Darryl Danielli How did the company start?

Mike Phillips Jason Auluk [joint owner and commercial director] and myself formed the company in 1991. We had met at Capital Print & Display, which went bust a few years after we left.

No connection I’m sure, what were you doing before that?

I was at Augustus Martin in estimating, then went to Capital as a salesman and I met Jason there in the late 1980s. We recognised that within a year or so we had doubled the size of the Capital business and we started to think that maybe we would be better off doing it ourselves. So we left and set up Delta.

That must have been in interesting time at Capital, I seem to remember it had a fairly colourful history?

[Laughs] It was very strange, I won’t go into it now because that’s a separate story, but the owner of the company was, let’s say, an interesting character and various people tried to stop us setting up Delta with both legal and illegal methods.

Enough said. Were you quite senior in sales at the business back then?

I was the only sales person; it was quite a small company, but through the experience I had gained at Augustus Martin I was very successful at Capital. We started using litho machines for point-of-sale campaigns, which at that time, as far as I know, hadn’t been done before because industry thinking was that instore and window campaigns had to be silk screen, because of the light fastness. So we worked out that we could produce them litho just by using inks with good lightfast characteristics. It was a bit like printing money for a while, because we could produce the work for half the price so we had a massive influx of work and I was getting commission on that.

Which must have helped when you were setting up Delta.

Correct.

That must have rubbed a bit of salt into Capital’s wounds?

It was probably a little painful for them, but they had made good money out of us. But it was a difficult start for Delta, involving lawyers and the police, but we never looked back. We had six staff including the two directors, but in the first year we turned over nearly £1m.

Not bad for a start-up.

I probably make it sound easier than it was. Our biggest client was Palace Pictures, which spent £70,000 and then duly went bust about four months after we started – we didn’t get a penny. We almost went to the wall, so it was an interesting 12 months what with that and our previous employer trying everything they could to shut us down.

The first year was a steep learning curve then?

It was difficult, but we went cap in hand to our suppliers and employees and managed to squeak through.

Are any of those original six staff still with you?

Yes, me and Jason, of course, and two or three of the people that were with us in the first year are still here.

But clearly a lot of other changes?

Well, in some senses Delta means change or variation, and our strapline is ‘Delta means change’, you can see that through the years. We were the first company to print large-format litho onto plastics back in the day using conventional inks, which was a real pain. And then we were the first to have a large-format UV litho press, a retro-fit Roland. And a few years later we were the first to have two of them. So even then we had cutting-edge technology.

So it was a period of rapid growth?

Every year we grew by about 20%-30%. It has obviously slowed down a bit now because of the size we are, but I think there might be some step changes coming up.

Back to basics though, is the business still owned by you and Jason?

Yes, 50-50.

How does that partnership work?

I do all the work and he gets half the money [laughs]. We work very well together – right from the start there was a very natural separation of duties. Jason is more the internal production and finance person, whereas I’m more the external sales – and we’ve kept those sort of roles, because it works very well.

I know that a lot of the successful print partnerships work because the partners keep their business and social lives separate; what’s your approach?

Jason and I did socialise for a long time, and lived in each others’ pockets, but we found that we were becoming like a really grumpy married couple.

I guess in the early days you were working 20-hour days, so it was impossible not to get under each others feet?

Exactly, we were married once, but while we’re not divorced, we’re seeing other people now.

Like your wives, presumably. But I guess your skills complement each other?

They do, it’s a great working relationship, that’s why it’s lasted 24 years. I know what Jason would say in most situations and he’s the same with me. 

Has the rest of the management team grown as the business has developed?

Our board now is seven strong.

Is that pretty lean for a company of your size?

I think it’s about right, we’re very operationally focused. But we can pull more people from the business as required.

That must be a challenge though, the business is your and Jason’s baby, so ceding a little control must be tough?

If I had a great CEO and could step down tomorrow, I probably would. Then I would just work in an advisory way, driving strategy – I have a no ego about being CEO.

I didn’t mean ego, I just meant you both built this £66m business, so it must be personal?

