Phoenix from the flames

The winter of 2008 will always be one that Iain Munro will find hard to forget. At the time, Scobie & McIntosh (Catering Equipment) Ltd — the company he was a joint owner of — had just emerged from a 10-day period in administration after being taken over by Unitech Industries.

While the rest of the country was preparing to welcome in the New Year in usual jubilatory style, Munro was busy reassuring two of the country’s largest supermarket groups that the business had been saved and remained in a position to be able to continue serving their needs.

“I spent December 30th and 31st in Morrisons and Sainsbury’s advising them because they were both sat hanging out for us, and we are very fortunate they did,” he reflects.

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Despite being on track to generate sales of more than £13m that year, the Livingstone-based outfit fell victim to the seismic changes that rocked the finance sector to its core and could only watch in bewilderment as its bank pulled the plug on the usual seasonal overdraft it required to steer it through the leaner winter months.

Although boasting an order book of £2m at the time — and having reported a record level of turnover less than 12 months previously — the company suddenly found itself in administration and forced to lay off 90% of its staff.

Six or seven parties made their interests in the business known as its future remained uncertain, but it was Unitech that landed the prize, viewing Scobie & McIntosh’s installation and fabrication expertise as the ideal foil for its own stainless steel and aluminium equipment production operations.

Now trading as ScoMac, the business has gone from strength to strength under its new parent, although that doesn’t mean it has had an easy ride. For a start, it has had to repair relations with manufacturers left out of pocket when the former company collapsed.

“There were some quite big hits in there,” admits Munro, “although I would have to say that 95% of the supply chain understood that we were caught. It wasn’t like we’d taken advantage of them and shut the doors and burnt the debt. The debt had been burnt without a doubt, but it was really down to the fact the banks hadn’t stuck with us to allow us to get through [the seasonally low months].

“The business was traditionally invoice-financed, so our cashflow was our invoicing and the business had probably gone through most years facing a similar juggling requirement — communicating to the supply chain that we were not hiding, we just hadn’t got the cash and if they could just stick with us… but the bank got to the point where it wasn’t willing to consider anything and that didn’t help us.”

Munro admits it has Unitech to thank for getting suppliers back on side quicker than might have otherwise been the case. As well as providing parent company guarantees to kickstart new trading relationships, its scale and reputation offered reassurance to vendors understandably nervous about extending credit.

In its first year since emerging from administration, ScoMac recorded sales of more than £8m. That increased to £11m in 2010 and then to £15m last year. With its workforce now totalling close to 115 people, the company has returned to the sort of scale it was before the administration.

More pertinently, however, Munro says ScoMac has been profitable in each of those years, although downward margin pressure and a rising cost base meant its bottom line return in 2011 was slightly lower than the year before.

Ironically, the company’s re-emergence as a powerful catering equipment force has been aided by the takeover of businesses that have found themselves in similar circumstances to those that formerly caused its demise.

Two years ago it rescued Cambridgeshire-based Welequip from administration — providing it with a much-desired presence south of the border — and in November 2010, it snapped up Stellex in Northumberland, which had suffered the same fate.

That acquisition gave it access to a 10,000 square foot production facility and a range of modular countering that complemented its own bespoke custom fabrication activities in Livingstone. In the same year it also opened up an office in Leeds to further its English ambitions.

Munro admits the company is open to the prospect of further acquisition opportunities — it is especially keen to further its business in greater London — but only if they make as much commercial and economic sense as its previous purchases.

“They have been very prudent acquisitions,” he remarks. “Welequip cost us something like £15,000 for the name and assets and it had a prison job on the books for about £300,000 that needed to be completed and a subsequent Belmarsh project, which we have just completed worth circa £600,000, so it wiped its face before we started.”

Munro, who many in the industry will know through his capacity as chairman of CEDA, is not one to get ahead of himself, though, and for now, at least, the main priority is stability.

“We have got back into a mindset where there is a level of apprehension being conveyed by the press about the economic climate,” he says. “Activity around the Olympics has happened and I think that has stalled any other investment at the moment. If anything we are looking at standing still at best this year with the hope that the ‘R’ word starts to be less used and some of those green shoots start popping up in the following years. My main emphasis is about managing costs.” [[page-break]]

One of the chief factors that will determine ScoMac’s fortunes is the success of its in-house fabrication business, which continues to contribute more than a third of its sales and provides it with stronger margins than third party equipment resale.

Munro insists the key is ensuring a stead volume of work flows through the 36,000 square feet Livingstone facility.

“Last year we still spent over half a million quid with third party fabricators, so we are focused on getting our own capacity sorted out and ironing out some of the peaks so that we are making the more standardised product in advance during the troughs,” he comments. “That does give us a huge amount of flexibility, though, even in as much as if something needs to be adapted onsite you have sheet metal workers there that can do it, whereas if you are using a third party it can be a nightmare trying to get somebody to attend and there is also a cost involved in it.”

With a customer base that includes Accor Hotels, Hertfordshire County Council and a number of local authorities in Scotland, not to mention the two supermarket giants referenced earlier, it is clear that ScoMac has put the woes of four years ago firmly behind it.

And, for Munro personally, that will hopefully mean he’ll never have to spend a New Year’s Eve reassuring bluechip clients they have nothing to worry about again.

Balancing brands

ScoMac provides the full gamut of catering equipment services, including planning, design, procurement, installation and maintenance. It also has a strong equipment resale element to its business and that means sourcing a range of kit that doesn’t just match customers’ budget expectations, but will do the job over the long term too.

Rather than limit its scope to just one or two core brands, joint managing director, Iain Munro, says ScoMac prefers to develop relationships with a handful of renowned names in each product category.

“I think because our customer base consists of a high level of key account customers, we are covering most of the leading manufacturers,” he explains. “We will be doing significant levels of turnover with all of the leading warewashing companies — Hobart, Winterhalter and Meiko — and it is the same with prime cooking. In the main it is obviously Falcon because our home market is Scotland and the demand is very strong there, but also the Hobart, Dawson and Manitowoc range of products as well.”

He adds: “The same goes for refrigeration, where you have Williams, Foster and Gram. If you take any of the leading brands we are probably doing a significant turnover with the three or four top ones in each category.”

Channel profile

Name: ScoMac Catering Equipment Limited
Address: 1 Bell Square, Brucefield Industrial Park, Livingston, EH54 9BY
Telephone:
01506 426200
Website: www.scomaccateringequipment.com
Specialist areas: Planning and design; Equipment procurement; Specialist manufacturing; Supply and installation; Maintenance and repair
Parent company: Unitech Industries
Fast fact: The retail market remains one of ScoMac’s strongest client sectors, accounting for around 35% of its annual revenue.

ScoMac revenue growth

2008*   £13m
2009    £8m
2010    £11m
2011    £15m
*Trading as Scobie & McIntosh

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