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for thought
Page 25
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David Frankish and Charles Stephens are settling in, having bought NFT Distribution from Northern Foods. Many challenges lie
ahead — and, as they told Bridget Carter,
that's just the way they like it.
Despite beginning their working lives with no intention of making careers in transport, David Frankish and Charles Stephens are the proud new owners. via a €51.2m management buyout backed by Phoenix Equity Partners, of NFT Distribution.
This is a firm with a high profile in the transport world thanks to its former parent, Northern Foods. With that company regularly splashed across the business pages of the national media. and with blue-chip customers such as Sainsbury and Asda, it was inevitable that when Northern put NFT up for sale it would attract a certain amount of media attention.
So yes, the firm has had its fair share of coverage, but what about the new owners: Frankish, the managing director, and Stephens, the business services director?
Wide skills base Frankish is an accountant by trade, but he believes he has come to know the business backwards: -I've had academic training, that's true, but after being with the company for 21 years you pick up quite a bit of background. I've been doubling as ops director for three or four years so we're both comfortable running different parts of the operation."
Stephens came to NFT by a different route, having started on the manufacturing side of Northern Foods, but he has also spent 20 years in various transport roles.
Stephens says transport grew on him: 'it's a bit of a cliche, but people talk about transport getting under your skin. I had a skill for the network-planning side and it's something I enjoy enormously."
Rumours about NFT being up for sale have been circulating for some years, but Frankish says it was never officially on the market until Northern Foods reviewed its business last year: "Northern Foods' view was that if anyone approached it and offered what was thought to be a fair price, it would talk.
"It wasn't until the strategic review that it decided to see what the interest was in the marketplace," Once WI' was on the market, banks, private equity firms and a few well known names in the haulage industry all expressed interest.
Frankish had previously been told that he would have to resign if he wanted to buy the business, but after November he was given the green light for the buyout.
Now they have taken the reins, Frankish and Stephens are confronted with what they describe as a problem (albeit a problem that some hauliers would give their right arms to share) most of the revenue comes from a few major customers, namely Asda, Sainsbury and Northern Foods. While big customers and big contracts are a comfort, losing any one of them would hit turnover hard.
On the other hand, Frankish cautions against spreading the firm too thinly: "I think too many people chase after new clients at the expense of the service they give to existing customers. We aren't going to make that mistake."
Stephens says this is why they need to find ways to offer added value to their existing customers.
NFT specialises in chilled food distribution, mainly ready-made meals. It's an area in which it has had much experience thanks to Northern Foods' vast portfolio of products. Northern was the first company to offer readymade sandwiches to the big retailers, so the management team at NFT also has plenty of experience in distributing foods with a 24-hour shelf life.
"The growth in the chilled food market in the past 10 years has been driven by innovation and product design, and greater demands for convenience," says Stephens. "In itself it has placed huge logistical demands on our industry, so order times are much shorter, replenishment times are much faster, there is no room for error and there are no margins for safety "Everything has to move very quickly and with absolute certainty," he points out. "We plan and design our businesses around this."
Tough sector
Frankish and Stephens both believe they thrive on challenges the greater the challenge, the stronger position it puts them in.
Frankish says some of the major players in the logistics industry shy away from their sector: "We find that our marketplace is one that the bigger players find a bit difficult;theyfind easier pickings elsewhere. The only big names you'd recognise are Wincanton and others such as Corby Chilled [Distributionl.You wouldn't see Exel there, for example."
Stephens adds: "You need to have the infrastructure in place before you can get past first base."
NFT's latest published turnover is £111.4m, generating pre-tax profits of £3.4m. Frankish says he has a five-year plan in place and aims to keep growing the company: "We make a margin of about 3.5% and that's pretty good for distribution. It's right in the middle and it's where you want to be if it's too high, people are going to say you're overpricing."
As part of their strategy, they are hoping to pull in customers in the food sector who would previously have regarded them as being part of their rivals, Northern Foods: "We'll target all the major food manufacturers and as time goes by look at other areas such as produce and ambient."
Certainly non-food loads could be a way forward; Frankish notes that 50% of the products Asda offers are non-food: "That's slightly different to your traditional grocer."
But for now. Frankish says the firm is "all about chilled. We don't have the depot network to handle frozen products."
Stephens adds:"The chilled sector is growing faster than any other sector and if frozen represents about 3 %, then chilled is about 30%."
And they are not going to get carried away with trying to grow too fast. Stephens concludes:" We need to concentrate on getting things set up properly and convincing existing customers that we're serious about wanting to stick with them. The last thing we need to do is be like kids in a sweet shop." •