Full marks to firm's pioneer
PUBLISHED: 15:58 28 July 2006 | UPDATED: 10:45 01 June 2010
The break-up of the Burall Group, once one of Wisbech s biggest employers, will bring to a close a formidable experiment in worker-ownership and participation. As JOHN ELWORTHY explains, the founder and chairman David Burall built a business operating in
The break-up of the Burall Group, once one of Wisbech's biggest employers, will bring to a close a formidable experiment in worker-ownership and participation. As JOHN ELWORTHY explains, the founder and chairman David Burall built a business operating in niche areas but which finally succumbed to the pressures of the market place.
EARLIER this year Buralls produced its gloomiest set of figures for many years. The directors, in their annual report, spoke of markets in which the group operated which "continue to be driven by price reduction and reducing underlying turnover".
It's horticultural sector, they added, also had a bad year "further impacting results".
The gloom that has prevailed over the group for some time seems a far cry from the turn of the century when the Duke of Edinburgh visited, the culmination of many accolades the specialist printing company had enjoyed over many years.
Built by David Burall, he saw the opportunities early on for bringing in his workers to enjoy the company's success. When, in the 1980s, he set up an informal cash/profit sharing arrangement, he was among the first UK employers to do so.
Gradually a more formal profit sharing scheme came about, and in the mid 90s, as he approached 60 and began thinking of retirement, he needed to think of the next generation.
With no immediate family members interested in taking on the business, he became concerned for his workforce, at that time easily one of the biggest employers in the town.
The deal that was struck enabled the employees to gradually gain ownership of the company through a shareholding structure that meant the cash generated by the business each year would be used to fund the purchase of shares. It was an innovative approach and gradually the share ownership grew so that employees owned 13 per cent of the ordinary shares with a further 43 per cent held in a Qualifying Employee Share Ownership Trust (QUEST).
But in recent years the company has shown visible signs of struggling to retain market share of the specialist worlds in which it operated.
There have also been redundancies, and movements among the board with Andy Leet, who was appointed executive chairman in 2004, remaining in post only until the summer of last year.
With a Burall office opening in Hong Kong and a major deal on the cards at the time for Burall Infosmart, Mr Leet, 35 years with the company and who began work there as an apprentice compositor, might have expected a long tenure of office.
However, the 51-year-old who had risen through the ranks, lasted less than a year before he stood down following an aborted sale of part of the company.
Incoming chairman Chris Simpson hinted at the time of his appointment last August of the difficulties that lie ahead, and warned that Buralls, like many other firms, had pension obligations to meet including a current deficit.
A month after his appointment, Mr Simpson announced the successful sale of the company's self-adhesive label business to Paragon, for a price described as "realistic".
But more than two thirds of the cash received went immediately into reducing bank borrowings, the accounts revealed.
Those accounts show the extent of the underlying problems within the group. Turnover in the year to 2005 was down, and a £300,000 operating profit had been reduced to a loss of £1.6million.
The accounts showed the amount due to creditors and falling due within a year had risen from £2.2million to £4.6million, and with financial pressures piling up on the pension fund, the writing was on the wall.
David Burall created an historic, and fascinating business, producing offshoots that he once termed "small, focused cells, each with a fully accountable management team".
He added: "The resulting loose federation was flexible and effective. Underpinned with appropriate incentives, group-wide profit sharing and, later, share ownership, the model grew into a virtuous circle."
Until recently he prided himself on having only five failures, and a handful of spin-offs that no longer fitted, but essentially what he built was what a corporate journal recently described as "a federation of 10 companies that operate in related markets."
The men in suits will now decide the bits that can be saved from this federation.