Lord of the Glen still switched on

THE FRIDAY INTERVIEW:MARTIN NAUGHTON, Chairman, Glen Dimplex

LIKE MOST of the rest of the country, Martin Naughton is feeling a bit down at the moment. He’s speaking a week after the IMF arrived in Ireland and a couple of days after the Government published its four-year plan, a point at which the economy hangs in the balance more than ever before.

He says he finds the whole thing “very disappointing and upsetting”, having spent much of his own time recently talking up the Irish economy in international markets.

“It’s hard to believe a bunch of bankers in three years not only destroyed the great banks in the country but also brought the country to its knees,” says Naughton, arguably Ireland’s leading industrialist through his ownership of appliance manufacturer Glen Dimplex.

This is about as close to an outburst as he gets, with the septuagenarian more given to thoughtful and occasionally steely calm.

He doesn’t like naming names when it comes to blame for the economic disaster but acknowledges that “there’s a group of people who carry a lot of responsibility”.

“Where were the boards of directors, where were the auditors, where were the financial regulators, the Department of Finance?”

Naughton is in favour of a four-year national government to take on the debris that will be left behind after Fianna Fáil exits and the IMF has its way with us, adding that it won’t happen because “we have plenty of politicians but we have very few statesmen”.

He believes the country had “very little choice” in the end when it came to seeking external assistance, but also wants to see opportunity amid the chaos.

“We are lucky that we have a very sound underlying economy,” he says. “This has given us a good opportunity to sort ourselves out. I believe there are positives in it.”

Sorting ourselves out will, in Naughton’s view, allow Ireland to restore its competitiveness, with a lower minimum wage a sensible first step in this process.

As one of Ireland’s richest men, he is unlikely to see any major lifestyle changes as a result of the national belt-tightening, but he is not as distant from a modest lifestyle as it may seem. The son of a garda and a housewife, Naughton is one of nine (seven surviving) children. He was born in Dublin as war was breaking out and grew up in modest surroundings in Dundalk.

His parents loom large for the entrepreneur now, as he describes their self-reliance. His father built the family home by himself, losing two stone in weight in the process. He also cut the family’s turf, mended their shoes, cut their hair and grew the family’s vegetables. His mother made the children’s clothes.

“They were a generation that just got on with it. One of the things I don’t like now is people who feel they have an entitlement to everything. They’re entitled to free education, they’re entitled to free travel, they’re entitled to a good living wage if they’re not working . . . I don’t think anybody’s entitled to anything.”

Naughton uses the analogy of his own business, which made and sold roughly €1.5 billion worth of domestic appliances last year. If he doesn’t give his customers what they want at the price they want, they will walk away, even if the relationship has lasted 20 years. He is not “entitled” to the sales.

“We have to stay nervous,” he says, of himself, and the rest of us.

In this vein, he sees this period of austerity as a time where all “extravagance” can be trimmed from the economy. “We should halve the size of the Dáil and question do we need a senate and whether we need a standing army or should we have a militia.”

And with those minor matters addressed, he says ESB and Bord Gáis should be challenged to provide cheaper energy, although he is “in favour of selling both”.

“I think we have tremendous people in the country,” says Naughton, who, with more than 8,000 staff under his care and a career spanning 50 years, knows a thing or two about human resources.

Naughton studied engineering at Southampton in England, having disappointed his parents by not going into the Army and learning a trade. He did well and, having tasted five years of life outside Ireland, decided he wanted to see more of the world by catching a ship in the busy port upon graduation. Plans changed, however, when he bumped into a friend on a Southampton street, who produced a job advertisement for a US firm establishing in Shannon.

Naughton applied, not with any particular conviction, and got the job.

SPS was the first US company to establish in Ireland after Ford and had no Irish connections. “All we had then was cheap labour; we were the China of Europe. There were no Irish managers and no professional class. All we had was cheap labour and everybody came to work on the bus.”

This meant US companies locating here had to bring in an entire management team, both senior and junior. Now, says Naughton, “US companies can get a great management team here and some of those managers will go on and run European operations or go back and run the US business.”

That is, he adds, “if you can get them to stay”. Naughton sees the emigration of Ireland’s management classes as one of the biggest risks to the country’s recovery, and urges whatever government is in place next year to tread a “delicate line”. “We need to be very careful to protect the people who can turn the economy around,” he says.

Naughton is no stranger to recessions, having lived through a couple and built up his business in the process. He also has proven foresight, having warned in 2003 that we should all be careful not to let our prosperity “slip away” through lack of competitiveness.

While feeling down about our current mess, however, Naughton does not believe that all is lost. “I think it’s going to take five years to sort it out. We need to rebuild the economy, this time on a sound basis. We can become a very competitive economy.”

Glen Dimplex operates globally, making everything from toasters to showers to air-conditioning units and, with this perspective, Naughton is confident that Ireland’s manufacturing industry can prosper.

