THE experience Nisa FD Simon Webster has had thus far belies his years – of which he can lay claim to 34. In Nisa, he has the reins of a familiar presence on the UK’s high streets, but one that has experienced vast change in recent years.
In June, it was announced that Costcutter would be switching its distribution from the £1.57bn company to Palmer & Harvey, ripping £500m in revenues from the business. Thankfully, part of the shortfall was made up in a deal to distribute to the larger outlets of convenience store operator McColl’s.
Nisa, an independent retail consortium, boasts more than 3,500 stores nationwide, with 1,300 members who are shareholders and independent entrepreneurs. Revenues are generated through subscriptions and sales through retail and supplying.
Fostering an entrepreneurial spirit among members is key to the way Nisa operates, with a degree of autonomy afforded to each store. So much so, in fact, that a significant portion of those stores do not carry Nisa’s name, but choose to go by their traditional names, such as Jempson’s in the south and Proudfoot’s in the Scarborough area.
“Each member gets the same buying power and pooling. Over the years, we’ve evolved and we provide them a service where they don’t have to worry about the back office and we can let them focus on the consumer – that’s their expertise,” Webster tells Financial Director as it meets the Scunthorpe-based FD at one of Nisa’s London stores.
A degree of standardisation is required, but it has to sit comfortably alongside the recognition that members are good retailers. “We can’t strangle them. They can’t lose their flair,” he says.
“It’s a difficult market – one that will be worth £49bn in the UK by 2019 – and offers are coming to our retailers almost daily around the country, and that means for every retailer we lose, we’ve got to replace that volume and more. We generally have a recruitment rate of 2:1, but what we’ve found in recent years is the one leaving is as big as the two joining, which is a challenge.”
Despite that flux, Nisa has posted growth. Like-for-like sales are up 1.1%, turnover jumped 10% in the last financial year, while profits rose to £5.3m from £3.3m in 2013, although those figures are likely to drop in the coming year to reflect Costcutter’s departure. The immediate concern is to replace and improve on the £500m in work it previously generated through Costcutter.
“We’re in a period of transition,” he explains. “We have to make sure we’re lean enough to carry forward the loss of significant turnover. We have replaced about £250m of that with McColl’s Retail Group, so the gap to bridge has been reduced and we’ve also recruited 14% of Costcutter volume directly, so we find ourselves trying to fund a gap of around £150m from that exit.”
There is pressure, too, from supermarkets such as Tesco, Sainsbury’s and Waitrose encroaching on Nisa’s space with the proliferation of their own convenience stores – a considerable source of member loss.
“Ultimately, it’s not a shock to us when a member leaves, but what we’ve done and will continue to do is create wealth for our members,” Webster says. “There are small differences that make each store unique – for example, there’s one in Scotland that has an excellent ice cream parlour that people visit from miles around, and that’s something we wouldn’t want to kill.”
As is the case with most businesses, the most capital-intensive area for Nisa is IT, which accounts for a significant proportion of the relatively low £2m-£4m of capital expenditure spent each year. However, the business does have some considerable gearing, with EBITDA standing at £12.2m and facilities of £95m in place.
“Those facilities are structured through guarantees for cigarettes and long-term loans. There was a simple refinance package which we did in 2013, with another due in 2016,” Webster explains.
Hitting the wall
Webster qualified at HLB Kidson, which later merged with Baker Tilly, before joining Sea Chill – a fresh foods manufacturer for Tesco in his native Grimsby – and later Icelandic Group UK when Seas Chill was acquired by the company. It was there, between 2008 and 2010, that Webster – as the UK operation’s most senior finance figure – guided the business through the financial crisis as the banks it was dealing with in Reykjavik failed.
“I was advised in April 2008 by the credit markets that they were pulling cover, and they couldn’t write cover because of the situation in Iceland with both the PLC and the country,” Webster says. “In September 2008 my son was born, and two days later I took a call from the CEO of the PLC to ask me to come back to the office because the economy had crashed.
“We were funded by Icelandic banks; we were owned by Icelandic pension funds. We were in turmoil – a distressed situation. No cash available. We had facilities that needed renewing, HM Treasury orders against us, so we couldn’t repatriate funds back to Iceland and couldn’t get the stock into the UK.”
Eventually, it was his success in convincing a salmon supplier to continue their dealings with Icelandic that prevented the company hitting the wall.
