What You See Is What You Get: My Autobiography (34 page)

Harold was a bit wary. He was a cautious fellow and worried about whether the layout of the factory could accommodate this additional work. I later found out that this was typical Harold. He was one of those guys who would say, 'No, it can't be done, it's impossible,' and then a day or so later he would tell you that he'd worked out a way of doing it.

By sheer coincidence, Nick Lightowler at Comet informed me that one of their speaker manufacturers in Norway, with whom they had exclusivity on a full range of speakers, had gone bust. It must have been fate! Nick could not have known about the major commitment I'd just made. I told him I had just acquired a cabinet-making works and would like a chance of tendering for that business before he rushed off to other speaker manufacturers.

I'll fast-track this story, as there's a lot to tell. After several weeks of liaising with Comet's technical people, we got the order for a whole range of new speakers branded Solavox - a name owned by Comet.

When I look back, I can see how I managed to beat people like Wharfedale
and Kef. These manufacturers had their heads so far up their arses about promoting their own brands, they were reluctant to make speakers on an OEM basis. Comet had cleverly realised the massive margins that could be made on speakers and, to be fair to them, they brokered a great deal with me. When I saw the retail prices they were selling these speakers for, they were doing pretty well for themselves too, earning much more margin than they would have ever got using Kef or Wharfedale. It was a win-win situation.

Often, people who bought hi-fi amplifiers or tuners would fix on the brand they wanted, then leave it up to the retailer to suggest a pair of speakers. Naturally, Comet's salesmen strongly recommended Solavox.

Harold, Mick and Norman must have thought I was a magician. Within weeks, they had to set up another production line to make these new speakers, which had fancy front grilles and metal trims, all stuff that was completely alien to their existing skill sets. Nevertheless, the staff got into the spirit of Amstrad. Previously, they'd been treated as faceless workers by their paymasters. Now they were dealing directly with the boss in a more exciting way, getting involved with me on product design, costings, sizes and so on.

The process of making speaker cabinets in those days was rather cumbersome. Most were made of high-quality chipboard and had teak veneer glued onto the outside, which would then go through a series of processes such as staining and polishing. It was real craftsmanship. But important changes were afoot in speaker manufacture.

When I was in Taiwan, I came across suppliers of a vinyl material on which was printed a wood-grain effect in teak, walnut or oak. It was very realistic, yet it was just plastic sheeting. The only process required was to lay the vinyl on the chipboard. The beauty of it was that when you'd made a V-groove in the chipboard, you were even able to fold the wood with the elasticity of the vinyl and achieve a perfect mitred corner - much better than you could ever get by gluing pieces of veneered wood together.

The problem with vinyl however was
psychological.
I spoke to Nick Lightowler and showed him some samples of a speaker we'd assembled using vinyl, pointing out to him the consistency of the grain. He was easy-going and agreed with me that the cabinet was much cleaner and that most consumers wouldn't know the difference. Regrettably, both Gerry Mason and his technical manager had a different view. They wanted real teak veneer cabinets, simply because that was the tradition. I had also upset Comet's technical manager, Bill Coupland, by arguing with him on the phone over this matter and he had gone into belligerent mode and was not budging from his position. I needed to move fast before the whole thing went tits up.

I loaded the back of my small plane with some sample cabinets, flew from Stapleford to Beverley Airfield in Hull, got an audience with Gerry and Bill and showed them the various shades I could offer and the beautiful consistency of the graining.

I convinced Bill that, from a technical point of view, the sound quality would not be compromised - a fact he could not deny. He could see I was no mug and knew what I was talking about. It was important to win this point in front of Gerry, as it then became just a cosmetic issue.

Gerry piped up that the process surely must be much cheaper than veneering and he wanted a reduction in price. Here was some light at the end of the tunnel - another business lesson to learn. Let your opponent win
something.
There I was, banging my point home like a sledgehammer, when I realised that it's no good boxing people into a corner; if you really want to succeed, you need to let them win a little and leave them with a nice way out.

I went into reluctant mode and moaned, 'I'll be losing money,' and all that stuff. I grudgingly agreed to reduce the price by PS5 a pair for the largest speakers, PS3 for the mid-size and PS2 for the smallest. They had won something and they agreed to the deal. I was at the races! Vinyl was the way forward and we had made a bold move in being the first to produce hi-fi speakers with vinyl-covered cabinets instead of veneer - something that the rest of the industry rapidly caught on to. I gave the good news to Harold and told him he needed to sharpen his pencil and get the costs down as I'd given away some of our margin.

The vinyl manufacturer in Taiwan had never sold vinyl in volume before in the UK, so he was hungry to get it off the ground. I said to Harold, 'Let me loose on this Taiwanese mob - I'll have a chat with them.'

With a bit of nifty work, I managed to get the vinyl supplier to provide the special machinery required free of charge to our chipboard supplier, on the basis that it was an investment for them. In return, I convinced our chipboard supplier not to charge us for the additional labour involved in gluing the vinyl onto the chipboard; just to charge for the chipboard and the vinyl. It was another win-win situation - I'd done the chipboard supplier a big favour and in time he was able to expand his business and supply everyone and his brother with vinyl-laminated chipboard.

*

My limited company was formed on 8 December 1968. By June 1979, turnover had risen to PS5.6 million, with profits of PS908,311.

I didn't realise it at the time, but behind the scenes Tim
Holland-Bosworth and his team had been beavering away investigating Amstrad independently. They couldn't just take my word on the company's performance because the owner of a company will obviously sing its praises. I always say that you have to take whatever claim is being made, divide it by two and take away the first number you thought of, and then maybe you'll get to the
real
situation. People are passionate about their businesses and tend to overlook certain issues which others may deem negative. Kleinwort Benson made sure that I had no skeletons in my cupboard, such as a criminal record or problems with the Inland Revenue. Just before Christmas 1979, Tim called me to say that he felt it was time for us to explore the possibilities of a public flotation. It was an exciting way to end the year.

