Pressing the right buttons

Pressing the right buttons

Yet another award for the innovative Brian Palmer and this time an endorsement of the admiration that other directors have for him. Brian Nicholls reports

Awards are nice. And when it’s your peers adding one to your collection you can feel confident you must be doing something right. It’s easily seen why Brian Palmer gets the acclaim. The company of which he’s chief executive seems to press all the right buttons advocated for manufacturing success these days:

• Resilient in recession

• Committed to investment

• Actively hunting talent and skills

• Heavily into research, development and enterprise in intellectual property

• Willing to work for grants, and to play the bankers’ new game, and

• Still prepared to take a calculated risk.

Brian Palmer’s development of Tharsus Group - from its roots in metal bashing to specialism in Original Equipment Design and Manufacture (OEDM) now - also illustrates how the presence in the North East of a world leader like Nissan can rekindle the region’s entrepreneurial spirit. One of the first graduate trainee engineers that Nissan took on at Sunderland, Palmer has since grown Tharsus, in the 16 years since his management buy-in there, to a business of 150 people in four places, exporting 40% of output and carrying big names on its client list.

Names locally like BAE Systems, SMD, Turbo Power Systems, Joyce Loebl, and CMR. And nationally and internationally 3M, Safety Clean, ITM Power and Rapiscan the airport scanning people. How has he outmanoeuvred recession? “By lots of hard work,” he laughs. “It’s definitely a lot harder than before. I took control of the business in 2003. Until 2008 we grew very strongly. We got to the recession with some good contracts already won in areas such as defence. But things also collapsed in a lot of our markets. So we did downsize at the start. We’ve grown again since.” Defence and telecoms figure less, subsea more, and clean tech equipment is the primary area of growth.

His background? Born in Newcastle and raised in Chapel House suburb, Palmer attended Walbottle Campus - “by virtue of social experimentation in bussing kids from Newbiggin Hall,” he recalls. He pitched for a place at the University of Manchester Institute of Science and Technology (UMIST). “I got very lucky convincing them to let me in,” he says. “I’d the lowest grades of anyone on the course but they took a chance on me, and we came through.” “We” did indeed, a 2:1 BSc Hons in mechanical engineering. In 1988 he returned to the North East to join Nissan. “I was very lucky,” he says. “Nissan was an excellent training ground.” He was one of 1,500 workers when he started, one of 5,000 when he left five years later. After his grounding in engine design, his chance came in 1990 to move to the engine design department in the carmaker’s newly created European technology centre at Cranfield in Bedfordshire. “I learned valuable lessons,” he says. “One still with me is that you can improve everything you do - even the good bits of your business. I also saw some of the issues such as their inability to control distribution in the UK. And the design of a car in the early days that wasn’t up with some of the market leaders, despite the quality of engineering and performance. A business must have a very balanced skills set. It’s not enough to excel in just one or two areas.”

A keen sportsman, he was later lured by the great outdoors; 1993 found him in the French Alps improving his ski-ing, before returning to England in 1995 to be a diesel engine programme manager for Ford at Dunton in Essex. The following year he returned to the North East to help sell the family business, Prempack Ltd. By December 1997 the urge to own his own business proved overwhelming. He led the management buy-in of the Tharsus Welding and Sheet Metalwork Company, now part of Tharsus Engineering.

It was a sub-contract sheet metal fabricator with an “interesting” customer base, and Palmer chortles at how, at least twice since, the media has reported how he financed the deal through a pools win. “The firm had been started in 1964 by three guys from Reyrolle. I wasn’t quite born then. It was they who won the pools. I have got 50 quid in Premium Bonds!” In 2005 he launched Tharsus Direct, which then supplied most of the cable management systems serving the UK’s telephone exchange infrastructure for the roll out of highspeed broadband. An acquisition of Direct Message at Blyth followed in 2007, from which he created Tharsus Vision, a specialist in outdoor advertising, and a specialist also within Tharsus Engineering. In 2011 he bought a second facility at Blyth, bringing on the business’s main focus and growth driver, its OEDM service.

Last year Tharsus Group was formed, and now Palmer has been named Investor Director of the Year by North East members of the Institute of Directors. The group’s 150 employees are fairly evenly spread among two operations at Blyth, one at Hebburn and a small telecoms customer service at Birmingham. Its new headquarters at Blyth comprises a £3m investment in 31,000sq ft, offices and manufacturing that look every square inch value for money. At nearby Spencer Road, the second factory of about 35,000sq ft does the specialist engineering and fabrication for defence, security, subsea and transport. Palmer says of the emphasis shift to Blyth: “Six years ago if you’d told me we’d be headquartered in Blyth now I’d have laughed. I wouldn’t have understood. But Blyth works very well from several points of view. Many people have to pass here to get to work at Newcastle. “Travel for them is a growing concern. They’re becoming conscious of how far they have to cover. Increasingly they want to work around here if they can. Why 15 miles extra into Newcastle? There’s quite a big catchment covering Blyth, Ashington, Bedlington, Amble and Morpeth. And Blyth, unfortunately, has quite high unemployment. “But there are some very good people here, and no difficulties in recruiting. It’s not as desperate as some people would tell you though, and all in all here’s a good place to do business.”