It is an issue for any business owner or manager regardless of size, but you soon realise that it would be impossible for your management team to do their job if you’re constantly sticking your nose in. I think I’m a megalomaniac in some ways – any business owner probably is, as I sit here stroking my cat...

But it’s not just Delta any more is it?

No, about 10 years ago we launched MPD and then about five years ago we launched Lick Creative.

Do they have standalone clients in those parts of the business or is it all common clients?

It’s a mixture. We have one of the top four grocers that works with Lick, but not Delta for example.

Not Asda presumably?

Asda works with Delta, but not so much with Lick – although we’re working on something at the moment. Lick is a very much a technology-driven agency proposition, but it complements what we’re doing in print; we don’t see new technologies as a threat – quite the opposite.

It’s interesting that you still keep them [Lick and MPD] as separate brands. There seems to be a trend now to bring the different offerings under one brand?

I think clients want that sort of consolidated costing, but from our point of view there is the challenge of keeping the value in these extra services, because if a client is spending X million pounds with you in print, say, and they’re looking at spending tens of thousands on an online project, somewhere along the line they are going to try to use the print spend as leverage and get a heavy discount on the online project, assuming they want to pay for it at all. 

And it becomes a loss leader for the main print business in effect?

Exactly, and that’s precisely what MPD and Lick are not – they have their own value propositions to clients, they’re separate limited companies, they’re just part of the group. If clients use all three companies then that’s the holy grail for us.

And I suppose Lick and MPD also drive business to the print side?

It’s interesting isn’t it, because print is the fundemantal service that we offer, but it’s often almost a given. It’s the other things, that clients might not even buy: sound chips, LEDs or whatever technology solution it might be, or audit and compliance systems that get people excited. The systems side is gaining a lot of traction though. We have good system here, something called Workstream, it does everything from artwork creation, through to campaign management, store ordering, library, job tracking, everything is on the system and it’s online, dashboarded to the client and, if appropriate, individual stores too. It’s a real USP.

Back to the growth story, what have been the milestones?

Setting up MPD was one. It was set up for the film industry, because Disney wanted us to distribute their marketing materials and also their film cans. Over time that has migrated back into retail and brands as well as the film industry, so it serves all of our clients that need a bespoke distribution solution.

How different is it today?

Massively; it used to be about 35mm film cans, but that’s almost disappeared in the past two years. It’s now on hard drives and we do the replications here from masters and send them around the country. But that’s more of a stop-gap, because ultimately it will be full digital delivery either through the cloud or satellite or IP delivery. We think it will be cloud-based delivery, so we’ve invested heavily in that and have just launched our first cloud-delivered movie a few weeks ago. 

I’m guessing you’re not going to tell me the name of the movie?

Nope.

But security must be a problem?

The files are fully coded and the end coding of the master file is unlocked with a key held at the cinema to unscramble the movie. We own another company in the West End, Soho Digital, and they do a lot of that of that work for us.

Is that a company you bought?

Yes, a couple of years ago now.

Have you bought many companies?

That was one, we also bought a programming business that wrote the programming for Workstream and we’re looking at acquisitions now actually. A lot of our clients want us to do what we do here further afield. We offer our services across Europe and also domestically in the States, and some global campaigns, but what clients want is for us to have set-ups in India, Russia, the Far East, etc. If we are to achieve that it’ll be through acquisitions, not organic growth.

Are you talking to people already about that?

We are; we’re looking at various possible acquisitions and talking to various larger groups as well.

Internationally rather than the UK?

It’s more international.

You’ve got a US operation already though?

We have a small set-up in LA, a fairly large set-up in Dublin, then there’s Scotland and Leeds, and of course the sites here in London. We then have various supplier contracts across Europe for production and installs.

Where you manage clients’ European projects?

That’s right. It’s just taking the model further afield, with digital technology and Workstream driving it. Then clients can have their cake and eat it where they can have the direct supply, quality, innovation and cost-out model. Sometimes we print centrally and distribute and sometimes we print locally – it just depends on what makes sense for the project. The closest model is the big print managers, because they can also offer that kind of global reach, but then it might be through myriad suppliers and the client loses control on quality.

