Graphic PLC…Are the Rumors True?
During a visit to Europe recently, I met with Rex Rozario to get to the bottom of the rumors and speculation regarding the sale of his company, Graphic PLC.
Barry Matties: I was at the recent EIPC conference and rumors were swirling that Rex has sold out; he's just sitting around and counting his money.
Rex Rozario: A good thought, a good thought.
Matties: First, why don't you just give us a quick overview of what you've done with the organization here in England.
Rozario: All right, Barry. At the last meetings we had in China and here in England we discussed the future, where we could take this industry, and our visions for the future. That was staying in with the latest technology and looking at the world situation, the labor, and economics and deciding like we did in China, to consider automation. Of course we needed to expand for that, so the first stage was to expand our business, because we couldn't push the walls where we were. Then we utilized our large car park we had on site and put in a three-story building, as you just saw and photographed. Since the last meeting we have done all that. The general thought is we are here to stay. My life has been in printed circuit boards, and I'm hoping what we are creating here will be left well after my time—still trying to be in the lead and competing in a world market.
Matties: The rumors are that you’ve sold your business.
Rozario: Not quite. We’ve had a joint venture, as you know, for a while.
Matties: With the DSG factory.
Rozario: Dongguan Somacis Graphic in China, that was ten years ago. We have a very good working relationship. Now we have to expand, and we have to expand in China, with more buildings, and we have to expand here. I think it got to the point where we either had to go out and borrow a lot of funding, or look at a more realistic situation of sale to the holding company and then buyback.
Matties: Did you at all look at buying each other out? Was that even an option? Or was the partnership so solid you decided against that?
Rozario: No, the cash we were looking at from the outside was beyond raising ourselves. We felt sale and buyback was a better option. Hence, that's what we have done. Nothing has changed. We needed some cash and so we found Quadrivio Asset Finance SpA, an asset management company, but good, and very solid. They had lots of other companies that they had purchased. The main issue was that we still control and run these companies. The idea would have been to sell 50%, but it was a full sale, and we managed to buy back 47.5%.
Matties: You sold 100% of the company then. With your facilities in China, Italy, and some joint facilities between the two of you in California, you sold it all as one unit, but then in the same day, you bought back 47.5%.
Rozario: Yes, we're still controlling our company, and we're still doing exactly what we did.
Matties: Let's talk about what you mean when you say you still control the company. Obviously, on a percentage basis you don't, but you are talking about on an operating basis. The daily operations will look the same?
Rozario: It's the same management, and everything's the same. Obviously, when we do something like this, the assets are held in a holding company, which myself and other people, from our colleagues to our shareholders, get cash in our pocket to invest as we find the latest technology and latest machinery. Because our marketplace is growing, we are very busy; both parties are busy. China has always been very steady. We are on the high end of the marketplace, where we always feel you can sell technology. If you were just doing the bread and butter stuff, it's a very competitive market, and we couldn't have the cash to invest in what we are doing now. Our marketplace can be very competitive, overheads are different, so all companies are running autonomously without any close manufacturing association.
Matties: That raises a couple of thoughts. Initially, when you're one company and run autonomously, obviously there's going to be some consolidation of functions, just because of the nature of business, maybe in purchasing, payroll, or inventory control, and that sort of thing?
Rozario: Yes, but because we are in different countries and locations, with different overheads, we have always been self-contained. That will remain. There could be advantages in purchasing, for instance. That could be world sourcing. With the pricing structure, they're all different, because they're different currencies. So we're still competitive; we'll be competing with each other like we did along the way and giving the customer an opportunity to have a choice.
Matties: It will be interesting to see how that pans out. Let’s just go back a minute. Now that you're one company, what's the name going to be?
Rozario: Technically, we are not one company as such. We are still individual companies: Graphic PLC, Somacis, and DSG, under the umbrella of the holding company Fine PCB, SpA.
Matties: The names won't change?
Rozario: Nothing changed. The management is the same and the directors are the same. The only changes are at the top—the holding company. The technology is different, and the marketplace is different.
Matties: I think once the customers recognize this, they may say, "Why is the pricing different?" You're answering part of it with currency, overhead, and geographical influences.
Rozario: We have a 10-year record of being different companies, so I think the customers are used to us, although we were partially DSG. They are used to us, and they realize they can come to us and we can get them supplied, or they can go to the others and get supplied on different contracts.
Matties: There's a difference though, from then to now. Now you're an investor, you're jointly an investor in the holding company that has interest in both. Now your interest is much stronger in the performance of Somacis as theirs is in the performance of Graphic, because they're tied to it from an equity basis.
Rozario: Yes, we had the same issue before of competition, because we had to supply DSG with orders. In a way, the competitiveness is still there, it's not the same company, and it's not one company. We work differently in our styles and our technology. That'll still run, we have to, because we're in a very competitive market. If I was a customer, and I had a large purchasing department, I could really look at reducing all that because I could come to one source, one company, and really get the same quality and approvals. As you talked about before, if you take Graphic as the most approached company, in comparison to our competitors, they're getting a quality product. If the pricing is right, we have to be.
