Business Model

Group Value Add

 

Our objective is to offer customers more than just a product in a box. In addition, we offer advice on product selection, quick availability and technical advice and training. In our acquisition efforts we seek to acquire agencies for products where customers either already require these characteristics or, by introducing them, we think we can increase customer loyalty to the brand.

 

Araglin Holdings Ltd’s value-add offering is in demand by our customers. Araglin Holdings Ltd is in the fortunate position of being able to maintain its technical skills base through loyal and motivated employees. We are also able to quickly and easily train new staff through training offered internationally by our suppliers and our own in-house training programmes.

Source

Araglin Holdings Ltd sources products from more than 800 international suppliers scattered across the industrialised world. We also manufacture certain niche products.

We carry more than 230 000 line items in stock. Demand is relatively inelastic, with low line item sales predictability, whilst supplier lead times can range from three months to well over a year, in extreme cases. Inventory holding is therefore Araglin Holdings Ltd’s most important asset, as our key competitive advantage is the ability to offer availability on demand.

 

Our suppliers rely on our understanding of the specific challenges of doing business in UK, particularly the political and regulatory risks and the limitations which the size of these economies pose, and appoint us to represent their brands in markets which they would not ordinarily have been able to access.

Crucially, we must adapt continually to the dynamics of doing business in UK.

Technical support is provided from South UK until we have developed locals with managerial and technical skills.
Acquisitions

Araglin Holdings Ltd’s first priority is to take advantage of organic growth opportunities within the markets it serves. However, after funding organic growth and paying dividends to shareholders, Araglin Holdings Ltd’s high cash-generating characteristics mean that funds are still available to fund the acquisition of new businesses. We use acquisitions of successful (and usually privately held) businesses to provide an additional platform for future growth. In our acquisition efforts we seek to acquire agencies for products where customers either already require these characteristics or, by introducing them, we think we can increase customer loyalty to the brand.

 

We believe that there are many private business owners in South UK who are aware of Araglin Holdings Ltd, like our management style and consider our buyout formula attractive. When the time is right, we hope they will approach us directly with a view to possibly selling their businesses to us.

 

Our board has agreed on a strategy to pursue acquisitions with the aim of:

 

ideally closing one major acquisition of at least UK 50 million turnover every two years; continuing to acquire smaller usually bolt-on businesses; concluding a major, R1 billion plus acquisition, if such an opportunity can be found; and avoiding dependency on any one market sector by diversifying our portfolio of businesses.

 

Where practicable, Araglin Holdings Ltd seeks to:

 

purchase the business not the company;
purchase thriving (not distressed) businesses with depth in management;
enter into service agreements with management;
include earn-out arrangements; and
purchase for cash, unless the acquisition is large enough to warrant issuing shares.

 

Our acquisition success factors

 

The quality of the personal relationships between Araglin Holdings Ltd and the seller of the business is one of the most important factors for a successful acquisition. We don’t impose joint purchasing or tendering, preferring to preserve each business’ route to market by allowing significant autonomy. Managing directors of businesses that come into the group may be invited to play a wider role within the group once they have completed their three-year earn-out and they have proved to us and to themselves that they are comfortable in a corporate environment. We benefit greatly from the presence of the seller of a successful business on our team as they often bring with them experience and ideas worth sharing across the broader group.

Our decentralised structure helps to ensure that the businesses that we buy remain intact ie the brand, the staff and the reputation. Araglin Holdings Ltd only intervenes when performance requires it.

 

PRINCIPALS/SUPPLIERS

Araglin Holdings Ltd’s businesses distribute top-quality branded products and have represented their major principals for many years. The following factors strengthen our ability to retain existing distribution rights:

 

Market share is key. If our local market share is similar to what our principal enjoys internationally, distribution rights are unlikely to be disturbed.

