregard for the customer, while the senior management of the company embarked on a wild and dangerous spree of international expansion. A US company, which made drop forgings, had been acquired in 1987, but in 1989, at the very peak of the boom in industrial aggrandisement, Ransomes embarked on its greatest adventure with the acquisition of Cushman and Ryan, a Nebraska-based manufacturer of turf trucksters and cutting equipment, alongside Brouwer of Keswick, Ontario, while at the same time making a couple of smaller acquisitions back in Britain. The price was high. It paid £103 million for Cushman, the largest of its acquisitons, and financed the deal by issuing convertible preference shares - a decision that very quickly returned to haunt it.

Any acquisitions made in 1989 were likely to look expensive in retrospect. Paying over the odds, and with expensive financing, was a recipe for disaster. As the economy turned down, the inefficiencies that had built up at Ransomes over many decades were to be cruelly exposed. In 1988, the year before the acquisition spree, the company had made profits of £13.2 million on turnover of £92 million - a very respectable performance. By 1990, Ransomes' turnover had close on doubled, rising to £165 million, as it digested its new possessions. But profits had fallen to only just over £9 million, an omen of things to come.

With falling profits, the dividends and interest on its debts became harder to sustain. By late 1991, its interim results showed that it slipped from profit to loss; it was £767,000 in the red on sales of £76.8 million. For the full-year, that loss had grown to £4.5 million, on sales of £147 million. At the same time, the company had to renegotiate borrowing facilities which now totalled £132 million. The dry weather, the company claimed, which had blighted lawns across the country, had scuppered its profitability as much as the recession, and the then chief Bob Dodsworth reassured investors and creditors that he expected the company to return to profits in the following year. He was right up to a point. For 1992, Ransomes managed to squeeze out a profit of £900,000 on sales which were marginally higher, but the company was by no means in the clear. The following year, 1993, saw trading swing into reverse once again, with a loss of £8.9 million racked up over the 12 months. That included a £5.8 million exceptional charge, but the losses were still substantial and increasingly appeared to be unsustainable. Gearing by now had risen to 450%, and bankruptcy was looming ominously close on the horizon.

Something had to give. The strategy pursued by Dodsworth and his colleagues had proved little short of disastrous and the fund managers had little sympathy for their predicament. In December 1992, Astley Whittall, the chairman of Ransomes, announced his retirement. His place was taken by John Kerridge, who had served on the board for many years, and who was already deputy chairman. Kerridge had built a strong reputation in the City during the 1980s as the man who had saved the pharmaceuticals and scientific instruments company, Fisons, from extinction, and then transformed it into one of the great success stories of British industry during the latter half of that decade. Unfortunately, he had also stayed around to see his success undone. After a dispute with the Food and Drugs Administration in the US, one of its key products had been pulled from the market, and its profits and share price had gone steadily downhill ever since. Kerridge had retired from the company, ostensibly with a heart condition, although that did not seem to prevent him from bouncing back as chairman of Ransomes a few months later.

Kerridge was always likely to be a discredited choice as the new chairman: he, too, had made expensive acquisitions at Fisons, and the fund managers were looking for someone considerably more solid and dependable to take the helm at the company. In the middle of 1991, John Clement had joined the company as a non-executive. A former chairman and chief executive of Unigate, and chairman of Littlewoods, he was exactly the kind of experienced businessman the institutions needed. And it was to him they turned when they decided that changes were needed at Ransomes.

In August 1993, less than a year after taking over as chairman, Kerridge abruptly announced his departure. No explanation was given, beyond a bland statement that he needed 'time for other commitments'. Behind the scenes, the fund managers had insisted that Clement be appointed with a brief to perform whatever savage surgery was needed to save the business. 'They were not happy with the leadership,' recalls Clement. 'They felt that something had to happen.' A bluff man, with a tough though good-humoured manner, Clement lost little time in reshaping the company. Dodsworth's retirement coincided with his arrival in the chair, and Clement inevitably went outside to find a new chief executive. This was Peter Wilson, who joined the board in November 1993.

Wilson was a sound choice. He had spent the bulk of his career at BTR, the one British company with numerous managers schooled in squeezing respectable profits from engineering businesses. Wilson had headed its sealing division, before departing for a brief and unhappy spell at Northumbrian Water. With a share-option package that will make him a millionaire if Ransomes is turned around successfully, Wilson was easily tempted to join the company despite its bleak prospects. 'It was like BTR in that there wasn't much plushness around,' jokes Wilson, recalling his first visit to the company.

