Hull-based MKM plans to open more branches after delivering record results

David Kilburn, founder of MKM Building Supplies,  who is a former winner of EY's North Entrepreneur of The Year award
David Kilburn, founder of MKM Building Supplies, who is a former winner of EY's North Entrepreneur of The Year award
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David Kilburn’s business has enjoyed a record year and he sees no signs of a Brexit slowdown. Deputy Business Editor Greg Wright reports

FEELING unsure about Britain’s place in the post-Brexit world?

You really ought to spend some time with David Kilburn, who leads a Yorkshire business which has reeled in record profits and revenues, and expects to fire on all cylinders next year.

MKM Building Supplies is a Hull-based company which Mr Kilburn co-founded in 1995 with just five staff. Today, it’s one of the biggest builders’ merchants in the country, and employs 1,100 people across 46 branches. MKM is the perfect antidote for anyone who is tired of bland, corporate brands.

Its growth has been driven by a branch equity ownership model, which means that the local directors have the flexibility to run the business in a way that suits their market.

The mantra behind MKM is “local people serving local people”, which enables the company to steal a march on rivals who are managed tightly from above.

This approach has helped the company to record full year revenue of £284.31m, which is a 13.2 per cent increase year-on-year.

MKM’s adjusted full year EBITDA (earnings before interest, taxation, depreciation and amortisation) was £22.40m, which is an impressive rise of 34.6 per cent on the previous year.

In the company’s accounts, which have just been published, MKM reports that the market remained favourable during the financial year ending September 30, and analysts predict a continuation of robust conditions in 2017.

It’s the type of corporate performance that must be music to Theresa May’s ears, as she prepares to steer Britain through complex, and potentially fraught, Brexit negotiations.

Mr Kilburn, who is MKM’s executive chairman, said: “We’ve done exceptionally well and had another record year. We’ve found like-for-like sales have risen since Brexit, rather than reduced.

“Talking to some of our major suppliers who are publicly quoted companies, while they are experiencing record sales and record revenues, their share price is still falling because people have discounted them, assuming that, in something like the second quarter of next year, we’re going to see a bit of a downturn in the construction industry.

“The only hard evidence so far is that the market still remains strong.”

Rothschild in Leeds is reviewing strategic options to fund MKM’s growth, and a decision about the next stage in the firm’s development is expected in January.

The Yorkshire Post understands that MKM is looking to grow through a re-financing of the business by replacing 3i and LDC, the existing private equity investors.

It’s believed that the most likely outcome will be investment from another private equity firm. MKM plans to keep opening around eight branches a year, which should take it to 76 branches by 2020.

Mr Kilburn said: “The secret of success, we have always believed, has been the business model – we find good people and give them a sense of ownership of that business.

“In our case, they take a 25 per cent stake in that business, and it drives a completely different performance out of these people. It provides a half-way house for people who have always wanted to run their own business, but haven’t quite got there and, of-course, they pay you back in spades.

“Another big thing is getting involved in the local community,’’ he added. “Builders merchants are a basic need industry. After food, water and air you need to put a shelter over your head, so you’re very much part of the community because everybody needs us, in some guise or another. You invest in the community and they invest in you.”

Mr Kilburn was 50 when he established MKM, after a 30-year career in the industry. Twenty one years later, he has the drive of somebody half his age.

There are no indications that he – or the business – will be taking it easy in 2017.

“I see the business expanding over the next few years in the same way that it’s grown now,’’ he said. “I don’t see the business model changing.

“The micro-managing of our competitors will drive more people to want to join us. We will probably have a larger pool of choice over time.”

Mr Kilburn is grateful for the long term support of 3i and LDC, who are still investors in MKM, with 35 per cent and 10 per cent stakes in the business respectively.

He recalled: “In the early days, when 3i invested in the business, it gave us credibility that we couldn’t have bought. The fact they were prepared to invest, and we passed the due diligence test, before they invested the money, from the supply chain point of view, gave us a lot of credibility which lots of other businesses couldn’t have got.

“Just the fact that they were there has helped us along the way.”

Mr Kilburn has picked up a host of accolades over the years – including EY’s North Entrepreneur of the Year award – and he’s proud that Hull will soon become the UK’s official City of Culture.

“The city of culture has certainly placed Hull on the map,’’ he said. “Unemployment is coming down in Hull. There are lots of new developments in the city centre. People are trying to grow and expand their businesses locally.

“There’s a feeling of optimism that hasn’t been around for some time.

“The most important part of the city of culture for Hull is really not so much the year itself, as the legacy it leaves. If it has a long-term effect on the economy, that’s great. There’s quite a lot of infrastructure work currently going on. It’s whether or not we can take that opportunity and do something with it. Whether it attracts external investment, both nationally and internationally, will make the difference.”

Mr Kilburn has been encouraged by the German engineering firm Siemens’ decision to invest in a giant wind power factory in Hull.

It means the city’s waterfront has the potential to become a world class centre for wind power manufacturing and logistics.

“Hull is the energy estuary,” said Mr Kilburn. “It could become the Aberdeen of the wind industry.”