no axminster catalogue from now on

[biskit]

Yeah but I used to see things in the catalogue that I did'nt need but wanted so I got. :wink:

 

[beganasatree]

I just like BearTricks requested one ,that was 4 years ago not 1 request but 2 and like BearTricks I am still waiting.

 

[mseries]

I have had 2 in 22 years and only one through the post, no real loss to me since I have never ordered from them anyway, always out of stock.

 

[Inoffthered]

I find Axminster's business model difficult to understand. Opening big sales units at a time when other retailers are looking to reduce overheads and move towards online sales???. Then despite the fact that catalogues are an established way of building customer loyalty and promoting sales, Axminster have decided to stop producing a hard copy version??? I bet D&M, Rutland and co are laughing.

If you force people to go online then it becomes a very small step for a potential customer to look at other online stores, all of sudden Axi have become just another box shifter

Having said that, if you look at the Axminster group accounts you can perhaps understand why they need to cut costs ....turnover £35million, profit after tax only £320k. The balance sheet makes interesting reading too, stocks of £10m , trade creditors (i.e. what they owe their suppliers) £4.8m and a bank overdraft of £5m. A stock turn of only 2.1 times in a year seems a bit low for a retail business.

 

[Rhossydd]

if you look at the Axminster group accounts

What year are those figures for ?

Things have changed a lot in the last two years.

Whilst you may not understand their trading model, they undoubtedly have the numbers to make the big decisions on what is actually happening in their business.
Their gamble will be how much the catalogue is/was driving sales and if the people who only rely on the catalogue are worth the expense of chasing.

 

[Inoffthered]

[What year are those figures for ?

Things have changed a lot in the last two years.

Whilst you may not understand their trading model, they undoubtedly have the numbers to make the big decisions on what is actually happening in their business.
Their gamble will be how much the catalogue is/was driving sales and if the people who only rely on the catalogue are worth the expense of chasing.

Accounts for year ended 30 April 2015.


On what basis do you say that they have the numbers to make the big decisions?

Looks to me like:-
high levels of borrowings (they'd be in trouble if interest rates started climbing)
annual interest charge of c£130k so not much cover if they need to borrow more
low stock turn
low profitability , gross margin of 38%, post tax profit less than 1% of turnover

If you do any sort of sensitivity analysis , a 2.3% fall in sales wipes out the profit.

 

[Rhossydd]

On what basis do you say that they have the numbers to make the big decisions?

They'll know all the big data on where the sales are taking place now;
Post - phone - store - web
They'll also be able to link who's buying via what source, whether they were on the catalogue mailing list, email list, likes on social media etc.
If they're really on top of 'big data' they'll have tracking data between mail shots/social media/web visits etc.
Plus their staff will be feeding back soft data on the importance of the catalogue vs web site to head office, it's not really a big company, so there's a lot of effective communication.

Accounts for year ended 30 April 2015.

So that will include the investment of the new store at North Shields. There's also been a shift in pricing in the last year to become more competitive, presumably on the back of currency fluctuations.
In that respect the catalogue has actually been a hindrance, Veritas, Festool and their machinery have all dropped in price a lot since the last catalogue and don't forget the greatly reduced cost of shipping small orders.

 

[Inoffthered]

On what basis do you say that they have the numbers to make the big decisions?

Accounts for year ended 30 April 2015.

So that will include the investment of the new store at North Shields. There's also been a shift in pricing in the last year to become more competitive, presumably on the back of currency fluctuations.
In that respect the catalogue has actually been a hindrance, Veritas, Festool and their machinery have all dropped in price a lot since the last catalogue and don't forget the greatly reduced cost of shipping small orders.

It looks like the costs of the new unit (£800k) have been capitalised and so the profit and loss account is not affected by the set up costs.

If, as you say selling prices are falling, then that will put even more pressure on the margins. As I said previously, a 2.3% reduction in sales wipes out the profits. So if they are reducing prices, they will need to increase the volume of sales to make up for it.

Your comments on "big data" are not relevant. So they know where their custom is coming from, big deal, even with that knowledge the accounts in 2015 do not look good. They are also competing against the likes of D&M who consistently under cut Axi on price (and deliver quicker imho) who have not gone through the vanity phase of feeling the need to open big retail sheds.

