The P&A Group is one of those companies that has many strings to its bow. On the one hand it’s a fencing and pallet manufacturer, on the other it’s a garden furniture importer and distributor. Then again, it’s also a garden centre, a landlord, a storage facility and, believe it or not, a café.
It was not ever thus, of course, but in the last handful of years, thanks to its entrepreneurial managing director Steve Morgan, the group has diversified to the point that some of the seasonality has been taken out of the overall business and, put simply, revenue streams from some divisions keep the wheels oiled at others.
P&A stems from Palliser and Ashgrove, a small sawmill and pallet-maker in Mold in north Wales where Steve Morgan’s father, Malcolm, had found work after leaving his native Scotland. In the mid-1980s Palliser and Ashgrove hit financial problems but Mr Morgan senior was able to buy the company and secure its future.
"It went bust on the Friday and my father got everyone in over the weekend to make sure they carried on supplying all their customers," said Steve Morgan. "And that was the start."
Family business
Since then it’s been a family affair. Mr Morgan studied timber technology at Bucks College, working on the fencing and pallet lines at the company during the summer vacations.
"The production manager at the time used to call my fencing ‘security panels’ because there were always nails sticking out everywhere!" he said.
Once he’d graduated, Mr Morgan joined the company full time, initially as pallet production manager and timber buyer. Then, when fellow Bucks College graduate Rhys Hughes joined (he is now operations director), he moved to the role of fencing and pallets production director.
"It was a good foundation as there were plenty of changes to be made on the production side," said Mr Morgan. "In fact, there were some quick gains to be made by relatively simple modernisation and basic technology – bringing turntables into the pallet lines so that instead of an operator having to walk all the way around the bench with a hand nail gun, he could just stay in one place and spin the table."
Further modernization
Further modernisation followed and the production facilities now include three pallet lines and a fencing line.
When his father retired in 1999, Mr Morgan took over as managing director but the first year was a bumpy ride.
"Within the first year we lost our two biggest pallet customers, through no fault of our own," he said. "We then had a bad debt of well over £100,000 and a health and safety issue with a new pallet machine."
However, as the saying goes, what doesn’t kill you makes you stronger and that certainly seems to have applied here.
"It was a great welcome to running a business but – now – I wouldn’t have had it any other way," he said.
The route to market at this point was predominantly business-to-business, manufacturing pallets, crates, fencing and "a couple of garden products" and selling to fencing contractors, landscapers, garden centres and some jobbing builders.
Now, the loss of these two vital pallet customers (both of which have since returned) prompted P&A to redeploy some of its pallet storage area and to open up a small factory outlet on one corner of its site.
"We started selling fencing and some more decorative garden products direct to the consumer," said Mr Morgan. "We didn’t have any competition in the area – and, more importantly, we didn’t have any [trade] customers in the area either."
In the first year of trading the factory outlet had replaced the profit from the two erstwhile pallet customers and the company knew it was on the right track. It has gradually expanded the area devoted to the factory outlet and each expansion has brought an increase in turnover with it.
"It made the cash flow work and that meant we were able to carry on the fencing and pallet production," said Mr Morgan.
Working the cash flow
Something else around the same time that made the cash flow work was the acquisition of an adjacent plot of land, which was needed for storage.
"It came with a big office block, which we didn’t need, but rather than sell it we decided to operate it as a serviced office. There are now more than 30 separate businesses as tenants and it’s a very nice, profitable, low maintenance revenue stream. We’ve made it pay for the whole site."
By 2005 Mr Morgan had reached the conclusion that ‘P&A Fencing and Sheds’ wasn’t the most alluring company name for timber garden products and Zest 4 Leisure was formed.
"It was a learning curve and we tried a few products that just didn’t work – hot tubs, timber structures from Canada, furniture from Slovenia," said Mr Morgan.
Today, while some of Zest 4 Leisure’s fencing products and some of its garden products are manufactured ‘in-house’ by P&A, 75% of its garden products are sourced from Polish manufacturers. These currently arrive in flat pack form but from next year new Zest 4 Leisure products will be imported as components to be assembled into flat pack kits at P&A’s Mold site, ready for the end consumer to put together.
