For 42 years Caparo has steadily built its business into a global empire, covering media and service sector companies but always with manufacturing at its heart. Its chief executive the Hon. Angad Paul, group finance director David Dancaster and some of the people who run its companies tell Will Stirling what Caparo does in the UK and beyond, and why the spirit of Caparo is about people and human effort as much as business success.
Perhaps the most diversified group of companies of its size in the UK, Caparo has businesses in markets from making merchant bar steel to supercars, tubular components to finance. Caparo is an enigmatic beast; just when you think you’ve got the measure of it, new and interesting commercial tentacles pop up to emphasise its long reach.
What began in 1968 as a small factory in Cambridgeshire making gas tubes is now a highly diversified, acquisitive business with forecast revenues for 2011 of about $1.3bn.
With its roots in steel and steel conversion, Caparo – one of the UK’s biggest private companies – has branched out into advanced engineering for aerospace applications, financial services and even hotels. While the non-core businesses are important “and great fun,” says Caparo’s CEO the Hon. Angad Paul, these have been borne out of the company’s industrial foundations.
Owned by the Paul family, Caparo is a private limited company with operations in eight countries spread over three continents, comprising 55 companies with 2,600 employees in the UK and over 7,000 in the rest of the world. It has 44 sites in the UK alone, manufacturing a large variety of steel, automotive and niche engineering products, including precision tubes for the Large Hadron Collider at CERN near Geneva.
Labour peer Lord Swraj Paul of Marylebone is chairman of Caparo and very much the spiritual head of the company, while his youngest son Angad has been at the head of the business since 2003. The family are part of an Indian dynasty who have multiple business interests including shipping, hotels and which founded India’s renowned Apeejay Education Society.
“Steel is the thread that runs through the whole company,” says Angad Paul. “We have some great UK businesses. For example, Caparo Merchant Bar in Scunthorpe takes hot rolled steel direct from the Tata Steel Europe [formerly Corus] site next door and processes it into high grade merchant bar for construction. Each month Caparo Wire produces enough wire to stretch around the world. Caparo Tubes Tredegar makes a range of specialist tubes and is the highest factory in Wales. Steel manufacture is the constant, but we have diversified greatly.”
Recession and rebound
Like any big company, Caparo has had mixed fortunes over its 40-year history, but it has grown consistently and at times rapidly, through organic growth and acquisition. In 2006, for example, Caparo acquired 22 companies in one year. Under Angad Paul, group turnover has increased significantly since 2003.
“The strategy for growth has been partly market consolidation,” he says. “We’ve deliberately tried to consolidate in sectors where targets have been good fits with our existing businesses and those running in parallel. Caparo Accles and Pollock is an example. It makes bespoke, highly engineered tubular components for aerospace and power gen applications. By acquiring it and bringing it alongside Caparo Tube Components, we’ve created synergies.”
Fabricating steel products for the construction and automotive sectors, among others, the recession was always going to bite Caparo hard.
Global turnover fell as orders for steel products dried up. As the recession deepened, according to published accounts the company reported a turnover of £861m but pre-tax losses of £3m in 2008. But chief operating officer Douglas Dawson says the company moved quickly to implement short-time working and the staff rationalisation necessary to keep total job losses to a minimum. “We were very wary of being left at under-capacity when the recovery came,” he says. “At companies such as Caparo Vehicle Products when the big auto OEMs return, order volume can be high, all at once. You cannot get caught short if you want to remain a reliable supplier.”
Lord Paul is a Labour peer and has at times attracted unwanted media attention. In July this year, several newspapers ran stories saying that Caparo’s accountants, BDO, had reported that some group companies had breached their banking covenants in 2008. Caparo hit back, Lord Paul claiming the newspaper reports were politically motivated. The company issued a statement saying that the accounts quoted related to only some of the group’s UK subsidiaries, which was standard procedure in the UK when a company underperforms against its banking agreements. Caparo was “alive and well”, it said, and the 2008 accounts were ancient history.
UK or India? Both, and beyond
Having restructured the funding of the group, recovery has been brisk, and for some businesses, rapid. Caparo Precision Strip, for example, is very busy, exporting its full range of welded steel strip to up to 50 countries, and is one of the group’s most profitable companies.
The group’s global revenue origination is crudely 50% UK and 50% the rest of the world. Angad Paul and chief financial officer David Dancaster say that, while the UK remains integral to the group’s core activities, the long term strategy is to have a more even worldwide split, about one third each in the UK, the US and the rest of the world.
Looking ahead, India, China, Mexico and perhaps Australia – watch this space – are key emerging markets for Caparo.
Several large investments in UK manufacturing sites in 2010 underscore Caparo’s commitment to its UK base. For example, both Caparo Tube Components and Precision Strip invested several hundred thousand pounds on new equipment from 2008 and 2010, including a new laser welder at Precision Strip (JB&S Lees).
Angad Paul saw the rise of Chennai as “India’s Detroit” in the late-1990s and began to develop Caparo businesses in India from about 2000. Today Caparo India comprises of 25 companies mainly involved in steel conversion/fabrication, but also a financial services company and the Ayatti Cultural Centre. Does the rise of India indicate a shift of manufacturing from the UK to low cost economies? “India is a very important growth market for us, we’re particularly excited about one or two new developments there,” says Angad. “But the UK is also important.
I’m not in a position to comment on strategy regarding. factory locations but they are not mutually exclusive regions, indeed quite the opposite.” It is likely that India and the UK will develop stronger examples of Caparo’s vertically integrated business plan, where in one factory value is injected into simpler parts made in another location.
Caparo Tube Components and Caparo Accles & Pollock
Caparo Tube Components (CTC) and Caparo Accles & Pollock (CA&P) occupy the same site in Oldbury, West Midlands. While being distinctly different companies, both manufacture tubular components, run in parallel and share certain synergies.
