Thursday 22 February 2018

Slick timing: family petrol firm's big growth plan

Maxol is stepping up expansion in post-boom Ireland – picking potential sites carefully and providing much-needed jobs to these localities. By Peter Flanagan

IT'S fair to say that Maxol does not fit the stereotypical image of 'big oil'. Some 90 years after it was founded by the McMullan family, the business is still a far cry from the 'Dallas' image, and its chief executive, Tom Noonan, is about as far away from JR Ewing as you can get.

Maxol has been something of an anomaly in Irish industry in recent years. While it seemed for a while that every business was expanding rapidly and was reporting turbocharged profits, Maxol was pottering along at a steady pace, but was hardly setting the world on fire.

Cut to today, and many of those turbocharged profits have disappeared as quickly as they appeared, but Maxol is still carrying on as it always has.

Under Noonan, there are now about 225 Maxol service stations around the island, while the business also runs a substantial home-heating division as well.

With turnover of close to €650m a year, the business is growing steadily but is now planning a huge expansion.

One of the first things that stands out about Maxol's head office in central Dublin, is the tea trolley. It may be an anachronism that has long been disposed of in other businesses, but in Maxol it feels like a welcome reminder that this is still a family business and not a hard-charging Plc as such.

"The McMullans are still heavily involved," says the 62-year-old Noonan.

"Three of them – Max, his brother Malcolm and their cousin Noel – make up the board of the parent company.

"They come in and it would be unusual for me not to have a chat with them every day and they would regularly walk the floor and chat to staff.

"It's probably an unusual form of management but we would encourage the staff to speak to them and it encourages openness within the business."

The natural conservatism of the Maxol business probably stopped it from over-reaching during the boom, but now Noonan is ready to expand the business greatly.

The company spent €15m upgrading its retail business and buying five new service stations in 2012, and this year it will spend another €35m on further expansion and a rebranding in the hope of increasing sales by about €100m.

This project will provide direct and indirect employment for about 400 people within the services and construction industries over the next five years, the company claims.

"I suppose the plan has its roots in what we didn't do during the boom," says Noonan.

"We looked very closely at buying Shell's Irish business at one point before Topaz bought it. We valued the business as a going concern but then realised other firms were valuing the properties rather than the business, and at that time the 'alternative use' of a site, be it for apartments or whatever, was way above what it would be as a going concern.

"As everyone knows, that's all gone now.

"In 2005, we had debts of about €41m and we wanted to get that down. We sold about 40 properties and they were everything from filling stations to truck depots but they were all ones we no longer needed.

"Now we have about €18m in the bank, so that has put us in a position to finance the expansion with Bank of Ireland," he says.

As anyone in business will tell you at the moment, if you can, it's a good time to expand. Just as overseas investors are crawling all over the property market here, the collapse has also created bargains for domestic players, and Maxol is no different. A service station that cost the guts of €4m only four years ago can now be had for a little over €1m.

"The challenge for us is not to get the finance together as such, rather, it's to make the right choices. There are lots of service stations for sale but not all are worth buying and we have to be suitably selective," the executive claims.

The oil and fuel business in general is one of the most politically sensitive industries to be in, especially in a recession.

Everyone is affected in some way by fuel prices, and the industry comes in for regular criticism for allegedly being slow to pass on drops in oil prices. The saying that petrol "shoots up and floats down" is a common one.

Mr Noonan, however, gives such an argument short shrift.

"It's a myth pedalled by people with their own agenda.

"I get correspondence in from consumers saying 'the price of oil has dropped 10pc – why has the pump price only gone down 3pc', and the answer is because the price of oil is only a small proportion of the petrol price.

"You have levies, VAT, duty and carbon tax, and when you add them up they account for more than 60pc of the price. Even if oil drops 10pc, that's only 10pc of 40pc, if you get me. VAT will fall with it but the others are fixed.

"The National Consumer Agency did a study on petrol prices in 2008 and it found that as an industry we were doing exactly as we should in terms of passing on price cuts," he adds.

Fuel, of course, wasn't touched in last month's Budget, but he doesn't expect that to last too long.

"Ministers specialise in doing two things. When petrol prices are high, they decry the high price, and when they fall, they load taxes on to make up the difference. It's ludicrous but that's the way it's always been."

Mr Noonan has a somewhat unusual profile for an oil executive. Active in student politics, he initially was a union man who went on to join the predecessor of the employers' group IBEC in the mid-1970s.

Poacher-turned-gamekeeper is at least a fair description of his role.

At the time, his position often put him across the table from a young ITGWU rep named Pat Rabbitte.

More than 30 years later he still has a close relationship with the minister who is now in charge of his industry, although he doesn't pretend that they haven't had "frank exchanges" over the years.

Mr Noonan is now more than 30 years with Maxol, and having taken over as chief executive in 1996, is now entering his 17th year at the helm of the business. What does he see in his professional future?

"I think it would be fair to say that this will be my last full-time job, but I have a lot more to do in this role. I'm not even close to finishing up yet by any means."

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