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Sector spotlight: Industrials

Just in time: Paul Lester CBE talks about change and opportunities.                             

Paul Lester holds an impressive array of chair positions, including that of FTSE 250 manufacturer Essentra and Chair of McCarthy & Stone the retirement housing developer. In addition, Paul is Chair of roof tile specialist Marley, which has been backed by Inflexion since 2019. Here he shares his thoughts on the opportunities for the industrials sector in 2021.

Over three decades working in the industrials sector means Paul Lester knows a lot about the space. Despite a myriad of experiences across various businesses, he is as quick as he is confident about what he deems the biggest innovation to the industry in that time: just-in-time (JIT) manufacturing and efficiency improvements on the shop floor.

“You can actually sit in an office and see the efficiency as you can now control things remotely,” he enthuses. And this segways nicely into what has underpinned the JIT advances – and so many others across various sectors.

The digitisation of age-old manufacturing businesses is good for customers too. Marley, a UK-based provider of concrete and clay roofing tiles, was carved out of Etex in August 2019 in a buyout led by Inflexion prior to embarking on a journey of digital enhancement. In 2020, Paul was selected from Inflexion’s network to be chair, and Marley went live with new processing automation for orders. The new digital platform enables customers to self-serve with a range of design, specification and installation tools. “The results have been very impressive, making it easier for customers to place and track orders,” Paul says, adding that such digitisation is being rolled out in other industrials businesses, including Essentra, a Global manufacturing business he has chaired since 2015.

Challenges of change

Of course big change costs big money, with Paul saying some digitisation projects he’s overseen have costs tens of millions. “These are substantial investments and not for the faint-hearted, and they tend to go over budget. But they pay off, and the investment is clearly worthwhile once it’s up and running.”

Another change he’s seen is diversity in the workforce. He is eager to see more of this, and hints that flexible working catalysed by the pandemic may have helped provide opportunities for some. “Saying you want to see people in the office is very old-fashioned and shows you don’t have trust; 2020 really debunked the myth that working from home is unproductive.”

Paul is clear that Brexit will cause short- and medium-term headaches for the industry, recalling a recent trip to Southampton Docks where he was greeted by lorries “all stacked up and unable to get onto the premises.” He is hopeful the situation will improve eventually but concedes it will be tricky – and costly – until then. He cites eye-wateringly expensive investments one of his businesses had to make to build a new warehouse in Germany operated by robots, and additional investment in the inventory to minimise lead time from the UK.

Turning challenges into digital opportunities

With market discrepancies come opportunity and Paul is optimistic the longer term may bring some. He talks to the housebuilding sector, given his experience here: “A lot of products have to come from Europe to build a house, and if they have long lead times now after Brexit, the build time will increase. A lot of labour also comes from Europe; McCarthy & Stone use a blend of local and European workers, though studies point to a labour shortage as a result of many of the European workers leaving or choosing not to come over.

The economic fallout of 2020 may also catalyse opportunity, as the government acts to pump life into a sluggish economy ahead of a general election in four years. “There will be real pressure to get the economy going, and it will probably mean investing a lot into infrastructure and housing.”

And this will all feed into increasing demand for technological enhancement. “Digital will continue to be a massive part of changing the way we work in factories and offices as well as how we interface with our customers. Investments made today will need to be upgraded again in a few years as the tech giants continue to build better techniques and do so more quickly. The opportunity to continue to invest and innovate is really there.”  Indeed, if firms act now, they may be just in time.

                                            

The future is bright and powered by solar

 

Much government-provided investment may head towards sustainability. “Anything for housing which reduces traditional energy use and maximises green energy will be huge,” Paul stresses this by pointing out there is insufficient electricity to keep the lights on in the UK, let alone power the glut of electric vehicles being made.

 

“Builders will be under pressure to build more sustainable homes in the approach to 2050 – it’s a tough goal, but it creates opportunities.” He explains a solar system Marley are marketing has been slow to materialise but is showing the potential to really take off.

 

“Sustainability is on the agenda of every business I’m involved in. It is the right and sensible thing to do for the planet, as well as a big business opportunity. If you haven’t got a sustainability programme led from the top, you’re going to fall behind pretty dramatically. It affects the value of a business when it comes time to sell, so savvy private equity firms embrace it. Many public companies have been acting on it as a result of pressure from their shareholders for the past few years.”

 

                                         

The Inflexion team has significant experience in supporting the growth of a broad range of companies within the Industrials sector, with current investments including Aspen Pumps, Huws Gray, Marley and Xtrac. All have access to Inflexion’s value acceleration levers: digital enhancement, international expansion, M&A, commercial effectiveness and talent management.

Contact

Sarah Gestetner

Communications and Marketing Director

T. +44 (0)20 7487 9820

E. sarah.gestetner@inflexion.com

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