 

[Rhossydd]

if they are reducing prices, they will need to increase the volume of sales to make up for it.

Not if they're making a better margin.

Your comments on "big data" are not relevant.

Oh course they are in the context of knowing where their customers are coming from.
We're discussing the wisdom of dropping the catalogue. I very much doubt it will have been an easy or quick decision to make and highly unlikely to be driven by their IT department.

 

[mseries]

Axminster probably paid a specialist to produce and send the catalogues anyway.

 

[Terry - Somerset]

A few plausible things strike me about Axminsters strategy:

1. Catalogues (good quality anyway) cost a lot to produce. Mailing lists need to be kept up to date. Prices are difficult to change mid catalogue run leaving them vulnerable to exchange rate fluctuations. And bear in mind that all these costs need to be recovered from the profit on the additional sales generated to make it worthwhile.

2. Purely on-line retailers need to be very price competitive and run a website. There is limited scope to differentiate different companies. I know that opinions on the Axminster site vary - but objectively most would probably rate them amongst the best. Some competitors are very much poorer, many very average.

3. Axminster are probably trying to dominate their segment of the total tool market - some generalisations:

- B&Q and Homebase sit at the bottom servicing mainly basic DIY. Prices high, quality low, availability widespread
- Screwfix and Toolstation serve upper end DIY and small trade/contractors. Prices OK, good distribution, no showrooms, limited catalogue.
- Axminster - high end hobby/DIY, small/medium business, contractors.
- Corporate - professional large scale manufacturing

4, Axminster carry a very wide range, have regional showrooms where machines can be seen in the flesh, fairly/well informed staff, high expectations for service quality and spares availability. So far as I am aware no other similar companies exist.

5. Lack of a catalogue (but a good web site) may deny them a few sales - the wholly non-IT literate and annoyed on principle. However I suspect their purchases would be insufficient to outweigh the cost savings. As time goes by they will represent a smaller and smaller segment of the customer base.

6. Catalogue or no catalogue Axminster will not always be (nor have been) price competitive. People use them (one assumes) because of the overall "package" of which price is an important but not necessarily the overwhelming rationale.

Just to add that I have no personal interest or affiliation with Axminster - merely an occasional and fairly low value customer.

Terry

 

[Eric The Viking]

Having said that, if you look at the Axminster group accounts you can perhaps understand why they need to cut costs ....turnover £35million, profit after tax only £320k. The balance sheet makes interesting reading too, stocks of £10m , trade creditors (i.e. what they owe their suppliers) £4.8m and a bank overdraft of £5m. A stock turn of only 2.1 times in a year seems a bit low for a retail business.

I read later in the thread these are 2015 figs, but where from, please CoHo returns or elsewhere? I didn't think Axminster group was publicly traded, so I assume you have had only the base CoHo set of numbers to go on. Be gentle I'm a bit rusty having not done this stuff for over 20 years...

It's all extremely interesting, especially the stock turn. It raises some questions and thoughts:

1. What sector would I put them in, for comparison purposes?
2. I'm rusty on this: stock of 10m, turnover 35m - stock turn of 3.5x? Gross simplification but still... and a comparison with the 2014 numbers would show if their stock-in-hand is growing or diminishing too.
3. It would be very interesting to know the terms under which they have their shops: short/long lease or possibly freehold. It would affect their ability to borrow. Under what period would they write-off the brand new shopfittings, etc.? I'm not very clued up on retail (you can tell!). Is there a standard practice for this in that sector?
4. Assuming normal tax rates, profit pre-tax is 400k, which is only 1.1% - not awfully good. But that's net, not trading.
5. If they were buying ahead in 2014, They're will have been helped by the yuan, as it was at a significantly better rate then than now, despite the current 'crisis'. How do FOREX purchases show in their accounts? If they read it right they might have been committing to stock manufacture at a lower rate, hence the higher trade creditors number. So that's not necessarily a bad thing.

It's all interesting - as I said would love to know where you got the numbers from.

E.

