A matter of convenience

It is a little known fact that, in Irish convenience retailing terms, the road to Damascus passes near the Walkinstown roundabout. For it is only a short drive from there to the new head office of the Spar, Londis and Mace owner, BWG Group. Its chirpy chief executive, Leo Crawford, has had a Pauline conversion on the perils of too much debt.

He led a €390 million highly-leveraged buyout of the company at the top of the property market in 2006, which probably seemed like a good idea at the time.

“I thought: what could go wrong?” says Crawford. “Here I was at 47, I had done well for myself and the economy was booming. We were buying shops and the thinking of the time was that, sure, property doesn’t go down in value. I thought there was nothing wrong with having a bit of debt and so why would I worry?”

A little bit like the Irish populace as a whole, he soon learned the truth the hard way. Although its trading performance was managed relatively well, BWG had a near-death experience in the misery years after the boom when it almost drowned in a €300 million sea of borrowings.

A few horrendously complicated bank deals and one equity fund-raising later, BWG has fought its way back to the surface. Crawford and his business partners, John Clohisey and John O’Donnell, have emerged with their business intact, growing and planning for a brighter future.

But former Ibec president Crawford, who once wanted to be a teacher, will never forget the lessons learned on BWG’s rollercoaster journey.

“Everybody has pride, an ego. I didn’t want to be seen as the one who did well and then lost. There was personal pressure. You’re fighting to keep your life’s work. The mindset was totally different [towards debt] back in the boom. Leverage is great when things are on the up. But when they’re not . . .”

BWG is now 20 per cent owned by Crawford and the two Johns, with 80 per cent held by Spar South Africa (SSA), the listed retail company whose €55 million investment 18 months ago saved Crawford’s firm from a life of debt servitude. BWG now owes a more manageable €150 million.

Its shops are infamously the natural habitat of “breakfast-roll man”, and the group has about 40 per cent of the Irish convenience retailing market.

It has sales of about €1.2 billion, mostly from supplying its retail estate of more than 1,000 stores branded as Spar, Mace, Eurospar, XL and Xpress Stop. Profit margins are tight, but last year, it completed the €23 million purchase of the ADM Londis, which supplies about 200 Londis outlets. Greater scale is expected to lead to bigger profits.

Most of BWG’s network is independently owned by small businesses, while it also operates a further 300 Spars in the southwest of England. On top of this, BWG owns a chain of 22 Value Centre cash-and carry outlets in Ireland. After Musgrave and Dunnes Stores, it is the biggest player in the indigenous grocery scene.

Royal riot

Holding court in BWG’s boardroom, Crawford is a riot. A doughty northside Dubliner, he dispenses wisdom punctuated with wonderful, gasping Muttley-esque laughing fits. From a working-class background, he has risen to Irish retailing royalty, spending almost his entire career at BWG.

The son of a civil servant father and a bookish mother, Crawford grew up in Marino and went to Charlie Haughey’s alma mater, St Joseph’s CBS. His grandfather, also Leo Crawford, was a former general secretary of the Irish Congress of Trade Unions.

“When I was giving my Ibec president’s dinner speech a few years back, I had a good laugh about that one.”

Crawford, a handy footballer who played for Home Farm, “did a good Leaving Cert” and applied to train as a primary school teacher. He got through the singing test – “quite an achievement for me” – but stumbled on the Irish oral.

He was devastated, but got a last-minute reprieve with a place at Trinity College to study business, where his classmates included Richie Boucher, chief executive of Bank of Ireland. He would have plenty of dealings with the bank in later years.

After college, Crawford joined Irish Distillers (IDL), which later took over BWG. He trained as an accountant and also gained eye-opening experience of brands in its sales and marketing division.

“It was a glamorous company to work in. The conditions were good, the social life was good. I loved it.”

His well-to-do workmates used to tell a joke that Crawford still finds hilarious. Question: What do you call a northsider in a Volvo? Answer: Leo. After peeling himself off the boardroom table, he continues with his life story.

Crawford was appointed IDL’s finance director at 31, when he also joined the board of BWG. He entered general management at the retail group in 1996, and was running it by 1999. In 2002, there was a majority buyout by private equity group Electra Partners, with management, including Crawford, taking about 15 per cent. BWG was valued at €220 million.

“It was my first time having an equity stake. It was good for the old ego.”

O’Donnell came on board as finance director, the company kept growing and buying stores, and by 2006, Electra was looking for an exit. Crawford and O’Donnell teamed up with serial Spar store owner Clohisey, who already owned 20 per cent. They bought out BWG in a deal that valued it at €390 million.

“Management did well in the deal. We gave no personal guarantees to the banks and the three of us were smart enough to bank some of our gains. We reinvested, but we took half our money off the table.”

I’m going to be nosey, now, I tell Crawford. “Go ahead. Ask me anything you like. Anything at all.”

Brilliant. How much cash did you take off the table for yourself? “I’m not telling you,” he laughs, or rather, he wheezes. It’s the Muttley thing again. It’s impossible not to laugh with him.

“It was significant money, plenty that you could have walked away with enough to relax if that’s what you wanted to do.”

The deal made Crawford a multimillionaire, but after reinvesting, he stayed on to run the business as chief executive. Life had been good up to 2006, and Crawford expected more of the same, with a plan to keep growing the Spar brand in Celtic Tiger Ireland. It was funded by its bank with a facility until the end of 2013.

“It was happy days. When you’re in business and doing things that are successful, you tend to keep doing them. We were buying stores and they kept growing in value.”

By 2008, sales were declining, the property market was crashing, consumer confidence had dipped and its store network were finding it harder to pay their bills to BWG.

“We were like a banker to these guys, and that cash had to be funded. On top of everything, I’m having to revalue all the assets on the balance sheet. We got into choppy waters.”

