Tellings Golden Miller

Source: Supply Chain Digital

Date :6/1/2007 4:09:46 AM

HOW TGM FLOATED TO EXPAND

Tellings Golden Miller came into existence some 35 years ago when Stephen Telling bought Golden Miller, a small coach company that had been around since the end of the war. It has grown successfully, and made a step change when it floated on AIM in 2005

Written by John O’Hanlon: produced by Paul Radbourne

Not long ago Tellings Golden Miller was a mid-sized privately owned bus and coach operator based in the south of England and doing rather well. The company was owned by Stephen Telling and his wife together with Julian Peddle, who held 28 percent of the shares. The main depot was at Twickenham; there was a second depot at Portsmouth; and TGM held a 60 percent interest in Linkline Coaches based in north-west London and a 30 percent holding in Burtons, of Haverhill in West Suffolk.

TGM was successfully operating Transport for London contracts in Surrey and south-west London. Telling saw opportunities for expansion not only in London but in other parts of the country too, and seeing that another coach operator in Wales had raised some very useful capital on the AIM market decided to enter into discussion with City advisors. He and his fellow directors decided that an offering could do the same for TGM, raising some cash for the business, releasing some funds to the shareholders, and allowing the company to inaugurate a share options saving scheme to reward its staff.

The company floated 30 percent of its shares on the AIM market in August 2003, leaving the three original shareholders firmly in control but allowing TGM to embark on the first stages of a planned expansion, which started with the acquisition of the balance of the shares in Linkline and Burtons (which accounted for nearly a third of the group’s £31 million 2006 turnover), and the purchase of some small companies that were consolidated into the existing operations. The Group provides coaches and crew under contract to National Express from its Portsmouth, Cambridge and Newcastle depots.

Post-flotation restructuring

Perhaps the most significant acquisition at the time was the Colchester bus operation of Arriva, now renamed Network Colchester. Network Colchester is definitely one of TGM’s success stories. It operates 40 buses in Colchester, half of the town’s bus services, in head-to-head competition with the First group. “That business is doing extremely well and growing, and we are very pleased with it,” says Stephen Telling.

Tellings sold its London and Surrey bus operations to National Express in June 2005, together with its Twickenham headquarters and its Hayes and Byfleet depots. Though the group continued to operate private hire coaches in London it had to base its metropolitan operations at a temporary location in Chertsey until earlier this year it completed the purchase of OFJ Services at Heathrow Airport, which gave TGM a prime base at the centre of Heathrow Airport.

The relationship with OFJ is an interesting one. The company had a contract for transporting the of some 50 different airlines crews from Heathrow to central London. The coaches had to go onto the ‘airside’ part of the airport to pick up the crews, where security has always been tight. However last year things got a lot tighter following anti-terrorism operations (we all remember that at one point armoured vehicles were deployed), so the three operators licensed to do this work, TGM with 45 percent of the work, OFJ with 35 and CCJ with the remaining 20, got together in October 2006. “We agreed there was not really room for all of us so we sold our aircrew ground transportation services to OFJ on Jan 1 this year.

At the same time negotiations were under way to purchase OFJ Ground services, which was a ground services support company repairing trucks for Alpha Catering, Menzies and the United Airlines ground services support equipment. That acquisition was completed in February. We turned that building into our HQ. Our coaches for the London/Heathrow area operate from one end, and there is a state of the art nine-bay workshop with offices above. It has worked out really well for us.”

As part of the deal, TGM will continue to maintain the 120 vehicles OFJ still has engaged on aircrew operations for at least five years.

Since the takeover of OFJ Ground Services, that operation has gone very smoothly says Telling. The major clients United Airlines, Alpha Catering and Menzies are happy, and that is what matters. The workshops, with 40 staff, maintain around 100 vehicles for United, including the six tugs it has for moving aircraft, 70 lorries for Menzies, which holds the baggage handling contract at Heathrow, and a fleet of scissor lift and other vehicles operated by the in-flight catering contractor Alpha Catering. In addition they have the capacity to maintain 90 TGM vehicles including the entire Linkline fleet, the 16 vehicles from the Portsmouth operation and 30 private hire coaches. “This is a really extensive maintenance facility, and it is kept going 24 hours a day every day of the year except Christmas. And I really see this as an expansion opportunity for us in the future.”

That the operation at Heathrow is going to be a very important and growing part of the business is underlined by the fact that Richard Telling, Stephen’s son and until recently group operations manager, has been appointed Managing Director for Ground Services, and will become the group engineering director as well.

Greener engines

Almost all TGM’s vehicles are maintained at its own workshops. In addition to the Heathrow location there are two maintenance depots in the North East, one at Annfield Plain in Co Durham and one at Washington, Tyne & Wear. And there are workshops at Haverhill and Colchester as well. The exceptions are the four Euro IV Scania vehicles the company added to its fleet last year, taking advantage of a two-year maintenance deal with the OEM.

Tackling the graded introduction of EC standards for engine emissions is a business issue for all passenger vehicle operators. By buying some Euro IV vehicles now (the deadline is 2012), Tellings is showing its commitment to cutting emissions, and some vehicles can be upgraded by fitting particulate traps, he says, though that is expensive too, costing around £5,500 per vehicle. But the company has to tackle this problem on a more immediate and more local scale too. The Mayor of London has declared a low emission zone from July 2008, well ahead of European legislation and not just within the present congestion charging zone. The LEZ will apply to just about the whole area contained by the M25. Within TGM’s London fleet only four vehicles need to be replaced to meet this legislation, but all the private hire coaches come into London sometimes, and of the 16 vehicles based in Portsmouth but frequently running into London, seven will have to be replaced.

But riding with business challenges like this and turning them to business advantage has always been part of Stephen Telling’s philosophy. “When seat belts were first fitted some people in the industry didn’t like it, but we took the view that as so many schools weren’t prepared to travel without them we would spend a lot of money and fit all our coaches with seat belts long before the legislation hit us. That meant we could charge the customer more, because we had the vehicles when others didn’t. I believe in making an opportunity out of a problem and turning it to my advantage!”

The entrepreneur’s view

It’s a good attitude to have in a business that changes quickly. People no longer take their holidays by coach as they used to, but new markets open up for operators like TGM who are flexible enough to capture them. “If a market declines you need to look round and see what else there is. We have always had the view that if everyone is turning right we look to the left and see what lies down that road! That is why we went into airport work, why Classic Coaches is the largest school tour operator in Britain and why we operate successful rail replacement contract in East Anglia. We have to look for the niche markets in sport and corporate work for example.” Because the coach hire business is an opportunistic market rather than regular contract you have to be very flexible and responsive, he adds. If a customer wants a coach with tables, then that is what he will get.

The view from the new HQ is a pleasing on for Stephen Telling. “I think we have taken our opportunities to grow, and have now taken the opportunity that the AIM flotation gave us and used it to the best advantage. We sold our London bus business because the opportunity was right. But we continue to operate buses in Cambridgeshire, Essex, and West Suffolk and also up in Newcastle, Co Durham and Portsmouth, and we continue to look for new opportunities.” At 59, he doesn’t plan to retire soon and is looking forward to continued organic growth with acquisitions if the deal is right. “It would depend on the deal whether we went back to the market, used our own cash flow or our own shareholding to finance that expansion. I wouldn’t rule any of them out.”