It has been reported by Insider Media in an article published on Wednesday that despite big falls in revenues and profits, earnings are up at national installers Everest.
Accounts for 2016 show significant drops in revenues of over £10m and a big squeeze on pre-tax profits. Still, the company was able to boost earnings from a loss in 2015 to being back in the black by a decent margin in 2016.
Here are the main points from that report, and a link to the original article by Insider Media.
The key points:
These are the bits that will be of most interest:
A number of business improvement initiatives put in place by a new senior management team have helped earnings soar at private equity-backed double glazing company Everest, despite a multi million-pound fall in turnover…
…The business has reported turnover of £112.3m for the year to 31 December 2016, newly filed accounts at Companies House have revealed, down from £122.9m a year earlier…
…Everest generated a full-year EBITDA profit of £3.1m thanks to the introduction of a number of new initiatives which focused on improving margin, together with cost control and reduction, rather than volume. It also posted an operating profit before exceptional items of £589,000, compared with a loss of £637,000 a year earlier…
…Pre-tax profits narrowed significantly to £382,000 from £3.2m.
Credit: Insider Media
Read the full Insider Media report on Everest earnings here
In the report, Everest explain that their new senior team, installed in February of last year, have implemented measures to control and reduce costs. Presumably it was these measures which allowed the business to turn a profit in 2016.
But where would a business prefer the balance of figures to lie? Revenues have fallen quite a bit from a few years ago. But they’re now making a profit. The task ahead is to get back on the road to revenue growth, without sacrificing the gains and structural tweaks which have allowed them to make a profit in 2016.
The structure of the nationals
Put aside your own personal thoughts on how the biggest companies go about their business for the remainder of this post. I want to take a look at the way these companies are run as a business.
These are turbulent times we are entering. Brexit. Trump. Geo-political tensions in Europe, the Middle East and the Far East. All of these factors have impacts on the costs of our goods, mainly in currency changes. For installation businesses or a large size this is a problem. Their reliance on large volumes means their costs can rocket much more dramatically than that for smaller installers. Being able to quickly adapt is notoriously difficult for large businesses. Not so difficult for smaller companies who are able to readjust their models much quicker to the new trading conditions.
But there are other factors at play here which will affect the nationals more than anything else. Things like the living wage, which increases every year. New pension rules which requires businesses to contribute to mandatory pensions for every staff member. These are all significant costs to a national window installer who may have a few hundred employees, or even more. For a smaller companies, with only a handful of employees at most, the impacts I believe are easier to handle. They’re no walk in the park, and if a small installer is already struggling then these types of cost increases will cause extra worry. But if that small installers is busy and doing well, it should be something that can be managed, with perhaps a percentage of that increase being passed down to the home owner.
The fact is, the smaller window and door companies are more agile, more reactive and proactive when it comes to cost management, customer service, marketing and of course installation. There is a big push at the moment for people to consider local businesses. A trend that nationals will not be all that supportive of.
Crucially though, I believe that the national are facing a period where change and evolution is necessary in order to thrive. Easier said than done, considering the size of some of our biggest national installers. But the winds of change are here, with home owners, the economic structure and the general attitude towards windows and doors from home owners as home improvement purchases. They prefer tailor made, bespoke, custom products designed to fit their needs, not windows and doors they’re being told they should have.
Change now, and the nationals will survive. Bury heads in the sand and hope to ride it out, well that is a risky move indeed. My tip? Focus on products quality and genuine customer service. The sales should fall into place after that.
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