BWG kept investing where it could, snapping up wholesale businesses, and opening a major food distribution facility in Kilcarbery, Dublin. It also slashed costs, and focused on maintaining its earning covenants. Crawford, wisely, figured it had better keep the lenders – Bank of Ireland, AIB, Lloyds, Ulster Bank and Blackstone – onside. It would need their help later.

By 2012, the year before the expiry of its lending facilities, its banks were questioning the future, with Lloyds and Ulster parent RBS both keen to cut their exposure to Irish loans. BWG knew it needed a debt writeoff.

“All the craic was gone at this stage. The stress was rising. I knew I’d lose credibility if the whole thing collapsed, although I didn’t really believe that would happen. But I knew it was possible.”

Advised by Investec, BWG reviewed all its options, including a sale, and decided to seek a deal with its banks. After tortuous negotiations, in late 2013 they agreed to write off €100 million of property debt, reducing its borrowings to €200 million.

In return, the banks took warrants – essentially a form of security via an option to acquire – over 75 per cent of the equity. “We essentially lost control over what was our baby,” says Crawford. But at least the baby lived.

Tough times

Crawford says he had a good Christmas that year, but when he came back in January 2014 it was the beginning of the “worst three months” of his career. Lloyds said it would have to sell BWG’s debt. Crawford had no idea what sort of rapacious investor or fund would end up in the bed beside BWG, or what interest rate they would charge, and he feared the ignominy of having to seek another haircut from the Irish banks. He was an Ibec board member and past president by now. He had status.

Crawford needed a friendly investor to buy the debt. In March, he attended a Spar International board meeting in Abu Dhabi. He has been president of the international network since 2005.

He sidled up to Graham O’Connor, the South African chief executive of publicly listed SSA, which had a strong balance sheet. Crawford asked him if he fancied investing in Ireland. By the next morning, he was discussing a deal with O’Connor and Clohisey over breakfast.

By the summer, a secret deal was thrashed out. Lloyds and Ulster exited, while SSA’s €55 million was used to take out €70 million of the debt. The Irish banks released their warrants, and Crawford and the two Johns handed over 80 per cent of the equity to their new partner. SSA will buy out their remaining stake over time, at a price that will be determined by future performance.

“The business was completely de-risked. We had got a guaranteed buyer, and then announcing we were moving to a new headquarters was symbolic. It was a sense of achievement and relief.”

The Irish shareholders of BWG will be bought out over a period of five to eight years. Crawford, who now owns 7 per cent of the business, has seven years to go, by which time he will be 64.

SSA has told its shareholders that it will explore the introduction of more larger-format stores to the Irish market, which could mean more Eurospars. Crawford confirms he will grow the format, although he sees more immediate opportunities in developing the 50 or so he already has.

“There is a big opportunity with fresh food, creating different departments in-store. A butchery, a fresh bread section, healthy options. There are big opportunities in convenience again. During the recession, people brought their sandwiches into work. That’s all changing again.”

Recent industry data suggested the sector had returned to topline growth of about 3.5 per cent. In the last three months, Crawford suggested, BWG has outperformed that.

His immediate priority is integrating the 200 Londis stores, and rolling out the new Bia Blas delicatessen concept. The Londis store network is historically under-invested, says Crawford, and BWG will invest on a 50/50 basis with owners.

BWG’s foodservice division, which supplies clients including hospitals and cafes, is also a priority. Divisional turnover grew 7.6 per cent last year, and Crawford is planning further investment. Cash and carry is also a profitable business.

Value is key

One thing left over from the recession, Crawford says, is that consumers have gotten used to getting good value in grocery stores and will never again return to the boomtime days when they will put up with being overcharged.

“I have a policy now that we shouldn’t have any insult pricing, as I call it. It’s when you go into a convenience store and you see a line on sale for, say, €4.50 when you can buy it for €2.50 elsewhere. It has a disproportionate effect on the image of the store. Consumers have learned lessons. They are definitely wiser, no doubt about it.”

Outside of BWG, he is also a director of the family-owned Stafford Group that owns Lifestyle Sports, and still sits on the board of Ibec, where he was president in 2010/2011 – the tricky bailout period.

“We [Ibec] were in to see Enda [Kenny] recently to set out the case for business before the election. We need to make sure the recovery is not Dublin-centric, and we need to invest in infrastructure.”

People who earn between €50,000 and €100,000 should also be a targeted group for tax relief, he says. “There has to be a little loosening of the purse strings.”

He acknowledges that such policies would be good for a convenience retailer like BWG, which is reliant on people having more disposable income.

“I am not a great fan of austerity. Improving disposable income helps my business, I make no bones about it. But you’re also talking about people’s everyday lives here. The world isn’t a spreadsheet.”

Crawford plans to step down in May from the board of Spar International, which he has chaired for 11 years. It will allow him, along with his fellow investors, focus on maximising the value of his stake in BWG by improving its performance before SSA buys them out.

“My partnership with [the two Johns] was very important in getting through everything. We’re very different guys, but we came through tough times together. Thankfully, we don’t live in each other’s ears. We all need a life outside work. This business could consume you totally.”

Interview over, Crawford gets back to doing what he seems to enjoy most: laughing, joking, musing about stuff. A committed Manchester United fan, he fancies Mark Hughes as to be the club’s next manager. Now there’s something worth laughing at. Crawford duly obliges. Then it’s back to work, building his legacy – the one he almost lost.

“I don’t like losing.”

CV Age: 56

Home: Howth, Dublin

Family: Married with two sons

Something about him you might expect: He’s an avid consumer of news, business and current affairs, and reads up to four newspapers daily.

Something about him that might surprise: He is a keen tennis player.