Benchmark
2019 THE WHOLESALE MARKET SUPPLEMENT
OPERATING MARGIN: MODEST BUT CONSISTENT
5-year
1. Bromborough 2. Toolbank 3. Aldridge 4. EFG
5. Newton Hale
6. North West Tools 7. Decco
8. Handy Distribution
9. Home Hardware SouthWest 10. Stax Trade Centres
11. Home Hardware Scotland 12. Harrison & Clough
average 8.4%
Latest -1 -2 -3 year year year year
8.0% 8.9% 8.8% 8.7% 7.9%
5.3% 5.1% 5.5% 7.2% 4.7% 4.4% 7.5% 7.6% 4.5% 2.8% 4.9% 4.7% 4.2% 3.6% 4.5% 2.5% 3.3% 1.7% 3.2% 2.0% 1.2%
1.0% 0.8% -0.4% 1.7% 0.7% 0.4% -0.1% 0.8% -2.4% -1.7% -3.4% -8.8%
Source: DIY Week analysis of fi led company accounts
6.5% 7.1% 13.8% 8.0% 7.3%
-4 year
6.8% 6.4%
2.6% 2.1% 3.0% 26.2% 5.4% 8.6% 3.7% 4.3% 5.1% 4.8%
0.2% 0.8%% 1.5% 1.9% 1.4% 1.2% 0.6%
0.4% 0.5% 5.7% 5.2% 4.5% 1.7% 1.6% 1.2% 1.4%
T STAFF COSTS: 5-year average 1. EFG
2. North West Tools 3. Handy Distribution
4. Home Hardware Scotland 5. Decco
6. Home Hardware SouthWest 7. Aldridge
8. Harrison & Clough 9. Stax Trade Centres 10. Toolbank
11. Newton Hale 12. Bromborough
he apparent trend on operating margin is skewed by a couple of one-off events. In 2014, Aldridge sold the freehold of its head offi ce
for £9.8m, resulting in an extraordinary 26.2% operating margin in that year; and in 2015 Bromborough sold a former trading branch near Eastham for nearly £1m, resulting in an operating margin for that year of nearly 14%. Excluding these two companies from the analysis results in a fi ve-year average operating margin for the remaining 10 of 3.1%. That breaks down as 2.6% in the latest year, 3.1% a year earlier, 2.8% the year before that, 3.9% the year before that, and 2.9% fi ve years ago. In other words, operating margins in the hardware wholesale business seem to be very consistent; and with the exception of Harrison & Clough, all the companies covered are consistently profi table at operating level.
HOW DOES EFG DO IT?
Latest -1 -2 -3 year year year year
6.3% 5.8% 6.6% 6.1% 6.5% 7.4% 6.7% 7.1% 7.6% 7.6% 7.7% 8.2% 8.0% 8.1% 6.7% 8.9% 9.5% 9.3% 9.2% 8.2% 10.4% 10.0% 10.2% 10.2% 10.5% 11.1% 11.6% 11.5% 11.2% 10.4% 12.1% 12.2% 11.3% 11.9% 14.1% 14.2% 13.0% 14.1% 15.8% 13.6% 14.4% 14.3% 14.7% 14.4% 14.3% 15.1% 14.4% 15.2% 15.3% 15.1% 15.9% 13.9% 14.8% 15.1% 17.0% 19.0% 19.2% 18.9% 20.6% 18.2%
Source: DIY Week analysis of fi led company accounts -4
year 6.2%
8.0% 7.3% 8.1%
11.0% 10.7% 10.9% 14.3% 14.1% 15.5% 18.7% 18.3%
T 8 DIY WEEK WHOLESALE MARKET SUPPLEMENT
he main question here is of course: how does EFG do it? It consistently records the lowest staff costs of all the wholesalers covered by this survey, with salaries
averaging just 6.3% of turnover over a fi ve-year period. Across all 12 companies, the fi ve-year average is that wage costs represent 11.9% of turnover, with remarkably little variance from year to year. So the message seems to be: if you’re running a wholesale business and your staff costs are less than 12% of turnover, you’re ahead of the game; if they are more than 12%, you’re probably not. That’s an over-simplifi cation, of course; if Company A employs its own IT people, accounts teams, delivery drivers, warehouse staff and so on, while Company B outsources those functions, then their salary bills will be very diff erent.
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