A Towering Success

1980-3

In January 1980 I got my first taste of City life and City people. The boy from Clapton went to the headquarters of Kleinwort Benson and sat in a boardroom with a load of posh-talking bankers to discuss the possibility of floating Amstrad on the stock market.

They were discussing
my
company, but the terminology that was flying across the table was totally alien to me. Terms such as P/E (price/earnings) floated around. The last time I'd heard the term P.E. was at school, where it had stood for physical exercise. Imagine me sitting there and being asked questions like, 'What do you think your P/E should be?' I had no idea.

One of my better traits is that I'm open and honest. I remember saying to these people, 'I'm a simple man from Hackney and, to be perfectly honest, I am in your hands. I haven't got a clue what you're talking about, but I'm a very, very fast learner. So if you wouldn't mind, perhaps you could explain things to me in simple terms. The things you're talking about may be common knowledge to you, but they're completely foreign to me.'

I think they found this refreshing and they certainly seemed to enjoy going into educational mode, debating amongst themselves the best way to explain things such as P/E to me, the thicko. It was quite amusing watching them jockeying for position to see who was best at putting these things into layman's terms.

We decided to go forward and draft a prospectus or 'offer document'. Tim Holland-Bosworth was cautious, telling me that the market was vulnerable, and he made it perfectly clear that the effort which was about to be expended on this exercise may come to nothing, as they might not be able to get the offer away. I didn't really understand what he was banging on about, but agreed to go forward.

Apparently, the first thing I needed to do was clean up the limited
company. At the time, the only directors were Ann and I. Tim explained that we needed to have a proper board structure. He suggested we keep it simple, but as a minimum we would have to have a financial director. I duly appointed Jim Rice as financial director and Ann resigned. We also needed to assemble a team of advisers. As I was completely out of my depth in this area, Kleinwort Benson arranged a fashion parade of advisers for me. To cut a long story short, I agreed on accountants Touche Ross (now known as Deloitte), lawyers Herbert Smith and stockbrokers Greenwell.

The adviser from Touche Ross was Mr Michael Middlemas, a very serious professional who acted not only on the flotation committee, but also as an independent financial adviser to Amstrad. Herbert Smith's team was made up of Edward Walker-Arnott, a well-respected corporate lawyer who went on to become the senior partner, and his sidekick, one Mrs Margaret Mountford. Greenwell's representative was Mr Howard Miles.

Margaret Mountford, who was then in her late twenties, came across as a real fiery character, very serious and exact - you could see she knew her stuff. She was short and very smartly dressed, as one would expect a City lawyer to be. Howard Miles was another typical City gent, quite tall and slim and decked out in standard pin-striped attire.

We all got together on a regular basis for what were called 'drafting meetings'. After the fourth or fifth meeting, a draft document appeared which would eventually be sent out to the public if and when the flotation happened.

Hours and hours were spent over many days drafting and redrafting this document. This continued throughout January, February and March. Between meetings, Tim Holland-Bosworth would come out to Garman Road to investigate the new products we were developing. He also wanted to visit the woodworking assembly factory at Stock Road. In fact, Amstrad was expanding at such a rate, we were bursting at the seams at Stock Road, so we decided to take a bigger factory on the Eastwood Industrial Estate in Southend. Tim wanted to see this place too. Kleinwort Benson was putting their name and reputation behind the offer for sale, so they had to make sure they had a great understanding of the company. In those days, reputation was of prime importance. The institutional shareholders' trust was based upon recommendations from bankers such as Kleinwort Benson.

On one occasion, Jim Rice and I were given a tutorial by Edward Walker-Arnott and Tim Holland-Bosworth about 'the yellow book - the stock market rules. We were warned about things such as insider trading and how the financial figures and results of the company must always be kept secret,
and how directors had to ensure complete openness and independence. They made their point very well. It really registered with me that confidentiality and adherence to the yellow book was a matter that had to be treated very seriously.

It suddenly occurred to me one day, while sitting in the luxurious offices of Kleinwort Benson, enjoying the wonderful sandwich lunch that was always served at these meetings, that somewhere along the line there must be some costs ticking up. There must be something in it for all these people. Was I going to get a whacking great big bill? How stupid of me only to realise this after a couple of months! I had the audacity to raise the subject, which caused a few red faces around the table. Michael Middlemas told me that the fees for the advice given by Herbert Smith, Touche Ross, Greenwell and Kleinwort Benson would have to be paid for by Amstrad, and they would be in the order of a quarter of a million pounds - at least!

I went mad at him, quite unfairly. He couldn't understand why I was so angry. Obviously these people wanted paying, but I had stupidly overlooked this. I ranted on, 'There is no way I'm going to pay a quarter of a million pounds with no guarantee that the company will be floated.'

Moreover, no one had discussed with me how much money I was going to get, or how many shares I would have to sell, or even the value of the company in the market. Talk about quick learner! Once the penny had dropped, I was on the case and made it quite clear that these drafting meetings should be cut down to a minimum, so that costs would not escalate.

In March 1980, I was informed that we needed to pad out the board a little, with what were known as non-executive directors. These were independent directors who would sit on the board and represent external shareholders, making sure the company was run correctly. They asked if I had any particular person in mind. The only one I could think of was Neville Shearman, the senior partner of Mordant Latham, my accountants and auditors. Kleinwort Benson were quite happy to accept him, but suggested that we also needed another independent director, whom they would find from the marketplace.