JAMES LATHAM PLC
‘Stack it high and sell it expensive’ could capture two important elements of the business of James Latham plc (AIM: LTHM, www.lathams.co.uk). Their Fareham, Hampshire depot was visited on 24th February 2011 by 10 members plus a guest.
Lathams’ principal business is the import and distribution of hardwoods and wood based sheet materials. They target the quality market and can quickly supply a very wide range of products from 10 centres nationwide.
Fareham is one of Lathams newer depots. It aims to maximise use of available space by storing timber and sheet products on racks up to 8m from the ground with minimal aisle width. The company works with its suppliers of racking to ensure that warehouse structure and layout optimise handling and minimise wastage. Careful training of the fork lift truck drivers who shift the goods is essential; but good customer knowledge ensures that even panels which do suffer damage can be sold. Logistics are key: the aim is to hold small stocks and turn them over quickly, typically 6x per year. Fashion also plays a part: apparently decorative finishes seen in a car now may well be seen in furniture in 4 to 5 years’ time. Provisions (about 2% of turnover) are made against outdated stock. Of the 22 staff employed here about half work in sales; as do one third of the 300 total staff. Deliveries to customers within a 50 mile range of each depot are made using the company’s own vehicles.
The Directors’ presentations emphasised their focus on building shareholder value over the medium term. The Latham family has 250 years experience in the timber business and has built a strongly ethical base. There is no compromise on environmental credentials. Long term customer relationships are cultivated. With 4000 active customer accounts over a range of market sectors, risk is widely spread. Construction / housing accounts for just over half of sales value. The company is seeking to increase its higher value specialist sales. It is the market leader in veneered MDF (30% of the UK market) and Russian birch ply (used in toy making). It is also expanding into non-wood materials, being the sole UK distributor of acrylic stone (which is crafted using woodworking tools). There is great emphasis on managing the product range and predicting future trends in demand.
Although an overhead reduction programme started in February 2009 reduced staff by 5%, staffing levels have since been restored. Encouragingly, bad debts (at 0.4%) are down somewhat on last year. The defined benefit pension scheme was closed to new members in 2003. An increase in its deficit to about £10M reflects a change in the calculation of liabilities.
Lathams seeks to grow its business by getting better value out of its sites, extending the concept of racking products (as seen at Fareham). They look to extend their geographical range, e.g. in Scotland; and to acquire similar businesses in order to extend the customer base and / or bring new products to existing customers.
We are most grateful to Mr Peter Latham (Chairman) for inviting us to Fareham; and to him and colleagues Nick Latham (Board Member), David Dunmow (Finance Director) and Steve Frommont (Depot Director) for their hospitality, presentations and discussion on the day. We greatly enjoyed our visit.
