Rational UK has revealed how Brexit preparation has augmented its sales in the 12 months to 31 December 2019.
In the combi oven manufacturer’s latest publicly-available annual report, it recorded a 2.6% revenue growth, from £61.9m to £63.5m. Plus operating profit increased by a massive 86.5%, from £2.3m to £4.2m.
Michael Keeley, finance director and company secretary, stated in the report: “Growth was down compared to the prior year but still outperformed the general economy significantly. Public sector austerity and a lack of private sector investment, resulting from Brexit uncertainty, contributed to fewer sales opportunities in the market. However, Brexit created opportunities for spare parts and cleaner, with an increase in sales through our distribution network, who all increased stock levels in readiness for the UK exit from the customs union.
“Gross profit improved due to the mix effect from an increase in non-unit revenue, namely spare parts (up 11% on the previous year) and cleaner sales (up 18% on the previous year). This increase was driven by our partners increasing Kanban levels to ensure continuity of supply driven by Brexit uncertainty.”
He reported that Rational UK’s selling and distribution costs declined despite establishing a UK warehouse and a £5.7m increase in stock levels. “Working together with our logistics partner and our production team in Landsberg we were able to streamline processes whilst increasing stock availability across all product lines.”
Operating costs rose slightly, 0.4%, as Rational focused on maintaining and improving its internal structures within the overall organisation.
As a result of revenue increases and reportedly tight spending controls, operating profit margin also rose by 3% to 6.6%.
Keeley analysed: “Our restaurant segment share declined by 3% as business shifted to retail and catering. Small declines in the education sector were compensated by gains in healthcare and military mass catering sites, both outperforming prior years. Encouragingly, we also saw big gains in the retail sector with business up 43% on the prior year.”
On Brexit preparation, he explained: “Throughout 2019 our focus has been on ensuring the supply chain was prepared for the expected stress as a result of Brexit. In Q1 we shifted our supply strategy from a just-in-time model to a warehouse model in cooperation with our UK logistics partner. This operation involved a shift in capacity and resources coupled with a rapid development of new technological processes to ensure local supply was effective and efficient, as well as ensuring that control measures and protocols were adhered to.
“We now know that we will be operating outside of the customs union in the near future so this investment has not only guarded against delays in transit times through UK ports, it has also gained Rational UK a competitive advantage in the market by offering our customers even shorter lead times.”
Looking ahead, Keeley evaluated: “The forecast for 2020 is impacted dramatically by the Covid-19 pandemic and makes forecasting with any certainty a challenge. Our scenario modelling provides a best-guess estimation which suggests that sales may be down significantly, perhaps as much as 20%, compared to the prior year, so our focus will be to increase cost efficiencies throughout the organisation whilst maintaining operational functionality.
“The Rational sales process has typically been face-to-face with at least 50% of our end-customers in the hospitality sector. We have already started adapted sales processes such as visits and product demonstrations to virtual platforms to meet the demands of the ‘new normal’ conditions we find ourselves in.
“In the short term this will be a challenge but we believe as an organisation we are well-positioned to come out of the crisis stronger due to the strength of the product range and the people we have in our business.”