BUSINESS DESCRIPTION

JLA is a leading provider of ‘on-premises’ laundry and catering services, providing distribution, rental and servicing of commercial laundry machines and catering equipment to the UK SME market, mainly to care homes and boutique hotels, primarily through the ‘Total Care’ offering (an eight-year rental and service contract of commercial laundry machines). The company is also a leading provider of coin operated, commercial laundry machines into accommodation units (e.g. universities, worker accommodation units, leisure parks, etc.), which it serves via its Circuit brand.

WHY DID WE INVEST?

JLA has enjoyed strong operating performance, including sustained organic growth through the period 2007–2009 and displayed many of the business model characteristics that we look for: a diverse customer base that considers laundry and catering as a mission-critical part of their day-to-day business; a large proportion of customers in long-term contracts (representing a high level of revenues and a greater proportion of profits); a high level of recurring revenues providing good visibility of future revenues; and potential for selective M&A.

HOW DO WE INTEND TO CREATE VALUE?

HgCapital is working alongside management to increase the benefit of selling new products and services through JLA’s existing sales force and service network. Following the successful extension into the catering industry, the management team are working on new industry verticals where JLA’s service proposition could also add value.

In addition, we plan to continue to make further bolt-on acquisitions, both in the laundry and catering markets. Since we invested, JLA has made numerous acquisitions across both markets.

WHAT HAS BEEN ACHIEVED?

A number of projects have been initiated covering strategic planning, customer retention and pricing. Management has been strengthened and fourteen acquisitions of laundry and catering companies have been completed, all funded with free cash flow.

The business now has a dedicated M&A team, with two acquisitions completed in 2016 (in both Laundry and Catering) and a pipeline for further acquisitions under development.

2016 also saw the opening of a second contact centre in Manchester to extend the existing sales & marketing capabilities. The new site is already delivering promising results seeing large cohorts of new customers.

In December 2015, HgCapital completed the refinancing of JLA and the sale of a minority interest to institutional investors, returning £17.3 million of cash proceeds to the Trust. These transactions, together with previous distributions, have delivered a 1.8x multiple on original investment in cash, whilst retaining 59% of the equity in the company.

HOW IS IT PERFORMING?

JLA has continued to experience year-on-year double-digit sales and profit growth driven by growth in the core Total Care and Circuit divisions. This has been supported by expansion into the catering sector (now c.20% of group revenue). Continued investment into the catering division and transition of customers to the Total Care offering should increase margins further.

JLA has continued to grow equity value through strong and consistent underlying trading.

HOW WILL WE CRYSTALLISE VALUE?

HgCapital is focused on positioning JLA as a platform for selling critical asset maintenance services into SMEs. We believe that the long-term recurring nature of contracts coupled with strong customer loyalty will support an attractive rating at exit to a private equity investor or a trade buyer.

 

Sector Location Date of Investment Residual cost £’000 Unrealised Value £’000
Services UK March 2010 3,511 24,619