Neither Clement nor Wilson were under any illusions about the size of the task they faced. 'It had all the signs of a terminal case,' says Clement. 'So we had to be very tough about what our priorities were.' The workforce was among the first to suffer. Over their first few months in charge, Clement and Wilson laid off about 12% of the staff, including 18 of the senior managers. Four directors also departed. 'It was heavy surgery, but if the body is dying you don't have time to worry about that,' recalls Wilson. 'We started off by taking the top people out. So at least the people lower down would see that the treatment was fair.' Of the people who led Ransomes in the 1980s, only two non-executives and the managing director of the consumer division still remain. The rest are all gone. Other immediate steps included closing down an expensive American head office that had been set up in the aftermath of the US acquisitions but which was sited several hundred miles from any of the company's plants. An effort was also made to restructure the US dealer network, which had been suffering defections among dealers who were worried about the prospect of the company going under and were busy sorting out alternative sources of supply - understandable, but hardly helpful to the company. A few dealers left but those that remained have been invigorated; regular trips from the US bring them to England to see the plant and learn of the company's plans. 'The one thing thing this company lacked was credibility with the dealers. Providing it was our key priority,' says Wilson.

Whilst they were working to save the patient, however, there were vultures lurking on the sidelines, as much interested in their failure as their success. In April last year it emerged that Steinhardt Partners, the giant American hedge-fund manager, with around £3.5 billion in funds under management, had quietly acquired a 30% stake in the convertible preference shares, for which it paid around £10 million. To outsiders its strategy appeared clear. The convertible shares were non-voting, but became voting if the dividend was more than six months in arrears. It had already been postponed once, and Steinhardt seemed to have a good chance of picking up a major stake in the company cheaply if it was not paid soon. Clement and Wilson were presented with a proposal by Steinhardt for a recapitalisation of the company that involved turning the preference shares into ordinary shares, but on terms that were weighted heavily in favour of the preference shareholders. Clement was not impressed and, after discussions with Ransomes' bankers, who included Barclays and the National Westminster, won their approval for the immediate payment of the dividend on the preference shares. That move effectively stymied Steinhardt. But, by putting more financial pressure on the company at a crucial time, it had not been a helpful intervention.

With the threat from Steinhardt averted, the new team could concentrate on its plans for reviving the business. The first task had been to trim whatever waste they could find in the company, and to salvage the dealer network. Longer-term they had to concentrate on restoring the company to health. In particular they had to drag it out of its time-warp. 'The culture here was very hierarchical,' says Wilson. 'People on the shop floor were always doffing their caps at you. We had to give them some ownership over what they were doing, give them some responsibility, and make it fun to work here.' Aside from slicing the workforce (which has saved $10 million a year in the US, and £1.5 million in the UK), the major elements of the strategy have now been laid out. They include getting rid of a tier of management, thus reducing costs further; improving the efficiency of its manufacturing - including the introduction of just-in-time techniques which had been ignored by the company up until the arrival of Wilson; an increased emphasis on product innovation, including speeding up the rate at which new mowers are bought to the market; and a heavier focus on sales and marketing. 'The new team has wasted little time in adopting a highly pro-active but considered approach to the group's problems,' says Geoff Douglas, an analyst with stockbrokers BZW.

One example is a new type of electric mower introduced to the US golf course market (a critical sector, since golf clubs in the US spend $140 million annually on grass cutting equipment). The advantage of an electric cutter over a diesel-powered machine is that there isn't the leakage of oil onto the green and, because it is virtually silent, the grass can be cut very early in the day without disturbing the residents of apartments that are often built next to courses in the US (and the players can therefore get onto the course earlier, so maximising revenues for the club). 'In the past the company tended to be very engineering-orientated,' says Wilson. 'We made it and the customer would just have to buy it.' Ransomes' prospects are now considerably brighter. In December last year it announced pre-tax profits of £6.1 million for the nine months (after changing its year end). Brokers are forecasting profits of £11 million for 1995. But the company is still carrying debt of more than £70 million, and Clement concedes that some kind of recapitalisation will be needed before it can be entirely returned to health. 'You can't be out of the wood when you have a balance sheet like ours,' he says. With improving results, however, the company should have a credible story to sell to shareholders. Mowing lawns is a specialised market, but with its strong position in the golf course market - now booming in Southeast Asia as well as the US - and in domestic lawn mowers, the grass is already starting to look a lot greener. And Ransomes is in with a good chance of surviving into its next century.

RANSOMES: FINANCIAL FACTS

Nine months turnover/profit before tax* (£000)

Turnover Profit

Grass machinery (commercial) 82,093 11,512

Industrial vehicles 11,856

Property 690

Grass machinery (consumer) 37,654 2,199

Interest (8,287)

Total 131,603 6,114

Turnover/profit by location

UK 40,217 3,562

North America 63,633 8,479

Continental Europe 27,753 2,360

Total (less interest) 131,603 6,114

Shareholders' funds (£000) 14,296

Number of employees 1,684

* for nine months to 30 September 1994

Matthew Lynn is business correspondent on the Sunday Times.

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