Business 7 Magazine Profile CSI Managing Director Robert Kennedy
Business 7 Magazine Profile CSI Managing Director Robert Kennedy
ESE director had to change focus in order to keep the business growing. ESE Robert Kennedy aims for a £10m turnover for Chess Group.
Robert Kennedy, director of ESE, has a new mantra - 'only the strongest companies survive a recession'
Having bought the industrial racking, shelving and storage solutions firm in a £1million management buyout with business partner John Scott in the mid-1990s, the pair took it from strength to strength.
In the proceeding years, the former salesmen built up relationships with some of the UK's largest firms, fitting out office and industrial space as their customers grew.
However, following the near collapse of the banking sector, ESE's main revenue stream quickly dried up.
Despite some tentative glimmers of market improvement, Kennedy is not overly confident those revenue streams will return to anything like pre-crash levels "for a long time to come".
Having realised this, he saw diversification as being the only route to survive a lengthy downturn. So in February 2008, ESE merged with Modul8 to form the Chess Group.
The deal was designed to capitalise on their respective regional dominance, with a view to expanding across the UK.
The ink had barely dried on the deal when the government was forced to nationalise Northern Rock and the subsequent collapse put expansion plans on indefinite hold.
Kennedy said: "The big contracts really just dried up in the second half of 2008. Although Aberdeen was still outperforming the rest of the UK, which helped to take some of the pressure off us in the short term, we knew we had to act quickly to strip out costs and look for new revenue streams because our market had changed overnight.
"What helped us over the worst of it was our existing customers were coming to us looking for solutions as they were downsizing or consolidating their real estate from a scattering of outlets to perhaps one larger, central base.
"A lot of the business we won in the 10 years prior to the crash came from the rapid growth in the financial services and industrial unit development across the central belt.
"The down side to this is we are now seeing those same customers looking to rapidly consolidate their real estate to downsize their operations, which means of course they are having to create new storage solutions as they go forward.
"Much the same process is happening across the industrial sector, with companies maybe moving from three or four big warehouses in different locations to one large hub in which they can accommodate most of their business, and that needs to have racking and storage solutions too."
With customers more cost conscious than ever before, Chess Group is finding new ways of using existing spaces.
Kennedy said: "The big out-of-town retailers, and supermarkets in particular, are now looking at ways to best utilise the excess headroom in their existing stores rather than building new property, which is good business for us."
The rapid downsizing of property portfolios also presented Kennedy with a new business venture, which he admits came about more by accident than design.
Having provided miles of shelving, racking and storage solutions to a wide range of companies in the boom years, those same firms were asking Kennedy if he could help in the resale of racking they no longer needed.
He said: "Green Racking is a venture borne from the work we were doing helping customers downsize because we built up an excess stock of used racking and were asked for help in deriving value from that excess stock for our customers.
"We now have a fully trained racking inspector who will go out and inspect racking from an insurance point of view to test its integrity before approving it for resale.
"On the back of that we have created a refit and maintenance side to that business too, so we can repair racking units to bring them back up to resale standard to then sell on.
"It's a business we can easily take beyond the shores of the UK and we are already looking at how best to do that."
Even though it had major customers such as Tesco, Kwik Fit and Schuh a year into the credit crunch, the group's turnover had dipped by more than £1m and was on track to fall further as more clients battened down the hatches for the recession.
Kennedy knew the Green Racking venture was not big enough in itself to sustain the group in a shrinking marketplace.
He said: "Recession is a funny thing because the necessity to survive means you really do have to get out of your comfort zone and look at every opportunity which has the potential for capitalisation.
"The office interior side of the business was flat and remains so because there isn't a lot of new building or expansion going on. Capital spend on major shelving and racking projects has also dipped.
"If we had merely hunkered down in 2008 in an effort to ride out the recession, we would have been facing real difficulties by now, but we took the decision early on we would look to diversify the offering and invest in new ventures.
"The primary reason for this was to generate enough work to keep the 32 staff we have because we have invested so much in building such a good team."
Ese had never considered a sizeable web presence in the past because the bulk of sales were based in large-project spends.
