Cleaning cheer in 2012
22 September 2011
A new report on the Contract Cleaning market from MTW Research suggests that the industry is on track for above inflation growth from mid 2012, with specialist cleaning services in particular set to drive market value in the near term.
Based on sales data for more than 80% of the industry value, the findings suggest that whilst business confidence remains fragile in 2011 growth of 2% is likely for this year, with opportunities for improved margins becoming more tangible in 2012. MTW point to a number of strengths evident in the market, with just under 60% of contractors having grown sales in the last 12 months and 90% of the industry having a healthy credit rating in September 2011.
Whilst pricing pressures remain intense in the contract cleaning market, the report identifies a range of opportunities for contract cleaning companies to exploit, with more specialist service provision and greater segmentation of target markets identified as offering some stimulus for near-term growth. MTW also highlight the increasing importance of differentiation in contract cleaning, suggesting that companies seeking to enhance service levels continue to outperform contractors operating on a price / volume strategy. Other key differentiators employed by contractors to add value to their core offering include environmental credentials, rapid reaction, improved CRM strategies and staff training amongst others.
Whilst the recent economic downturn has resulted in declining liquidity and lower capital expenditure by contract cleaners, the report offers a more positive forecast for suppliers of cleaning equipment for 2012 onwards. With capital equipment purchase having been deferred for a number of years, MTW believe that contract cleaning organisations will be spending more on equipment and materials in the next 1-2 years as the market continues to recover from the legacy of the recession, business lending facilities continue to improve and a more tangible rise in business confidence becomes apparent. Cautionary notes are also expressed in the report and it is clear that the industry is likely to only experience relatively modest growth in 2011 as macro-economic conditions remain fragile. With borrowing to the industry set to exceed £5 billion for the first time in 2012, the report highlights a clear need for the industry to ‘deleverage’ in order to sustain healthy longer term profit growth. Nevertheless, the report forecasts total industry sales to rise by around 15% in the next 4 years, with contract cleaning sales expected to reach almost £5.5 billion by 2015.
The report finds that the industry is dominated by companies that are more than 11 years old, reflecting established trading history and experience. However, 26% of the market is accounted for by companies with less than seven years of trading experience and the report suggests that these companies remain in the most vulnerable position at present due to a combination of low profitability in the sector, a relative lack of liquidity & the current lack of credit available. Despite these negative factors, more than 50% of the industry comprises well-established companies with more than 11 years experience.
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