Business profile: 'I know all the condom jokes'

The chief executive of SSL, the maker of Durex prophylactics and 'electric massagers', tells Martin Baker that he is having the time of his life - even though he uncovered a financial black hole when he first took the helm

Garry Watts is doing more than giving off good vibrations - he's giving them out. "This is probably the most fun I've had in my career," he says.

Watts lays out a big, blue, battery-operated banana, a purple lollipop microphone and what looks like a tiny version of the Star Ship Enterprise for inspection.

You can see why the chief executive of SSL International might find his job stimulating. These are, after all, the three electric massagers at the sharp end (one hopes not too sharp) of a product range that goes from Durex condoms to Scholl corn plasters, to gel insoles designed to stop stiletto-heeled revellers getting party feet - the last-named product being a major hit in the high street, apparently.

We are in the modest Blackfriars headquarters (staff count: one dozen) of a chunky little company. SSL, which employs 4,500 people in Europe and Asia, made pre-tax profits of £21.7m on turn-over of £418m in the financial year ending in March.

So it is a serious business. Except, of course, it's the kind of serious business that would bring out the sniggering schoolboy in Miss Jean Brodie. Watts is not exempt from having a bit of a laugh, but he knows that po-faced examination of the product range is a rite of passage that must be gone through before the business story can be told. "I'm giving a prize to anyone who tells me a condom joke I haven't heard before. I know them all," he warns.

Fortunately, I don't know any. But for the neophyte in the prophylactic world, it's difficult to move beyond the coarse innuendos of a Carry On film. Even an innocuous proper noun like Matterhorn has a sexual subtext when you see an advertising poster displaying Switzerland's most famous mountain sheathed in a giant condom.

Watts is a robust, solidly middle-aged chap in his late 40s, with the affable air of a jolly uncle who happened to become an accountant. And now, after a career as a finance director specialising in pharmaceuticals, he has ended up running the world's biggest manufacturer of contraceptive sheaths, with a twin speciality in foot care.

When we have finished the vaudevillian stuff, Watts gets round to one of the more interesting business stories to be told in today's City.

SSL's share price has been oscillating wildly amid on-off bid rumours that about half the consumer goods sector is going to buy the company. And there was some rum accounting at the business, which was unearthed by Watts and resulted in a number of prosecutions that were subsequently dropped.

"Durex is a well-established brand," he explains. "It has 29 per cent of the world market. Its nearest competitor has 13 per cent. In most markets it is number one, with the exception of US and Japan, where there are opportunities."

Watts is in on of those difficult situations - between a rock and, erm, a hard place - where he just has to get on and manage the company, ignore the speculation, and grow the business.

"The strategy of Durex is combining that solidity and respect for the brand, the prevention of sexually transmitted diseases and pregnancies. But we are increasingly helping and encouraging people to have a fulfilling and rewarding sex life. The catch-phrase is from safe sex to better sex," he says.

That strategy was a little bit too hot for the nice folks at Boots, who chose not to stock their shelves with Pleasure-max, Love and Play (a magenta-coloured "sensual massage gel with Vitamin E" that comes in a wide plastic cylinder and is shortly to be found in Superdrug's stores).

The other major brand is also being developed in a way that Watts says makes good sense. "Scholl harnesses new technology in foot care and is targeting younger women, rather than older women with a foot problem, looking at the preventative rather than the pure cure."

In the US, Scholl is doing particularly well in insoles, which are sold "mainly to men. The idea is getting people to improve their posture-gait management."

But isn't he alarmed by the constant speculation? Don't the bid rumours make him take his eye of the ball?

Watts is in familiar territory here: "SSL is clearly an attractive proposition, with two brands that are particularly attractive. We have historically spent 20 per cent plus of our turnover on fixed overhead … If someone could take that out, it would go immediately to the bottom line. So there are two clear reasons why people would want to acquire this company.

"Recognising that and finding someone prepared to pay our shareholders for those future synergy values is a very different proposition. We have to move forward. We set ourselves the target last year of doubling the effective operating profit over three years from £26m to £52m. At the end of the first year, we've got to nearly £40m. I'm confident we'll do it, providing there are no wholly unforeseen horrors."

Watts has got himself some useful help to grow the brand. Ian Martin, the outgoing chairman, will be replaced by Gerald Corbett of Woolworths and once of Railtrack, at the up-coming annual general meeting.

Watts, referred to by one City analyst as "a good communicator with a credible strategy and a low tolerance for fools", is pursuing the path to growth as though Reckitt Benckiser, this month's favourite suitor, didn't exist. "The business can justify its own existence. It does need to add to the top line. We'll do that through organic growth. But as we remain independent, we'll also do it through our own acquisitions - modestly to start with, but there are clear opportunities.

Watts argues that SSL is "also well positioned in India and China through joint ventures, both of which we control. We have factories in both countries. China in particular offers not just a low-cost source of manufacture, but an almost unbelievable number of people becoming urbanised as they move to towns from the countryside."

It's certainly been an interesting ride for Watts, since he joined the company over four tears ago from Celltech, the biotechnology group, where he had been finance director: "In my first week the then chief executive was effectively fired."

The company's annual report from 2002 makes fascinating reading: "In June 2001 it was reported that sales and pre-exceptional profits for the 25 months ending 31 March, 2000, had been overstated by £22m and £19m respectively. As a consequence, a report was sent to the Serious Fraud Office." No-one, however, was ever brought to trial over the alleged discrepancies in the accounts and Watts, who joined SSL in February 2001, believes that the matter is now finally behind the company.

So, irrespective of bid rumours, Watts will battle away.

The combative nature beneath the joviality is inherited from a father who, unable to read at the age of 13 because of an education hampered by asthma, managed to get a place at Cambridge by the age of 17. Watts has huge respect for his father ("he thinks no job can't be done"), but, remarkably, did not go to university himself.

So was this an act of youthful rebellion? "'Rebel' is a bit too strong a word. But I was lucky - I found accountancy, where there were all these people who'd been to university. I passed all my exams first time, having not been able to pass my A-levels."

There is more than a little regret here. Though Watts seems happy and relaxed (he likes the outdoors, quietude and fishing - so he has to be at peace with himself on some level), not going to the student union bar has left him with a bit of a chip on the shoulder. "I wish I'd been to university, if only for the wonderful stories people have.

"What I don't like is advertising agencies, investment banks, consultants or whomever else coming in and treating me like I'm an idiot, with pre-prepared selling messages. Intellectual arrogance I do enjoy pricking. Intellect I love."

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