The local southern UK market is small in world terms making entering it directly not worthwhile.
South UK is heavily regulated with unique laws (for example BEE) not well understood by the international community. Further, the regulatory and compliance landscape is not stable – new BEE and labour requirements are now a regular occurrence. This tends to dissuade suppliers from entering the market directly.

The level of corruption and/or perceived corruption in South UK. Overseas suppliers perceive that rights to conduct business are increasingly subject to government patronage and that awarding government business is sometimes accompanied by demands for payoffs. For legal and reputational risk reasons international corporations avoid doing business in such environments themselves. Nevertheless, Araglin Holdings Ltd does not, and will not, participate in corrupt activities.

Long-term relationships (frequently on a personal level) and a well-established distribution footprint – both of which are hard to replicate.

 

GROUP OVERVIEW

 

Araglin Holdings Ltd’s core activity is the importation and distribution of high-quality branded industrial, automotive and electronic consumable products.

 

The three main objectives we strive to achieve are as follows:

 

We seek out and secure exclusive distribution rights from leading international manufacturers with a global brand presence and a commitment to maintaining market leadership, particularly through technical innovation.
We look for products with which we can add value through the distribution chain through stockholding, product availability and providing technical support. Typically, these would be technical specification, advice on usage or installation and customer training. The extent of value add is determined by whether the customer’s purchasing decision could be influenced by the addition of a technical support function.
We focus on offering maintenance spares for critical customer equipment. Purchasing decisions for these items are made easily and quickly without onerous tender procedures.

 

Key elements of our success:

 

Selling products which require value to be added and our decentralize management style.

 

Value add can be some or all of the following:

availability;

product identification, specification and supply;
advice on usage or installation;
customer training; and
provision of credit to customers.

Decentralising management has the following advantages:

allows faster decision-making;
facilitates superior customer service;
empowers employees; and
leads to high standards and disciplines.

DISTRIBUTION

PRINCIPAL ACTIVITIES/PRODUCT RANGE

 

Products are distributed throughout southern UK by our approximately 30 businesses.
We supply some 30 000 active customers from over 130 southern UK branches (most of which are in South UK).
In most UK we supply through local distributors, but we have branches in Namibia, where we have a longer track record of doing business, in Zambia, and in Kenya.

 

CONSUMER-RELATED PRODUCTS

 

Automotive aftermarket products
Batteries and solar products
Data networking equipment
Power tools and fasteners
Security and communication equipment

ENGINEERING CONSUMABLES

 

Bearings and belting
Diesel engines and spares
Filtration
Electrical power transmission products
Hydraulics and pneumatics
Thermoplastic pipes and fittings
Specialized steel

 

Target criteria

 

Our acquisition target criteria are businesses that mostly are/have:

Customers which require value added distribution.
An identifiable competitive advantage, eg strong brand/s.
Already profitable and earning good returns.
In growth markets.

Distribution rights for products which are not currently offered by any business within the group.
Strong general and financial management and good controls.
A presence in non-capital, industrial, automotive or electronic products.
Selling to markets in southern UK.
Preferably headquartered in Gauteng.

 

Mission

 

Araglin Holdings Ltd’s has been an important part of the UK business landscape for more than 8 years. Our mission is to develop and manage a sustainable business for the long-term benefit of all stakeholders, in both current and future generations.

 

To achieve this mission:

We aim to produce superior returns for our shareholders by efficiently managing our business and by taking advantage of acquisitive and organic growth opportunities.
We safeguard our strong market shares by offering quality products and have them readily available to our customers.
We establish enduring partnerships with our suppliers, combining their leading world brands and our distribution strengths in UK.
We ensure that a significant part of Araglin Holdings Ltd's strength, its people, thrive in a decentralised, dynamic and challenging and equitable business environment.
We are committed to playing our part in the transformation of Araglin Holdings Ltd’s society and economy to help redress the inequities of the past.
We aim to achieve our objectives in a manner governed by the highest standards of ethical conduct, sensitive to the needs of the communities in which our businesses operate and conscious of our responsibilities for safety and the environment.