BUSINESS DESCRIPTION

JLA is a leading provider of ‘on premises’ laundry, catering and heating services, providing distribution, rental and servicing of commercial laundry machines, catering and heating 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 machines/equipment). The company is also a leading provider of 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, catering and heating as mission critical parts 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 business is now rolling out a similar proposition in heating, whilst the management team are working on other new industry verticals where JLA’s service proposition could also add value.

In addition, we plan to continue to make further bolt on acquisitions across the laundry, catering and heating markets.

WHAT HAS BEEN ACHIEVED?

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

The business now has a dedicated M&A team, with three acquisitions completed in 2016/17 (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, adding 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 Company. 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 continues to see year on year organic sales and profit growth driven by growth in the core Total Care and Circuit divisions. This has been enhanced by expansion into the catering sector and will be further supported by the ongoing expansion into the heating sector. 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 robust and consistent underlying trading, leading to an increase in the value of the Company’s stake of £1.5 million in the first half of 2017.

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 Mar 2010 3,511 26,162