Consistent performance keeps CJD on track in cutthroat machinery business

THERE is nothing small about CJD Equipment.

Of course, the equipment tends to be big, much of its destined for the mining sector. That is the nature of the yellow goods and trucks that CJD deals in.

Its Kenworth trucks, for instance, can haul up to 300 tonnes in road-train configurations, the biggest loads found anywhere in the world.

But it is not just the equipment. The company office, completed just as the GFC hit, has a significant presence on Great Eastern Highway, just east of the Midland Bypass. It is a major two-storey complex offering spacious accommodation for its corporate headquarters servicing the branch network of retail and maintenance outlets.

For a private company based in Perth, CJD’s national footprint is also unusually large, with 16 branches and employees in most states – from capital cities to major regional centres.

It has spent $100 million on developing new branches or refurbishing old ones during the past 10 years as it has extended its reach from Western Australia to operate across the country.

The most recent figures provided to WA Business News’ Book of Lists show turnover was about $360 million, putting it among the top 15 of the state’s private companies when measured by revenue.

But the scale of CJD’s presence and sales belies the fragile nature of the industry in which it operates, with the dealerships it invests in so heavily being up for renewal every year.

CJD managing director Alan Barnett admits that, despite the scale of the business, it is in a tough, low-margin industry that suits a family-run enterprise with people who love the sector, above and beyond the money they make from it.

It is also hard for those outside the industry to accept that all this investment rides on agreements with manufacturers that rarely extend beyond 12 months; that means everything is riding on consistent performance year after year.

CJD’s own history shows that it has benefitted from this cutthroat side of the industry, however.

Significant parts of its early growth in WA and later national expansion have occurred due to the failure of others – either manufacturers that found direct selling too hard, or other dealerships that got into strife.  

History

CJD’s name reflects its roots, started nearly 40 years ago as the Chamberlain and John Deere dealership by Ron Rafferty and Rob Jowett.

It remained focused on WA, branching out into trucks and construction equipment, until the late 1980s when it established dealerships in Tasmania and NSW and, in 2001, became the national distributor for Volvo’s construction equipment.

Two years later it sold out of the John Deere business.

The two founders remain shareholders in the business but have expanded the equity base to include Mr Barnett, Mr Jowett’s son-in-law. 

Mr Barnett said the founders still worked in the business even though they no longer had an official day-to-day role.

“It is not because they have to come to work,” he said. “It’s because they want to come to work. The staff love seeing them around the place.”

Mr Barnett said the founders had also retained their equity in the business, ploughing profits back into CJD.

“We keep investing profits into expanding the business,” he said. “At their age it is still not about taking money out.”

Mr Barnett, who has a background in accounting and technology, came into the business in 2001 and moved up the ranks to managing director in 2008. He bought into the business in 2009.

Mr Barnett said at the time he was first asked to get involved (1999) he was focused on his role with ST Synergy, a technology company that listed on the ASX.

Two years later, when approached again, he thought he would give it a go, despite knowing the risks of becoming part of a family business.

Describing himself as a strong-minded individual who was not going to just do what he was told, Mr Barnett said he has fitted in perfectly at the business he now runs.

The timing of becoming the executive leader of the business was, of course, a little more problematic.

Within a short time of taking charge, the world started to unfold as markets around the globe, including WA’s mining and construction sectors, reacted to the debt crisis.  

GFC

“I had a fantastic wealth of knowledge and experience in Ron and Rob,” Mr Barnett said.

“They had been through the downturns of the 1980s and 1990s and 2001. The difference was (this time) we were a much bigger company employing a lot more people, so the risks were much greater.” 

A disadvantage for Australia, he said, was the distance from the manufacturing centres, which required significant lead-time to ensure supply was available. 

“The machines were on the way and our customers had cancelled orders,” Mr Barnett said.

The boats could not be stopped and turned around, so CJD ended up with around $100 million in stock in its yards – compared to around $25 million it would typically have on its retail floors and $15 million to 25 million in equipment en route.

Management was concerned with such a big overhang but Mr Barnett said the company’s financiers – Bankwest, Commonwealth Bank and various specialist players linked to the product manufacturers – were very supportive.

“We just had a pure focus,” he said. “We had to move stock.

“We never had any pressure from any of our financiers. Within 18 months we had cleaned up that inventory to about $20 million and we did not lose a dollar as a company.”

Mr Barnett said part of the benefit of being a conservative private company was that CJD had only a small amount of direct borrowings, with its debt instead on floor-plan equipment.

However, he noted this was not the same for many customers, who wanted to purchase equipment but could not get funding.

“The interesting thing about the GFC was the market shut down but there was underlying demand. There was a need but there was no money,” Mr Barnett said.

Apart from discounting new stock, which kept revenue strong but slashed margins, CJD looked to innovate by adding service lines such as rentals.

On the people side, the company prides itself on staff retention, with dozens of employees having worked for than a decade and a handful of current staff whose time with the group started when it was founded in 1974.

“We tried to keep people on so we reduced hours,” Mr Barnett said regarding the human resources response to the GFC. 

Here and now

Those difficult days are past and CJD is cautiously expanding. It is selling SDLG equipment, made by a Chinese firm 80 per cent owned by Volvo.

It is planning to build new premises at Port Hedland, refurbish its Volvo showroom at South Guildford and expand its workshops at the same site behind its headquarters.

Mr Barnett believes this kind of investment shows staff, customers and suppliers that CJD is in the business for the long haul.

He said he was watching China closely, but is convinced that it will keep powering WA for some time.

“How long the cycle goes for is anybody’s guess,” Mr Barnett said from his office tucked away in a quiet executive area of the corporate headquarters overlooking the company’s workshops, just past a small creek that feeds the Swan River.

“I reckon we have five to seven years of pretty good business; then it has to steady off.”