CTC is the UK’s largest, multi-product supplier of tubular components to the automotive industry, producing high volume parts directly to Nissan, Ford and BMW Mini, and indirectly to Bentley, Jaguar Land Rover, Aston Martin and Honda. It’s onepiece flow manufacture with no room for variation.
Caparo Accles & Pollock is niche, low volume work mainly for aerospace and power generation applications, including nuclear, supplying to companies including Rolls-Royce Canada. Today the site is busy and confidence is buoyant.
“Recently more work is coming from the energy sector,” says the MD of both companies, Philip Begley. “For land power gen, we supply the necessary pipework to convert the inlet and outlet manifolds. The engines don’t fly so they’re a lot heavier and generally made of stainless steel.
CA&P involves far more hand crafting than CTC.
CA&P recently joined the SC21 programme run by ADS, the aerospace and security trade association. “Accles has grown quite rapidly recently,” says Begley. “It was the right time to look at our processes and supply chain for efficiencies.” Participants pay to join SC21 but Begley says the cost is justified. “In CTC, it’s easier to check production figures and output based on known standards. Accles is a more difficult environment to introduce data collection into. SC21 helps to put in systems to record what’s going on, and we intend to implement complimentary computer software upgrades.”
Training and lean
CTC and CA&P are ‘Investor in People’-approved companies and have provided NVQs in computing and some engineering skills, mainly via night school. There is a training appraisal programme in place where employees are assessed for their professional development needs. “We’ve invested perhaps a little more on training than some of the other companies, partly to get the most out of two distinct parallel businesses,” says Begley.
CTC operates skills matrices and an internal welding training programme. There is a degree of voluntary employee transfer between the two companies which disseminates knowledge.
Three years ago the CTC factory was reconfigured and now operates a kanban system to reduce stock levels.
And last year the engineering team led an internal lean manufacturing study. Designed mainly for one part, the power steering column, it used Pareto analyses and Boss charts to tackle root cause of inefficiencies. Where possible, the company sends operators to the manufacturer of a new machine to train on how to operate the equipment before it’s delivered on site.
Accles & Pollock in focus
Next door is the more discrete CA&P operation, with more handcrafting involved as skilled fitters work on tubular parts like aerospace ducts in titanium and inconel – a nikel alloy that operates at high temperatures – for aerospace and power gen markets.
Precision welding is a big speciality for CA&P. In March, the company invested £75,000 in the latest TIG welding sets designed for welding super alloys. Trained welders can achieve super clean welds on small diameter tubes where, other than colour, the weld is barely apparent. CA&P also uses an orbital welding process. “It’s done in an enclosed head with an argon backing gas,” says Simon Horton, technical sales manager at Caparo Accles and Pollock.
“The optimum welding programmes are generated automatically by the software in the welding equipment, it will even take into account the gravity on the weld pull.” I’m shown a weld straight from the machine, no polishing applied, which is incredibly clean.” A little-known fact about this Black Country tube bending firm is its contribution to the European Organisation for Nuclear Research (CERN). Many of the beam screens used at CERN’s Large Hadron Collider in Geneva are made in CA&P’s specially commissioned, temperature and atmosphere controlled manufacturing cell. They are manufactured on tracks mainly in 16.5m sections. “Laser welding equipment is mounted on ABB robots which pass down a track, highly calibrated with laser CMM equipment when it was set up,” says Horton. “The lasers weld a smaller coolant tube to the main tube, which contains helium at -237° when it is fitted at CERN. When completed, the parts are ultra-precision leak checked, using a vacuum and helium, to test the integrity of the weld and the material.”
Caparo Precision Strip
Caparo Precision Strip is an amalgam of three renowned strip steel companies bought by Caparo in 2004 – JB&S Lees, Firth Cleveland Steel Strip and Ductile Stourbridge Cold Mills. It is a high value-added, profitable company with a specialist product, processing rolled steel into more durable, valuable steel strip for mainly cutting applications such as saw blades, band saws, hole saws and industrial blades.
“As a crude summary, we take a hot rolled, commoditised steel product and convert into bespoke, highly engineered products for our customers,” says the enthusiastic managing director Eugene Harkins.
Each plant has a time-perfected speciality, in the case of JB&S Lees – which trades as the Lees brand, under Caparo, in the US where the legacy brand is strong – it is ‘product cutting’.
Grades of strip can be simplified into five main types, distinguished by their properties and end-use; MCBS, Mild strip, carbon strip, H&T, and the more advanced and valuable bimetal. This is an alloy steel backing strip welded to a high speed steel (HSS) edge wire, which together produces strip typically used for high performance band saw blades. In China – home of Precision Strip’s biggest customer – saw and blade manufacturers have skipped the lower grades and demand bimetal exclusively. Elsewhere, including the US, customers are set up for both bimetal and the well known ‘pink label’ grade products.
Precision Strip’s vale proposition is that it makes product with very little finishing required. “For example, a hand saw blade is heat treated and a finish polish applied to it,” says Harkins. The customer just has to stamp it, tooth it and stick a handle on it – no further processing or finishing needed.
It’s very highly engineered.” Caparo was attracted to this added engineering value that JB&S Lees was putting in, taking the steel outside the commodity sphere.
In terms of investment, in 2008 Precision Strip moved from a conventional welding process to a laser welder machine for bimetal production. This produces higher weld integrity at higher speed. All inspection is now conducted at every stage on the reconfigured line.
“Using our in-house NDT inspection, we were screening out defects that would otherwise have gone to the customer,” says Harkins. “Stage inspection through the line is achieving a higher level of defect detection, and rejection count is reduced.”