SCOT JCB (Holdings), the Scottish plant and machinery specialist, has cited competitive trading conditions, acquisition-related costs, and depressed pricing in the used equipment market as profits fell in its most recent financial year.
The family-owned firm, which supplies JCB and other vehicles to builders, contractors and farmers, made a pre-tax profit of £3.3 million in the year ended December 31, a fall of 23.7% on the year before.
Profits dipped as the firm reported a 28% surge in revenue to £173m, with turnover boosted by the acquisition of Forfar-based AM Phillip Agritech, accounts newly-filed at Companies House show.
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The deal, which was completed in March, added £20m of revenue to the Glasgow-based firm.
Privately-owned Scot JCB saw strong growth in its core agricultural and construction markets. The latter is being driven by a buoyant housebuilding sector in Scotland, which is currently showing no sign of slowing down. Sales to the construction sector rose 30% and to the agricultural industry by 7%.
However the firm highlighted a slowdown in big public infrastructure projects, with work on major schemes such as the Aberdeen Western Peripheral Route coming to a close.
Stephen Barker, finance director of Scot JCB, said: “The market has clearly been strong in a number of sectors.
“We have seen growth both in our construction and agriculture exposure, construction in particular, driven by the housebuilding sector, which we are exposed to through plant hire customers and directly through contractors. That’s been going well and [has] driven sales up substantially.
“Where it’s maybe a little bit weaker is on infrastructure projects, and that has continued into 2019. There’s a wee bit of a shortage of some of that just now.”
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The acquisition of AM Phillip significantly increased the firm’s growing presence in the agriculture sector, which broadly accounts for between one-quarter and one-third of its business. AM Phillip has five branches in north central Scotland, which Scot JCB has retained along with the staff.
The firm saw its overall headcount climb to 338, up 23% on the year before.
Staff numbers rose largely because of the AM Phillip deal, though the firm has also grown its employee base organically with the addition of engineers and customer service advisors.
“We are continuing to grow,” Mr Barker said, noting that as turnover rises “we need people to support that.”
Scot JCB now has network of 17 depots across Scotland and the north of England. It is chaired by majority shareholder Steve Bryant, whose two sons, Iain and Robin, are joint managing directors. Daughter Rhona Cameron is also a director.
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With the total investment in the AM Phillip acquisition totalling more than £6m, the resulting increase in interest costs, brought through financing the deal, was one of the factors which contributed to the drop in profits for the year. “It’s investment now for reward later,” Mr Barker said.
Asked whether the firm would consider further deals, Mr Barker said directors were “not looking down the shopping list every day looking for something to buy”, stating that the immediate priority is to consolidate following the AM Phillip deal.
He added: “I suppose you never say never. You would look at anything that came along.
“For the moment, we are not out there with the cheque book, looking for something to buy tomorrow.”
Meanwhile, asked if Brexit was causing any disruption to the business, Iain Bryant pointed out that JCB does manufacture in the UK, which gives Scot JCB confidence that its supply chain will not be interrupted.
Mr Bryant added: “It would good to get a bit of certainty, whatever happens.
“If we knew what was going to happen, then we think… people would start buying [more] again.”
The company noted that it recently introduced an electric mini excavator, which it hopes will sell well on the back of demand for low-emission vehicles.
“You have to keep innovating,” Mr Barker said.
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