As is the case with so many successful businesses, Scotland’s largest independent timber merchant started small.
MGM Timber’s first branch was established in Perth in Scotland in 1991 but by 2000 that one outlet had spawned a network of five, with depots opening in Grangemouth, Dundee, Dunfermline and Glasgow.
Over the next five years the number of depots had doubled to 10 and MGM became a wholly owned subsidiary of James Donaldson & Sons Ltd (JDS). In so doing, it joined a family of companies that now includes Donaldson Timber Engineering, James Donaldson Timber, James Donaldson Insulation and Nu-Style Products.
Being part of one of the UK’s longest established and most respected forest products companies has had its advantages, both in terms of the practicalities of running a business and in creating an ethos.
“The tangible benefits come from having access to Group resources, such as finance, IT, marketing, HR and IMS,” said David Mansell, MGM’s managing director. “The policies and best practice that are developed are shared all across the Group. The intangible benefits come from being part of a family business with over 150 years of history.”
While the family ties are undoubtedly close, MGM is able to forge its own path in the world. The timber merchant’s head office still operates from Perth and the MGM board are based between there and the branch network. The board has six members covering sales, products, finance, business development and marketing.
“Each branch has a manager who is responsible for the key decisions affecting their branch and they have full responsibility for their own profit and loss account,” said Mr Mansell.
He added that, while each branch operates autonomously, there is a great team spirit across the network.
That network now includes 13 branches, with the most recent addition coming from the acquisition of Robert Reid & Sons in Hamilton in 2016.
“We don’t have a specific target number [of branches] over the next few years but we explore all opportunities in our market and our management structure is lean enough to act on these quickly,” said Mr Mansell.
“Within Scotland we are always looking for expansion through additional branches, new customers and new product ranges,” he said, adding that there are only a few regional differences in the product ranges required throughout the network.
The currently Scotland-centric company has “no imminent plans to open” any branches in England, however, it is “an area of interest”.
MGM is enjoying good, steady growth: for the year to March 2017 turnover was £44.6m, giving growth of 7% on the previous year. The year to March 2018 is on track for a further 7% growth.
“We haven’t measured ourselves [for market share] against the overall builders’ merchant market in Scotland and certainly not the UK,” said Mr Mansell. “I am sure this would be a very small percentage but in Scotland we have had the highest turnover and net return of all Scottish independent timber merchants for many years now.”
Trade comes from a very mixed customer base covering all sectors of the industry.
“It doesn’t make business sense to rely too heavily on any one customer or sector, so we aim to keep this as diverse as possible,” said Mr Mansell.
“We tend not to deal directly with national housebuilders but do supply a lot of their supply chain.
“A high percentage of our turnover comes from the RMI sector, with a wide spread of customers in that market from national construction companies to DIYers. Small to medium-sized builders also feature, along with the self-build market and some customers from more specialist areas of our industry, such as specialist shop-fitters.”
The company has also been involved with Scotland Excel (the Centre of Procurement Expertise for Scotland’s local government sector) since the latter’s inception and supplies local authorities across the country. MGM was recently nominated for an award in Scotland Excel’s Environmental Practices category.
“We have recently installed a new computer system to help us in creating a paper free ordering and invoicing system. Our customers will be able to view their accounts in real time and invoices and delivery notes will no longer need to be printed. Additionally, we aim to reduce landfill through improved recycling.
“Our feedback from Scotland Excel is that they like our people, find us easy to deal with and trust us that our environmental practices and our procurement of certified and responsibly purchased timber is never compromised.”
As part of JDS, MGM is able to draw upon the Group’s key supply chains.
“Each Group business operates independently and we are free to make our own buying decisions, which works very well,” said Mr Mansell. “Common sense does always prevail.”
Outside of the Group the company mainly sources products from manufacturers and distributors in the UK, although its kitchen range is imported from Germany.
“Supply of some sheet materials and timber items has been tight for several months now but we find that partnering our key suppliers for the long term ensures continuous supply.”
