Made in Britain, remade in Britain and resold worldwide

Made in Britain, remade in Britain and resold worldwide

The terminal decline of collieries in the UK has forced one band of Yorkshire coal men to sell their talents into other markets which appreciate them more. And, as Andrew Mernin discovers, their global success is keeping alive the engineering prowess that once put British mining on the map
Armies of proud pit workers were sent trudging off into dole queues and service sector jobs when the decimation of British collieries came.

And as they switched off their headlamps for the last time, their valuable skills which had helped to power British progress for generations were in many cases lost forever.

But on one patch of South Yorkshire, a band of ex-pitmen is continuing to prove that the engineering nous at the heart of the British coal industry remains the envy of the world.

“We’re not trying to reinvent the wheel as a company, but we just know the British equipment backwards,” says Eddie Daly, sales director at Webster Machine Limited
in Doncaster.

Webster – staffed almost entirely by former UK coal industry workers – is Mr Fix-it to the world when it comes to British-made
mining machines.

Out of a crumbling industry at home, it is an emerging force overseas with its uniquely in-depth knowledge of the equipment once widely used in British mines.

A few days after our interview, Daly and finance director Dave Dean are off to China where Webster has sourced an unwanted British machine that it will ship home, overhaul and sell into the Indian market.

“India is a massive market with a massive requirement for coal,” says Daly. “They use a lot of older methods of mining there but India knows for it to be competitive it must update its mining systems.”

Daly and Dean are at the heart of the success of Webster, which is approached for pieces of drilling equipment by companies, the majority of which are in the mining sector.

It then sources them second hand, strips them down and refurbishes them in Yorkshire, before selling them as new for around a third of the price of a new machine.

The company’s latest overseas mission comes after it secured £400,000 of investment from Reward Commercial Finance to enable it to purchase a ‘Dosco’ machine in China.

In the coming weeks this will be brought back to Doncaster and overhauled and then moved on to India, where Webster’s engineers will re-assemble it for the client.

Amid terminal decline in the UK market, such global contracts are increasingly becoming the norm for the business. >>

“Straight from school” Daly and fellow founding director Dean entered the mining sector and both worked for the UK’s largest mining equipments supplies firm, Mining Supplies in Doncaster. Then, in 1999, came their first entrepreneurial foray, D&D Mining.

Daly recalls: “We would locate equipment predominantly for British mines. But then we saw a market in selling this equipment as there was a lot of redundant stock as the UK mines were closing. We also knew the export markets very well.”

Instead of merely playing middle men between equipment sellers, subcontractors who restored the equipment, and buyers,
in 2009 they decided to do the whole
process themselves.

They spotted a dormant but well known equipment-making brand, Webster
Machines of Doncaster, and D&D was subsequently reversed into it, with royalty agreements signed.

With founders who were “old Doncaster mates”, South Yorkshire was deemed the obvious location for the business and today it continues to thrive from its base on Womersley Mill Business Park.

“With D&D we were restricted in what we could do in terms of overhauling as subcontractors in our game were busy supplying what was left in the industry in the UK,” says Daly. “When we became Webster we could control the capacity by utilising our own people to take on more jobs and that worked to our advantage.”

Webster’s emergence came at a time when the market was being stifled due to high prices and long lead delivery schedules that contractors could not live with.

Also at the same time, the UK deep mine market was in decline, and there were a number of used quality machines available that could undergo a full overhaul and be re-introduced back into the market place at a fraction of the original cost.

Webster now supplies machines for civil applications, mining applications, hydroelectricity projects, and in any application requiring tunneling work.

Over time the business has grown a team of 12 and an annual turnover of around £2.2m - but in the longer term it sees the potential to become a £20m-a-year empire on the back of its growing exports prowess.

While the equipment is “scattered all over the world,” according to Daly, China has proved to be a particularly rich seam of sellable assets.

“In China there were 5,000 collieries at one stage but they have now tightened up the restrictions on mining there and have done away with all the unsafe mines – and by that I really do mean a hole in the floor and a bucket. And so now they have a network of ‘super mines’.

“Formerly the Chinese government, wanting to produce coal for their own industry, had no restrictions on costs and so came to the UK to buy the best equipment.

“But in real terms what they’ve done now is copy that equipment and it’s mainly manufactured in Chinese control now. So we’ve located British-made equipment in excellent condition and are now marketing it actively. In my opinion the Chinese manufactured is substandard and so we only supply UK-made equipment.” Perhaps surprisingly to the uninitiated, there are pockets of British manufacturing continuing in the sector – namely through Joy Mining and Dosco. And so, as mines close around the world, there is no shortage of valuable equipment for Webster to acquire. At the same time, markets like India and South America are driving new industry demand.

Daly says: “Sometimes you have a situation where a mine may have closed recently and you have equipment available that’s state of the art. That’s when it’ll be particularly competitive to get the machines. For the slightly older equipment, though, we’ve got three or four sources we can buy from at any one time.”

Much of Webster’s overseas work involves roadheaders – excavating equipment consisting of a boom-mounted cutting head, a loading device usually involving a conveyor, and a crawler traveling track to move the entire machine forward into the rock face.

A glance at the figures from one of Webster’s recent roadheader deals reveals a healthy, business model.

A machine is purchased for £250,000, shipped back to the UK for between £12,000 and £16,000, overhauled at a cost of £100,000 to £200,000 and installed for around £30,000 – after being sold for between £650,000
and £1m.

But Webster is now aiming for bigger transactions. Longwall systems are, says Daly, the only machines that can close an entire mine down if they malfunction.

