The pace maker

Michael Fahy meets Pace Micro founder David Hood - one of the few entrepreneurs to have made a fortune from technology manufacturing.

There was something strangely familiar about David Hood, and it wasn’t just the fact that we’d chatted previously at an EN event in Leeds back in March. His slender frame, bookish demeanour and soft Yorkshire tones reminded us of someone, but it wasn’t until halfway through the interview that the realisation dawned he could probably earn a living as a doppelganger for Leeds-born playwright Alan Bennett.

Not that he’d need to, of course. Although Hood resigned from his non-executive post at Shipley-based Pace Micro two years ago, he retains the enquiring type of technician’s mind which has served him well since long before he co-founded Pace in the early 1980s. This has led him into all kinds of new areas, including an airline services business based at Leeds-Bradford airport, a developing interest in luxury aircraft sales and a new search engine business which recently floated on the Alternative Investment Market. He is also quickly building a substantial commercial property portfolio.

It is Pace for which he remains most famous, though, and although he sold the bulk of his shares through two major divestments in 1996 and 2000 (which netted a total of £200 million), he remains the largest single shareholder in the business, with his 20 per cent stake in the £140 million-rated company worth around £28 million. “I do still see them occasionally,” he tells EN, as if talking about a longlost friend. “I think they went through a black period in the last three or fouryears, but they’re doing quite well again now,” he says, before cautiously adding that the next 12 months would be “make or break” for a business that has lost goodwill among its shareholders.

In fact, it is now more than a decade since Hood and his then business partner Barry Rubery floated the company on the Stock Exchange. At that time, Pace Micro could do no wrong as it serviced a boom in demand for set top boxes sparked largely by Rupert Murdoch’s Sky TV. Within two years both of the founders had resigned their full-time posts, but Hood stayed on as a non-executive, witnessing the rollercoaster ride the firm underwent during the dotcom boom and bust. At one stage its share price hit the £13 mark, but once the tech bubble burst, it suffered a dramatic collapse, losing 96 per cent of its value. It then staggered through almost five years of crises, reeling from one disappointment to another like a punch-drunk boxer.

Hood left the board in September 2004. He says that, “The non-exec life doesn’t really suit entrepreneurs”. “In some ways it’s OK because you can ask why things aren’t being done without having to do any of them yourself,” he says. “But you do find it very frustrating.” However, his retained 20 per cent means he keeps a close eye on things, and he seems confident that new CEO Neil Gaydon – appointed a year ago – could be the man to finally deliver the firm’s oft-promised breakthrough into the televisual promised land of the United States. “If the company is ever to really grow it has to be a player in that market,” says Hood. “But I think he (Gaydon) is doing well. He’s matured into the job enormously over the last six months.”

Hood’s earlier major cash-outs have endowed him with enough resources to play the waiting game, but this doesn’t mean he’s just been sat around counting his money. In fact, from the moment he walked away from his full-time post in 1998 he has been developing a portfolio of other interests. His interest in aviation was sparked while still at Pace. After being “stitched up” into taking flying lessons by the helicopter-owning husband of Pace’s mobile phones supplier, he shared his role as technology director with that of official company pilot, picking up important overseas customers directly from Heathrow and whisking them directly onto Pace’s Shipley site.

“It was great for a company that was trying to win friends and influence people,” he says. “It made the occasion very memorable for them.” Once the company began heading for the stockmarket, though, Hood realised he had to buy the helicopter because “it wasn’t really a suitable vehicle for a plc”. He placed it in an off-the-shelf company called Multiflight. He later added a plane and, when the company providing hangar services for both announced that it was selling its base at Leeds-Bradford Airport, he bought that too.

Multiflight has since grown into a full-service business for people owning private aircraft. It offers airline handling and parking for private aircraft flying into Leeds-Bradford Airport, as well as a full range of parking, servicing, engineering and flight training services for local owners (including footballer Michael Owen). Hood has spent substantial sums upgrading equipment and services at Multiflight’s base, which includes a state-of-the-art simulator for those learning aviation at a local college. In fact, a recent £5 million hangar refurb might seem over the top for a business that is only currently turning over a similar amount, but he has ambitious plans for it.

He says that some areas of the business, such as handling aircraft, are far more profitable than others – engineering, for instance. “People just won’t pay,” he complains. “We have customers who, by and large, are very wealthy and own cars that are worth £80,000. They’ll think nothing of paying £100 an hour labour for that, but they complain bitterly about paying £50 an hour for a £1 million helicopter. It never ceases to amaze me.”

