Back on track11 March 2010
A few years ago the outlook for Pittards was uncertain as a black hole in the company pension fund and difficult trading conditions threatened to drag the business under. Step by step they have restructured the business, made two acquisitions and have recently received a royal visit. Martin Ricker visited their UK headquarters to see the turn around at first hand
‘Five years ago you could of described us as a UK tanner competing in a global market. Following our recent acquisition of ETSC in Ethiopia and our business agreement with TehChang Leather Products in China you can now describe us as an international
business competing in a global market’, says Pittards chief executive, Reg Hankey.
Following a recent visit by Princess Anne (also known as The Princess Royal) to the Pittards’ plant in Yeovil, there does appear to be a feeling of optimism around the tannery following five difficult years of restructuring. Pittards is one of the most famous brand names in leather making with Charles Pittard having been first recorded as operating as a leather dresser in Yeovil in 1826. Most famous for their gloving, particularly golf glove leathers, the public listed company have always been at the forefront of the industry.
However, it very nearly went terribly wrong and the company almost went under after it was announced that the company had a £32 million ($53 million) pension fund deficit. This was compounded by an operating loss at the company’s former bovine leather division based in Leeds and foreign exchange rates that made sterling uncompetitive against other major world currencies.
A number of changes took place in the boardroom and the current company chairman, Stephen Boyd joined and immediately looked at restructuring the business.
‘Firstly we had to look at getting the cost-base down and improve our product ranges’, Boyd told Leather International. ‘This meant that we had to close our Leeds facility in 2006 and consolidate both the bovine and small skin production on to one site in Yeovil and develop our overseas ventures in Ethiopia and China.’
‘At the time we seemed to spend more time trying to sort out the pension problem than getting on with the business of leather making’, admits Reg Hankey. ‘Thankfully we managed a way of keeping the business running and simultaneously removing our liability with the pension fund.’
In 2006 is was proposed to shareholders that the company enter in to a Company Voluntary Arrangement (CVA) which meant that they could hand over the pension fund liabilities to the UK government’s Pension Protection Fund (PPF). Pittards became one of the first companies in the UK to transfer liability to the PPF and was seen as a test case at the time. Such practices now are often referred to ‘as doing a Pittards’! However, without such a move the company would have had to call in the receivers. ‘Thankfully the banks were also very supportive of us during this period and helped us throughout the CVA period’, said Hankey.
During the CVA process Pittards shares were suspended. As a result of this action Pittards final salary scheme pension holders received 90% of the full pension under the PPF.
During 2005 and 2006 they made a number of operational changes to the business, which included transferring some production of hairsheep and goat to the Ethiopia Tannery Share Company (ETSC), a state owned tannery located two hours outside the capital Addis Ababa. From August 2005 Pittards held a contract with ETSC to manage the tannery and expand production on the site using their know-how. Production was increased to wet-blue and crust which were finished in the UK.
Pittards also announced at the APLF in 2006 that they had also formed a partnership and licensing agreement with the Taiwanese-based leather group TehChang Leather Products Co and production of the bovine leathers was transferred from the former tannery in Leeds to TehChang’s plant in Dongguan and to the reconfigured tannery in Yeovil.
Production at Yeovil now begins with
wet-blue or crust (for small skins) and is processed to the finished leather.
Processing bovine side leathers for footwear and leathergoods will continue at Yeovil and the company are looking to extend their partnership with TehChang in the future. ‘We are looking to use our brand and partnership with TehChang to sell our high-quality technical leathers into the China made footwear market’, says Hankey.
At the end of November 2009 it was officially announced that the company had come to agreement with the Ethiopians to buy the ETSC tannery for £3.8 million ($6.3 million) in cash with £2.8 million ($4.6 million) being raised by issuing new shares.
‘Pittards have been doing business in Ethiopia for many years now and the acquisition of the ETSC tannery is a symbol of co-operation between the UK and Ethiopia’, Berhanu Kebede, Ethiopian Ambassador to the UK told Leather International. ‘We can benefit from Pittards know-how and technology which will allow the Ethiopian tannery to add value to the abundant raw material which we have and will act as an important source of income generation for our country and will hopefully open the door to other like minded companies’, he said during the visit of The Princess Royal on December 7.
‘We see the acquisition of the ETSC tannery as a fulcrum deal in the ongoing development strategy of the business’, says Stephen Boyd. ‘We can now shift some production capacity to ETSC and maintain the Yeovil site as a centre of excellence for technical innovation, sales and marketing, logistics and brand development as well as maintain a leaner cost structure. Meanwhile in Ethiopia we aim to develop the local employees with the Pittards ethos and values, and in time it will be seen as a world-class operation’, he added.
The Princess Royal officially opened the new marketing suite in Yeovil on December 7. Prior to the unveiling of the marketing suite the princess toured the tannery to observe the manufacture of bovine side and small skin gloving leathers which are both manufactured on the single site.
The Princess Royal’s visit was organised in conjunction with the UK Fashion Exports organisation of which she is patron. Pittards export around 90% of all their production. ‘The Princess Royal’s visit is the icing on the cake for all the recent developments we have made with the business and underlines the Pittards brand as a continuing leader in the manufacture of fashion and technical leathers’, Stephen Boyd told Leather International. ‘All of this however, could not have been achieved without the continuous and loyal commitment of both our customers and staff.’
The Princess Royal was presented with a number of gifts at the unveiling including a saddle and other leathergoods manufactured using Pittards leathers.
Pittards customers include some of the most famous sports and consumer brands in the world. One important customer is the American golf brand FootJoy which are the leading golf glove maker in the world as well as makers of golfing footwear. ‘Pittards supply leathers for a our premium range golf gloves such as our Taction APL gloves which consistently provide full water resistance and breathability for up to 18 rounds of professional golf’, Maria Bonzagni, senior director of marketing FootJoy gloves and accessories told Leather International. ‘We are now on our eighth generation of this range since Pittards first approached us with their StaySoft range in 1980. Our relationship is close and we have a mutual respect and understanding of each others businesses’, she added.
As well as dress and sports gloving leathers Pittards also process a wide range of bovine leathers for the footwear upper, equestrian and leathergoods markets which includes a range of high performance camouflage leathers known as Camo for the military as well as similar range of less technical Camo leathers for the fashion market.
Other technical leather developments, which were presented to the Princess Royal, included their high-abrasion resistant Keratan leathers for applications such as motorcycling and extreme sports. They also demonstrated their latest generation of very lightweight aircraft leathers developed using goatskin leathers, which are 50% lighter than traditional airline upholstery leathers. So far, three major international airlines have ordered the lightweight range.
Now that the business is back in profit and on a more stable footing they have been keen not only to expand their leather making activities but also move along the supply chain into finished leather products manufacture and retail. In October 2008 they acquired the UK leathergoods maker, Daines and Hathaway which had itself been in receivership. Daines & Hathaway specialise in producing a small but select range of quality leathergoods from their factory in Walsall. ‘We want to move in to the area of leather products and retail however, we will not be looking at producing products that are made by any of our main customers, for example golf gloves’, says Reg Hankey.
Following the acquisition of ETSC Pittards are looking to eventually shift much of the small skin production away from Yeovil and create capacity for the bovine ranges and technical development. This will become clearer once the deal has been ratified by the share holders.
Through their agreement with TehChang, Pittards are also looking to use their technical know-how and brand strength to increase their market share in the lucrative China made footwear upper leather market.