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Gaining industry influence with support from private equity

reconomy

Reconomy has been a major regional oper­ator in the UK’s waste market for many years and has largely chosen to stay out of the spotlight, but this is set to change. The national conversation on resources has been dominated by international companies operating in the UK, such as Suez, Veolia and Viridor. As Reconomy reaches its 25th birthday this year, it looks like it is graduating to the high table.

The business has been quietly growing through acquisitions, with three major buys in 2018, and has now reached a point where peo­ple in the sector are sitting up and taking notice. It is expanding outside its core activity of managing waste services for construction and house-building firms. In particular, the purchase of compliance scheme Valpak has raised some eyebrows.

This is all part of a master plan. Through acquisitions and organic business growth, Reconomy’s revenue for the end of the 2018/19 financial year is forecast to exceed £250m. Chief executive Paul Cox says: “Being private equity-owned, you are there to build. We intend to double the size of the business every two to three years. The majority of my job is about acquisitions and growth.”

Cox says it had “not been our style to pro­mote ourselves”, but this mind-set has changed. From having only one marketing manager until around 18 months ago, a full team has now been put in place: “As we’ve changed our model, I think we have come closer to where the big four or five UK waste firms are in terms of where their influences are.”

Cox was instrumental in Reconomy becom­ing owned by private equity firm Bregal Capital, which is not such a common governance structure for waste companies. A second sale in 2017 saw another private equity firm, EMK, take over.

“EMK lets us run the business how we see fit,” says Cox. “It is very supportive of our acqui­sition plans. I think we’re quite lucky in that we have got a very good relationship. There is a group board which I sit on, along with private equity leads, and also a chairman, and we set and sign off our plans.”

Company Timeline

reconomy1

reconomy1

1994: Wastefile UK (today’s Reconomy) established

1999: Paul Cox joins Wastefile UK

2001: Management buy-out completed

2006: Business sold to Bregal Capital, which becomes majority shareholder. Cox becomes managing director

2010: Cox becomes chief executive

2014: Turnover hits £65m; 140 employees; 30,000 waste movements per month

2015: Acquisition of Network Waste, a King’s Lynn-based outsourced waste provider; acquisition of CountryWide

2016: Acquisition of outsourcing arm of Cory Environmental (Skippy Nationwide, Skip Hire UK)

2016: Turnover reaches £111m; 300 employees; 50,000 waste movements per month. Named Resource Management Business of the Year at MRW’s National Recycling Awards

2017: Business sold to EMK, which becomes majority shareholder along with management team

2018: Acquisitions of Waste Check (February), Helistrat (July) and Valpak (December)

2019: Projected turnover £250m; 500 employees; more than 100,000 waste movements per month

Cox sees an increasing interest in waste from private equity as an indication that confidence is returning to the sector after years of uncer­tainty.

In 2010, following the financial crash, Reconomy restructured and chose to focus on its outsourcing services. It sold its operating business – Reconomy Recycling Solutions, which served the south Midlands and East Anglia – to Viridor for £23.8m. Four ‘key sectors’ were then identified: house building, construction, infrastructure development and commercial & industrial (which Reconomy refers to as ‘business & industry’ or B&I).

“We have in the past few years had a more strategic approach and sales focus on the B&I sector. And acquisitions as well, hence the acquisition of Helistrat and Waste Check, to give us a more even spread over those four sectors.”

Then opportunity knocked when along came Valpak, which had not really been on the com­pany’s radar: “Valpak came to the market in late summer last year and it just clicked; it became our fifth sector. It was a pretty fast process.”

It was also a fast learning curve to get up to speed with the compliance sector. What made the purchase worth the effort was the good name that Valpak had generated in the indus­try and its “strong management team”.

“It has probably woken up a few different people to what we’re doing,” says Cox. “We had been acquiring successfully and growing aggressively for the past few years, but not in the compliance space.”

There is no set method for Reconomy’s many acquisitions; some deals come its way naturally while in other cases it approaches companies that may not have thought of selling. Other deals are struck through agents who identify and target potential buyers, as with Valpak.

