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Contractor Profile: Denco moves up the league

It is very rare, these days, to find someone who has literally worked their way from the shop floor to the boardroom. Mark Shutler is a member of a dying breed
Contractor Profile: Denco moves up the league
TWO decades after he started as an apprentice on the shop floor, Mark Shutler led a management buy-out of the only company he has ever worked for – air conditioning manufacturer and contractor Denco – and this year sold the Hereford-based business to German engineering giant GEA.

Now he is in charge of a company that is part of a O4.5billion global multi-national with his sights on an expanding world market.

Mark, along with the rest of Denco’s long-standing management team, will remain in place and they are all seen as “a key part of the group’s future”, according to Dr Frank Voßloh, a board director of the GEA’s Air Treatment Division of which Denco is now part.

“We are delighted to welcome them into our organisation,” he said at the time of the acquisition in October.

Denco directors were equally enthusiastic about the arrangement, hailing it as “the next phase” for the company that has been producing highly engineered solutions since 1944.

GEA said it had long been an admirer of Denco’s engineering achievements adding that its close control air conditioning products and 4Service after sales and maintenance division would be particularly strong additions to the GEA portfolio.

4Service consists of more than 100 field-based service and maintenance engineers covering four product areas – heating, ventilation, air conditioning and refrigeration – who will respond to any customer call within four hours.

These complement Denco’s 60-strong installation and commissioning engineers, who work on all types of air conditioning, including the company’s own range of close control and underfloor systems.

Denco engineers will now also be working with the full range of GEA products, including air handling units, chillers and fan coils.

“This is a very exciting development for everyone at Denco,” says Mark, who became managing director in 1999 and led the management buy-out, backed by Lloyds TSB Development Capital (LDC), a year later. “We haven’t had any negative comments from our staff because they too recognise this as a fantastic opportunity. GEA is a massive, global player with a strong engineering pedigree and with a complementary range of products. We will be a perfect fit within the GEA organisation.

“This is one of those rare cases where one and one makes three, rather than one-and-a-half as in many mergers and acquisitions. There is absolutely no overlap and no conflict – we are totally complementary.”

Full potential

GEA Air Treatment has no other direct presence in the UK so Denco effectively becomes its sales and technical support centre here, while the Denco close control air conditioning range will be added to GEA’s Europe-wide product portfolio. Denco, which had a turnover of £33 million (EUR 48m) in 2005 and employs 380 people, also adds its two production facilities in Hereford and Istanbul, Turkey to the seven already operated by GEA Air Treatment.

The Denco brand will remain, with Denco styled as “part of the GEA Group”.

“GEA’s widespread international sales network will give us the opportunity to act as a strong player across many European markets,” Mark believes. “It clearly has the resources and the desire to take Denco onto the next level and to help us realise our full potential as a truly international manufacturing and building services business.”

GEA, which stands for Global Engineering Alliance, reported earnings before interest and tax of R209.4million in 2005 and employs 18,500 people. It is primarily involved in mechanical and plant engineering for specialist applications including the pharmaceutical, food and petrochemical industries.

“It is especially the close control systems that will grant GEA market access to the operators of computer and telecom centres in Europe,” adds Dr Hugo Blaum, president of GEA Air Treatment Division. “We have admired Denco’s dedication to engineering excellence for many years and we are very pleased that our negotiations with Mark and his team have had a positive outcome.”

Andy Lyndon, investment director at LDC, believes the acquisition was a logical next step for Denco: “We like to back high quality management teams and our investment in Denco exemplifies that approach. The standards they have set since the buy-out from AMEC should stand them in good stead for the next stage in their development as part of GEA.”

He added Denco had made “excellent progress” and that LDC, which has sold its shareholding to GEA, wished them well for the future.

Purpose built

Part of that progress was the decision the company made to leave its original home opposite Hereford racecourse and move to purpose-built facilities on the outskirts of the city earlier this year.

“Our national and overseas expansion means we were crying out for a truly world class centre of excellence built to our own specification around which the rest of the company could develop,” says Mark.

“We needed to move but we were determined to remain true to our heritage and our roots as a major employer in the Hereford area.

Many of our staff have been with us for their entire working lives so leaving Holmer Road was a wrench but everyone accepted this move was essential to maintain our momentum. The new overall floor area is not dissimilar to that of our previous home but this new site is better planned and has more room for expansion.”

That room couldn’t have come at a better time with the extended product range offered by GEA.

