Managing director of 4 Aces Chris Penn comments.
“Brexit jolted a lot of businesses but, like anything in life, it’s not the knocks that count; it’s how you recover from them. For us, that has meant moving forward with a solid foreign exchange strategy in place to shore us up against any further impact and to ensure the most profitable purchases.”
“It’s hard to predict exactly how major political events will impact on industry and Brexit has been no exception. 4 Aces has been on a roll since the business’s inception in 2001. We’ve enjoyed a healthy, annual growth, which has been carefully managed to ensure that flexible service provision and good customer relations are promoted and maintained and, as a consequence, we’ve gone from strength to strength.
“We’ve been in the business of creating a profitable brand and so our focus has been on the quality and choice of our product offering, along with quick and reliable deliveries, rather than currency rates and home politics. And so, back at the start of June 2016, we had no reason to consider foreign exchange rates, despite the fact that they could radically affect our business. We were building our costs on our profitability and making money based on what was a good and stable exchange rate.
“Our partnerships were all established on a strong currency and, in the Summer of 2016, we were in the midst of investing another half a million into the business, to accommodate an office move to larger premises, new machinery and a state-of-the-art IT infrastructure – all with the goal of further improving our service offering and continuing to grow the business. The forecast was good…
“I don’t think many of us anticipated the outcome of the Brexit vote – or the subsequent fallout. Our business relies heavily on import. We bring in goods from Europe, China, Thailand, Canada and the US and between 60 to 70 per cent of our imports are European. The outcome of June 23rd knocked us hard and, immediately after Brexit, we experienced a 15-20 per cent loss on our currency arrangements thanks to the perilous exchange rate.
In the 16 years that 4 Aces has been running, prior to this period, we’ve never experienced an event that has hit the pound with such force and, had we had an idea of what was to come, buying extra currency, before June, would have certainly placed us ahead of the game.
In the first few weeks, post-Brexit, we simply took stock – despite bearing a currency charge increase of up to 25 per cent that was immediately impacting on the bottom line. We had little choice. We didn’t want to adopt a knee-jerk reaction, imposing immediate price increases that could damage long-term customer relations, when all businesses were feeling vulnerable, to some extent.
“Fact is, most businesses in our industry and similar, including our competitors, have had to review their prices in the last six months because of the foreign exchange rate. We gave our customers a two-month grace period before we were forced to act, driven by a declining Euro, and in August we put our prices up in order to stay in profit. Thankfully, we’ve not been too scarred by this particular act as the majority of our customers were expecting it; pretty much everyone has had to do the same.
“There is some small comfort in this price increase. We did it because, like many suppliers, we had to. Those who haven’t either had the very best pre-Brexit advice or their prices were way too high in the first place.
“And so, we’ve proven the integrity of our pricing structure and now we intend to demonstrate our resilience. We pressed ahead with the inward investment that had been planned well in advance of Brexit and have consolidated a plan for future growth, which we will drive forward, demonstrating a commitment to both our loyal staff and customers.
“As a company, we rely on the strength of the pound and what Brexit has taught us is that we can’t ever afford to get complacent. To help put practices and procedures in place, and to be alert to future happenings, we have secured the services of a non-executive financial director and a treasury advisor. They will help to ensure we have a failsafe foreign exchange strategy in place to take us forward, considering our currency requirement over a long-term period.
We are looking at our currency agreements for the next 12 months, rather than the next few weeks, and agreeing exchange rates that are locked in to manage the market risk and protect ourselves against any further dips in the value of the pound. At the time of writing, there is no clear strategy for Brexit; it’s still the unknown and there is a lack of clarity regarding what will happen and when however, we will most certainly be ready !
“As we all know, the markets hate uncertainty and so we have to employ a robust strategy, with locked in arrangements that will future proof our profitability and minimize the impact of any future economic insecurity. We now have a post-Brexit game plan in place that should enable us to significantly increase our turnover by 2020.
The critical appointments, the larger office and the new systems reflect the fact that we are emerging from 2016, slightly dazed and battle weary but with an appetite for success and future growth. We’ve invested in a fluent operation and we absolutely refuse to get stagnant.
“So, 2017, a rocky Brexit and the future antics of President Trump? Bring it on… At 4 Aces, we’ll be ready.”