“The difference between us and Biffa and Viridor is that they monitor their own sites but we independently audit the whole supply chain. We have the ability to walk into a site and audit from a duty of care point of view.”

Cox says Reconomy was built on the back of innovation in technology for clients and the supply chain. When you boast of co-ordinating more than 12,000 waste movements every week and managing around three million tonnes of waste a year for thousands of busi­nesses, having good systems is vital.

“We control waste segregation and move­ments from around just under 50% of new-build housing sites in the UK – data on quantity and quality of materials is all there. The chal­lenge is how to commercialise this – that is why a new chief information officer, Jody Fullman, has come on board.”

Despite all the wheeling and dealing, Cox is mindful of Reconomy’s place within the wider community. To this end, a new head of sustain­ability and social value was appointed, Diane Crowe, who joined from Carillion. She is help­ing to launch the Reconomy Social Value Pro­gramme (RSVP) this year.

“I saw a documentary on homelessness last year and it touched me. Then, on a night out in Birmingham, it knocked me back how bad it was,” says Cox. “We’ve always driven Reconomy as a family business that looks after its own, and I feel that, probably over a few years, I lost my way a bit – success brought that. But the docu­mentary took me back to my roots and I thought ‘we have to do something about that; it is not acceptable’. ”

The company already works closely with local housing and care charities. But the RSVP initiative is a five-year plan that focuses on issues such as homelessness and young people not in education, employment or training, along with ex-offenders and young people making the transition from the care system into work.

“We’ve already had a great success story – we’ve got an employee who has come through from care via a mentoring/fostering transition home. He is now climbing the ladder within the business.”

Along with Biffa and Viridor, Reconomy has also joined the Hope for Justice (HfJ) charity, which works with victims of modern day slav­ery and forced labour.

“We use HfJ to train our staff,” says Cox. “We have supply chain managers going to sites who can recognise the signs of exploitation. It’s a hard enough job as it is – if pickers at a MRF are prepared to do that they should be looked after. The difference between us and Biffa and Viridor is that they monitor their own sites but we independently audit the whole supply chain. We have the ability to walk into a site and audit from a duty of care point of view.”

It is the smaller, independent sites that could benefit from such an approach because they may have less capacity to monitor its temporary workforce compared with national firms.

Promoting good practice across the whole supply chain is important to Reconomy. A sup­plier forum has been set up for April, where around 80-100 independent suppliers – regional and smaller operators, everything from skip firms to anaerobic digestions plants – will meet.

“We did it a couple of years ago, to dip our toe in the water,” says Cox. “It’s partly to show­case our technology, including our app suites and API [application programming interface] links. But we also want to cover the Fleet Oper­ators Recognition Scheme and invite HfJ too.”

As Reconomy expands, its role within the wider waste and resources industry and influ­ence over suppliers will also grow. Cox, as ever, is enthusiastic about the prospect: “There is always opportunity in the waste sector, it’s an ever-changing industry. With innovation and new technology coming in, there is always the ability to make money.”

Paul Cox Background

paul cox

paul cox

Cox started his working life as a florist in his home town of Wolver-hampton, but his career changed dramatically in the late 1980s thanks to a chance encounter.

“I grew up in the family business of butchers, florists and greengrocers. One day Karin Johnson, the other half of Reconomy co-founder Keith Johnson, came by and we got talking.

“She pulled up in a beautiful new Jaguar – coming from where we come from in Wolverhampton, you don’t often pull up in a Jag. I asked what she did, and she said she was in clinical waste and that they were struggling to get drivers. I offered my services and she later phoned me. I ended up running the transport side of the business within about six months, at the age of 19.”

Cox was a winner in the Transformational Leader Midlands category in the Ernst & Young Entrepreneur of the Year Awards 2017. He says it was a proud moment: “It was quite a shock on the night, especially with the competition in that category – there were some big-hitters. To come out on top was pretty special.”

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