Distribution company The Siltek Group has joined the growing list of channel operators that have wielded the axe in the lead-up to Christmas, with 34 "non-essential" staff today being trimmed from the Agate and Prion arms of the operation.
Siltek CEO Hugh Evans confirmed the retrenchments saying staff numbers have been reduced by "around 17 per cent" (34 staff) and is "the final step in the merger between Agate and Prion". Evans lamented the move as being "a tough call to make, just before Christmas" but added it was essential to ensure Siltek maintains the profitability that has been its sustained heritage.
"We have made this decision for the good of the organisation," Evans said. "The focus will now be wholly on Siltek. It allows us to start the new year afresh and it means that the horizon is nice and clean. Even in terms of the reduced margins, we will be able to make money."
Evans denied categorically that trimming staff numbers was the beginning of the end for Siltek.
"Absolutely not," he said. "Siltek will survive and prosper. We are, and will remain to be, a profitable organisation dedicated to being the best at what we do. Our core values are growth and profitability, and this move has all been about maintaining profitability."
Not too many people in the channel would argue with Evans that 2000 has well and truly been a year to forget. He named the Y2K, GST, business activity statements, the crashing Australian dollar, five interest-rate hikes in the year, the stock market correction, and the Olympics as major contributors in the channel's shocking year.
"We had to do this," he said. "We have done the right thing. If we didn't do this now, we would really start to feel the losses and pain next year. It was evident that if we didn't do something, we would go into a loss situation next year."
Evans said 2000 represented the first time in nine years of operation Siltek has had to "take provisions" (sell through stock at a loss), which he said was a pretty good barometer on just how badly the industry had performed this year.
He said revenue over the September to November period was down 22 per cent on last year, but added this is probably reflected across the board in the channel - not just in Siltek. He denied Siltek had incurred significant losses over this period and said "irrational competitors" who compromise on margins contributed to the poor results.
"Some players are doing silly things to their selling price just to get the business," Evans said. "There have been no operating losses in the organisation and we don't intend there ever to be. That is what this move is all about. We are a very prudent organisation so we have taken provisions to get rid of some excess and obsolete stock.
"In our forecasts, we anticipated sales to grow by over 20 per cent this year and bought extra stock to cover that. It has been a bad year for everybody and we have not been able to sell all that stock through."
According to Evans, the lost jobs at Siltek have not been dominated by staff from either the Agate or Prion distribution arms of the organisation. They have been truly "across the board", he said, with retrenchments in sales, administration and management.
Meanwhile, the merger of Agate and Prion into one organisation, to be known as Siltek, is almost complete. However, Evans said we have not seen the last of the Agate and Prion brands.
"There is still significant value in the Agate and Prion brands," he said. "You will continue to see them for a while."
Effective from January 1 next year, the two organisations will have totally combined customer lists and will be operating as a single entity, he said. The two companies only had 300 cross-over customers and the merger has introduced a total of 1800 new customers to one or the other of the distributors.