 

[Inoffthered]

I read later in the thread these are 2015 figs, but where from, please CoHo returns or elsewhere? I didn't think Axminster group was publicly traded, so I assume you have had only the base CoHo set of numbers to go on. Be gentle I'm a bit rusty having not done this stuff for over 20 years...

It's all extremely interesting, especially the stock turn. It raises some questions and thoughts:

1. What sector would I put them in, for comparison purposes?
2. I'm rusty on this: stock of 10m, turnover 35m - stock turn of 3.5x? Gross simplification but still... and a comparison with the 2014 numbers would show if their stock-in-hand is growing or diminishing too.
3. It would be very interesting to know the terms under which they have their shops: short/long lease or possibly freehold. It would affect their ability to borrow. Under what period would they write-off the brand new shopfittings, etc.? I'm not very clued up on retail (you can tell!). Is there a standard practice for this in that sector?
4. Assuming normal tax rates, profit pre-tax is 400k, which is only 1.1% - not awfully good. But that's net, not trading.
5. If they were buying ahead in 2014, They're will have been helped by the yuan, as it was at a significantly better rate then than now, despite the current 'crisis'. How do FOREX purchases show in their accounts? If they read it right they might have been committing to stock manufacture at a lower rate, hence the higher trade creditors number. So that's not necessarily a bad thing.

It's all interesting - as I said would love to know where you got the numbers from.

E.

Numbers were taken from information filed at Companies House.
Axminster is part of a group and so to avoid distortion that can be caused by inter company charges I actually quoted numbers from group accounts of the ultimate holding company (Styles & Brown).


Stock turn...the stock turn ratio is actually calculated on the basis of cost of sales not sales (which is quite logical if you think about it). Cost of sales in the accounts was c£21m so 21/10 =2.1.. This was broadly similar to the stock turn in previous year.

As for properties , the additions to fixed assets in the year suggests that the new site was on a short term lease.


Re foreign exchange, the accounting policy used is:-
"Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction or, if hedged, at the forward contract rate. monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date or, if appropriate, at the forward contract rate.

The accounts show a profit on exchange of £26 k in the year.

 

[HappyHacker]

They used send me two every year. It took me ages to read them both.

 

[Terry - Somerset]

With nothing else to do on a wet saturday morning, and getting over a touch of bronchitis which precludes the workshop dust, I thought I would take a look at the Axminster accounts. It may start to make some sense of why they do what they do given the discussions above.

1. Axminster Tool Centre are a subsidiary, but seem to make up most of, of Styles and Brown (the original family firm??). Therefore all observations are with respect to S&B accounts at companies house.

2. Turnover is £35.5m and profit before tax £470k.

3. Gross profit is £13.7m - 39%. Normally the cost of sales is the cost of the machinery only including shipping costs and import duties. It should not include any staff, property or administrative costs. Note that not all items will make the same % - some may be as little as 10%, other may be 60% depending on nature of the items and competition. They will probably also try to carry lines which are well regarded but as sole or principal UK distributor.

As Axminster have quite extensive showroom/staff costs it is somewhat easier to see how purely online competitors can undercut prices on some items if they have the volumes to negotiate as good a purchasing deal as Axminster. This may be the Rutlands strategy - buy in container loads of popular products, discount the price, small margins, go out of stock before they buy some more.

4. Distribution costs are £1.3m - 3% of sales. Given their free delivery on over £50 this does not seem unreasonable - eg: of £500 items weighing perhaps 40kg would simplistically cost them ~ £15 - probably an understatement as not all items will be shipped.

5. Administrative expenses are £11.9m. In large part this arises from the nature of the business in providing showrooms, distribution centre and associated staff. Main items:

- 263 staff at a cost of £7.0m incl. NI and pens. costs. Includes directors and is an average of £26.6k per head. Reasonable.
- £0.5m depreciation of assets - mostly on fixtures and fittings
- £1.1m lease costs, or which £853k relates to property - I assume much of the property/branch network is rented not owned

6. The balance sheet appears sound with shareholders funds of £4.9m - but the devil may be in the detail!

7. There are fixed assets of £4.0m, the main element of which is is short leasehold land and buildings £1.8m. Note that this may be the value of improvement work done by Axminster (partitions, flooring, electrical installation etc), not just an amount originally paid for the lease. Fixtures and fittings (displays, counters, racking etc) amount to £1.1m. There is also £0.4m intangible asset which seems to relate to goodwill generated about 8 years ago - often arises when a company is purchased (Brimarc???)

