Norbain have been in the news somewhat recently with various items of gossip which is a result of the “credit crunch’ (the polite word for the recession). And as the largest security distributor within the UK, Roy Cooper our MD decided to nip down and interview Alun at their new offices in Reading.
I opened the meeting by setting the scene about how the industry was preparing itself for a turbulent 2009 and asked what Alun’s take on it was.
Alun said that he felt the recession started back in June and felt that certain sectors were suffering more than others, Worst hit was the retail market where the company had seen a number of projects being put on hold and hence a drop in orders in this specific area. Therefore the growth that they had seen had disappeared. Norbain have specialist advisors that are dealing direct with the end users and installers so are very close to the market. He said they had been advised that capital expenditure was being reduced and, in fact, put on hold in some companies. This being where the money came from to finance the electronic security systems.
He said that in addition to this the banks were putting the squeeze on installers and credit protection insurance companies have pulled cover. Alun drew my attention to one in particular, a company called Atradius who have said they will be withdrawing protection on 7,000 companies, and that a number of security companies fell within this strategy. As a result Norbain are finding themselves in a position of funding their customers, in fact they are doing this specifically when the banks are refusing finance. They have turned to their key suppliers "the brand manufacturers" for support with this and have had favourable results. However it does mean keeping a tighter control over these accounts as they could be caught with a bad debt which has of course already happened. The credit control department is playing an important part of this calculation.
I pointed out that this was one of the rumours that was running around the industry that the company had been subjected to some large bad debts recently, however Alun was very casual about this saying they budget for it, and were within budget. Not a good thing of course but it is the nature of the business they are in.
Alun went on to say that the company had also seen CCTV sales dropping but that intruder and access sales were not effected that much and perhaps were enjoying from an increase, in fact even if you analysed the CCTV sales IP (Internet Protocol) was on the up as well.
I asked Alun: is the rumour that they were pulling out of the intruder market true? Alun said that this was completely wrong; he said the company had reached the status of third distributor in the UK and that they were on target to become the number two distributor of alarm products by the end of 2009 thus achieving the target they had set themselves.
Will the company be affected more or less than the industry? "Actually I think we will perform better than the industry trend, our core business has always out performed the industry trend. However we need to re focus the business."
What does that mean? I asked. Alun said that there were three areas in any business that were key to this, sales, margins and overheads. Norbain have started to launch a new range of entry-level products which they are calling Xeno. These products will be very competitive, he said, and will be de-featured – it does not have all the bells and whistles, it’s the basic product in plain English – thus allowing the company to achieve sales in an area they have not worked in before. He said that end users were insisting on cheaper products as they needed to save money but still needed to be protected. The company has also planned some new products within the Vista range which will also be launched over the next few months. In addition to this the company need to remove significant costs and are cutting overheads, as we are aware, one of those areas being the decision to pull out of Ifsec 2009 – the exhibition floor at least. This will save the company a significant lump of money; some will be redirected to the marketing of the new products. They are closing one of their premises and subsequently a few people will be made redundant. The numbers of these is yet to be decided as the company are busy discussing other options with these people. So those two things should take care of sustaining the all-important margin but Alun stressed that it was equally important to maintain the efficiency of the business.
Finally Alun said that all companies should be looking at doing similar things to protect their business. He felt that some would not survive if they did not and in fact told me that he thought a few more manufacturers like Dallmeier and Pyronix would break their alliance with Norbain as they too re-focus their efforts in different directions.
