With the release of his company’s half year trading figures this month, Nisa chief executive Nick Read sat down with Steven Lambert and Stefan Appleby to discuss the results and his vision for the future. Better Retailing looks at the five key points from the meeting and what this means for Nisa members.
1. Nisa remains “on track” to hit its full year targets
After suffering an operating loss of £3m in the last financial year – the first loss in the group’s history – Nisa set itself a target of hitting pre-tax earnings of £7.2m by the end of the current financial year.
Mr Read said trading since then has been “hugely promising”, with half year results revealing earnings before tax of £3.3m, a £3.5m improvement on figures for the same period last year.
“We had a huge Q1 in terms of volume, but sales weren’t as profitable as they could have been,” said Mr Read. “Q2 was hugely successful. We went from £600,000 profit in Q1 to £2.7m in Q2. The momentum is clear and we remain on track to hit our full year targets.”
2. A strong start to the My Local distribution deal
After a last-minute decision by Morrisons to remove the majority of stock from its former M Local stores, the launch of Mike Greene’s My Local business faced a potentially disastrous start. But Mr Read said that Nisa was able to rescue the situation by delivering £7.5m of additional stock to stores in their first week of trading. He added that stock availability to My Local stores was now in the region of 96%.
“The big challenge was less about stock and more about getting distribution right,” said Mr Read. “We managed to mobilise the vehicles to get out to stores and they would be very happy to say that where they are now is where they want to be – irrespective of the Morrisons deal. I can indicate that Mike is very pleased with where sales are.”
Nisa chief financial officer Robin Brown talks about the key changes that have led to Nisa’s profit turnaround.
“There were several elements that we’ve addressed. We’ve managed to slim down our overheads and have improved distribution efficiencies. We’ve saved around 5p per case, which saves us a lot of money over the course of millions of cases.
“We’ve also managed to significantly strengthen our trading function. In Q1 we did step into profitability and in Q2 we managed to trade better, and we’re now getting an enhanced trading margin.
“We‘ve also made a change in personnel and a change in how we deal with suppliers. We have four new traders, and we’ve turned around the relationship with out key 75 suppliers.”
3. New banking facility leads to greater confidence and availability from suppliers
With its latest positive set of financial results, Mr Read said Nisa has been able to secure a renewed banking facility with Barclays.
He added that the deal is having knock-on benefits for members, with suppliers placing more confidence in Nisa and, in turn, leading to greater availability on products, particularly on tobacco.
“The challenge over the summer was that credit insurers were uncertain because we didn’t have a facility in place for two years,” said Mr Read.
“Now that we have this, it gives the market more confidence in us.”
Looking to the near future, Mr Read said he and his team would look closely at a number of issues raised by Nisa members.
In particular, he pointed to concerns over a small number of individuals who were “cherry picking” deals and products from the company, to the point where their promotional percentage was “out of control”.
Mr Read said: “Want to get to a point where every member is pulling their weight, so no-one feels like they are subsidising those who aren’t. This has held the business back in the past.
“We’re trying to run a business for the many, and not the few.”
5. Heritage will be a big focus in 2016
Another key area for Nisa next year will be its own label Heritage range, which Mr Read called the “unsung hero” of the company.
He said the group will invest “energy, time and brains” to develop the range over the next 18 months, while retaining its “value” credentials.
He also hinted that the number of Heritage products would be reduced to offer a more streamlined range to retailers and shoppers.
“We’re in a process where part of the review is to look at which categories we need to be in because of where convenience is going,” said Mr Read.
“As a symbol, if you don’t have an own-label range you can genuinely stand behind, you’re going to get absolutely hammered over the next five years.”