Do the figures still add up for volume fabricators?
Rob McGlennon, managing director, Deceuninck, asks does the high-volume model still add up for fabricators?
It’s been a stormy end to summer and start to autumn. Profit warnings from Safestyle were followed by the collapse of Duraflex and now, UK Windows and Doors Group.
Routes to market for each may be very different but what they share is a volume model. Safestyle and UKWG are massive fabrication businesses – and both have fallen on harder times as trading conditions have become more challenging.
Safestyle, for the moment continues to fight on. The management team have a plan and while Safestyle may not be at the top of everyone’s Christmas card list, I wish them well.
For UKWG things have been terminal and in that, there is a warning for all of us.
There is a phrase that springs to mind: ‘top line is vanity; bottom line is sanity; but cash flow is reality’.
There is a reason why the Duraflex/UKWG model didn’t work. They may have been ‘manufacturing 10,000 frames and 15,000 glass units a week’ but they weren’t making enough money and fundamentally didn’t have enough cash in the bank.
Are they alone? If I was a betting man, I’d say not. There are some other very big fabricators out there who will also be feeling the pinch of inflationary overheads and toughening market conditions.
I never want to see any business fail but I do believe we’re in for a period of reckoning. Cashflow will be tested and volume fabricators are particularly vulnerable because their overheads are greater.
The question isn’t about scale. It is about how businesses are run. Larger scale fabricators can negotiate harder, they have resource to innovate. If they’re investment-led, they can pull the rest of the industry up with them.
Bigger isn’t, however, always better by default. If margin is sacrificed for volume, it doesn’t serve anyone in the industry, systems companies, fabricators, or installers because it drives instability and business failures.
Deceuninck isn’t the cheapest profile on the market, neither are we the most expensive.
We have grown on the strength of investment, the proven stability that we bring to systems supply, and on the flexibility of our colour offer.
That carries through to Deceuninck customers. They sell more colour than anyone else, their customers do the same. Colour delivers higher margin opportunities for fabricators and installers – and that means more margin.
As we have said before, not everyone is feeling the impact of inflation in the same way. The people who are buying colour tend to be more insulated from the squeeze on household incomes, and it’s a sector of the market that alongside flush, continues to perform strongly.
This is where for my money we should be moving as an industry. Upselling and delivering a better product to the end-user. They get a better product and we get a fair price.
Is that the direction that I think the industry will move in? I hope so.