“Some of our competitors are very big companies and one of our strengths has always been being a ‘family company’, becoming employee-owned cements that,” said managing director Graham Denny.
The group’s new ownership structure came into force in early February and it centres on a majority shareholding being held in trust for its circa-100 employees via new company Denny Bros Trustee.
However, the group’s management team remains in place and Graham Denny and chairman Barry Denny, sons of the group’s two founders, retain a significant, but minority shareholding.
Barry Denny said that the hope was that the family would maintain its interest in the business for generations to come, regardless of its operational involvement. While he stressed that for the foreseeable future he, his cousin Barry and brother, strategic development director, Andrew would continue to lead the business, longer term the plan was to “build up a team that can take the business on over the next few years as we’ve got some great staff here”.
Last year the Bury St Edmunds-headquartered business celebrated 75 years of trading and, according to Graham Denny, this seemed the perfect time to become employee owned as the second generation family firm had been advised for a number of years to consider its succession strategy as there were no family members obviously placed to take on the business.
He added that while the business had received its fair share of approaches to sell over the years, "we didn't want to go down that route because we've seen what sometimes happens to others, who have cherished and built up their businesses only to see the new owners perhaps not treat the staff as they would have liked or even, ultimately, seen the business shut down or relocated."
Under the new ownership structure, the Trust directors are Andrew Denny, Barry Denny, the group's accounts and HR manager Rachel Smith, and Ian Hiscock, a seasoned independent EOT trustee who sits on a number of trusts including five years previously with the John Lewis Partnership Trust.
The management team worked with specialist advisory firms Birketts and FRP to implement an Employee Ownership Trust (EOT) structure, which Graham Denny said "was the best solution for us in terms of maintaining the firm's independence and planning for succession”.
Under the EOT scheme, employees of the firm will now be eligible for bonusses pegged to company performance that are tax free up to £3,600.
“That’s the main fiscal benefit to the staff, but another benefit will be a bit more engagement through the business with the staff recognising it’s their business as much as ours.
“It brings certainty and security to the staff ultimately, because we’ve been asked many times over the years what happens when the family no longer wants to be involved.”
The £8.2m-turnover group consists of 11 companies, with operations spanning engineering, tool and die-making, signs and nameplates, conference facilities, property management and machinery sales. However, the lion’s share of revenue, around three quarters, comes from its Denny Bros label printing business.
Graham Denny said that while the business had been impacted like most by the pandemic, it had proved resilient thanks to its diversified customer base, which includes many healthcare clients, and products like its Fix-a-Form leaflet labels.
According to its most recent accounts, the group generated a pre-tax profit of £1.5m in the year to 31 December 2019.
Barry Denny said a lot of the group’s success was derived from an unrelenting focus on developing inhouse expertise and, as a result, its people.
“We believe employee ownership allows for the greatest degree of continuity, stability and resilience among all the possible options we considered,” he said.
“We have ambitious plans to deliver further growth and I look forward to this new model helping us achieve this.”
EOTs are currently in operation at around 500 firms in the UK and according to FRP corporate finance partner Dave Howes they are likely to become increasingly attractive to family-owned SMEs as a tax efficient, long-term exit strategy.
They were introduced by the government in 2014 to mirror the John Lewis model and encourage wider a roll-out of employee ownership.
Lisa Hayward, head of employee incentives at Birketts, added: “In the wake of a highly uncertain year, employee ownership continues to be an attractive option for businesses across the country who wish to protect their legacy.
“By offering the very people that built the company a stake in its future, EOT arrangements facilitate increased employee wellbeing and in turn, higher job satisfaction and an increase in collaborative behaviours.”
