After boasting record-breaking profits in 2009, appliance specialist CDA is looking to build on its success. Tim Wallace met founder and managing director Ian Kershaw...

Last year saw appliance specialist CDA record the highest level of profitability in its 19-year history.Profits before tax were £1,764,000 - an increase of 132% on 2008. 

Set against the severe impact of the economic downturn the results are impressive. The company managed to increase sales - albeit by only 1% - at a time when its rivals were slumping by up to 20%. 

The increase comes from what the company describes as 'a far-seeing strategy that has brought increased efficiencies'. Running costs were reduced by £700,000, while investment was increased in key customer-facing areas. Last March the company had the largest stand in the kitchen section of the kbb Birmingham show, displaying well over 100 models including concept cooking products such as its innovative leather-clad and touch-screen ovens. 

CDA's principles of innovation and style are largely driven by founder and managing director Ian Kershaw (pictured below). I caught up with him at the company's Nottinghamshire base...

Q: You describe last year's 132% hike in profits as "astonishing". What do you put it down to? 

A: There will be alternate years where our costs are higher, like 2008 when we were doing the kbb Birmingham show and launching new products. That year was also affected by the currency problems, 2009 was better, but only a bit more than 2007.We all came to work in January 2009 expecting it to be catastrophic; the last part of 2008 had been such a scary time with the currency plummeting and banks on the verge of going bust. But I think confidence started to grow into the middle of the year and people started thinking maybe it's all right. That was then scuppered by two weeks of snow this January and we haven't seemed to pick up since then. 

Q: So how would you describe the first four or five months of 2010?

A: Sales aren't too bad but not as good as we expected. We're 8% up on last year which is impressive, but still 7% behind target which is not so good. We've budgeted for £30m turnover this year. We'll get close to it but not quite where we should be. The currency is a big worry. It's a big part of what generates profit and loss. 

Q: You're quoted as saying you tackled the market downturn through "improvements in efficiency and encouragement of all cost-saving opportunities". Can you expand on what you meant by that?

A: A lot of it was about appealing to the staff. Their greatest fear was redundancy, which wasn't our intention. Instead we asked them to give up one day's holiday, work half-an-hour extra every day and cancelled April bonuses. Staff signed a voluntary compromise agreement. It was harsh but we needed to do it. We had a good response from the staff but by last July/August it became clear we could cancel that and pay a flat bonus at the end of the year. Fortunately we went into the meltdown in a strong financial position so we could afford to make a loss. We didn't have to reduce our stock and we kept our front line sales people. Other people did the opposite so we picked up where they faltered. 

Q: What other changes did you make?

A: We told every department to get every major cost down by 10% - go back to the advertisers, go back to the printers etc. It's positioned us well for this year but 2010 will be tougher because the costs that you pause can come back. We didn't change any cars or vans last year but we'll have to this year. And the exchange rates are going the wrong way again. A lot of our products are US dollar paid for, so we'd have to go up 40% to get back to where we were. 

Q: How would you describe the CDA philosophy?

A: Innovation and style have become our watchwords, the things we have running through our DNA as a business.

Q: Is it hard to keep coming up with innovation in such a crowded market?

A: It's actually quite easy, but it's hard to get them into production. It's also hard to get people to buy into them. 

Q: Where do your design ideas originate?

A: Mostly from me. We're not like some companies that have thousands of R&D people. I was talking to the managing director of one of our competitors recently and he was telling me they have 300 people in R&D. So where are the fruits of their labour? Dyson has 700 but it does produce things. Others have thousands but where are their products? I think they spend their time trying to be too far from what the consumer is going to buy. 

Q: Do consumers care about energy saving?

A: It's not top of their list. It won't make the sale, but it helps it. People are very price sensitive. If you can say the difference between an A rating and a B rating is fifty quid, they prick up their ears. But nobody can say that because people use products so differently. Soon everybody will have A plus anyway, it's the way the market is going. 

Q: How does your strategy differ from your rivals?

A: We're aware of what the customer wants but we challenge convention. If you're in touch with the customer but don't have anything different that's a waste. And if you invent things that the customer won't buy that's also a waste. It's probably what the big companies suffer from, there's a gulf between the two things. You can spend hundreds of thousands on market research and find out exactly what you know anyway. I'm always amazed at how un-product focused they are. They become obsessed with themselves so everything becomes inward-facing and they forget that the reason they're there in the first place is to make and sell appliances people want to buy. 

Q: Any other appliance manufacturers you admire?

A: The majority are much of a muchness. I do admire the BSH Group in terms of quality but the pricing is getting too high now. I also admire Miele's products and brand position. I like the exacting standards but there are certain products I find disappointing. You can look at a Miele washing machine and say that's the best you can buy. The ovens look like more of an afterthought. I respect Smeg's design. But they don't pay enough attention to the details and they make some classic Italian mistakes. They'll miss the last 2% that would make a fantastic product out of a good product. 

Q: What's your internet policy?

A: I'm supportive of the internet because it will continue to grow, but we try to appeal to internet retailers to advertise our products responsibly. What they sell our products for is none of our business. The problem for the internet guys is each other, they drop their price in line with each other, which impacts on the kitchen studio guy. We need them to stop fighting. We get our big four internet retailers round the table and discuss ways of being more sensible. There are things we can do to help protect the CDA independent retailer. We've launched a brand called Matrix to cater for budget sales, particularly things where people don't want to buy a CDA or Neff, just an oven. We want to put a bit of distance between CDA and the bottom of the market.