Crown Paints looks to glossy future
DECORATIVE coatings maker Crown Paints has returned to profit in its first full year under ownership by Yorkshire private equity firm Endless.
The company has just filed accounts which show an operating profit of £2.8m on sales of £179.2m in the year to December 31, 2009. This is in stark contrast to an £11.4m loss declared on turnover of £37.8m during its first three months of trading under new ownership between October and December last year.
Leeds-based Endless’ buyout of Darwen-based Crown Paints took place in September 2008 and followed a sale process sparked by the European Competition Commission following the acquisition of ICI by Dutch chemicals giant Akzo Nobel a year earlier.
ICI already owned the Dulux brand, and the Commission decided that the deal would give the merged business too much of a dominant position in the UK paints market.
Endless paid a reported £70m for Darwen-based Crown in 2008 and then embarked on a major restructuring, which included reducing the size of its workforce by 9% and an overhaul of its stock and management policies.It also began to work more closely with retail customers.
As a result, the amount of paint sold in the UK retail market increased by 22.5%, despite the fact that the wider market increased sales by just 0.2%. Overseas sales have also increased through increased exports and new licensing deals.
Crown Paints’ management team has also been overhauled, and the company is now led by the former chairman of busmaker Plaxton Holdings, Brian Davidson. The company employs around 1,4000 people at manufacturing sites in Darwen and Hull, at four distribution depots and at 128 Crown Decorator Centres.
Mr Davidson said: “Following the buyout from Akzo Nobel and a complex separation process, there remained a number of legacy challenges in the business that had to be overcome in order to move forward,” he said.
“I am delighted to report that hard work, determination and a resolute focus on stringent cost management, positive trading and strong cash generation have combined to put us on a sound financial footing.
“Trading in the first half of 2010 has exceeded budget expectations and the business is showing significant profit growth on 2009 levels. At the half-year point, we have also reduced operating costs by £2m and are £20m ahead of our cash forecast. However, as we head into the second half of the year, we expect this to tighten as inflationary pressures begin to take effect.”
He said that the firm was planning further cost reductions – including a restructuring of its Irish operations – which will allow it to continue increasing operating profits. It is also planning a further £6m worth of investment in its infrastructure and e-commerce sales channel, as well as exploring more licensing opportunities in the Arabian Gulf and the Far East.
Warwick Ley, partner at Endless, said: “The business has performed ahead of expectation, particularly in 2010, and we are delighted with the way that the management team has tackled some particularly challenging market conditions.
“There is a genuine buzz and excitement around the business and Crown’s plans for the future.”