In its early days Zest 4 Leisure’s route to market was via sales agents. "That was good for a start but can only get you to a certain level, certainly with our products," said Mr Morgan.
As a result, a recruitment drive a couple of years ago saw a new national sales team come on board. The Zest range is now available in more than 400 garden centres, builders merchants and retail outlets. Buying groups are a growing part of the customer base, as are online retailers.
"We don’t have our own website selling Zest products but we do have an online Zest marketeer supporting our customers that are selling direct on-line," said Mr Morgan.
Zest 4 Leisure’s turnover has doubled every year since 2011, and 2014 looks to be no exception as it’s already 30% ahead of this year. The division will shortly become one of the main contributors to the overall business.
Warehouse operation
That said, attention has not diverted from the core fencing and pallets side of P&A – or from exploring other avenues.
Last year, with the help of a £1.5m HSBC finance package, the company acquired a 4.5-acre site next to its own. One of the two 26,000ft² warehouses that came with the site is used for the company’s garden products business while the other is used for a new operation – P&A Warehousing, providing serviced warehousing for one of the company’s pallet clients. Again, it’s another new revenue stream that pays for other parts of the business.
The expansion has also helped P&A develop its factory outlet and a burgeoning landscaping division.
"When we started selling direct to the public from the factory outlet we were being asked to install decking, fencing, sheds and log cabins and so on, so we set up the P&A Landscaping and Timber Building division," said Mr Morgan.
"It was growing nicely but when the recession hit there was an awful lot of competition through the black economy and we ended up being busy fools. So now 95% of those jobs go to one of our landscaper customers and we diversified into more commercial work with local authorities and schools, which the black economy couldn’t target."
It’s been a major success, he added, with plenty of work to keep the division busy both in and out of the traditional season, including rebuilding the company’s main office in a more central position on the site and servicing garden centres in the winter months by building displays.
"We’re also erecting 2km of fencing for Wrexham local authority to secure a site where they’re building a prison and we’ve built some cedar cabins for Chester racecourse, which are used as retail outlets for famous name brands. Racecourses need to get more out of their space and we’re hoping to meet up with others around the country."
Eco-classrooms
The division is also busy quoting on "eco-classrooms" – a log cabin alternative to the Portakabin of many a school education.
"We’ve got one going up in south Wales in the next couple of months and one in Windsor in January," said Mr Morgan. "This is where we see the landscaping business going."
The landscaping division is also being kept busy at the factory outlet where, in another departure, the company is launching the Woodworks Food Company.
As well as selling timber products, the outlet has been selling horticultural goods for some time and it’s now being remodelled as a small garden centre, complete with café. The old office buildings are being refitted and the Woodworks Café is due to open this month.
"We’ll sell some of the products we make or source elsewhere too and it might even lend itself to franchising," said Mr Morgan.
In other developments, two biomass boilers and solar panels to the tune of £500,000 are currently being installed, one to heat the kiln, the other to heat the factory and offices and Mr Morgan has his sights set on further investment in the fencing and pallet production lines.
"They are due for an overhaul," he said. "We’re going to have a big push on that."
Exploring every prospective revenue stream in order to maximise the potential of everything the company has at its disposal means the P&A Group is one of the fastest growing companies in Wales. Most of its growth has been seen in the last two or three years and the company now employs 92 people – up from around 60 four years ago – and turnover has reached £7m.
KTP collaboration
"We’re growing at such a rate that we need to know we’re doing things right and aren’t just muddling along," said Mr Morgan. "So we’re collaborating with Glyndwr University in an 18-month Knowledge Transfer Partnership, mapping the whole company and plotting what changes and improvements need to be made."
His objectives are clear, he said. "We want to be the employer of choice, with staff who are proud of the organisation; we want to be the supplier of choice, with a reputation for high quality products delivered with high quality service at competitive prices; we want to deliver a profit every month and increase that each year; and we want to increase our market share through maximising our existing customer base and by acquisition.
"We haven’t got to the acquisition stage yet – but we will."