However, the sales team was first to notice buyers were quickly moving away from traditional relationships and were looking for a professional online resource to navigate the bulk of their purchasing needs.
This was to form the basis for the launch of another new venture last year, CSI Products Online Shop , a stand-alone company combining the catalogues of ESE, the Chess Group's Modul8 and the recently launched Newgate Integrated in Newcastle.
Kennedy said: “We have witnessed a structural change in how people do business because purchasers have less time to talk to sales guys than before which means they are doing a lot of the research they previously done face to face on the web.
“Because of that shift, we have had to build a strong presence online so that when the calls do come, the customer has all the information they may need prior to putting a call in.
“It may sound strange we have only just got onto the web, but traditionally the market we were in was in project spend, so we really didn't have a need for a web presence as these were big, industrial racking jobs and buyers really didn't go looking for those kinds of capital spend items online.
“We set up the website initially to give our existing customers an online version of the printed catalogue we produce annually along with a payment add-on for discretionary spend products. “The sales growth online has from the word go been nothing short of phenomenal. It’s easily growing by 100 per cent month on month.
“More and more new customers are now finding us through the web, and from that initial dealing we can then set out to build better links with these new customers and offer more services through that web presence.
“We are also now seeing a shift from purely commercial sales to new clients in the public sector, small businesses and the general public.
“We have now been invited to become an Amazon reseller for its automotive section purely as a result of the success of our online sales and the work we have done to improve our search engine optimisation.
“At present our online shop has around 10,000 individual items for sale and that's growing all the time as we bring new suppliers on board.
“We have cut back on the printing run for the catalogue by half to around 15,000 as a result and have reinvested that print spend back into the website.
“We have already brought our three-year plan for CSI forward by a year, and we expect to break £1m in sales in that venture by 2011.
“There is an enormous amount of activity in this sub-market because companies still have to function and still need equipment and supplies to operate. We're finding we are winning larger contracts now from new customers coming into contact with us at this discretionary spending level.”
The CSI and Green Racking venturesare expected propel Chess Group back towards £10m plus turnover for 2010 despite the traditional industrial and commercial markets remaining largely flat.
Kennedy said: “We were very lucky prior to the banking collapse that we have never carried any debt.
“We did act very quickly in retaining the people we have and consolidating our offering through the Chess Group.
“Before the crash, we were perhaps a bit too focused on winning those contracts worth hundreds of thousands of pounds for major racking and storage jobs.
“By extending our offering to much smaller contract work and the resale of used racking and shelving these new ventures have already become a major part of our business and have put us in a strong position to capitalise when the economy improves.”
Career profile
Robert Kennedy has spent the bulk of his career with ESE, having been enticed to join the company as a trainee salesman with the lure of a company car.
He spent the next 10 years working his way up through the company's ranks, before joining forces with his fellow salesman John Scott to lead a £1million management buyout of the company in the late 1990s.
Kennedy and Scott went on to negotiate a major supply deal with Dexion, which was the biggest distributor of shelving and racking goods in the UK, and in 2003 went on to lead a consortium of UK companies to rescue Dexion from administration.
After joining the board of Dexion, Kennedy played a pivotal role in turning the fortunes of the company around and then leading its sale to a Norwegian consortium, though he remains on the company's board.
Ese had also formed a close working relationship with Aberdeen-based Modul8, and both firms agreed not to encroach on the other's territory.
However, by 2008 ESE was negotiating a deal with The Chess Group, which includes the Knight Property Group, to join forces with the group's subsidiary Modul8 to combine the businesses with a view to accelerating a UK-wide expansion plan.
The Chess Group of companies now includes Chess IT, Bluesky Business Space, Chess Storage Interiors, Modul8, ESE Scotland, Newgate Storage and Interiors, based in Newcastle, and Strathtay Storage and Interiors, based in Dundee.
ESE operates as a separate company within the Chess Group and now includes subsidiaries Green Racking and CSI Products under the Chess Storage and Interiors banner.
The group now employs 32 people across Scotland and the north of England, and is on track to record £10m in turnover this year.
Kennedy is married with two young children.
(May 14 2010 Scott Mcculloch www.business7.co.uk)
|
News 