Ready for the next recession?

Two years into the implementation of a five-year strategic plan to deliver growth and enhance its adaptive capabilities in a fast-changing builders providers market, the Brooks Group has put the experiences of the downturn behind it, but not the lessons learned. Managing Director Mark Lohan recently spoke to Bernard Potter of The Hardware Journal, about exciting developments at the group over the last two years and explains why its strategic plan is called “Preparing for the next recession”.

The Hardware Journal: In the depths of the downturn in 2012, you played a key role in securing the future of the group by attracting the backing of investor, Premier Forest Products. What persuaded Premier to back the Brooks Group?

“We are a working capital-oriented business and all our metrics reflect this,” Mark Lohan, Managing Director, the Brooks Group.

Mark Lohan: In 2012, it was extremely difficult to attract investors to the sector. And it was equally difficult to persuade international investors to look at investing in Ireland. However, Premier knew the Brooks Group and saw the longevity, heritage and value of the brand. They understood the industry here and, as the operators of a successful timber and buildings material business themselves, they had the vision to see both the long-term potential and the underlying strength of the group.

It has proved to be a very constructive relationship. Premier own a number of companies and they treat each company, including the Brooks Group, as autonomous. As long as we deliver the result, they let us get on with it. As far as they are concerned, they have confidence that we know our market, we know our products and we know our customers. They give us the freedom to develop the business and shape its direction and, at the same time, if we want support, they are ready and willing to provide it. This was particularly evident in 2012 and 2013 at a time when we needed that support.

How has the experience of the downturn influenced the running of the business in recent years?

I think both ourselves, and the industry as a whole, have learned lessons from those years. The group’s current five-year strategy is called “Preparing for the next recession.” While we have confidence in the strength of our business, the commitment of our people and the measures we are taking as part of our five-year strategy, it is a confidence built on hard-won realism. We’re fully aware that although a recovery is underway and we are optimistic about the next few years, there is a high degree of probability that another recessionary cycle will occur at some time in the future. The key is to have a strong, lean and agile business ready to cope with whatever challenges arise. In late 2012 and into 2013, it was all about getting business to a sustainable level in what was still a very difficult time. Our focus was on short-interval control, there was weekly communication with managers, and we identified five or six priorities that we managed on a daily basis. During that period, we got the right systems and processes in place so that we could plan long term.

We have retained the management control style with twice weekly conference calls and a monthly round table meeting as a leadership team.

Could you indicate the overall thrust of the five-year plan?

It encompasses all aspects of the business and is supported by four key pillars – working capital, profitability, customer count and new products. We are a working capital-oriented business and all our metrics reflect this. Our managers at each branch are given a specific purchasing budget. This means that they are responsible for their own purchasing within their own branches and ensures that they focus on maximising the profitability of their stock and their purchasing. The focus is on delivering profit within the prescribed purchasing budget rather than on spending an unspecified amount to chase down a profit target.

On the debtor side of the business, this working capital-based approach means that credit we give and credit we get must be kept in step with each other; and that is a daily management control. Keeping that working capital treadmill at a steady pace is crucial.

One of the fundamental factors that has influenced the plan is the inevitability of change. This business is changing rapidly and will continue to change in the future.

Could you clarify what you mean by this?

At some point in the mid- to long-term, house-building will become a vibrant sector again. I believe it will be very different to when it last thrived. I am more than interested in how much of the demand for materials will be satisfied by the merchants. It will be a good indicator of how our industry has, or has not, adapted to the changes that are taking place.

When house-building does recommence, there is significant commentary indicating that speed of build and regulations and compliance in terms of products and completion, will be the order of the day. It’s likely that in response to those circumstances, there will be a demand for engineered solutions, which are not the typical mainstay of the merchanting sector.

Another factor to take into account is that when the housebuilding sector does take off it will have an effect on the repairs and maintenance sector of the business, which currently accounts for a lot of revenue in the industry. We have to understand the implications of this and assess how best we can respond.

You are now into the second year of the implementation of the five-year plan. How has it been progressing?

Although we are ahead of target in terms of the financials, more fundamentally, we are on target in terms of the key initiatives we wanted to implement – promoting the brand, delivering new products, and enhancing our reputation for technical expertise.

Looking at brand promotion, we have worked hard to promote the Brooks brand, including delivering an Opel van giveaway promotion last year, which was very successful and which we’ll repeat this year. We are very active on social media and in the development of our website. We have a big promotion for customers at the beginning of every month and a smaller promotional initiative at the end of each month. Those promotions are nationwide across all our stores. They convey to our customers that there’s always something happening at Brooks. Social media and online engagement constitute a significant amount of work and require a consistent level of commitment. The impact is not necessarily seen in monthly terms but its longterm impact is evident and this kind of activity has been critical in developing the repairs, maintenance and improvement (RMI) sector of our business.

Mark Lohan with John Rooney, Managing Director of Dublin Plywood and Veneers Ltd.

Could you give some details on what you’ve accomplished in terms of the other two initiatives you specified — delivering new products and communicating the group’s technical expertise?

In relation to new products, the last couple of years have been particularly busy. We now have a heating and plumbing counter in all our branches. We also introduced a sanitary ware range, an entirely new departure for our stores.

A few months ago we added trusses to our product range. This is an engineered solution: we can turn a truss quote around in three days and have it on site with a lead time of seven days. Another innovation has been the provision of a Part L solution for housebuilders. Now, rather than a housebuilder having to talk to a number of product
suppliers to come up with a product solution certified by an architect, we provide a Part L solution in one ready-made package, which is ideal from an architect’s perspective and a tremendous, cost-effective approach from a builder’s point of view. We’re certainly not finished with the development of new products. The market is changing all the time and demanding different products and ranges.

Engaging with our customers and sharing our expertise is another key element of what we’re doing. For example, we are meeting regularly with architects, engaging with them through the delivery of CPD courses on timber to the RIAI. These are regular events, taking place once a month around the country. The courses have been in place for some time and have proven popular drawing strong attendances. At the CPD courses, we go through all timber products and the proper uses of these products. It’s vital to encourage awareness of the proper application of timber products throughout the industry. The opportunity to add value comes about through informing customers about the products, their differing traits and attributes, and the best use and application of each product.

At the end of the five-year plan, how will the group be positioned?

Ready for the next recession! We’re stronger but there are still significant challenges. We need to be cognisant of that in our plans. We need to ensure that we have a good variety of customers. And we need to ensure that we maintain a healthy level of working capital. Achieving this will not necessarily be about the quantity of sales. It will be about the quality of the sales and the quality of the engagement with the customer and about being in the sectors where you know there’s going to be a significant amount of action.