While CAT is unable to visit businesses in person, we instead bring you some of our favourite archive features from the past few years. This interview with Jim Sumner, the then Chairman of Andrew Page was conducted in January 2016, some months before the firm went in to administration
The last time we caught up with Andrew Page was fifteen months ago. Back then, the company was going through a turbulent time, with rumours circulating throughout the aftermarket about the factor chain’s future, both long and short term.
Soon after the group secured a £40m finance package – and under the leadership of new and charismatic chairman Jim Sumner it was rarely out of the headlines. Large scale acquisitions in the land grab that followed UAs demise and rejoining the Parts Alliance only to leave it again after six months.
Recently, the rumour mill has started to grind once again. It’s a fact that the £40m finance package has been extended by a further £10m and there have been mutterings in the aftermarket that it was spending though it too quickly.
“Oh, we like spending money, that’s for sure. I think ‘burn’ is an unfortunate phrase”…
“Oh we like spending money that’s for sure” Jim Sumner replies when we ask about the cash burn. “I think ‘burn’ is an unfortunate phrase, because it is ‘investment’. It’s only burn if it is not going to go to good use – I guess others might have a different opinion on that – but it is investment”.
Part of this investment – around £7m according to Sumner – went into replacing the firm’s ageing fleet of light vans. “We needed it quite frankly – the average age of our van fleet was well over five years old. The mobile advertising side is important – and I think people tell the health of a business by the health of their vans – and I think that by that measure we’re healthy”.
However, this wasn’t a change just to get a new set of mobile billboards, nor was it jus to ensure reliability (the firm does of course have a ready supply of spare parts). Instead, it is the first step in Sumner’s vision to have a new kind of logistics fleet.
“We may use the fleet for other innovative purposes, we are talking to a number of distribution companies” confirms Sumner. “All of the parts distribution companies, whether ECP, the Parts Alliance or us, are the same in that our vans are active from about seven in the morning to six or seven in the evening. They are not used throughout the evening or at night, so we know there is opportunity there, particularly as home distribution companies like to deliver in the early evening when people are home. So there are thoughts there – we don’t particularly use the vans at weekends – and that applies to our competition too”.
You might imagine that this plan for using vans to do more work would mean that the size of the fleet is being increased. However, the opposite is true. “We’ve taken out, on a growing sales trajectory, 11 percent of our van fleet in the last year” Sumner said, explaining; “That’s by upgrading to new vans and driving harder on telematics.”
READ: ECP ACQUIRES ANDREW PAGE
There’s no doubt that the race all factors have joined to be the first to the garage door is an expensive one, a point Sumner concedes. “For the whole of our sector, that last mile delivery is one of the most costly things that we do. Garages don’t always want to recognise it – or pay for it. Some of them are very quick to say that some of the prices are cheaper online, do they realise the cost in getting that 45 minute delivery time that they all want?”
“I think there is going to have to be some realisation and review of these things – and I don’t think that we are going to be the only party doing it. I think that we’ll be looking at some creative options in how we use that distribution”.
He explained that the leaner van fleet, running what he describes as ‘state of the art’ telemetry was part of a drive to get the firm ready to introduce the living wage, which will be rolled out throughout the company in April.
This is a subject about which Sumner is most animated. “The living wage set to be a major game changer, which I don’t think the aftermarket has fully woken up to. I think this is a really interesting area – and we sat down and decided that we are going to have to be ultra-efficient. If we thought we were efficient before, we are going to have to be more efficient in the future.” Sumner said that the firm worked out how it was going to meet the minimum wage when it was announced in the budget. Nonetheless, it took while for the ramifications to sink in. “First of all, there is the question ‘is it really going to happen’ and there was some lobbying against it – we knew there would be – but he [George Osborne] isn’t budging on this one.”
Other big-ticket items bought by Page this year include a new IP-based Cisco phone network. The system connects all of the branches and replaces the dozen or so incompatible networks that were part of the legacy of CAF and Unipart Automotive sites. “The majority of our trade is done over the telephone and not to have a modern digital telephone system was clearly remiss of the previous management team, so we’ve made that big investment” Sumner said, gesturing towards an alien-looking device on the boardroom table, which is apparently a part of the new phone network.
Features on the new phone system have already started to pay off though as calls for a whole branch can be patched through to another. This has already turned out to be useful. “Just a few weeks ago our Bury brunch was flooded under three feet of water. Fortunately, the speed at which we could switch the telephone system and retained that business is a testament not only to that team, but also to the telephone system.”
Other advantages to the new system are that it is now easier for trainers to monitor calls and it also opens the possibility of closer collaboration between groups of stores in an area.
Pricing and suppliers
Another rumble in the aftermarket is that Page’s pricing has been keen of late – perhaps unsustainably so. Interestingly, when the point is put to Sumner, he doesn’t offer an outright denial. “I think the whole industry is going to have to look at pricing” he says. “The government believes – and this is well documented – that it is trying to drive a bit of inflation. I think there is inevitably going to be some inflation in the economy and I think that is going to reflect in the pricing”.
“We are having some very grown up and mature discussions with suppliers”
If pricing is going to increase, the obvious question was who is going to pay for it and will this mean a change to supplier contracts. Sumner is blunt: “Inevitably everybody has to share in this challenge. We’ve got some great supply partners and we are having some very grown up and mature discussions with them. They recognise that the industry is under pressure and that we have to look everywhere for opportunities.”
We had to know just how ‘grown up’ these discussions had been. Sumner laughed and said: “Well, I wouldn’t want to be classed as the same kind of scenario as Holland and Barrett!” (The health food chain had that week demanded a ‘contribution’ to its investment plan from all suppliers, plus a five percent price reduction) “We work in partnership with our top suppliers. I think it fair to say that there are ways in which we can ask them what they can do to help us, because it is an industry challenge” he furthered.
Profit and loss
Speaking of money, we wanted to know when the group would next record a profit. “We’ve never not been in profit” Sumner returned sharply. “If you look at our latest results our sales have increased 12 percent, that’s a £20m absolute increase in sales year on year. Our overheads have been tightly controlled.”
“If you forget our balance sheet of 18 months ago when there were some adjustments made, if you just look at the P&L we remained profitable for all of that period.”
The balance sheet in question shows the group to be £8m down after exceptional expenses. “Yes, there were specific balance sheet movements in there that weren’t pure trading” said Sumner. “If you look at the trading we have remained profitable. There was clearly a need for some debt write off in the February of the prior year due to the new investor coming in. As is normal at that point there were some changes to the valuation of the business. And our EBITDAR [Earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs] has doubled (Sumner pauses to emphasise the point) over the past twelve months.”
Having dealt with the past, we were interested to know about the future and any new brands that might be available during 2016. This was an issue Sumner remained tight lipped on: “You will, I can’t say too much about it at the moment, but you’ll be the first call we make. We’ve got some very exciting stuff coming in and some licensing and trade marking with some key strategic partners. We don’t want to be a ‘me too’ seller of product, we want clear blue water between what we sell and what our competitors sell. We want to sell quality and value, we don’t want to get locked into a ‘race to the bottom’ with our competitors on price.”