Days before Ireland imposed a national Covid-19 lockdown, the Co Mayo-based workwear company Portwest announced a strategic investment in professional footwear manufacturer Base Protection. It was a very good fit (no pun intended) for one of the most successful indigenous businesses in the west of Ireland. 

Base Protection had €50 million in revenue last year and employs 250 people. Its product range complements that of Portwest, which posted €220 million in sales and has 4,500 employees worldwide.

There was a catch, however: Base Protection has its headquarters and one of its two factories in Italy, which was the country worst hit by the pandemic when the deal closed. Next on the coronavirus’s path was Spain, where Base Protection’s parent company Fegumu is located. Fegumu remains a partner in the Italian business with Portwest.

With two month’s hindsight – a lifetime in pandemic business terms – Portwest CEO Harry Hughes has no regrets.

“When we actually signed it on March 2, we were fully aware of Covid. So the answer, would I do it again, is yes,” he said on Wednesday. Hughes explained that this type of deal came after two to three years of preparation. “When you get a quality company and you get really good factories, really good products, you want to get a single opportunity to purchase that company and we weren’t going to let it go.”

“Brexit is certainly a crisis, and I do certainly believe it’s going to be a hard Brexit.”

Harry Hughes

Speaking on an export webinar hosted by PwC as part of their “Succeeding in uncertainty: Responding to Covid-19” series, Hughes put the current crisis in perspective. He recalled that when he started working in 1979, postal, phone and petrol workers were on strike, making communications impossible. He placed the relative impact of Covid-19 in contrast to the past, but also the immediate future: “This is a crisis, it will pass. Brexit is certainly a crisis, and I do certainly believe it’s going to be a hard Brexit. I think this is really the focus, that companies should be focusing on what is going to happen post-Brexit.”

Julie Sinnamon

No-deal Brexit “pretty much done”

Also speaking on Wednesday’s PwC webinar, both Enterprise Ireland and the Irish Exporters Association CEOs echoed Hughes’ warning on the imminent risk of a no-deal Brexit.

“Brexit is a major threat at this point in time,” said Enterprise Ireland’s Sinnamon (pictured). “As we begin to come out of lockdown in many markets, I think companies have to dust off their Brexit plans if they have put them up on the shelf and they have to prepare on the basis that they need a more diversified portfolio of markets.”

Sinnamon urged Irish exporters focused on the UK to look at the eurozone next. She pointed out that this had already been taking place prior to the pandemic, with one third of exports by Enterprise Ireland client companies going to the UK compared to 43 per cent in 2008: “We’ve continued to grow exports to the UK by over 50 per cent over that period, but we’ve been growing the rest of the world at a faster rate and really, what we’re saying is that’s a journey that we have to continue.”

Simon McKeever of the Irish Exporters Association added: “I’m absolutely and utterly convinced that there is going to be a hard Brexit. I don’t think there’s any compromise in the UK and where they’re going, even if you look at the way the Prime Minister is backing Dominic Cummings and the way he can’t live without him.”

McKeever said that the UK would not want to pay into the larger EU budget being prepared in response to the Covid-19 crisis and no-deal is “pretty much done at this stage”. Association members have increased uptake of customs training in the past six weeks in preparation for this outcome, he added. 

On a positive note, McKeever expects a hard Brexit to accelerate the establishment of direct export connections to the rest of Europe. “Since about 2016, we have been saying that there will be a tipping point at which direct shipping to the continent will probably overtake the landbridge,” he said. “We are increasingly seeing more companies looking to direct-ship to France and to Holland and that can only aid market diversification. And I think we will see continued capacity built out of both Rosslare and probably Cork as well to facilitate direct shipping.”

Hughes said Covid-19’s impact on Portwest’s sales has translated into much larger disruption to its supply chains. Up until the start of March, turnover was up 30 per cent on last year – on track to achieve this year’s €300 million target. But a sharp drop in the second half of March brought first-quarter revenue back in line with 2019. Then April sales were cut by half year-on-year, before May caught up with previous levels.

“From a planning point of view – the forecasting – you can imagine in the space of four weeks to go from 30 per cent up, down to 50 per cent down, and back up to now where we are, yet you have to source your product from China that has a lead time of 14, 15 weeks,” said Hughes. “So there’s a little bit of chaos there, but we’ve come out the other side and we’re happy with where we are now.”

“All of a sudden, we were competing against governments trying to get PPE out of China.”

Harry Hughes

A major factor of disruption has been the shift in demand from Portwest’s European and American clients towards PPE such as face masks and disposable clothing, from 6 per cent of sales prior to the pandemic to 40 per cent today.

“All of a sudden, we were competing against governments trying to get PPE out of China. We had six containers ready of face masks to leave China in the middle of March. The Chinese government seized those because they put on a ban on the export to PPE,” Hughes said. Meanwhile, the traditional two-week Chinese New Year period extended into another three to four weeks of factory closures as China imposed health restrictions.

Portwest turned to the stocks it had in warehouses in the UK and Poland. “And of course in Poland, they put on an export ban on PPE, so we were getting governments interfering on the supply chain on both sides – on the supply side and the actual demand side,” Hughes said. 

Harry Hughes
Portwest CEO Harry Hughes: “It will radically change sales teams and the way they operate.”

This led the company to stop taking orders for a while. “Obviously customers were not happy with that. But every competitor is in the same boat,” Hughes said.

At that point, while Irish staff were working from home with surprisingly few broadband issues from Achill Island to Castlebar, he said that Portwest had furloughed some of its largest sales teams in countries where government schemes allowed it, including the US and Spain. “It’s interesting that in the furlough countries we’re doing just as well as the countries with a sales team, Hughes noted. “I don’t think customers will welcome a visit from a salesperson, certainly for the next three or four months or probably longer. So it is communication by Zoom, by email, by telephone. Communication is key to all this. Whether they’re placing orders on a digital line or whatever, the customer has got to feel very confident that we are responding to their needs. 

“But it will radically change sales teams and the way they operate, certainly for the next six months,” he added.