AS Colour and Hayes Knight in Idealog

In business, often the simplest ideas are the best. And when a company with a simple idea sticks to what it does well and keeps doing it well, the results can be phenomenal. Five years ago, Lawrence Railton founded AS Colour. The New Zealand-based company supplies high-quality blank apparel, including T-shirts, singlets and sweatshirts others can print with their own designs.

As featured in Idealog Magazine March/April 2011. Download this case study

AS Colour now has 18 staff and two warehouses in Auckland, with a new warehouse under construction, and a further six staff working for its Australian operation. Orders range from a couple of T-shirts for personal wear to quantities in the thousands purchased by clothing brands and promotional companies.

While manufacturing blank T-shirts may not be the most innovative of ideas, it’s something Railton is passionate about and good at. He’s made sound decisions and managed his company’s growth well, but credits some of his success to a good relationship with his business advisor, Brendon Cutler from accounting firm Hayes Knight.

“Brendon’s been with me since the beginning and has always been an excellent sounding board,” says Railton. “We’re similar in age and outlook, and Hayes Knight has a reputation for being a younger, more innovative accounting firm. They work in a rather traditional industry, like us, but they’re trying to make it a bit more interesting, so we understand each other.”

Brendon Cutler, Hayes Knight business advisor is an “excellent sounding board” for Lawrence Railton, founder of AS Colour

One of Hayes Knight’s first suggestions to AS Colour was to review their current banking facilities, which resulted in the company moving to another bank, providing AS Colour with consolidated services across it’s New Zealand and Australian operations.

Its impressive growth has made the business hungry on working capital and, with a trade cycle of 320 days, this places a lot of financial pressure on the company. Hayes Knight has helped AS Colour in this area too. “We have to carry a lot of inventory because our customers rely on being able to ring up and order exactly what they want, so we sit on millions of dollars worth of stock,” says Railton.

“This is a very capital-intensive business, especially with our long trade cycle, and getting the right cash model has been key to our success. Hayes Knight has really helped us, developing a consolidated cash flow for both countries. It’s quite complex with all the trade finance, and we have a large debtors ledger so there are a lot of funding requirements. Brendon gives me good advice on how to manage that working capital.”

To deal with this, Hayes Knight has developed a customised, integrated cash flow forecast tool that Railton uses on a weekly basis to manage his business, understand his specific buying requirements and model ‘what if’ scenarios. The model is fully consolidated and includes KPI’s for bank covenants and other key financial ratios, says Cutler, and the bank really appreciates the detail of the information.

Keen to avoid surprises, Railton also enjoys being able to see what will be happening six months down the track. Among its expansion plans, AS Colour is currently building a large, new state-of-the-art warehouse in West Auckland. Hayes Knight helped negotiate the funding for this new venture, and its comprehensive financial reporting has also satisfied the bank’s requirements.

“We’ve had to borrow large amounts of money to fund the new warehouse,” says Railton, “and Hayes Knight really helped us secure that. The bank requires a lot of information and looks closely at the advisors we’re working with. Our bank manager really respects Hayes Knight and knows that they can rely on the numbers, which adds a lot of security and integrity to our
funding requests.”

Brendon Cutler is excited about the future for AS Colour and thrilled to play a role in its ongoing success. “Lawrence has made AS Colour an incredible success story,” he says. “I’m blown away every year by how much the company continues to grow. They’ve created a whole new market, which is very much web-based, and they know what their market wants. Lawrence is always looking at new and better ways to do business. He’s a great client to deal with. I just knew from early on that he would be really successful.

But they both know that Lawrence Railton can’t continue to run his rapidly expanding company alone. Railton and Cutler have discussed the need for improved corporate governance, better planning and putting more structure in place, with a management board to take AS Colour to the next level, which includes a possible move into Europe in the next 3-5 years.

For more information on how Hayes Knight can assist your business, contact:

Brendon Cutler
Business Services – Manager
E brendon.cutler@hayesknight.co.nz
T +64 9 414 5444
M +64 21 441 654