Cleaner lifted hire!
17 February 2012
When the going gets tough, toughen up! LCC Support Services suffered the loss of its two biggest clients and then, as Executive Chairman Bob Vincent told Tim Fryer, a number of key strategies were implemented that have turned around this cleaning company’s fortunes.
The conventional wisdom may be that a company with a specialisation, such as LCC Support Services whose core competency is cleaning, must diversify and grow or shrink and die. The latter fate certainly seemed on the cards 18 months ago when LCC lost its two biggest clients, Lloyds and HSBC, whose combined business was worth in the region of £8m and represented around half of LCC’s turnover.
The route to safety was not however to branch out and provide different services. Instead it has taken a number of steps to establish itself in a lucrative niche in the UK’s service industry and turn an £86,000 loss in the first half of last year into a healthy £423,000 profit in the second half, based on a turnover that has more than doubled to approaching £20 million.
Vincent’s first move was to cut overheads by relocating to smaller premises and restructuring – filling the gaps either by internal promotion or by taking a leading sales role himself. Until a recent appointment of a new Operations Director he was even in that hot seat as well, and confesses to being too involved!
The real secret has been in Vincent’s ability to attract new business and the strategy he now has for doing this going forward. A number of direct clients include a £2.9m contract with Centrica and another £1m contract with Royal Mail extended LCC’s existing interests with them into the North of England. However, it is through its alliances with national FM companies that the big potential lies.
“What we have now that we didn’t have a couple of years ago is that we are now a preferred supplier with Carillion and Johnson Controls – we have just won our first big contract with them which is worth about £3/4m,” explained Vincent. “We are also working with SGP and we have just won some work cleaning the accommodation in the Olympic Village with them, and Norland and Vinci. So we are preferred suppliers for these five and if they are winning business then so are we.”
The majority of these new relationships in part seem to stem from Vincent’s knack of being in the right place at the right time – the result, according to Vincent, of being a tireless networker (with an understanding wife!)
But more than that the landscape has changed for cleaning companies and Vincent believes, partly through luck and partly through judgement, that LCC finds itself well positioned: “The cleaning industry has really raised its bar,” said Vincent. “I would say in the last five years it has become a lot more professional and the companies that are successful are the companies that are run professionally – you have to have 9001, 14001, 18001…. you need to have a dozen badges just to go on a tender now. So those smaller companies that don’t invest in these accreditations will never get on the tender lists and never win the big tenders. I think that is what we have got and it makes us a little bit different. Your MITIEs and OCSs have all got those badges but not companies of our size who can provide a national service.”
Consequently the bigger TFM companies like Carillion and JCI can work with LCC on a national basis, on sites too small or geographically diverse for them to self-deliver, without partnering companies big enough to be competition. Vincent commented: “We are cleaning specialists so there is no threat of us getting close to their customers and nicking their contract.”
Another interesting strategic decision in recent months has been a pilot scheme with a hire company who is now providing all equipment and machinery on all new projects. Although this scheme is still in its early stages, and has not been without its teething problems, Vincent is convinced that the benefits are manifold.
Vincent described the scenario: “In the past if a vacuum broke, the cleaner needed to refer to the supervisor, who then had to possibly pick it up, bring it back, replace it or maybe get it repaired. If it was a scrubber and dryer with a battery leak, it would involve a call to the manufacturer, get someone to come down and they would charge us for coming out and another charge for fixing it. With the hire company they will come along with exactly the same machine or equivalent and take the old one away. However, the biggest positive thing for me was it took the compliance away from me - the PAT testing. Each year 2000 – 2500 vacuums had to be PAT tested as did all the rest of the electrical equipment - and that has been taken away.”
Unfortunately the idea of hiring equipment only presented itself after the chunk of £8m-worth of new business had started up last summer and autumn. However, given LCC’s national footprint and potential for expansion with some of its TFM partners, Vincent believes the strategy is perfect for him. “We can grow and grow and grow and not have to worry about compliance, PAT testing, and equipment breaking down which is hassle. It also makes the bidding process easier there are set costs. And if you lose a contract in say a year’s time, but that contract has been priced over its three years duration to include your machinery costs, you pay for equipment that comes back here and might or might not get used again. With the hire company it is their equipment, so they come and take it off site.
“It also improves cash flow. We know that we are not going to have to fork out a quarter of a million quid if we win £5m worth of business as previously all bids for a new contract would include new machinery and equipment. However, I know some of the equipment we have is old so you could say that is now not costing us anything which is the negative side of it.”
It has clearly been an eventful 18 months for LCC. Following the loss of its two major banking clients its contract gains add up to around £11m of new revenue. The new contracts are largely national programmes with fees from £0.5m to £2.9m and the number of sites ranging from 9, for The Arts Council across the UK (for Vinci Facilities), to cleaning 64 Post Offices in the South East and 31 in the North for existing client The Royal Mail.
In association with Carillion, LCC has started work on 28 Land Registry sites from Plymouth to Hull. Centrica is the single largest financial gain at £2.9m and covers 39 prestige UK premises. In the manufacturing industry LCC has won the contract for Coty, manufacturers of Rimmel make-up at Ashford in Kent. There are the cleaning and landscaping of 78 sites for London social housing organisation Places for People. New retail business includes 21 sites in the South East of England for fashion chain H&M - Hennes & Mauritz UK Ltd.
As Vincent commented himself: “It’s been quite a turnaround and something I am proud of, I can barely believe it myself.” It seems now though that all the components are in place for the success to continue.
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