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European Ceramics: Flexible when it counts European Ceramics: Flexible when it counts

Like most businesses involved in the construction industry, European Ceramics has had to adjust to the ebbs and flows of an ever-changing market. It’s an imperative that’s given rise to its mission statement: to ‘morph, adapt, change and evolve’.

If you've been to Smales Farm, Holy Trinity Cathedral, Botany Downs Shopping Mall, the ANZ Tower or Sky City Grand Hotel, you'll have walked on or seen tiles supplied by European Ceramics.

The family business founded 30 years ago, has built a solid reputation as the go-to supplier for quality natural stone, porcelain, ceramic, limestone, marble and granite tiles. It sources its stock from around the world and works closely with specifiers, providing product for large commercial developments, hotels, apartment blocks, aged-care facilities, group home builders and high-end residential projects.

Owner and managing director Jason McGranaghan took over the company from his parents just as the global financial crisis hit. The economic downturn battered the building industry, but European Ceramics weathered the storm, thanks in part to its reputation and track record.

"It was a difficult period for the industry but the longstanding relationships we have with key developers and specifiers helped us get through," says Jason.

"We've been involved in some of the most prestigious projects in New Zealand and we've been operating in this space for three decades so we have a lot of experience and expertise. Our clients come to us for exclusive and custom-ordered product ranges, so that sets us apart."

In 2015, Craig Stachurski became a partner in the business and this has further solidified their future. Jason and Craig bring two different points of view that effortlessly blend together, creating a more dynamic approach to business.

In the interests of ongoing improvement, the company recently undertook a full review of its operations and systems. This resulted in it taking on Hayes Knight as its accounting supplier and working with Scott Travis and Jaimee Hart.

"We wanted fresh approaches to every area of the business and to keep up with innovation and technology," says Jason.

"Having an accountancy firm that supported this vision was paramount. We've been working with Scott, Jaimee and the team now for over a year. Hayes Knight have added value to our business while offering advice from an outside perspective. They've helped us with financial reporting, tax, forecasting, due diligence, and shareholding advice, all resulting in better overall business performance. It's essential for us to have accountants assisting us on a pragmatic, nononsense basis. Scott and Jaimee fit that bill with their practical advice, taking a genuine interest in our business and keeping an eye on what's best for European Ceramics."

Scott and Jaimee worked to identify areas where European Ceramics could improve its operations.

"They have a solid business, but Jason was looking at ways to improve things from an efficiency point of view, and around how the business was financed," says Jaimee.

She has begun working more closely with Jason and his team to provide advice regarding cash flow reporting and stock management. Managing cash flow and building the company's cash reserves are priorities. The challenges lie in establishing how much to invest in stock, what type of products to buy, and keeping stock levels manageable to ensure the business is healthy from a cash perspective. Having an awareness of the hidden costs of holding stock, such as insurance, financing costs, storage, obsolescence, damage and leakage provides additional motivation to manage stock levels effectively, and look after the bottom line.

The business operates in a fluid, design driven market where trends can change quickly so staying in tune with these and aligning product offering is a critical function of the management team.

In order to generate growth, European Ceramics has focused on three important areas.

"Doing quality work for quality clients is their goal," says Scott. "While it's vital to make the most of a buoyant market, you don't want to just grab at anything. Jason either looks to work with clients he's successfully worked with before, or conducts due diligence on prospective clients so that he is comfortable with the level of risk."

Fine-tuning payment terms has seen clients pay for products before or when they're shipped, meaning European Ceramics isn't left to carry the cost. This is particularly important in large transactions.

"With our AAA credit rating, international suppliers are eager to secure our business and provide generous payment terms," says Jason. "We review foreign exchange rates daily and secure forward rates, which gives us time to manage creditors and debtors effectively, and to offer our commercial customers alternative payment terms. Our market is predominantly specification, so our procurement is mainly indenting products on order."

While growth is important, lessons learnt from the GFC mean that Jason prefers a measured approach rather than growth for growth's sake. Becoming a large organisation with big overheads and too many staff, and taking on the risk profile associated with that isn't Jason's goal, adds Scott.

"It certainly looks like there is a lot of blue sky on the horizon in the construction industry, however at some point the market will ease so the business needs to be robust and agile enough to cope. Having us on board has given Jason the confidence to seek more growth knowing the core business is in good shape. He's also looking to build equity in the business for the shareholders so that the balance sheet is more robust and the company can take those curves in the economy. Rather than stripping out the profit as you go, it's about creating a business that's resilient and able to respond to changes in the market."

"They've over-achieved their budget for last year and have a good number of jobs lined up, including a lot of big developments," says Jaimee. "Jason is positive but realistic. His philosophy is very much 'plan for the worst but hope for the best', however having Hayes Knight work alongside has provided more clarity."

With this in mind, discussions with Hayes Knight about strategy and future planning are high on the agenda. Jason's vision is to stay innovative and keep the business future-fit. His goal is to balance work and lifestyle and to grow wealth while protecting the company's assets - he knows that keeping flexible is key to remaining on the right track.

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