What should a company do when it loses a third of its sales almost overnight?
Pickersgill-Kaye, a railway lockmaker and metal finisher, faced just such a dilemma when the UK’s big rolling stock manufacturers closed. It decided to chase the business abroad and was able to recoup as much in exports as it lost when the factories shut.
The slump happened in 2004, six years after a management buyout of the 150-year-old company. Kaye’s locks were ubiquitous in the old slam-door carriages, the bulk of which were scrapped that year.
Peter Murphy, managing director, says: “We lost £1.25m of our £4m turnover. We had to act very swiftly. We had to make redundancies. We did not wring our hands and procrastinate. We thought, ‘if we do not do something, someone will do it to us.’
“Ten years ago all rolling stock used in this country was built in this country. After privatisation, they went international and closed plants in the UK. We went with it.”
Pickersgill-Kaye approached the likes of Canada’s Bombardier and Siemens of Germany which were making trains, not only for the UK but for worldwide markets too. Therefore, contracts to sell its locks saw Pickersgill-Kaye’s products going worldwide also. It even equips China’s national railways.
Turnover has now climbed back above the £4m mark, with exports accounting for £1m, up from £400,000 in 2005.
Murphy, who owns 60 per cent of the Leeds-based company while his five fellow directors have 8 per cent each, says the company also realised in 2004 that it would have to diversify.
“The product range was heavily into the railway industry, especially maintenance of slam-door locks. We have got back to where we were but with much stronger plans and a better product range,” he says.
Murphy and his team sat down to plan future strategy. They were aided by Brian Cooper, the non-executive chairman.
Cooper, who had chaired other local engineering companies, joined at the time of the management buyout.
“I was commissioned by the bank to see if they should lend the money. I
told them they should and that I liked the company so much I was joining it,” he jokes.
David Pickersgill, who sold the company so he could retire, had also stayed as a non-executive director. He helped finance the transaction by lending the management team some of the money to buy the group.
Murphy says: “We had to decide where to put the investment. We looked at the profile of the sector. After doing the research, a few things hit me. Manufacture of the volume stuff was going abroad. Volume manufacture of small components wasn’t for us. We needed to be a niche provider and create a one-stop shop.”
Pickersgill-Kaye invests around 5 per cent of turnover on research and development. “We have invested heavily in R&D to develop new products. Around 60 per cent of sales are of products designed in the last five years,” Murphy says.
Leeds University, which has a strong engineering tradition, works closely with the company, with postgraduate students taking on research projects for it.
The business has expanded beyond trains to locks for prisons and oil rigs, bringing to its range to 2,000. It even provides complete doors for Strasbourg’s trams.
“Most products are safety-critical,” Murphy says. “We are dealing with the health of passengers and crew on trains. When we design a product, it goes through intensive testing.”
The locks can take as long to test as to build. Many of them are designed in conjunction with the customer. Pickersgill-Kaye tries to create products tailored to be different. An in-house design team can work for months with customers to get it right.
Still, there is a limit. “You can spend ages designing a product and then not make any money out of it,” Murphy explains.
The company also decided to hang on to other parts of its business, such as a metal finishing and plating operation and paintshop. The former makes signs for high street brands, such as Gregg’s the baker and Asda, the supermarket chain.
As well as gaining government grants to invest in some new equipment, such as a robotic arm that can test several components an hour rather than just one, it has also hung on to old machines.
“Some lines are still using carriages over 30 years old. We make up to five locks at a time for them,” Murphy says. “We are the only people who can.”
Murphy has tried to keep prices high. Pickersgill-Kaye had long pitched to put
cab locks in General Motors’ US locomotives without
“We were always too expensive,” Murphy says. “But they had so many problems and complaints from drivers that they came back to us and paid our price.
“We do not compete on price. We compete on performance and solving people’s problems.
“Having said that, our margins are tight – 4 to 6
per cent. Our biggest cost is people, 50 per cent of turnover.”
The company has no debt and owns its building. Yet it remains one of the last manufacturers in a town that was a powerhouse of the industrial revolution.
In spite of the ups and downs, Murphy says he has no regrets about keeping the business alive.
“It was a big risk but I could not have lived with myself if I had not done it,” he says.
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