You arguably have an advantage in that you work in vertical markets rather than trying to be all things to all clients; what’s the split sector wise?

About 60% retail, 25% brand and 15% entertainment.

Are any of those more profitable than others?

Actually, as sectors probably not.

Which do you see as the key growth area then?

I think brand and retail, because the world is getting smaller and smaller and big brands and retailers want the same quality, service, reporting and price and ROI across all their locations. Through MPD we close the loop, because we offer audit and compliance; we’ll make sure something has worked and if for any reason it hasn’t, we’ll feed that back, take it on board and make sure it works next time. We’re trying to work further upstream with clients too so that we can have access to sales numbers in terms of ROI to ensure something has worked well.

Are clients open with that kind of information?

Generally, not at all. But we’re getting there and we have some that are and it’s starting to become more available through the data and the systems that are out there now and as result of client relationships become partnerships.

Back to the business though, what have been the challenging times?

Well, I’ve already mentioned some of the early ones. Of late, moving in to this place was a big one, because we moved in at the end of 2011 and we also won the Asda contract the same year. The site was bigger than we needed, we were turning over about £40m at the time.

And you kept the original site too?

Yes, we still run Walthamstow, which we had purpose built about 15 years ago. That’s where most of the presses are and this new one is where the finishing and logistics are. But back then we were looking for more space, just not this much more space. But we viewed this because it was a good price, because it had been vacant since it had been built four years previously. But the fact it was bigger than we needed and the correspondingly higher rates meant we thought it probably wasn’t right for us. We were just starting the Asda tender at the time, but the expansion and the tender were unconnected. I brought my dad to see it and he just said go for it, so we did. Then about three months later we got the green light from Asda and it was perfect, because it was a huge win. In the first week we had to take over their library, which was around 1,500 pallets. So while we thought it would take three or four years to fill this place, we did it in around three or four months. 

But a big move like that can be the end of a company, even if before they were doing well and growing. Taking on a big site is just too much for their short-term cashflow.

Well, it was exactly that for us. We had a very difficult 2012 because we had to spend millions of pounds of cash on here, in terms of getting the site right, strengthening floors, putting in offices, sorting out power. We then spent a lot of money landing this huge client, we had to TUPE across 77 people for instance, we had to set up an office in Leeds for production prototyping – so there was a big spend there. Looking back, perhaps we were slightly naive financially. It was all doable, but if we had been slightly more financially astute, for example if we’d had the CFO we have now, we wouldn’t have been in such a sticky position.

Or if the move was six months earlier, or Asda six months later?

Of course, that would have been no problem at all. But with the bottleneck of the move and the fact that we were so busy after landing the Asda business, we probably didn’t have the eyes on the numbers in the way we probably should have. This all happened at a time when banks weren’t really lending either, so we were quite close to being in serious trouble. But we managed to get through it, by the team pulling together, lots of hard work and, put it this way, I know my local MPs well now and I know the Department for Business, Innovation and Skills well too. Let’s just say it was interesting time.

What did you learn from it?

Be more focused on the numbers and the cashflow. I never went to business school, I haven’t got a degree, I’ve learned more by the seat of my pants and I’ve done okay by that, but I learned that a business lives and dies on cashflow, not just profit.

It must have been a scary time?

It was, but it seems a very long time ago now. Through 2010 to 2013 we went through a massive period of growth, we essentially doubled in size. That got us recognised as one of the Top 50 growing SMEs by Deloitte, which meant I got invited to Number 10 to talk about how we had done it.

You probably had some nicer conversations with banks after that too?

Once we had got through 2012. Yes, the banks are very nice to us now.

Are you still with the same bank you were with in 2012?

No, we dropped them and it was our choice.

You mentioned 2010 to 2013 was a period of high growth, but you’ve hinted that more is on the cards, is that going to be just driven by M&A or partnerships too?

A bit of both. I would imagine that in the next five years we will be part of a group that will be £150m-£200m that will be servicing global clients, we have a lot of clients that ask to replicate what we do here and it’s hard to say no.

