Andrew Hodgson, Chief Executive, SMD

Apr 19 2010 by Peter McCusker, The Journal

After helping run a global aerospace company Andrew Hodgson wanted a business he could "put his arms around". Now he has one, he wonders how long it will last? Peter McCusker reports.

TWO months after Andrew Hodgson was introduced to Manchester-based private equity firm Inflexion, they approached him to run a company they had recently bought on Tyneside.

The following day Hodgson accepted their offer and, since then, Wallsend-based SMD has set off on a rapid growth curve. Last year the subsea engineering specialist achieved record revenues and won the fastest-growing company in The Journal Ward Hadaway Fastest 50 annual awards .

The business is expanding rapidly into new markets, both geographically and in product terms, and is on track to achieve Inflexion’s target of trebling revenues in five years to £120m.

Hodgson explains how he came to be the head of one of the region’s beacon companies in a sector where the North East is the leading global centre of excellence.

“I was doing consultancy work in the private equity sector when I was introduced to Inflexion and they pretty much told me that I was the kind of guy they would like as CEO. Two months later they asked me if I would like to join SMD. That was on November 1, 2008 and the following day I decided it was a good thing to do,” he says.

“There are a lot of similarities between the aerospace business, where I had worked for over 10 years, and SMD. They are both companies which start at the design stage, moving on to manufacturing and then product support, with an engineering focus. I have worked in high-end engineering businesses all of my life.

“When I worked at Airbus, which was a £20bn business, I was looking after the finance department which had 800 staff. Spirit Aerosystems was likewise a £4.4bn turnover company.

“I was looking for something I could put my arms around. A business that was not hamstrung with the politics of large organisations.

“In large organisations getting decisions agreed and approved takes a lot of steps, here at SMD we can look at a problem, make a decision and move on. Our investors are very supportive of us, they do not interfere with what we are trying to do.”

SMD had been owned by the Reece family since it was founded in the 1970s and in 2008 long-time owner and managing director John Reece accepted an offer for 60% of the company from Inflexion, with Mr Reece and four other senior managers taking the remaining stake in the company.

Hodgson continues: “SMD had changed and it had grown to a size where John Reece decided it was the right time to step aside. Clearly the investors thought it had a lot of growth potential and they wanted to take the business in a different direction.”

With sales of £50m last year, and the company set to achieve £75m this year, it is on track to achieve the projected growth targets by 2012.

This will mark the fifth anniversary of the Inflexion investment and with the majority of equity investors working to a five-year time frame where does this leave SMD?

Hodgson explains: “They do not want to enter into the conversation. There are no immediate plans to sell the business. We are happy with the investment we have got here.

“But there will come a time when the business has achieved a certain size and a new owner will benefit it. Once it reaches that certain size then the next step will require a much larger level of investment. We will become very attractive to some large industry players, some global manufacturers.

“We will be a world leader in a growth market. Not only on oil and gas but also in telecommunications, renewables and the nuclear industry and the business will have the infrastructure to help SMD expand.”

Hodgson says he is “frustrated” that Inflexion has not yet opened this dialogue on the future of SMD.

“It may be 2012, possibly. But I do find it frustrating. I am the sort of person who likes to plan ahead. If we are to become part of a conglomerate, then the management team has to be ready for that.”

The descendant of five generations of Workington steelmakers, Hodgson has always had engineering in his blood.

“I always wanted to work in industry. I have always been passionate about manufacturing,” he says.