Smith & McLaurin restructures shares

Four years after it was rescued from administration, a 152-year-old Scottish manufacturing company is entering a new era with a share restructuring deal that spreads ownership more widely across its management team.

Kilbarchan-based Smith & McLaurin manufactures and supplies more than 2,000 different paper products to self-adhesive label, ticket and tag manufacturers across four continents. The restructuring of the firm – whose raw materials typically end up as food and pharmaceutical labels, car-park tickets, or warehouse distribution stickers – will pave the way for the implementation of a new five-year business plan.

The deal, worth a seven-figure sum, has been made possible by funding from the Clydesdale Bank’s acquisition finance team in Glasgow, which has provided facilities totaling 6m to the company, including the re-banking of existing debt from Royal Bank of Scotland.

Colin Gault, managing director, is supported by operations director Colin Loudon, sales director Craig Monks, chairman Ian Mackay, and non-executive director Allan McLaughlin. Mackay, hitherto the majority shareholder, has released shares to allow management to increase their stake in the company.

Mackay has played a major role in turning round the fortunes of the company, taking it out of administration in July 2002 and drafting in Gault to help him transform the ailing business. Mackay and McLaughlin own Corporate Solutions Scotland, a turnaround/investment corporate finance firm which actively invests in the recovery of distressed and growth businesses. Smith & McLaurin is one of eight companies in the Corporate Solutions portfolio.

In the four years since Mackay’s arrival – with the firm overhauled under a ‘back to basics’ campaign implemented by Gault – the company has increased turnover by 46 per cent from 12m to 17.6m, raising export sales from 30 per cent to 40 per cent in the same period. This has all been achieved with a very modest rise in employee numbers from 73 to 79, all of whom work at the Renfrewshire base the company has called home since inception in 1854.

The financial year just ended in July 2006 offers a barometer of success for Smith & McLaurin. Eighty-three of its 350 current customers were added in this period, with new export territories developed in Latvia, Germany Greece, Romania, Finland, Bulgaria and the Czech Republic. The firm also won Renfrewshire Chamber of Commerce’s ‘Excellence in Manufacturing’ award and anticipates profit before tax of 800,000.

Colin Gault said: ‘It’s been a fantastic year for the business and the performance is testament to the response we received from the workforce in Kilbarchan. We’re an unusual beast in that we are a Scottish manufacturing operation which is growing, increasing exports, profitable and efficient. We have earned a reputation for innovation and the development of new products for various markets will be key to our continued success. Our customers are at the forefront of everything we do at Smith & McLaurin and one of the benefits of our size compared to the industry giants is that we can and will respond to customer demands quickly.

‘The growth of our export business has been hugely encouraging. Around 40 per cent of our produce is exported, with key markets in Ireland, Belgium, Holland, France and Scandinavia. We’ve added several other export markets in the past year or so and are currently looking at opportunities in Chile and the ex-Soviet block. Our share of the UK market stands at approximately 4 per cent, so there’s lots of room for profitable growth here and that’s why management were keen to increase their investment as we continue to take the firm forward over the next few years.

‘The Clydesdale Bank’s support has been invaluable during the past couple of months. When we spoke to the team there about the share restructure, they were interested not only in our balance sheet but in the business as a whole, which we found refreshing. They really took time to understand what we do, how we work, and all the little things that make us different from the rest. It was that attention to detail and genuine interest in our company that gave us the confidence to proceed with the Clydesdale team.’

Lyn Calder, director, acquisition finance at Clydesdale Bank, added: ‘It was clear to us very early on in our dealings with Colin, Ian and the team that the Smith & McLaurin turnaround was an inspiring story. The firm’s potential to add many more positive chapters to the tale was clear and, as such, we were delighted to become involved in their business. We wish the management team every success as they look to build on the outstanding results achieved to date.’