“I’m a big believer that if that hadn’t happened, it would’ve been a different outcome,” he reflects. “I left that business with about £10m in the bank in March 2010, having done a lot of turnaround with the added-value business. We’d got a refinancing position ready, but we didn’t take it on because Iceland came to the rescue in the end.”
Webster joined Nisa in 2010 after guiding Icelandic business through that storm in his first senior job. The unusual structure of the group plays a substantial role in shaping the FD role at Nisa and the pressures affecting it, he notes.
“It’s a different challenge,” Webster says. “The members are shareholders … so they join the business with a view to joining in the synergies of buying and retail and thereafter run their own stores with a view to their own profits. They ultimately own the business of Nisa that I work for and are quasi my employer, although as a member of the board, we’re entrusted with running the business on their behalf.”
A broad church
Webster and his 34-strong team provide what he describes as “a broad church” to members, also providing HR and legal support. And it’s a democratic system, too. Webster’s contact details are provided to each member, who can then make representations to him at any time, as well as bi-annual regional meetings and an annual conference.
“I’m very accountable to members and I have a lot of interaction with them. That’s 1,300 shareholders that have direct access to your mobile and e-mail address. It’s not easy, but ultimately it gives me the most satisfaction in my job when I can work with members, and it’s a wonderful feeling when you can make a difference and support them financially,” he says.
“Being accountable, though, does mean that I won’t keep them all happy. It’s a difficult task managing their expectations.”
And expectations are, rightly, high, with Nisa’s daily stock deliveries hitting 96% of time slots, while underperforming home-brand products were replaced with a new Heritage brand, which saw sales jump 50%. “It’s done very well,” Webster acknowledges, noting the challenge to Nisa now is to get members buying that range – “not just the cherry-picking we see at the moment”.
“We want all members buying Heritage because they’ll see the benefit to their enterprises as shopkeepers and the wider corporate of Nisa Retail,” he says. “If we get this right, there’s a significant opportunity to generate about £500m in retail value back to the corporate.”
But such performance can leave the finance functions with headaches. The high rate of on-time deliveries is a double-edged sword, given the cost involved with keeping the volume of lorries and drivers at its current rate.
“There’s a balance to be had,” Webster explains. “The sales director wants to keep deliveries at 96% and I’d be happy to take a lower figure because I want to balance the costs, so I need to look at what that extra 1% is worth between 95% and 96% – to Nisa that could be a considerable amount of money, so I need to ensure there’s a return on investment.”
There is an acknowledgement, though, that a significant drop in delivery rates would prove a risk, and the current reliably high rate – “even to members in the Channel Islands and Benbecula” – has been a selling point to the membership, given it forms the basis from which members can operate and create wealth.
And the consortium has done just that, having announced that it will share out about £2.2m among its members, representing about £14 per share, with each member allowed to own up to 250. The payments come in addition to £31m that was paid out to members in the form of rebates in the last year.
“[Unlike the supermarkets] … we are positioned to help the local sector compete on the simple things. ‘Making a difference locally’ is our strapline and it’s our USP. Ultimately, what owners do differently in their own community is up to them. It’s fundamentally different to a Tesco or a Sainsbury’s store. These owners are working a lot of hours to make it work. That’s what the business was set up for in 1977. Forty years on, we’re continuing that,” concludes Webster. ?
Since Financial Director met Webster, it has been announced that Nisa’s CEO Neil Turton and COO Amanda Jones are to leave the business. Turton has worked for Nisa for 23 years and has been CEO since 2007. Jones has been with the company for 16 months and will take the COO post at Bargain Booze owner Conviviality Retail in December. Christopher Baker, chairman of Nisa, said: “It is testament to the success of Nisa in serving the needs of thousands of members and millions of customers that our top talent is the target of other companies. The board has put in place a robust transition strategy and will immediately commence the search for an experienced retailer that will be able to take Nisa to the next stage in its development. Neil will manage the succession strategy and continue to drive our retail focus and consumer-centric propositions with the existing management team.”
IN BLACK AND WHITE
2010 – present Senior group financial controller and finance director, Nisa
2006 – 2010 Group financial controller, Icelandic Group
2002 – 2006 Financial accountant and financial controller, Sea Chill
1998 – 2002 Trainee, HLP Kidson (later Baker Tilly after merger)