Are your potential acquisition targets on a similar scale and offering to you then?

We’re looking for companies that are strong on digital.

What about being acquired yourselves though?

It works both ways – we want to be part of a bigger group. People do approach us regularly and we’re also looking at companies to buy. In terms of the future, we’re looking to be part of a bigger group. Now, if we’re the ‘senior partner’ or someone else is, then we’ll see how that goes.

So a merger is a possibility.

It’s one option.

But in terms of Delta leading the group, would it be private equity backed?

We’ve had conversations, there’s not a problem raising funds because the business is doing very well. We’re looking at an agency deal now for example, to add to Lick, which might happen in the next few months.

In terms of you personally, has anyone had a big influence on you career wise?

I was fairly naive when I started at Augustus Martin, I sort if fell into the print industry. I had a summer job at china manufacturer, Capital China, in the Midlands and I was a litho printer there. I then worked at a company in Watford that did the under-surface printing for touchscreens. I was there a few months and then applied for a job at Augustus Martin, luckily I got the job because the old company found out and sacked me for applying for another job. I was at Augustus for seven years and really learned my trade there.

Anyone in particular have an impact on you?

I owe a lot to Lascelle Barrow. I hadn’t been there long and one day he called me in and told me that basically my supervisor wanted to sack me.

Why?

I worked in estimating, probably because I had a maths ‘O’ level, but they couldn’t believe I didn’t even know what the A1 format was, and I didn’t because I had never come across it. But Lascelle supported me and gave me another chance.

Do you come up against Augustus much in pitches?

We do, not a tremendous amount, but there are only a handful of companies of our scale that can take on the sort of campaigns that we do. Augustus is certainly one of them.

You mentioned your challenges earlier, what about those facing the industry generally?

I think our sector generally has been quite poor on the management side, although it’s much better now. In the old days business owners were printers that had just ‘done good’ – but there was a lack of professional, articulate business leaders. I think that’s changed now. Proving ROI is another key challenge for the entire industry, all budgets are being squeezed, and it’s a cliché but if you can’t prove you’re good value then you’re not going to be around for long.

And industry threats?

Standing still. For years everyone has been saying that print is dead; it’s as alive and kicking as it ever was. We grew the business 10% last year and that was the core business: print. 

You mentioned earlier that 80% of your work is now contractual, but looking at some the brands you work with, presumably that means you are heavily reliant on some big contracts?

We don’t have any clients that put more than 30% through our business.

But that’s still big.

It is compared to some of our peers though it’s not bad – some have clients that are 50%. You’re right though, in an ideal world we wouldn’t have anyone that is more than, say, 20%, but as we grow that will happen.

Again, looking at your client list, you’re dealing with solid brands, but the retail market has been through a fairly torrid time.

We’ve only had one horrible bad debt and that was Blacks Leisure Group. It was during the crunch, around 2010, and that was to the tune of £500,000 – so that hurt.

Ouch.

They were mid-sized and we were regularly talking to the managing director and marketing director and they gave us confidence that it would be able to pay its way. But on that occasion we got it wrong. Over 24 years though, other than Palace Pictures, that’s the only really big bad debt we’ve taken.

So you weren’t working with Phones4U then?

No, although we got close at one point – but we were concerned with their credit rating and the deal they were after wasn’t sustainable.

On sustainability, is overcapacity an issue in your sectors?

There is overcapacity in print generally across Europe, the print management companies have had a lengthy heyday because they can play into that. But obviously there’s a price to pay from a client’s point of view because those savings might not always be passed on. So how we try to operate is to embed our price matrices in a client’s system and those prices are then fixed. That’s ideal because we then know where we are for the next 12 or 24 months and, importantly, so does the client.

Do you work with print managers?

Not really, we have worked with one or two in the past, but our clients tend to be happier working with us directly.

Last question, you’ve been doing this for 24 years, do you still enjoy it?

Last year was great. We had a wobble in 2012, but I think last year reinvigorated not just me, but the whole business. I’m happiest when the business is growing, and now that we’re talking about acquiring companies, expanding globally, growing Lick – that’s what really gets me excited.