Fewer fake fags favour Parfett’s fortunes

AG PARFETT, the Stockport-based independent wholesaler with six depots, has said that a tighter control of contraband cigarettes has helped to boost legitimate tobacco sales, pushing up its own profits.

The company saw sales in the year to June 30 increase by 4% to £289.1m while pre-tax profits jumped by more than 20% to £2.8m.

Managing director Steve Parfett told TheBusinessDesk.com that efforts by customs’ officers to stamp out illegitimate sources of tobacco had seen it fall to around 1/5 of the total UK amount, compared with a quarter previously.

“The evidence is that while there is still a substantial market for fraudulent tobacco it is less obvious in retailers,” he said.

He argued that despite tougher noises from HM Revenue & Customs on clamping down on traders flaunting alcohol duty rules, the firm had yet to see the results of its actions.

“HMRC is making to right noises but they haven’t got the problem under control,” he said.

He admitted that contraband alcohol is more difficult to identify than cigarettes, where the lack of prominent health warnings makes them easier to spot. However, he said Customs officials have threatened to use powers gained for combating carousel fraud on mobile phones to clampdown on the supply of alcohol where proper levels of duty hadn’t been paid.

“If they can bring it under control it would have big benefits,” he said.

The Parfett family began a transformation of the business towards being an employee-owned company two years ago when they sold a 55% stake in the company to an employee benefit trust for £20m.

Steve Parfett said that the firm, which celebrated its 30th anniversary this year, had witnessed “tangible benefits” since the ownership change.

He said that although it was difficult to quantify”, efforts such as holding formal meetings where the firm’s figures and other management information are made available to everyone and staff are consulted on key decisions were having an impact on performance. He said the business should become more profitable as the £20m buyout loan is eventually repaid and interest charges reduce.

By its June 30 year end, the company’s long term loans had dropped to £18.3m, from £19.9m a year earlier.

The company supplies mainly independent retailers in the North West and Yorkshire through depots in Stockport, Aintree, Anfield, Halifax, Sheffield and at Somercoates in Derbyshire.

Parfett said that he expects the trading environment to be extremely competitive and that the coming VAT rise “will bring home to people” that economic conditions remain tight. As a result, he expected trading to be largely “flat”.

“If we manage to achieve a similar performance as last year, well be delighted,” he said.