If you look at our customer base, they are all the big names in the industry. You must ask the question: Why are they coming to us?
Matties: There's no doubt that Graphic is a high-end company, and the evidence is the number of supplier of the year awards and things like that, and the impressive customer list.
Rozario: And in China, like Honeywell, we were Supplier of the Year worldwide.
Matties: That's great; so your position is the same. You're still going to be showing up and working every day and steering the company. In terms of the customer's point of view, it's all the same, the names of facilities and each company will remain autonomous.
Rozario: My position obviously is with the holding company, and from that point of view, I was chairman here before, but obviously I'm now the director and shareholder of the major company, but the interests are still the same.
Matties: And your title here?
Rozario: It will just carry on as before.
Matties: Last year we looked at the expansion, which you mentioned a little earlier. You're well underway here with some expansion. Tell me more about what you're doing here, with the expansion, and the purpose behind that?
Rozario: To start, we have to look at plating is—a very important part in our industry. We have extended what we have and now we have to find space for the new technology we are putting in, advanced pulse plating and so forth. We need large areas for that. The effluent plant is built underground here, so we can go further afield. We need to expand all those departments. We're looking at new technology, and new technology needs space, and suddenly you find that you're one on top of the other. Obviously, from the customer's point, the capacity is getting a bit tighter now, so if you're looking at the next 10 years, we've got to plan for it now, which we're doing.
Matties: How will the new holding company allocate resources to the factories? If you're autonomous, and the money's coming from there obviously, there's going to have to be some justification.
Rozario: As you look around now, and the same for when you visited in China, each company has a budget and a spending budget as well for what's required. From that point of view, we already have got those, and we already know what's going to be spent here.
Every company has an investment budget. From that point, those are all being adhered to and looked at. It's nothing to do with capacity. The whole purpose is for the future and our standing in the global marketplace, and to be there to survive it’s something we have to do it. It would have been easy for me just to sit back, sit on my butt or play golf all day, but I don't. I’ve built this thing. I think it's in your blood, and you've just got to carry on, and we've got this stream of followers as well.
Matties: The directors will approve, and obviously they're looking out for the team, which you're a part of, and looking for ROIs.
Rozario: We obviously have a future here. For instance, we’ve got the holding company, which we are, and then the whole group situation, with Giovanni Tridenti, who is going to be the CEO, and David Pike as managing director and the rest of the people are the same. From a customer's point of view, their contact point, all those people are the same people. Nothing's changed, but we hope that we'll be in a better position to give better service, maintain our qualities, and also be very competitive.
Matties: What sort of dollars do you expect to have to invest into the organization to grow it to the levels that you hope to achieve?
Rozario: You're looking at overall? The buildings here for instance are owned by my building company as well, so that cash comes in for the building company. We have a 10-year lease here, so that won't be cost involved in our present situation, but because of our relationship with all our present suppliers and so forth, from their point of view, when anything new comes in, we are fortunate because we at least get a first look into it. It's hard to actually put a number to it, it's like an ongoing thing, and each company has put in several millions towards the investment. It also is depending on the trends, when you’re in too high we need it quickly, otherwise there's a time factor. As far as the overall spend, I don't want to put a guess to it until everything we do is actually worked out. I haven't got that figure in front of me yet.
Matties: All right, in turnover revenue, when you look at the holding company's view on all the assets in there, you're probably within the top five.
Rozario: I know that with volume producers, we can't really compare, but if you take the technology companies supplying what we do, we must be in the top three, but if you look at the world situation, possibly the top 10. Our target is $300 million, and we are getting there. That's the target for the moment. We are hoping that is the target for this year, but because you're starting mid-year in June, it'll probably be in the next financial year.
Matties: Is there anything else that you would like to add?
Rozario: At this stage, most of our customers are used to us expanding and I think our business has always been built on trust, and the services we give them are value for money. As long as we can do that, and be one step ahead of our competitors, I think that's an achievement. It's not the money any longer for all of us; we have been in it long enough. I mean, everyone needs the money. If there was $20 on the ground in front of me, would I pick it up? I certainly would. [Laughs]
Matties: Well, congratulations. This sounds exciting for you, Rex.
Rozario: Thank you very much. Obviously we feel the industry has had so many changes, and so many different things have happened in the past. We’ve had a little bit of luck as well, but we manage to stay ahead. I think the satisfaction is that, technology-wise, I don't think anyone's any better. With our set of qualities, no one does it better.
Matties: I remember you saying that. Time will tell, we'll just have to see how this all works out.
Rozario: Thank you very much. We owe a lot to our federations and people like yourselves who are constantly keeping everybody aware of what happens. I think that's all part and parcel of it. It's not us alone, it's the team behind us, and people like yourself. Thank you.
Matties: Thank you very much, Rex.