Cambridge Pixel switches to employee ownership model

Litlington-based radar technology company Cambridge Pixel has moved into employee ownership, which co-founder and CEO Dr David Johnson says “will secure the long-term future of the firm... and will benefit the founders, the employees, and the company’s customers”.

The move involves setting up an employee ownership trust (EOT) and also provides job security for the company’s 12 employees using the model that has rocketed in popularity in the last decade, having been pioneered by the John Lewis Partnership and more recently adopted by local companies including Richer Sounds and Aardman Animation.

Dr Johnson said: “It will enable the employees to have collective control of their future and to continue to deliver world-leading radar technology to companies developing mission critical products in naval, air traffic control, vessel traffic, commercial shipping, security, surveillance and airborne radar applications.”

The company was set up in 2007: it was most recently in the Cambridge Independent when it converted its radar services to assist the development of a Covid-19 raised temperature sensor system .

“We’ve been looking at various options for a transition for a number of years,” David told the Cambridge Independent, “and we discovered the EOT is a good mechanism.

“The original shareholders wanted some exit benefit – capital – and the employees wanted protection for future success. This has been a good overall compromise. The EOT is very relevant to us as the people employed by the company will have a share in profits and growth. Everybody has signed up.”

The mechanism sees three of Cambridge Pixel’s “responsible for overseeing the running of the company”.

One of the three is Andrew Haylett is Cambridge Pixel’s chief engineer.

“I’ve been with Cambridge Pixel almost five years to the day,” Andrew said. “My background is in electronics, I’m broadly working in the field of customer design.

“Dave asked me to be one of the trustees. The three trustees are responsible for overseeing the running of the company.”

The scheme will initially focus on paying the exit option for the original shareholders.

“The company’s profits go back to the shareholder,” explains Dr Johnson. “So, once the original shareholders are paid off – there is an element of debt – when that’s happened and assuming healthy profits, then all the employees will benefit.”

Dr Johnson saw many advantages to the switch to employee ownership and believes that it will benefit the founders, the employees, and the company’s customers for the following reasons:

- Employee ownership secures the firm’s independence; this is important for a company providing software licences for radar display and tracking to major defence companies the world-over

- Customers benefit too as employee ownership makes the company less vulnerable to acquisition and any interruption to the supply of their product

- Employee ownership secures the commitment of the hand-picked team of specialists as they will now have a stake in the business and share the profits

- Employee owned firms are also more resilient and are proven to weather economic cycles better than most, this may prove to be important as firms deal with the impact of the coronavirus pandemic

- Founders also benefit from selling a majority share to an Employee Ownership Trust as they pay no capital gains tax and it gives owners, planning for retirement or an eventual exit from the business, a way to withdraw slowly as they mentor a successor team.

Meanwhile there are no salary implications.

“It’s a great vote of confidence,” David concludes. “It’s a win-win all round. The original shareholders are happy and the employees can see what’s coming down the line, that the profit is there.

“People always talk about it being the John Lewis model but John Lewis has fallen on hard times now, so perhaps it should be called the Cambridge Pixel model.”