Autoclenz

Source: Stock Market Digital

Date :29/08/2007 14:02:20

Since joining the Alternative Investment Market (AIM) last year, Autoclenz is now a recognised and respected name in the motor vehicle retail, franchised dealership, rental and distribution sectors.

Written by James Hurley & Produced by Kiron Chavda

A company that can rely on a broad business base for its stability and extensive service offering, the Autoclenz group, based near Burton on Trent, has grown to encompass seven brands, each dedicated to serving its own sector, supported by its own management team with extensive geographical and product knowledge. These brands cover consumer and trade valeting and vehicle preparation services (Autoclenz, Pinnacle and AC Volume Car Preparation), minor vehicle repairs (ACSMART), car valeting and preparation for the rental market (AC Ready to Rent), contract labour recruitment for the automotive industry (ALS) and REACT, specialists in deep cleaning and decontamination.

Expanding the business

Autoclenz’s history stretches back to the 1960’s, and over time it has seen a number of changes within its market and its business, including an ownership change.

In the late 1980’s Autoclenz went into receivership. It was subsequently purchased by Yule Catto & Co plc, a Harlow based niche chemicals group in 1989. At the end of 2005, as part of Yule Catto's corporate strategy of reshaping its performance chemicals activities, it sold the business to Autoclenz Holdings for £18 million.

The sale and re-financing deal used the ‘accelerated IPO route’, a rarely used structure comprising a share acquisition and a public flotation where the acquisition is funded by a combination of debt and the proceeds of an issue of shares from the flotation. The deal was conditional on the Admission of the shares of Autoclenz Holdings plc to trading on AIM which was successfully achieved on 7 December 2005. “The flotation has given us the opportunity to expand the business and drive it in different ways,” says Chief Executive Grahame Rummery. “In the past we could never invest money in any of the divisions. Yule Catto was interested in cash, cash, cash and not necessarily in thinking about how the business could evolve.”

Rummery had worked with Yule Catto alongside Finance Director Trevor Clingo, who also moved across to the new Autoclenz Holdings business. “When we floated, the structure of the deal meant we raised £13 million from the issue of shares in the Company, then borrowed £5 million from HSBC, and we are paying that off as we go. We are still creating growth as we go forward; our turnover was £26 million last year and will be moving towards £28 million this year,” he explains.

“Last year revenues increased by 7 percent and that was achieved through a combination of growth at ACSMART and Ready to Rent and althoughREACT, was a little flat last year we are seeing ito be recovering. The fastest growing division is ACSMART, which grew by over 50 percent last year.”

AC SMART works with some of the biggest names in motor sales, leasing and fleet management, doing ‘SMART’ cosmetic repairs to vehicles, from painting and repair of bumpers to alloy wheel, windscreen repairs and bumper scuffs. AC SMART aims to provide a cost-effective way to present vehicles in pristine condition which maximises value and profit for its customers.

“We are the only company in the market place that offers a managed service. A lot of the SMART operations that you see in the market place are franchisees. With them, you have all the ups and downs, like when people go on holiday and you need someone to cover - the big advantage we offer is that we have a managed service, so when people need to go on holiday we have the flexibility that allows us to put people in to cover.” This enables the Company to provide a flexible, consistent service; it can provide staff at short-notice to meet extra demand, eliminating the need to look for another supplier.

“In the dealerships that we work in, our customers really value a quick turnaround on their used car stock. That’s critical if you have millions of pounds tied up in stock. The last thing you want is stock in a body shop being repaired and coming back a week later. We can often offer a same day service.” Customers can opt for a mobile service or, subject to volumes, have an AC SMART team based at their site full-time.

Labour management

Asked about the challenge of managing seven different brands, each with their own distinct identity and covering a diverse range of industries, Rummery says that at their core, each division is founded on the same management principle. “If you look at the Autoclenz as a whole, we’re a service business with expertise in managing lots of labour; when people ask me what our business does, I say that we manage the skills of lots of people, , clean and prepare cars and make a profit.

