Building a future after the construction market crash

At the height of the boom, Brooks was the largest timber distributor on the island of Ireland and the third-largest builders’ merchant. It had an annual turnover of more than €150 million and was part of the larger BHT Group, which employed more than 550 people.

However, the 2008 property crash and the ensuing economic downturn brought the BHT Group to its knees. With spiralling debts of more than €31 million, including €21.8 million to unsecured creditors, BHT entered examinership in February 2012.

With the examinership process failing to attract any investors, the then trading director of the Brooks business, Mark Lohan, was left scrambling to find someone to provide the necessary investment to bring Brooks out of the liquidated BHT Group. His gambit paid off, and the brand is now back on track.

Long history
Tracing its history back to 1789, Brooks is one of Ireland's oldest timber brands, specialising in the sale of hardwood, sheet products, flooring, doors and decking to a variety of customers, including other merchants, carpenters, furniture makers, builders and members of the public.

The brand is now operating from just six branches, where previously there were 20. Before liquidation, the group was owned by a private equity firm which had bought BHT in 2010 when Wolseley retreated from Ireland.

Wolseley, a FTSE 100 listed company, had bought Brooks in 2004 for €213 million and combined it with other brands it owned in Ireland, Heat Merchants and Tubs & Tiles.

At that time, Brooks was posting operating profits of €9.4 million on turnover of €195 million and held 6 per cent of the €3 billion Irish merchanting market.

In just three years under Wolseley’s ownership, Brooks increased its workforce from 430 to 550, adding seven new branches across Ireland. It was at this peak, in 2007, that Mark Lohan was brought into the company.

“At the height of the boom, 90,000 houses were being built every year in Ireland. That drove the entire industry from the suppliers to merchants to the retail trade,” said Lohan.

“That figure is now down to between 5,000 and 8,000, depending what figures you look at – 2006 was the height of the boom so, when I joined the company, it had already started to decline. We still had a few months of strong results but the writing was on the wall.”

Lohan had studied commerce at NUI Galway before qualifying as a chartered accountant. He worked for PricewaterhouseCoopers (PwC) and TDG Logistics for several years before joining Brooks as a trading director in 2007.

Turnover at the BHT Group halved following the property crash, falling from more than €500 million to €250 million, and Lohan found himself engaged in five years of cost-cutting, with staff all taking pay cuts and the company reducing its size on a number of occasions. BHT reduced its size on a number of occasions and each time we’d have to go back and do more.”

With spiralling debts and no cost-cutting left to be done, BHT went into examinership. An independent report by PwC found the company had a reasonable prospect of survival but, although there was significant interest, no investor was forthcoming.

“There was interest in the three brands but the market was continuing to decline and there was no talk of the green shoots [that] we hear now.”

The group entered liquidation on April 20th last year. Within 24 hours, Heat Merchants and Tubs &Tiles were sold to Irish-owned heating and plumbing suppliers Harleston.

Believing Brooks was a business worth saving, Lohan went looking for a backer.

“I met every VC firm and syndicate in the country. I believed there was value in the Brooks brand as we had a very loyal customer base.

“During the period of liquidation, we had customers coming in here paying cash. Builders – they could have gone anywhere, we didn’t have all the stock they needed – but they came in to keep us alive. Also, the company had been trading for 200 years and had significant credentials.”

With all other options exhausted, and every name on his investor wish list crossed off, Lohan contacted Welsh timber importer Premier Forest Products.

“Premier was a speculative call. They were well down the list. As it happened, one of the main directors answered the phone. I convinced him to come to Ireland to see our set-up and the following Tuesday the company’s three main shareholders arrived over.”

“Premier is a highly acquisitive group. It was difficult to get them across as it was their year end and they were doing a stock take. I did a presentation over the phone to convince them to visit.”

In one day he brought them to Cork, Galway, Sligo, Tullamore and Dublin clocking up 683km in the process, to see the various sites.

Great addition
"They saw the breadth of the Brooks experience and saw we were not just a timber distributor but [also] suppliers to the trade and the public. They realised the company would be a great addition to their business."

The gambit paid off and, several days later, on May 11th, Premier Forest Products took over the company.

“They satisfied a third of our immediate stock requirements. Since then they have introduced other products which we like and can flush through our system.

“It was a big punt for them. They had to rely on our own belief in the company as a basis for purchasing.”

Brooks had 13 branches and 150 staff when it went into examinership. Six branches and 65 staff emerged from the ashes of insolvency.

“Now we have 75 directly employed and 23 indirectly employed at the company.”

Lohan said the six branches selected to stay open had the crucial mix of customers: furniture manufacturers, merchants, builders and retail customers.

“The hardest thing was when I was telling branches they weren’t going to be one of the six that would remain open. The branches were still fine branches with fine people but the market was oversupplied.

“It was a bittersweet week. On the one hand there was huge euphoria at getting an investor but at the same time there were fine people who were not going to be part of the new company.”

Following the acquisition by Premier Forest, Lohan set about getting suppliers back on board, and last October, the company returned to profit.

“We spent the first two to three months getting suppliers back on board. Insolvency was far from an ideal situation, as suppliers lost out on money owed, but we’ve tried to do the right thing the whole way through. We made commitments to suppliers that had been hurt by the liquidation of BHT; in terms of settlement of Reservation of Title claims and offered them the opportunity to earn money from trading with the Brooks legal entity going forward.”

This week Brooks announced its first expansion under its new owners, acquiring Dublin Plywood and Veneer Company (DPV), securing 11 jobs at the DPV site in Glasnevin. The workforce is expected to be increased by 14 new full-time staff as operations at the site grow in the coming months.

Lohan said the acquisition of DPV by Brooks represents a significant strategic step in broadening Brooks’s product range in timber products.

“DPV will trade separately from Brooks but we can get procurement advantage where there is a crossover of products and introduce new products where there is not”.

He says the plan going forward is to concentrate on building up the customer base, maintain stability in the business, keep overheads low and stick to what they’re good at.

“This is a story about a brand that has seen good times and bad times. Staying focused on the key elements of the business that maintain stability and sensible growth are the order of the day.

“Obviously one would never be happy with the declines in the fortunes of the country or the industry. Neither could you be happy with the difficulties faced by our brand over the past number of years.

“However, having come through it, we are leaner and tighter than we have ever been before, with a renewed respect for each other and what we do. Perhaps the same will be said of the country as a whole when these green shoots start to blossom.”

* This article was amended on June 7th, 2013 to correct a factual error