Victor Manufacturing is betting on a new streamlined commercial structure to power its return to profitable growth after suffering its first decline in annual sales for five years.
The Bradford-based catering equipment supplier saw its turnover increase by 46% between 2012-13 and 2016-17, but the growth was halted last year as uncertainty over Brexit and austerity measures in the public sector – where Victor is historically strong – impacted foodservice equipment investment by local authorities and public services.
Turnover declined by 5% year-on-year to £8.6m for the 12 months to 31 March 2018, according to accounts just filed with Companies House.
In their review of the business, the company’s directors said market conditions had resulted in a “very price sensitive sector”, with competitors “trying to maintain market share by cutting margin”. Its own gross margins fell from 56.7% to 55.6% in the year.
While the company reacted by controlling overheads as far as it could, inflationary increases from suppliers and the effect of the depreciating sterling exchange rates led to a 0.9% increase in administrative costs.
Victor, which specialises in hot cupboards, counters and retail displays, had increased headcount from 109 to 114 at the start of the accounting period in anticipation of an expected increase in production during the second quarter.
However, it allowed those staff levels to fall later in the year through natural wastage when its forecasts failed to materialise. “Further cuts in staff numbers have been made early in 2018-19 as the harsh economic and market conditions continue,” the directors stated.
The reduction in sales value and gross profit margins, along with a modest increase in administrative costs, meant Victor ended the year with a loss of nearly £146,000 compared with a £186,000 profit the year before.
Bosses noted that despite the loss on the income statement, the business remains in a “very strong” financial position, with net assets of more than £5.8m along with cash and short-term investments of more than £3m. “This demonstrates the financial strength of the company on which the directors plan to build in the coming years,” they stated.
During the year, the directors took the opportunity to review the company’s five-year strategic plan with the aim of restoring profits this year (2018-19) and beyond, resulting in a detailed assessment of its internal structure and processes.
Most of the initial restructuring has occurred within the commercial and sales functions and the directors are confident that the new structure, along with a change in some personnel, will deliver a much more effective commercial offering for its customers and encourage sales growth.
Since a new sales director was appointed in October 2017, dedicated regionally-focused teams have been set up, as well as ones for national accounts, which Victor believes will deliver an enhanced customer experience.
Some of these changes did come with “significant” costs, which added to the loss it reported, however it expects the new structure and processes to enable it to deliver better results in the current year, which it is now nine months of the way through.
“The directors have also started reviewing manufacturing and operational functions with a view to increasing productivity and efficiency within these functions. This should drive cost reductions and result in price benefits for customers in the future,” the report stated.