“For example, REACT’s job is hygienic deep cleaning, so the only difference is that it doesn’t involve consumer vehicles. It is a different type of cleaning and there’s a lot more risk attached to it – you could be out on a railway line, picking up a dead sheep in the middle of a dark November night! It’s a business that generates its own natural marketplace, yet its not the easiest market to grow in because a lot of the business comes from councils, highways and organisations of that type – a lot of effort has to be invested into getting this kind of business,” he says.

“If you’re part of Autoclenz, all of that work can be interesting; it all depends on which bit you happen to be working in. If you’re managing ten dealership accounts with 40 operators in it and two don’t turn up, it becomes very interesting! I’ve been here for 17 years and the one thing you can say for certain about this business is that no two days are the same.”

Reflecting its service industry identity, the Company has a flat management structure. “If someone has a problem, we need a management structure that can respond quickly. We have an operational board of directors with managers that are responsible for a brand and a part of the country that reports to them. AC SMART, for example, is run by the director responsible for the North of England. In any service related industry, if you didn’t have a flat management structure, you can have major issues,” Rummery says.

A Senior Manager heads all Autoclenz activities in the geographical areas in which it operates. They are primarily responsible for ensuring customer satisfaction, and directing and co-ordinating area managers working in various types of businesses within the industry.

An uninhibited business

The consistent growth that the Company has delivered, Rummery believes, can partly be attributed to what he calls an ‘uninhibited’ business model.

“I don’t think our threats are any different to those faced by any other business, from the challenges posed by changing legislation, the ability to gain labour, to health and safety considerations. I think a lot of businesses suffer from inhibition and in any company that’s one of your greatest potential enemies. You have to accept that if you want to grow, you have to go forward and look for different opportunities.

“Three half years ago, we didn’t have a SMART repair division. And we were the very first company to take on an outsourced daily rental business.” Its Ready to Rent division is a truly national service, providing a full range of vehicle preparation services, providing customers such as Avis, National and Europcar with clean, fully prepared Ready to Rent vehicles, leaving them free to focus on their own customers’ needs.

Across all of its divisions, Autoclenz is constantly grinding at its cost base. “Fundamentally, our cost base is our labour – if you don’t pay the labour, you don’t get the people, and if you don’t have the people you haven’t got a business,” says Rummery. “We constantly review everything that we do and every pound that we spend. We have to, as it’s a tight margin business. Cost initiatives are crucial, and we have regular meetings focused on cost and performance. Invariably, any lack of performance needs to be reviewed constantly and this can be fundamental to what any company does. Costs such as the price of oil affect us, since we use Kerosene. If the oil price goes up, we look at how we can use less Kerosene. The materials and chemicals costs, although re-charged to the operators, have to be kept economically viable. We’re looking at the cost base, day in day out.”

An example of this is the Paperless Valet Management System (PVMS) which the Company has developed. An IT driven system based on a secure network, PVMS gives customers round-the-clock access to constantly updated information on the status of vehicles as they go through each stage of the preparation and handover process. Different authorisation levels enable clients to control access to the system and costs.

“We’ve always generated a lot of paper, and PVMS means we’ll be able to cut out a huge amount.. It also gives our customers a bigger level of control over what they’re doing and spending. When the information feeds into our office, it’s easy to store and easy to accurately read - unlike handwritten notes that could be very difficult to decipher. These are the kind of initiatives that will really drive the business forward. It’s a mature industry, but only 6 percent of vehicles that are valeted are outsourced,” he explains.

“The customers are more demanding now, and they have a right to be. This means that we, as customers, are more demanding of our suppliers. But there’s plenty of scope to look for new business and ways of delivering our service at a higher quality. This means there are a host of opportunities for us to continually gain new accounts in new and existing market places, and that’s the way that this business grows.”