Branch managers are free to decide the products and quantities that work best for them and there are no stock limits imposed from above. However, stock is monitored for any slow moving or obsolete items and there are processes to move these and make space available for faster moving items. Supply chain partnerships ensure MGM’s branches receive multiple deliveries per week, allowing them to keep stock as fresh as possible.
The aforementioned kitchen range targets the high end of the market and was introduced into MGM’s product portfolio about three years ago. Manufactured by the Bauformat/Burger company in Germany, these bespoke kitchens are offered on a design and supply service basis and are aimed primarily at the company’s trade accounts, although they are also available to retail customers.
“It has shown double digit year-on-year growth and is an area of focus for us in the future,” said Mr Mansell.
Growth is being seen in other sectors, too. “Our timber frame customers are busy and with the well-publicised shortages in housing stock, this looks likely to continue for the foreseeable future. Structural timbers and sheet materials used by the timber frame market are seeing high levels of demand just now, with increasing demand coming through the home-grown softwood products we supply.”
RMI is also a significant part of MGM’s business and provides steady growth year-on- year, as does demand for insulation materials and for flooring products.
“Demand for insulation products has increased due to Building Regulation standards and requirements and the need to provide solutions to help meet and exceed these standards. And we see our flooring offering changing, with a move away from solid to engineered products and laminate ranges evolving, developing and continuing to grow.”
MGM’s newest branch, in Hamilton, has machinery to offer a cutting service, although to date this has only been used for the local customer base. The company offers bespoke services for a range of joinery products, such as stairs, windows and doors and for other machining and cutting services it has connections with companies within its customer base that have the necessary woodworking facilities.
The company takes training very seriously and approaches this through a variety of different means.
It recently joined the Builders Merchants Federation (BMF) and has a number of its employees attending BMF-accredited courses including Essential Sales Skills, Managing for Success, Yard Foreman’s Toolkit and the Diploma in Merchanting.
“We also have seven of our younger staff currently on apprenticeship covering warehousing, administration and customer care,” said Mr Mansell. “We acknowledge the need to invest and develop the next generation.”
The James Donaldson & Sons Group has also recently introduced its own Management Training Programme, which several MGM employees are currently undertaking.
“We were the first timber merchant in Scotland to have full Chain of Custody in each of our branches and, as such, we have regular training and audits to ensure this is managed in the correct and proper manner.
“We also make sure that our suppliers are providing regular product training at our branches, so that our staff are able to offer advice and product support to our customers. Looking to the future, MGM sees housebuilding and, in particular, timber frame construction continuing to strengthen and provide opportunities for the business.
“Although they are important, we don’t just want to be selling commodity products, we want to add some value to the build process by being more technically astute and by coming up with solutions to our customers’ needs,” said Mr Mansell.
Similarly, the company is keen to support its “equally important” RMI market and to differentiate itself from its competitors as it does so. It is also keeping a watchful eye on how retail sales develop.
“We do see more retail customers coming through our doors and they are now looking at merchants as a better option in terms of product advice, product quality and, ultimately, a better all round service.”
As for the challenges that face the industry as a whole and that are outside its control, such as Brexit, David Mansell is phlegmatic.
“Political uncertainty is never good for business but it seems that we have been in periods of uncertainty for so long that it is becoming the new norm.
“Any slowdown in the new build market is generally not good news but the political focus on housing makes this seem unlikely and, historically, a slowdown in new builds generally brings increased activity in the RMI market, which we are well placed to serve. “I am sure leaving the EU will bring new challenges but product will still be traded between us.”
As for further expansion, MGM Timber is open to it but isn’t rushing in.
“We have never thought that the number of locations is the most important measure for us,” said Mr Mansell. “We believe it is better that we continue to improve and develop our branches as we go forward.
“That said, we have already openly commented that we are looking at Aberdeen, Edinburgh and the north of Scotland and we are always on the lookout and prepared for any opportunities that may come our way.”
And, he added, although the company has not yet ventured south of the border, it seems likely that “at some point” this will be considered.