8. Stocks are £10m and are valued at cost less any provisions usually for slow moving or obsolete items. This represents around 5.5 months cost of sales - seems high. Worth noting however that to get best discounts and reduce shipping costs they may see full container loads as as preferable to smaller more frequent shipments. Also long delivery lead times means that to avoid too many stockouts, goods need to be shipped in expectation of future sales, not "just in time" which is an alternative strategy in some businesses.

9. Debtors are £2.7m - I assume mainly trade accounts (larger, more regular, mainly business customers?) . Assuming this represents around 2 months (60 days) sales would imply that these trade accounts represent approx £16m pa - about half their total turnover.

10. Creditors are £11.7m. Of this £5.4m is bank loans - increased over the previous year by £1.4m possibly due the cost of opening new branches. The other major item are trade creditors of £4.7m representing approx 2.6 months purchases of tools and machinery - seems as expectation.

11. Not on the balance sheet or in the profit and loss account are contingent liabilities. At April 2015 Axminster had made forward currency purchases of £8.3m mainly in US$ - I assume because their supplier currencies (China etc) are not so freely traded but historically broadly related to US$.

This allows Axminster to "fix" the cost of (some of) their future purchases in ££ and enable them to set prices in their catalogue. A bit like a fixed rate mortgage - it reduces uncertainty by fixing your mortgage repayments but may still cost more if interest rates fall after you have signed up to the contract.

At April 2015 the average value of these forward purchases was US$1.65:£ compared to a spot rate then of US$1.54. The rate today is US$1.45:£. This is obviously very good news for Axminster as they made the forward contract when the rate was (with the benefit of hindsight) very favourable. Under the contract $1000 of product would today cost £606. If they had to pay at the rate today the cost would be £689!

Terry

 

[Eric The Viking]

With nothing else to do on a wet saturday morning, and getting over a touch of bronchitis which precludes the workshop dust, I thought I would take a look at the Axminster accounts. It may start to make some sense of why they do what they do given the discussions above.

Thanks Terry - makes a lot of sense (and I need to get more practice!).

There is also £0.4m intangible asset which seems to relate to goodwill generated about 8 years ago - often arises when a company is purchased (Brimarc???)
. . .
9. Debtors are £2.7m - I assume mainly trade accounts (larger, more regular, mainly business customers?) . Assuming this represents around 2 months (60 days) sales would imply that these trade accounts represent approx £16m pa - about half their total turnover.

I wonder if #9 above is also Brimarc

10. Creditors are £11.7m. Of this £5.4m is bank loans - increased over the previous year by £1.4m possibly due the cost of opening new branches. The other major item are trade creditors of £4.7m representing approx 2.6 months purchases of tools and machinery - seems as expectation.

Given your observations on Forex this would make sense too: the loans would allow them to hedge, and given that the exchange rate has fallen far more than the rate they'll be getting from the bank, any loans for that purpose must be well worth it.

Do you depreciate purchased goodwill?

E.

 

[Terry - Somerset]

Goodwill is being depreciated over 20 years - approx £34k pa. This is an area where accountants need to exercise a lot of judgement as to what value is represented and how to reflect this in the accounts - although not particularly material in this case.

Terry

 

[Claymore]

.........

 

[Mike-W]

I have been a customer of Axminster for more than 25 years and always felt the one thing that stood Axminster head and shoulders above all other tool retails was that they published an annual catalogue with an incredible range of products that i could browse, select from and purchase.
I have noticed over recent years the clearance sales would start late summer of some of the choice of quality hand tool accessories and tools (the Clifton range of planes for example).
Apart from being able to browse tool catalogues any time, anywhere (also equally easy these days on the web), printed catalogues provided an excellent historical record, i’m not sure such historical information will be archived in the same way on the internet for the future.
Ironically I find the choice once offered by Axminster is now available from other UK and German tool retailer websites, i think Axminster will need to have some particularly clever marketing plans to be able to retain loyal customers like myself.

Mike