Australian cleaning supplier Oates, which is a division of GUD Holdings, enjoyed a record year of sales to its heartland commercial and industrial distributors, resulting in a 2 per cent revenue growth in the year.
However, the company struggled to grow sales in the grocery and hardware sectors due to a combination of factors, including uncertainty over the future of the Masters hardware chain and the increasing focus by supermarkets on lower cost, lower quality product offerings.
Despite registering a growth in revenue, Oates also reported an 11 per cent decline in EBIT (Earnings Before Interest and Tax), to $10.2 million from $11.5 million previously.
The principal reason for this decline was the difficulty in achieving price increases in the grocery and hardware market segments, which were required to offset the higher cost of product due to currency effects. The extremely competitive nature of these sectors, where the focus is on price to gain and retain customers, underlies this difficulty.
Accordingly, the future direction for Oates is product innovation aimed at the higher returning commercial and industrial markets.
“Oates is expected to deliver growing profit contributions from on-going innovation programs, further cost structure improvements and acquisitions,” said GUD managing director Jonathan Ling.
Consistent with its sister companies in the GUD group, the Oates cleaning products business also has a new product program. During 2015-16, this resulted in Oates releasing a range of gardening tools with unbreakable, flexible heads and introducing a range of packaged, single use wipes designed for specific cleaning tasks.
Following new product introduction activity in recent years Oates is benefiting from considerable sales growth in the modular janitors cart product range and from its unique Decitex microfibre mopping system.
A number of new product opportunities remain in development at Oates, the majority of which are focused on the professional cleaning market.