The Hebburn arm will be 50 years old this November. It was resituated there in 1972, and last year an adjoining site was bought too. So what prompted a switch of emphasis to Northumberland? Outdoor advertising lightboxes. Palmer explains: “Telecoms had brought our biggest market growth. But on entering defence we, almost by accident, ended up with this outdoor advertising business also. We’d started discussions to buy the defence fabrication side at Spencer Road. Because of a delay the other party had over a contract with CBS and the London Underground - the biggest outdoor advertising contract I think the country’s ever seen with about 5,000 units for the entire system - the contract stalled. “This was due to planning permissions. Many Tube stations are Grade I and Grade II listed architecturally. So you can’t just run power as you want or drill a hole in a tile. English Heritage and everyone else has to get involved. The company got into trouble. “It became a case of buy all or nothing. We bought it all.

We created Tharsus Vision and worked hard for two years on it, delivering for London Underground and talking about contracts in Milan, Madrid and about primary city-type projects. But overnight that market died. It’s very high capital expenditure. New technologies coming out are more expensive. And advertising revenues are falling. “A bit of a perfect storm, then. We’d built a team for it. We sat down, either to pull the plug or re-invent. We could see all the big multi-million pound projects disappearing. We came up with an equipment design and manufacture model that’s running now. We still do some advertising light boxes, mainly for Lebanon and Ireland. But it’s still a low level of business. Had we been just an outdoor advertising manufacturer we’d probably have gone under. “Undeterred, we bought our new site just over two years ago in February 2011. We didn’t occupy that till April 2012. There was method to the madness. We won a couple of contracts we couldn’t have won without that extra space. Though still at Spencer Road, we could show the client a computer generated video of how a new production floor would look here, convincing them we understood how we’d deliver. We took a bit of a gamble. It paid. There’s always a slight risk stretching yourself, and any funding you can get slightly derisks the gamble. That’s when something like the Regional Growth Fund and Grant for Business Investment Fund as was paid off. The day we bought this property we hadn’t need of it. But we believed we would have the need and it was the thing to do. We were supported in that. We got a mortgage from our bank too.”

Skilful managing of risk had brought the firm backing before. Now, says Palmer, the banks have new rules. “It’s about understanding the rules. Banks are cautious. As a customer you must learn how to deal with them - bring them along.” Much overseas business involves international customers with a UK footprint, and different products for 10 different markets may be brought out with only slight variations. The hot spots presently are Spain and France, with Turkey, the Czech Republic and even China also appearing on the manifests. It was pure coincidence, so all the more satisfying, that when Michael Fallon as Minister for Business Innovation and Skills came to open the headquarters officially last November, units destined for China were on display. “The minister liked that,” Palmer says. Tharsus has a busy research and development staff of 14. Recruits for that are a major consideration in Palmer’s talent searches. “You can’t just sit and hope new talent will come to you,” he says. “You must seek it out, making sure you’re attractive as employers. You have to engage with universities.”

The firm has 10 apprentices too and Palmer continually invests in training. “Some people who were with the company long before I joined began as labourers and are now metalworkers. Others once operators are now senior supervisors. We’re multi-skilled too. Here everybody can do three jobs, and every job has at least three people who can do it.” Winning the IoD award was a surprise. “It’s great to be recognised,” he admits. “It increases the pressure to match expectations. I still see us in early stages of our journey. We’ve a very motivated team out to prove what we can do.” The 2015 target is to get the present £13m turnover up to £25m, then maybe £30m three years after. “You worry about saying things like that,” he admits. “People might take it as arrogance but we’d genuinely love to see that.”

Sharing IP benefits

Sharing IP Benefits

Tharsus, though deeply into intellectual property, avoids ideas others could commercialise. Palmer exemplifies: “We’ve just agreed heads of terms with a new customer, IP based and with no manufacturing capability, who have bought a number of patents from other businesses.

“If we come up with new IP in the form of patents for them, which we’ve already done for a couple of customers (for example, with a glass recycling machine) that’s patent protected with one of our guys named as inventor.

“And so, if we’re named patent inventor under a new patent box regime - whereby instead of paying 20% corporation tax you only pay 10% - we’re saying this... On profit generated, because you have that patent when we’re developing a product for you, if we come up with some additionally clever ideas to patent, whereas we’re named inventor or co-inventor, we’d  take only 20% of the tax savings.

“So it’s win, win. They wouldn’t have the saving if we hadn’t come up with the idea. It also encourages our guys to question what they can do to be clever and different, since that protects our customer’s position too.

“That’s what’s unique about our business. We’ve no interest in owning the IP. In summary, any ideas generated while we do the development work will be transferred to our customer. Exclusivity is two way. We’ll have an exclusive manufacturing agreement but also be exclusive
to them within their specific market segment.”