Top marks for quick switch

Findel, whose directors have just been named Board of the Year at the Yorkshire Post Business Awards, had difficulties when schools stopped spending. But the directors spotted another opportunity, as Ros Snowdon, Deputy City Editor reports.

EIGHTEEN months ago Findel, the Burley-in-Wharfedale home shopping to school supplies company, was in a mess.

The group's education business was hammered by the schools' funding crisis. Schools were no longer spending money on exercise books, pens, pencils and other equipment in the face of budget shortfalls.

All credit is due to Findel's board who quickly recognised that the schools business would continue to be hit by problems outside its control.

Realising this they axed costs – the supplier base was cut by 30 per cent and items stocked were reduced by 20 per cent – and ploughed all their efforts into the home shopping business which continues to go from strength to strength.

The fact is that schools can't postpone orders forever and Findel's board believes that orders will come back.

With this in mind the group has taken the bull by the horns and two weeks ago it announced a 27m deal to buy educational supplies firm GLS.

Findel said the deal will allow it to cash in on increased government schools spending ahead of next year's General Election.

The government has been criticised for failing to plough enough money into schools, but with an election pencilled in for May, it has to woo voters by showing that it cares about education.

While the government has made more funds available this year, the problem is that headteachers are reluctant to spend their cash as they are worried they might need the money for other purposes.

However, Findel believes they will start spending the money next February or March.

"Once headteachers know exactly how much money they have left, they will want to spend it rather than risk losing it the following year," says chairman Keith Chapman.

Findel supplies exercise books, pens, pencils, art materials, science equipment and other educational supplies to schools throughout the country.

It was the home shopping side that saw Findel through the difficult patch and despite a general slide in the market for home shopping, Findel, whose main brands are Ace and Studio, has seen strong growth, thanks to aggressive discounting on branded goods.

Best-sellers over the last few months include personalised belts, luggage, towels and T-shirts. Consumers are opting to personalise goods with either their initials or photos, particularly of children.

Another big seller has been children's pyjamas which carry the name of the child on the front and cost 9.99 for two pairs. Cutlery bearing children's initials has also sold well at 3.99 per set.

The other main growth area is branded clothing, including Ben Sherman, Adidas, Nike and Reebok. The group has deliberately focused on general fashion items such as T-shirts, trainers, footwear, hats and slacks rather than high-fashion products.

Perhaps one of the secrets of Findel's success is that it has the management experience to spot good growth areas and is not afraid to invest in them.

One new area with a lot of potential is the healthcare division, which provides zimmerframes and wheelchairs, as well as installing stairlifts in people's houses. When the products are no longer needed, they are refurbished and rented out again.

"It costs 23,000 to keep a person in a nursing home for a year compared to 13,000 to keep them at home, so the Government has strong motivation to encourage people to stay at home," says Chapman.

A spin-off from the healthcare business is a device which looks like a wristwatch. This monitors an elderly person's activity and the information is passed to a computer which works out normal schedules, such as when the person goes to bed, and this is used to detect any abnormal patterns, for example if the wearer falls down or starts wandering at night. An alarm is set off and a neighbour, relative or friend receives a phone call so they can check on the person.

The device has enormous potential and the Government is investing a lot in this area.

Three years ago, the healthcare business was part of Novara, an educational supplies acquisition. Findel toyed with the idea of selling the business and then realised it had enormous potential.

"It's got bags of growth," says Chapman. "The healthcare division can double sales again. It will be 46m this year and I can see 100m in sales over three or four years. Bear in mind it was worth just 9m three years ago."

Findel was started in the early 20th century as a greeting card publishers, and floated in the early 1960s as Fine Art Developments.

The business sold cards to customers via mail order and also had a wholesale business. In the mid-1980s, the group expanded the mail-order business into others areas and by 1997 the greeting card business had been spun off from Fine Art Developments. It was later sold to Hallmark.

In 2000, Fine Art Developments shortened its name to Findel as investors were confused by the name, thinking it was a development business or a fine art company.

Profits Up

Two weeks ago Findel announced a 76 per cent increase in half year pre-tax profits to 2.6m for the six months to September 30. The first half is always much slower than the second, which contains the all-important Christmas trading period.

Analysts have pencilled in pre-tax profits of 47m for the full year, up from 41m and in 2006 they are predicting a jump to 55m-56m in underlying profits.

The Board

Keith Chapman, 61, executive chairman

Mr Chapman joined the Findel board in March 1984 and was subsequently appointed group managing director and then chairman and chief executive in January 1988.

Tony Johnson, 60, chief executive

He joined Findel in 1988 as group finance director and became the group managing director in 1994. In 1997, following the de-merger of Creative Publishing, he was appointed group chief executive.

Dr Ivan Bolton, 60, executive director and company secretary

Mr Bolton has been with the group for more than 25 years in a number of senior commercial roles and was appointed to the board in 1989. He has a BSc and a PhD from Leeds University and had 10 years' industrial experience before joining the group.

Philip Maudsley, 43, executive director

Philip Maudsley joined the group in 1987 as general manager of a manufacturing subsidiary. He became managing director of the Home Shopping division in 1994 and was appointed to the board on April 6, 2004.

David Dutton, 45, group finance director

He is an Associate of the Institute of Chartered Accountants (ACA) and joined the group in 1986. He has held a number of senior executive roles, latterly group financial controller, and is now group finance director.

Gordon Craig, 57, non-executive director)

He joined the board in October 1997. Until his retirement in 1997 he was a director of M&G Investment Management. He was also a non-executive director of Stirling Group until its delisting in October 2003.

Patrick Jolly, 38, non-executive director

Patrick Jolly joined the board in March 2001. He is an experienced corporate finance lawyer and is a director of SurfControl.

John Padovan, 66, non-executive director.

Mr Padovan joined the board in October 1997. He has considerable experience both in the City and as a public company director, including past non-executive directorships with Tesco and Whitbread and present ones which include Interserve (deputy chairman) and Schroder Split Investment Fund (chairman).