“I would hope that we in Glen Dimplex would be able to employ a lot more people in Ireland in 10 years than we do now,” he says.

“In manufacturing, we’re not going to compete against China or India and we don’t have to, but we’ve got to compete against Europe. The future of the company depends on business and trade and commerce.”

Naughton is optimistic about the future of his own company, which he founded in the midst of economic turmoil in 1973. That was a time when workers in Britain were on a three-day week and the British government was urging its people to switch off the very appliances the then Glen Electric was about to launch on the market.

The catalyst to set up shop at such an uncertain time came when Naughton’s then employer, Louth engineering firm AET, began to fail and his rescue plan was rejected. This, coupled with an ambition he will now admit was naive, brought Glen Electric into the world, initially making oil-filled radiators.

“My objective when we started was to become the number one heating manufacturer in the world. That was the drive.” From the start, the culture was to work hard – the business day lasted from dawn until dusk and holidays were unknown. The company also worked seven days a week, on the basis that “our competitors were on the golf course on Sundays”.

The plan worked, with Glen Electric employing 100 people in Newry, Co Down, within 18 months. After four years, Naughton achieved his initial ambition when Glen acquired the top brand in its field, Dimplex, then in receivership.

“It sent shockwaves through the industry,” says Naughton, recalling the surprise in an Irish company buying an English brand leader. The pivotal deal involved significant financial and business risk, with 20 per cent of Glen Electric being part of the transaction and a new financial director, not of Glen’s choosing, brought in. Within 12 months, the company had earned the purchase price and was free of external control once more.

Now Glen Dimplex, the group went on to buy business after business from receivership, victims of what Naughton describes as “too little, too late”. The result is a stable of brands including Morphy Richards, Roberts Radio, Creda and Belling, with Naughton rejecting the idea of the firm being a “conglomerate” and preferring “international appliance company”. Ireland now contributes less than 2 per cent of the company’s sales.

Glen Dimplex is, he says, run on fairly simple principles, with its subsidiaries kept on a loose but firm leash and delegation the name of the game. “Our budgets are like the Bible,” says Naughton, adding that Glen headquarters wants to know what’s going on all the time but without interfering. There is an annual budget, with a six-month review and monthly board meetings, which involve moving around the world by “following the sun”, beginning in Australasia (Glen manufactures some products in China and sells into Japan) and finishing up in the US.

The group has just two central functions, with banking done in Dublin and design in London. Once a month, Naughton personally chairs a meeting aimed at securing patents on electric fires, still his secret favourite.

In Ireland, the company mostly has “pretty basic manufacturing jobs” (600 people in the North, 300 in the Republic), with some engineers working on group projects. Glen has just invested in a new laboratory in Dunleer, Co Louth, to conduct research into renewable, sustainable projects. Naughton sees this area, possibly as basic as heating that switches off when it senses nobody is in the room, as holding great potential.

He says Glen is “constantly developing new products” and could direct its investment to wherever in the world is most competitive. Ireland could be that place, but not if costs are too high. Glen, Naughton, points out, still makes things in locations such as France, Germany and the Netherlands so there is no good reason why it can’t do the same at home.

“We can provide a lot of jobs at a certain rate of pay. We can’t provide any above that,” says Naughton, admitting that 200 job losses last year in Louth were rooted in this policy as the company protected its cash. Glen Dimplex has no debt and would never make an investment that risked too much, he says. It always aims to be in a position to survive not one, but two recessions.

He extends the philosophy to his personal investments, which include backing for a Louth wind farm, a share in Dublin’s Merrion Hotel and numerous property interests.

In property, Naughton has won as well as lost, but isn’t keen to discuss the battles. He has been listed as an investor in the ill-fated Glass Bottle site in Dublin’s Ringsend and in White’s Hotel in Wexford, which went into receivership last year. On the flipside, he has done well in Dublin’s IFSC, where he and long-standing business partner Lochlann Quinn own a number of buildings together.

“You learn from your mistakes just as much as you do, or maybe more, from your successes. We’re all big boys,” he says, emphasising the separateness of his personal investments from Glen Dimplex.

There are no cross-guarantees, he says, expressing dismay about the proliferation of personal guarantees in property circles during the boom. “I can’t believe it. I was shattered when I heard they were giving them round like confetti.”

His policy is more conservative. “We would never be exposed in any investment we make,” he says, describing his outlays as being “containable”. “The only time in my whole life when all the chips were on the table was Dimplex,” he says, admitting that taking such a huge risk once was probably necessary.

Within his investments, Naughton retains particular affection for the Merrion Hotel, which he and Quinn established along with hotelier Billy Hastings so that Dublin could have a “world-class” hotel. Naughton keeps an apartment there as a base in town, while maintaining his home at the 18th-century Stackallen House in Co Meath.

