Five lessons from companies that beat the downturn

It’s been a disappointing year for corporate results, with rampant discounting, low sales and frugal customers taking the gloss off profits.

But some savvy companies are bucking the trend. Among a wave of profit downgrades and losses, companies in a wide range of industries are delivering solid results by cutting costs, training staff and stringently targeting key markets.

They aren’t just in the right market at the right time – these companies are making sure a good opportunity doesn’t go to waste by constantly innovating, creating new products and experimenting with technology.

Here are five lessons you can learn from some of the best financial results announced this year.

Cut your costs

There is absolutely no question retailers have been hurt the most over the past six months. But Noni B has managed to deliver a 68% increase in profit to $3.9 million by scrutinising its internal business and cutting costs.

By investing more in training staff, applying more vigorous scrutiny when choosing which leases to renew and embarking on a “strategic plan” to cut out in-store inefficiencies, Noni B was able to increase profit despite fairly flat sales.

With those costs taken care of, the company zoned in on its target market – women over 40. By introducing a new Liz Jordan label, and focussing its marketing budget on high quality visual advertising, the company was able to avoid rampant discounting.

More training was provided to staff to help cut more costs and improve the company’s reputation, while it also kept in contact with their one million most popular customers through a comprehensive database.

As a result, the company has delivered a strong full-year result with EBITDA up 24% to $9.4 million, even though sales are up by just 0.7% for the year and same-store sales were down 0.5%.

Retailers shouldn’t be pressured to discount just because rivals are. Find some innovative ways to cut costs, use your customer database to focus on your target market and you’ll be well positioned to navigate a volatile market.

Know when to grow

Arguably, The Reject Shop is in a solid position, given shoppers are constantly looking for bargains in this type of environment. But managing director Chris Bryce says the company is only able to take advantage of that market by pursuing an aggressive growth strategy.

The chain opened 27 new stores during the year, and today marks the opening of its 200th location – halfway to its 400-store target. Another 17 new stores are expected to open in the next year and 22 are being refurbished.

The aggressive growth has led to a solid result, with net profit after tax up 22.9% to $23.4 million, and although like-for-like sales were up by only 1%, total sales grew 14.2% to $80.8 million.

Bryce says the aggressive growth strategy is part of a long-term trend, but it also means The Reject Shop is constantly putting itself in customer’s faces. Its already projecting a net profit increase of 14-16% based one the first six weeks of the new financial year.

It isn’t enough to have a product people want. If you find yourself in a booming market, take advantage of the trend and pursue some aggressive, controlled growth.

Have a dominant position and keep it

The float of CarSales on the ASX in 2009 is undoubtedly one of the most successful listings of the year. With a network of over two dozen classifieds sites, the company has been able to leverage the trend of bargain-hungry consumers to deliver EBITDA of $64.5 million, up 48%, with total automotive enquiry volumes up 28%.

CarSales’ secret isn’t complicated – it has a dominant market position and aims to keep it through a mixture of high-quality marketing, moving more of its services away from print and the increased use of new technology trends like mobile.

With simplistic, attractive advertising campaigns through automotive magazines including Wheels, Top Gear and Motor, along with television advertising that focuses on “real people” looking for a bargain, CarSales has been able to capture those shoppers looking for a discounted deal.

This is also combined with a big focus on new car dealer customers, constant updates to the main site and a focus on access through mobile devices, especially the iPhone and iPad app which has recorded over 400,000 downloads.

SEO and SEM techniques, advertising on social media like Facebook and the use of a constantly-updated Twitter account have helped the company claim 75% of all time spent by users looking on automotive classified websites.

The company is now larger than Fairfax, Telstra and News Corp combined in the automotive category. But a focus on its other sites, including BoatSales, HomeSales and CarPoint.com.au, means the company’s network extends far beyond its core product.

Once you’re at the top of the market, your work has just begun. Constant advertising and innovation, combined with providing access via new technology such as smartphones and social networking, along with regular updates and improvements, means CarSales has been able to not only control its market, but continue dominating it altogether.

Invest in your sales teams

SMS Management and Technology is in a competitive industry. ICT consultancy is a saturated market with plenty of players, and competing for clients is always a hard task.

The solution? Focus on your sales teams.

SMS increased its staff size by 19%, boosted its sales teams and was able to pursue new contracts worth $303 million, beating out rivals and gaining new contracts.

The company managed this huge boost in staff by putting into place the initiatives recommended in a staff survey. It introduced a performance rewards system and new professional development initiatives for employees. The move paid off, with new business with new clients making up 17% of total business.

Total revenue is up 7% to $247.6 million, with net profit after tax up by 15% to $27.9 million.

Simplfy your processes

The manufacturing industry is constantly under pressure, but 4X4 parts manufacturer ARB has managed to buck the trend by delivering an astounding 44.8% profit increase through simply making its processes more efficient to support demand.

Car sales were up 9.4% over 2009-10 following a shocking year after the financial crisis hit, but demand alone wasn’t enough to help ARB along. The company says over the last six months it made major investments in warehouse space, but the biggest change was in internal efficiency.

By investing in new plant and equipment to cope with demand “close to full capacity”, ARB was able to scale its business and grow at a sustainable rate without crashing and burning.

The company says these improvements in manufacturing efficiency are a “major contributor” to the profit increase, and “management efforts will continue to focus on this area in the future”.

Net profit was at $32.6 million, while revenue also increased by 19.7% to $230.3 million