These are vast machines, weighing thousands of tonnes, which enable the mining of a long wall of coal in a single slice.

Daly roughly estimates them to cost around £5m to £8m to buy, £1m to ship back to the UK given their 2000 to 3000 tonne weight and £4m to overhaul. But their sale price could spiral up to tens of millions.

“A longwall system can take between 12 and 15 months to supply new but we can locate them and have them on water within eight to 10 weeks. And we could offer a fully overhauled longwall for less than 50% of the price of a new one.”

Although it is yet to complete a longwall contract, it is actively quoting them in the market and recently came close to its first longwall-related transaction – before fire burnt the opportunity out.

Webster had sourced specialist roof supports in China to be used in longwall mining at Daw Mill colliery – one of the UK’s last remaining deep coal mines . VISAs were arranged and flights booked. But then a fire ravaged the mine, closing the site and scuppering the deal for Webster.

Daly is hopeful of new longwall opportunities though, with such transactions financed through staggered payment arrangements with the buyer. However, while there has been no shortage of global demand for Webster’s buy-fix-sell model, finance in general has been a tough area to navigate.

Daly says: “Traditionally to obtain finance for exports you had letters of credit that were virtually cash but the restrictions that the banks apply today on letters of credit
are ridiculous.

“When the banks went into meltdown the facility became extremely difficult to obtain, basically due to a lack of trust between UK and foreign banks.

“It’s getting better now but it’s still difficult so it controls what you can do. We had a scenario where we had to cancel an export order in Turkey worth £650,000 because the bank agreed to it, but then backed off.

“We also get offered a lot of equipment which is a steal, in terms of price. There are certain things we could buy knowing we could sell for profit in the future if we had funding available to us.”

Another hurdle to Webster’s anticipated growth is a lack of readily available skills, although it does now have two young apprentices on its books.

“It’s amazing if you go to a colliery today, the average age is probably 50. For us to progress into the future we need to bring in people who are aware of what we do. Young people are hard to find and you’ll see in the collieries that are left in the UK, the younger generation isn’t really bothered about coal and working underground.”

Meanwhile, as overseas markets continue to emerge around the world for Webster, in its depleted home market might fracking offer new opportunities?

“Fracking’s fantastic and is another method where we’ve got our own resources rather than importing someone else’s. I’m looking now at some of the drill rigs that are used and we’re waiting to see how it’s going to transpire because you don’t want to gear up for something that’s going to close down. I’ve seen it in the US, it’s fantastic and we’re just waiting in the wings to see how it plays
out here.”

In the meantime Webster is focused on mining increasingly lucrative international deals. But Daly still harbours hopes for a revival of sorts for coal in the UK.

Or at least he is infuriated by what he sees as the needless dismantling of an industry with much richness yet to give the national economy. Exasperated by the Government’s shunning of our remaining underground coal reserves, he believes there are ways to overcome the environmental arguments against a rebirth of collieries here.

“There were 153 collieries here 20 years ago, each supporting local communities all paying tax but we are now importing into the UK around 75 million tonnes of coal every year and we are producing about 6 or 7% of that amount, which to me is ridiculous.

“The UK is now dead and in the last 12 months there have been more closures of collieries – today there are two collieries in England and one in Wales. That’s the market.

“Coal seems to be taboo but we live in a country where we are sat on coal. I understand the green issues and there are ways to overcome them if there was a will to. But unfortunately the UK energy minister is anti-coal and as long as the will is not there it won’t happen.

“Other countries have dumping taxes for coal – so anyone that imports to, say, Poland, will automatically receive a dumping tax which is used to prop up their coal industry. Whereas in the UK we’ve just let it go. If that’s political from the history of the industry I don’t know, but there is not yet an alternative to coal. Our power stations are all burning coal and until we get a better method of producing energy, coal will be here.”

Daly’s vision for an environmentally sensitive return of the collieries may never be realised.

But at least – through Webster - the engineering skills that made Britain the great mining nation it once was continue to be exported, even if Blighty’s black stuff isn’t.

Move fast on funding gap

At a time when banks are still keeping a watchful eye on their purse strings, lenders such as Reward Capital are filling a vital gap in the market.

Supporting entrepreneurs who might have struggled to gain finance from the banks, the Leeds-based asset-based lender is seeing demand for its services rocket.

Reward provided finance to more than 60 organisations in 2012 and is set to exceed that number this year.

Backed by wealthy South African businessman Christo Wiese – the sixth richest man in Africa according to Forbes – Reward’s average deal size to the small and medium-sized enterprise market is £350,000.

In the majority of deals it is involved in, Reward helps businesses leverage off assets to maximise opportunities where speed is of the essence.

According to partner Dave Jones, the £400,000 support given by Reward to Webster to enable the company to acquire a major piece of drilling equipment demonstrates the demand by many businesses for quick funding solutions.

“But this demand isn’t being met by the majority of mainstream lenders, on many occasions due to demanding timescales,” Jones says.

“Cash and the ability to move quickly are driving the marketplace. Reward is certainly seeing this and the number of deals we are completing proves it.”

He adds: “There are some fantastic businesses out there but some of them are being hindered by traditional lenders that are blocking funding streams.

“An inability to move quickly, banks’ own capital constraints and current risk averse nature as a result of having had their fingers burned, all combine to make life difficult for the average business to access funding.

“It is still a problem but given the economy appears to be picking-up, lenders such as Reward Capital are in a strong position to take advantage.”