Food for thought

29 May 2006 00:00  [Source: ICB]

David Garman was ready for a change when he was approached to head TDG in 1999. Having spent nearly 26 years in the food industry, he relished the opportunity to run and develop a different business. ‘The food industry is a tough old game, with mature static markets. It was time for a new experience and a new challenge,’ he says.

Garman had a clear vision of what he wanted to achieve at TDG, but he faced tough times along the way. Indeed, his experience in food retailing has stood him in good stead in steering TDG towards higher growth markets.

‘When I joined TDG as chief executive, the business was in danger of being overtaken by time,’ he says. ‘It was a haulage-and-storage business that had not made sufficient progress. It was at a competitive disadvantage and its traditional profit areas were about to go in the wrong direction.’

Garman decided to move into contract logistics and supply-chain management, and to concentrate on two sectors – chemicals and consumer products. ‘We wanted to create and develop a west European contract logistics business to replace the UK storage and distribution business,’ he says.

Progress

Garman made some progress during his first two years, disposing of the remaining haulage and storage business – the equivalent of about £150m (€220m/$280m) of TDG’s total turnover of £400m. ‘I kept a business with a turnover of about £250m and replaced the lost assets with a contract logistics business, growing total turnover to £500m.’

Unfortunately for Garman and his team, world events then took precedence. ‘After September 11 2001, the market slowed right down to very low single figures,’ says Garman. ‘The 1990s had seen growth in west European logistics outsourcing of about 10%/year, which was very attractive to me, coming from the food industry.’

Since there were fewer contracts to bid for, they were more fiercely contested and for shorter periods. Potential clients took longer to decide, and margins went from an average 5% when Garman joined TDG to 3% today. For Garman it felt like déja vu. ‘Market conditions became more familiar to me because I’d been there before,’ he smiles ruefully.

Difficult time

The period between 2002–04 was a difficult time for Garman, who had to batten down the company hatches and suspend growth plans. Instead, he concentrated on driving cash flow, finished his rationalisation programme and created a strong balance sheet.

But the picture brightened in 2005 as the market’s appetite for projects started to look healthier, and clients began to look at ways to unlock value in their supply chain.

Garman’s tenacity was once more in evidence as he embarked on an ambitious growth programme, forging ahead with his supply-chain management proposition, and winning ‘flagship’ deals with Corus and Johnson Diversey, in 2005 and 2006 respectively.

In March, TDG bought Belgian logistics firm Mond & Cie for £17.9m. ‘Mond has given us an infrastructure and major platform on the continent to go with our continental contracts,’ Garman says.

The Mond deal is the first in a series of planned acquisitions to expand TDG’s geographical footprint in western Europe. The company has prioritised the fast-growing packed and speciality chemicals sector and is looking for further capability in either the Benelux region or in Iberia. TDG has just opened a new warehouse in Barcelona, Spain, and Garman says that several customers are interested in working with TDG there.

European chemicals now accounts for a quarter of TDG’s overall business. Garman has expanded turnover from £80m a few years ago to more than £123m in 2005. ‘We have a good track record in chemicals,’ says Garman. ‘Over the past five years we have raised sales by a compound 7%/year and earnings by 12%/year.’

TDG is split into five divisions over six countries and has more than 100 sites. It is no surprise then that Garman spends only a day and a half every week in his central London office. He travels extensively around the UK, as well as to Ireland, Belgium and the Netherlands, meeting potential and existing customers. He also makes occasional trips to the US and to Asia.

Garman says that his priority over the next three years is to move the business forward ‘more measurably’ through a combination of contract logistics, supply chain management and bolt-on acquisitions.

With more than £10m in net cash and £130m in net assets, TDG is well placed for more deals. ‘Operationally, we are a well-run business with a strong cash flow and a balance sheet that many people would envy,’ he says.

Garman says that the European logistics industry is being challenged on several fronts. Margins continue to be under pressure from high costs, customers are increasingly demanding more capability but are reluctant to pay for it, and there is an ongoing trend towards consolidation and internationalisation.

Progress

‘You are expected to be, at the very least, a regional player now,’ says Garman. He believes that although the pressure remains, consolidation does not provide all the answers.

‘Increasing your scale can strengthen your business model but this is also an industry where customers require responsiveness and agility, which the smaller, more flexible companies can provide.’

It is this agility and flexibility that Garman believes differentiates TDG from its competitors. ‘We can enter into tailor-made agreements and, because we are not so big, our major customers feel that TDG’s senior management is always accessible. We seek to make that flexibility and responsiveness a point of difference for us.’¦

DAVID GARMAN IN 60 SECONDS

Which three words best describe you?

Positive, developmental and direct.

What is your biggest job challenge?

To grow the company after a period of deliberate consolidation. My remaining challenge is to move the company forward in the areas of contract logistics, supply-chain management and value-added acquisitions.

What are your interests outside work?

I like sport and play tennis, which I’m good at, and golf, which I’m not. Now my children are grown up I can take more time and travel further afield for holidays. I also like going to the cinema and theatre.

If you weren’t working for TDG, what would you be doing?

I was interested in teaching, but it does not pay very well and tends to be undervalued by society these days. As a youngster, I would have liked to be a professional footballer, as I have always played and enjoyed competitive sport. But you need either to be big or like lightning over 100 yards: I am small in stature and a long-distance runner!

What is the best advice you have ever received?

Don’t take yourself too seriously and beware of slipping into arrogance, which is easy to do when you get into senior management. Also, try and retain a sense of humour – it makes the business day much more enjoyable.

VITAL STATISTICS

• Turnover (2005) £510.5m
• Ebitda (2005) £37.8m
• Number of employees 8000
• Warehousing space More than 1.4m m2
• Sites Belgium, Germany, Ireland, Netherlands, Poland, Spain, UK

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