He realises, however, that he needs to offer the engineering services if the business is to move into another lucrative part of the market: aircraft sales. After refurbishing a couple of smaller helicopters and fixed wing aircraft which were snapped up by clients, Hood has been eyeing up the business jet market. This started when Multflight decided to buy a $40 million Boeing 737 and spend a further $25 million fitting it out to luxurious standards. Instead of the rather cramped interiors found even in regular business jets, this had a double bedroom, shower and kitchens. His intention was to lease it out as a charter jet at a rate of around £8,000 an hour.

“I didn’t use it an awful lot and it just about paid its way as a charter jet. “But then we got approached by a Russian guy last year and we sold it to him for $70 million.” Hood says it wasn’t so much the slight profit that convinced him to sell. Instead, it was the prospect of the nine month-old plane depreciating faster than a securities business which puts Nick Leeson in charge. Besides, he says, the fun was not in owning it but in carrying out the refurb. “I’m toying with the idea of doing another now,” he says. This time, he will be more ambitious, taking on a much larger plane with a few more miles on the clock.

“You could buy a six year-old 757 for $15 million. It’s not new, but it has bags of life in it because they’re designed to go on forever. You could spend about $5 million on the refit, have a luxury interior to seat about 15 people on sofas and chairs in the front, a business class section in the middle and maybe 60 economy seats in the back.

“That would be a much more useful aircraft because it’s cost you a quarter of what a new 737 costs, so you can hire it out at a lower rate. You could probably hire it out for £6,000 an hour, which isn’t a lot when you consider that you could get 50 or 100 people on it.” He says that even by refurbishing a 737, one could spend a total of $15 million and have a quality business jet for 30 or 40 people, which is around a third of the cost of a new 12-seater Falcon business jet. “People don’t do it because it’s quite a daunting experience, and it’s not for the fainthearted. But having done it once, if we did another for ourselves then I think the third one would be easy to do for someone else.”

One thing Hood is not shy about is taking risks, which explains why he’s poured more than £2 million into an internet search engine business started by former Pace colleagues Derek Oliver and Steve Barnes, who have become operations director and managing director respectively. Eyebrows have been raised regarding his decision to pump money into Infoserve, which provides local search engine and listings services, as the competition in this arena is steep and failures have been plentiful. However, Barnes says that it has a solid business model based on the quality of its data and a realistic approach to its customers’ needs.

For instance, it signs up the majority of its customers over the phone and has 125 staff split between call centres in Darlington and Leeds. It also knows that many of them are not technical experts, and talks them through the process of getting their listings onto some of the 280 sites and business finder services which the company feeds. These include ‘media partner’ deals to provide business finder searches on sites owned by the Daily Mail, The Telegraph and Sky TV, as well as every one of the 72 football league club sites.

He also says that by speaking to customers directly, it has a better idea about the products they stock and the keywords they want associating with their businesses. “We’re launching the first ever keyword search site in the UK. We have this repository of data on three million or so businesses in the UK. We know their names, addresses, phone numbers, and what they do by category. Increasingly, we also know what they do by keyword as well.”

Whether it achieves the type of phenomenal success which Barnes (a motormouth salesman who never seems to stop pitching) is clearly expecting is still unclear. Although the firm did well to raise £2 million on the Alternative Investment Market in June at a time when other businesses were postponing or cancelling theirs, it was around a third less than they had originally predicted which means Hood won’t see a return on his early stage investment just yet. Hood quotes numbers showing monthly growth rates of ten per cent and (admittedly impressive) customer retention rates of 65 per cent. However, it will need both to continue in a similar vein just to stem losses in the short term.

“It’s only really exploded in the last 18 months or so,” he says. One can tell that the prospect of seeing Infoserve (or Multiflight, for that matter) blossom into another Pace is the thing that keeps Hood excited about these businesses. And it is the validation of his business instincts, rather than the accompanying financial reward, which spurs him on most. This goes some way towards explaining why he spends so little time talking about his property ventures. He has poured substantial sums into a series of commercial property ventures across the North over the past 12 months. These have been made on his behalf through a series of vehicles (all known as Amerdale) run by ex-Teesland director Mark Hancock
“I’m not very involved in that,” he explains, almost dismissively. “I just put some money into that and it looks after itself.”

The portfolio has grown from a standing start into a £100 million concern in just over 12 months. “In many ways it’s the most profitable, but property’s property and it’s not very exciting.” Not even with £100 million riding on it, it seems

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