Both are lined with artworks, with Naughton and his wife Carmel noted collectors. He picked up a few pieces at Bank of Ireland’s recent auction and has a long association with the National Gallery.

Philanthropy is now a habit for Naughton and, while much work is conducted in private, notable public donations include £500,000 to Queen’s University in Belfast to assist in the creation of a gallery, £1 million to Belfast’s Lyric theatre and €5 million in funding for Trinity College Dublin’s nanoscience institute and Science Gallery.

He says none of this is linked to “ego”, with his favourite philanthropic act one that involves funding the university education of a small number of students from rural counties who want to pursue science, engineering or technology.

The family picks philanthropic causes that will bring some good to Ireland. “When you’re doing well and money’s coming in from all kinds of investments, you’re inclined to be generous with it. I never had an exact figure.”

His judgment is informed by a love of Ireland as much as by a business head. He frequently expresses his love for the country, remarking that it would be “silly” to live somewhere that holds no appeal just for tax reasons. “ I made a conscious decision to come back to Ireland, to have an Irish family, to stay here and pay taxes.”

At 71, Naughton is now well beyond retirement age, but he has no immediate intention to step down from his chairman role, despite his two sons holding seats on the board and the company being in good shape. As a private business, Glen does not publish accounts, but numbers available for subsidiaries suggest buoyancy.

“It’s always going to be next year. I still enjoy it but it’s a physical thing. Sometimes you feel 40 in here but you’re not – your body can’t do it.”

He is also against the idea of flotation. While he admits “you can’t run a business from beyond the grave”, he doesn’t expect his sons to follow the floatation route either. Glen Dimplex has received sales approaches but only from parties that would like to break up the company, says Naughton, clearly showing dislike for such a prospect. In five years, he expects Glen to have become even bigger.

“We’ve been doubling the company every five years since inception. Managerial resources and financial resources – that’s all we need.”

As for himself in five years?

“I hope I’ll still be here.”

The Timeline

1972– AET, the Louth engineering firm where Naughton worked, was floundering. Naughton drew up a plan for a new business, based on both engineering and design.

1973– Five directors put in £50,000 between them, with another £20,000 raised from the bank and backing secured from the Northern Ireland authorities. Glen Electric was born.

1975– Company now selling to Ireland, Britain, Belgium and Australia. 100 men employed.

1977– Glen Electric becomes Glen Dimplex with transformative purchase of rival Dimplex, then in receivership. New markets open.

1978– Glen buys Naughton's former employer AET from its receiver.

1980– Lochlann Quinn joins as deputy chairman and financial controller.

1981– Purchase of Belling Heaters and Burco Boilers. Northern Ireland Finance Corporation's involvement with the company ceases.

1985– Acquisition of Morphy Richards, offering entry to the US market.

1986– Glen consolidates its US position by paying $120 million for Hamilton Beach, a leading domestic appliance maker. The deal is marked by an editorial in The Irish Times.

1990– Seán O'Driscoll (now group chief executive) joins the company as group finance director.

1994– The Naughton Foundation is formally established to distribute funds to arts, education and social causes.

1999– Hong Kong-based sourcing office opens, along with two offices in China. Japan will follow.

2000– Turnover now at €1.5 billion and the firm has 8,500 employees.

2002– A Chinese joint venture establishes a £10 million factory. Lochlann Quinn retires.

2004– Naughton becomes the sole owner of the group, buying out Quinn's 26 per cent stake for an estimated €200 million.

2006– Expansion into Australia and New Zealand.

2008– A new Chinese sales subsidiary set up.

Glen buys out its Chinese joint venture partner a year later.

2010– Turnover is €1.5 billion and a total of 8,500 people are employed.

Do you have one? Glen Dimplex brands

• Dimplex
• Morphy Richards
• Roberts
• Creda
• Redring
• Belling
• Roberts Radio OptiFlame
• Stoves
• Faber
• Burco
• Xpelair
• Lec
• Galaxy Showers

MARTIN NAUGHTON IN QUOTES

"I never psycho-analyse myself. I don't carry an ego around with me. You do it because you want to do it - On philanthrophy

"It's very nice over pints or over cups of coffee to talk about it. It's a different matter giving up your job and going out into the cold world. Failure can't be an option - On starting a business

"Coalition governments have served us very well in the past. They'll get a go at it, they'll mess up and then they'll get thrown out - On the likely next government

"Where Ireland's at now is not a destination. We're on a journey - On recovery

ON THE RECORD

Position: Executive chairman of Glen Dimplex.

Age: 71

Family: Married to Carmel, with three adult children and eight grandchildren.

Background: Engineer and founder of Glen Dimplex, which he fully owns. Philanthropist and art collector.

Why is he in the news?The low-profile Naughton has views to share on the economy, business and social conscience.

Something you might expect:He has no plans to retire.

Something that might surprise: He is fascinated by the albatross, the largest bird in the world.