George Dexter is the CEO of Armour Home – a multi-award-winning audio home electronics firm that has fought through the COVID-19 crisis to achieve strong levels of growth. Dexter spoke to Business Leader about the journey he has been on with the company, including the lessons he learnt from the MBO, the importance of marketing and what it means to be a leader of a company.
Can you give an overview of the company?
Armour Home Electronics was a business that spun out of a plc called Armour Group plc, where I was the CEO for 16 years. It was an AIM-listed business and when I started, we were basically bust! We then grew to become highly successful in the consumer electronics sector. However, when the financial crisis hit, like many businesses, the company took a big hit and a period of restructuring followed.
I then led an MBO for Armour Home Electronics along with a couple of colleagues in August 2014. The business itself is now a specialist consumer electronics company, designing award-winning audio solutions.
Our key brands are Q Acoustics, which are Hi-Fi loudspeakers; QED, for hi-fi cables; and Goldring, which manufacturers styluses for record players –our own brand portfolio makes up 90% of our revenue, which we expect to be circa £16m in the current financial year.
The other 10% is where we distribute other audio brands, who are primarily non-UK-based – these include a headphone brand called Grado, a digital musical player brand called Astell&Kern and another digital device brand called iFi. We sell our products in 65 countries across the world.
Can you take me through the MBO process and the lessons you learnt from it?
Pre-MBO, when I was the CEO of the plc, we had two operating divisions. We had an automotive car audio business and the home audio business, which I was also leading at the time of the MBO in 2014. There was an approach for the automotive business from a large, private-equity backed American firm in March 2014, which was accepted. After that deal went through, it just left the home audio side of the business.
The Chairman, who was the principal shareholder in the plc, said to me that the business wasn’t big enough to move the share price even if we doubled the size of the remaining home audio business – and consequently he decided the best strategy was to sell the business. I’d been leading the business since the financial crisis and said that I wanted to buy the home audio business – we negotiated and agreed a deal. At the time it felt great as we were now the masters of our own destiny.
However, our biggest mistake in structuring the deal was that we were under-capitalised. Looking back, we should have negotiated harder on our debt slice in the capital structure – and as a result, for a few years, we struggled with cash flow.
The biggest lesson when buying a business, especially as an MBO, is to make sure you get your capitalisation structure correct to enable future growth. You will need cash and resources to weather difficult times, but also fulfil the strategic plan for growing your business.
How did you turn it around and achieve the level of growth you’ve experienced in recent years?
Hard work and sticking to your growth plan. Do not get drawn into areas that are not part of your core strategy and focus on your brands that will drive your revenues and profitability. There might be an interesting new piece of technology or new sectors you could develop – but if it is not a part of your core strategy, don’t do it until the foundation of the business is secure. Put simply, focus on what you are good at.
As a business, to ensure growth, we invested heavily in product development and marketing. The latter, marketing, was the biggest change in the business after we took over, and a key to our success.
You can have fantastic products that are poorly marketed, which won’t achieve success. You can have mediocre products with brilliant marketing and succeed.
But if you have great products and great marketing, which we believe we do, then that is the winning formula.
How is COVID-19 affect the business?
On March 24 every retailer that we supplied across Europe had to close their stores. We had a plan before Boris’ announcement though, and it was immediately put in place, and whilst there have been difficult moments, 2020 ended up being a successful year for us.
March and April were very tough, we had to furlough 30 of our 47 staff members, and everyone went on a salary sacrifice for 7 months. It was terrifying and I thought we might go bust.
However, once the shock of those two months passed, audio as an industry started seeing a lot of growth. It is clear that with no opportunity to spend money in restaurants and pubs or on holidays, people are buying products and the audio category has be a beneficiary
In every month since June, we have seen both sales and profits increasing, with the first four months of our new financial year, which started on 1st September, being the best performance since before the 2008 financial crisis.
How do you describe yourself as a business leader?
Determined, honest and willing to learn. Determination is a vital leadership ingredient in implementing strategies and resolving problems. I always believe that there is a solution to all problems you face and whilst you might not like the solution, it is there for you to find and implement.
In terms of honesty, you must be truthful to yourself and with those who are around you. I have always believed that people respond best when told the truth – no matter what that truth is and how bad it is. If you don’t do this – it will come back to haunt you. Being truthful pulls your team together and after the year we have all had, this is very important.
We never stop learning and you need to be prepared to learn, because if you think you know it all, you will almost certainly fail.
Can you tell us more about how you have built your leadership team around you?
To grow a business, you need to surround yourself with good people and potential leaders who will challenge you. You want people with ambition and a desire to lead, whether it is in their field or in the company. For SME’s it can be hard sometimes to attract the right talent so you need to be able to offer them something that they will not be able to get in a bigger company, whether it is shares or something more specific to the role.
In their day-to-day role within the business, if you don’t trust the leadership team to do their jobs correctly, you need to question why are you employing them? Trust is very important as it is a two-way street. If they feel the trust to do their job, they’ll be a great asset – if you don’t trust them, then you’ll be constantly looking over their shoulder and not concentrating on your job.
How do you build an international brand?
Developing a strong international business requires good partners, a quality product and brand and capable sales people who can build and manage relationships. We also put a lot of effort into product reviews and marketing to raise brand awareness, which in the digital world we live in is important where product information is so easy to access. Today our international sales account for 50% of our revenues and this is growing with US being our single biggest international market.
What future trends do you see in the industry and where do you fit into this?
I am a “hopeful traveller” and an optimist about the audio industry. In the 2000s, there was a generation that grew up listening to music on headphones. This, combined with the fast growth of music on demand services, means today there is a new generation of home buyers who are potentially wanting a good home audio solution, particularly in times of lockdown as we are now – the challenge for the audio industry is to encourage them to buy and we are doing this through great product and marketing.
Today there are more people listening to music than ever before and the audio industry has a great opportunity to fly high on the back of this surge in demand for audio content. Armour and our brands are well positioned to take advantage of this and It is for this reason that I am optimistic about the growth for the company and the wider audio industry.