Sydenhams’ success stems from economy-led trading
Sydenhams, 54th on the Solent 250, has a long tradition of supplying timber and building materials throughout Hampshire, Wiltshire, Dorset and the Isle of Wight. Founded in 1874 on Hamworthy Wharf, Poole, a site where timber is still imported, the company has a network of 22 branches and hire centres. Sue Hughes of The Business Magazine spoke to joint managing director James Sherborne
In a century of trading, a company such as Sydenhams has weathered good and bad times, and is acutely aware that what you trade in depends on how any downturn affects business. “It’s actually been tough, but profitable,“ said Sherborne. “In three to five years there will hopefully be an improvement and growth for the construction sector and expansion for Sydenhams through both greenfield development and acquisition. We are already seeing more opportunities for acquisitions as both the owners and the banks are getting fed up with the lack of recovery.“
For this year, however, the key obstacle is the rate at which the construction industry recovers, but as Sherborne is aware, it is a key driver for growth: “We will only expand if we generate cash, so in the long term I am optimistic, but in the short term, neutral. Recovery is also hampered by a slow and complicated planning system, which I hope the Government sorts out.“
Sydenhams, which has its head office at Ashley Road, Boscombe, is seeking acquisitions rather than disposals. “We’re primarily looking at timber and builders merchants, plant hire and timber engineering,“ Sherborne explained, “and currently bidding on two businesses which would be an excellent fit.“
Operating across Dorset, Hampshire, Wiltshire and the Isle of Wight, the company will push into areas where national merchants operate, but has more ’gentlemanly’ working agreements with other independent merchants, which work well. Looking at its ratios and comparing margins and profits on a regular basis, it benchmarks well with its competitors.
The more aggressive expansion, which has taken it from around £8 million to £50m in a decade (1999-2009, with less expansion occurring in the recent recession) has seen six branches increase to more than 20, although Sherborne points out that some double up with two businesses operating from the same sites.
Joint managing director with his brother Charles, Sherborne has worked tirelessly to unite the business structure, buying out and uniting diverse family interests to forge an extremely strong and profitable business. With a combination of bank finance and selling prime operational sites to then fund multiple new sites, he has recruited quality managers and ploughed profits back into growing the business. “We’ve now got cash in the bank rather than loans and have a large, unused, bank facility,“ he continued.
The headcount is 350, about 10% lower than in 2007-08, but other than a few redundancies, it has decreased by not replacing those people who have retired or left the area. “When we bought the company out, we wanted to recruit the very best people we could find. It’s a private company and having acquired the shares, we did not want to give up the equity, so I set up a phantom share scheme, based upon asset value, and set a dividend policy. Some profit is converted as an incentive for directors and branch managers, but the ’shares’ cannot be redeemed for three years. There’s an uncapped bonus scheme too, based on a branch’s profit.“
With a flat management structure – joint managing directors, an operations director and financial director – the key managers feel part of a family business, which in turn, benefits from instant decisions because of a lack of layers such as sales and marketing managers. Sherborne closed the final salary pension scheme to new members in 2000 and to existing members in 2006, replacing it with a more straightforward defined contribution group personal pension plan.
Citing health & safety and the removal of the default retirement age as regulatory issues currently holding back his business, he describes employment legislation as ’madness’ and adds: “If I had a key message for the Government, it would be cut bureaucracy and red tape now and review employment legislation to allow businesses to hire and fire more easily.“
For the remainder of 2012, his personal goal is to get fitter, and regarding business: “I’d like to eliminate the old final salary pension deficit – and succeed in acquiring and developing further the two new depots I’m currently after.“