The new building has been aptly named Dolphin House in honour of the strong branding icon associated with Denco’s successful and award winning marketing campaign signifying its commitment to ecological and sustainable principles. The manufacturing, R&D and customer test facilities are located in the equally appropriately named “the air conditioning factory” on the same site.

Dolphin House is also a living example of what Denco’s air conditioning systems and designs can bring to offices all over the world. The ground floor operations area is served by a Denco Officecool underfloor system in a floor void. The first floor corporate area benefits from a more traditional ceiling void ducted VRV system supplied by Daikin.

Hands on

After 27 years with the company, Mark has been part of huge changes, but his passion for engineering remains undimmed and this remains the core of Denco.

Like many who come into the engineering sector, Mark found the formal education system something of a turn-off.

“Education was never going to be my strong point, so I went to the careers advisor and asked him to steer me away from it,” says Mark, and it was hands-on work, which appealed.

“I was 17 when I joined an engineering course at the local college – part of what was the Engineering Industrial Training Board, supported by Denco. After 12 months sponsored at college, I started a four-year placement at Denco. They sent me into specialist training linked to the role. This appealed to me far more than general education.” Mark successfully completed an HND level BTEC at Bath in air conditioning and refrigeration. He was also able to try work in different parts of the company and at the end of four years’ training; he felt he had found his focus.

“I went for the front-line customer facing role using my engineering skills because without the customer, we don’t have a business. And I wanted to be in touch with where the business was going, by seeing it from the beginning.”

He may have stayed with the same company, but there has been no shortage of new experiences and Denco has allowed him to see the world including, in 1993, being based in Hong Kong establishing a South East Asian strategy. “It was a real eye-opener, from a personal and business point of view. It was a good learning curve and a career shaping experience.”

Passionate

When Mark became managing director of Denco, then owner AMEC was looking to dispose of non-core activities, including manufacturing. The Denco management team was given the opportunity to buy the company.

“I took the view that, if, as an officer of the business, you believe it’s a good business, and you are passionate about the company, then you should want the opportunity to buy it. An officer of the business who doesn’t want it when given the chance must question why they are in that position.”

Mark has dedicated himself to carrying the company forward, but he always recognised there would come a point when it would need a further boost.

“Just after the management buy-out, I recall a comment made by my father that ‘Nothing is forever’ which came back to me six years later when we started discussions with GEA. We had reached a certain point in our growth curve, but were in danger of flat lining and needed to take that next step to move on again.

“We are extremely pleased to have found a partner that understands our business and recognises the value of the Denco brand. GEA gives us the potential to double the size of the company in the coming years and that is now our aim.”

GEA also sees the value in Denco’s use of the Dolphin branding and that will continue to play a key role.

“I have always been critical of our industry in that we don’t promote ourselves well, which is partly why we struggle to attract people. Investment in marketing is often overlooked.

“We came up with an identity which takes us away from pictures of products, but focuses on an icon people can relate to. I accept that the link with the dolphin is thin – it’s whisper quiet, user friendly and energy efficient – but it’s plausible!”

Sexy business

He places great emphasis on marketing: “If you worked for a car company and suggested you were going to remove the marketing budget, you wouldn’t last three months because they would insist on 6% to 8% of turnover on marketing. Our industry doesn’t do that.

“It’s the same as the training budget, and the two are linked. If more money was spent on marketing it would attract more people into the industry because people would perceive it as a better industry than perhaps they do now.”

That investment in people over the years has paid huge dividends for Denco.

“I’m just one of many staff members who has been at Denco for over 25 years,” says Mark. “That is one of our successes. Continuity of employment is important to our clients and us. Of our five board directors, two started here as apprentices and three have been with the company for more than 25 years. I am very fortunate to have such an excellent team of like-minded management around me.

“If we are to build and grow it will be directly proportional to the good people we employ. We need to get more of these people into building services and our need is even more urgent now because of the GEA partnership.

“That means making our business sexy. We need to demonstrate good use of IT; so young people don’t see working in building services engineering as taking a step back in time. I want young people to see us as a forward-looking company and with all the opportunities now opened up by the climate change agenda and in our new guise as part of GEA, we are in a great position to achieve that.

“However, we won’t take on just anyone. I am always looking for that X factor, which only people who genuinely want to make a difference have.”

The name and the management remains the same but a new chapter in the history of Denco has clearly just started.
1 December 2006

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