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Wheatley`s dream dies as Focus is liquidated

01 July, 2001

Wheatley`s dream dies as Focus is liquidated

Focus Dynamics, the drives company created and run by former Control Techniques chairman Trevor Wheatley, has been put into liquidation after he failed to raise £22m to secure the company`s future.

Much of the money - around £17.5m - was needed to fund two large acquisitions that Wheatley had been planning. One of these was the DC drives business of a well-known drives player with whom Wheatley had been negotiating for more than a year. The other was a systems integrator that would have formed the basis for a "Focus Centre" for North America.

Wheatley had managed to raise £15m before time ran out. "We needed working capital for expansion," Wheatley says. As well as the acquisitions, Wheatley was planning to build a drives factory in Wales and was about change to a new supplier of small AC drives - probably AC Tech.

Wheatley says that over the past 18 months, he and his son Robert, Focus` production director, had invested around £750,000 in the business. He had sold personal effects, including part of his art collection, to raise funds. Wheatley also disposed of Focus` German operation - the former Dietz drives business - last year.

According to Focus Dynamics` liquidator, Martin Williamson of PriceWaterhouseCoopers, the company has "anticipated deficiencies" of £678,000 with a further £4,000 for its subsidiary Focus Dynamic Drives. He does not expect the creditors of the main company to receive any payment, but the FDD creditors could receive 50p in £1. At the time of liquidation, Focus had no employees.

The largest creditors were Breckenburn Realisations, which had helped Wheatley to buy Focus, and thje financial advisor Ernst & Young. The Welsh drives-maker Invertek, which badged its low-power drives for Focus, was owned more than £26,000. Sprint Electric which supplied badged DC drives was owed less than £2,000.

The only product that Focus made itself was the 22kW-1MW MX AC drive series. These will continue to be produced by Focus` Malaysian partner which has acquired the rights to the technology.

Wheatley now plans to go into semi-retirement but will retain his interest in the Manchester-based AT Group where is a non-executive director.

"I won`t be involved in the drives business in future," Wheatley says, adding that "I`ve enjoyed my time enormously - it`s an exciting business to be in". He believes that the industry "still has enormous potential".

But, because of the intense competition in the sector, this is not a good time to be making drives. "I`m not sure of the merits of manufacturing small drives," he says.

Wheatley was a pioneer of the UK drives industry, and was one of the three founders of KTK which later became Control Techniques. He chaired CT during a period of dramatic growth when it dominated the UK drives market.

But his fortunes changed after Emerson Electric bought CT. He fell out with Emerson which fired him and later took him to court, alleging that he had broken undertakings by setting up Focus Dynamics. The court forced him to resign as chairman of FD and to sell his shares in the company which he subsequently had to buy back above their market value.

Wheatley also lost a subsequent case in which he accused Emerson of unfair dismissal and tried to claim around £9m in damages.

To add to Wheatley`s woes, he was chairman of ICS (Industrial Control Services), whose board members were attacked bitterly by shareholders last year after they sold the company for the equivalent of 1p/share. Four years earlier, ICS shares had been worth more than 125p.

Focus` origins can be traced back to 1997 when Trevor Wheatley bought 22% of Tyzack Precision as a vehicle for re-entering the drives industry. In December 1997, he became chairman of Tyzack, but was foced to resign three months later after his initial court battle with Emerson.

During 1998, Tyzack, now renamed Focus Dynamics, bought the German drives-maker Dietz Electronic and the Kent-based systems house, KEM Engineering. Wheatley`s non-competition agreement with Emerson expired in December 1998, and early in 1999 he raised his stake in Focus to more than 25%. Soon after, a company called Corporate Resolve made a £5.76m hostile bid for Focus but failed.

Wheatley attempted to rejoin the Focus board in the first half of 1999, but was rebuffed. He then joined forces with Breckenburn Realisations (a venture capital company whose principal shareholder was a railway tycoon, Sandy Anderson) to bid jointly for Focus. Their £5.2m offer was accepted in September 1999 and two months later Wheatley became managing director of Focus Dynamics and Focus Dynamics Drives.

Under his agreement with Breckenburn, Wheatley took control of the drives businesses (Focus Dynamics and Focus Dynamics Drives) as shell companies, while Breckenburn took Focus` two non-drives operations, including the former Tyzack blade-making business. A £300,000 working capital loan was agreed with Breckerburn. Wheatley`s advisor Ernst & Young was confident that the Focus group could be refinanced to raise sufficient funds for trading to continue and for further acquisitions to be made.

Wheatley became managing director in November 1999 and was forecasting sales of around £6m and losses of £1.4m. But the cashflow shortfall was running at around £100,000 a month. Focus` overdraft limit was raised to £700,000 with Wheatley offering a personal guarantee.

During 2000, Wheatley started to rationalise the group`s activities. KEM Engineering, which had been running at a loss, was put into liquidation. Focus` Singapore operation was sold to its manager for a nominal sum and, in November, Focus` German operation was sold to cut the company`s overdraft from £1.2m to around £100,000. Wheatley reckons that he had to sell the former Dietz business for half of its true value.

At Focus` headquarters in Newtown, Wales, two adjacent sites were consolidated into one, several staff were made redundant and savings of more than £50,000 a month were achieved. Focus started to make its first in-house product - the high-power (22kW-1MW) MX3 AC drive range - and started selling it in Thailand and Malaysia.

In April this year, Trevor Wheatley brought in Ernst & Young to help rationalise and re-finance the group. But even with their assistance, he was unable to raise sufficient funds and the re-financing activities were suspended in May. After taking professional advice, the Focus companies were put into liquidation.

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