There are almost a million violent crimes committed each year in the UK. Many occur at home, although incidents frequently erupt in bars, clubs and street corners. Once the police have been called and forensic teams have done their work, crime scenes need to be cleaned and decontaminated. The job can be messy, difficult and traumatic but it has to be done.
React Group specialises in emergency cleaning of every hue. The shares are just 1.25p and should go far under turnaround veteran, Mark Braund.
React does the kind of work that no one likes to think about, cleaning up after accidents, from motorway pile-ups to prison brawls. When squatters are evicted from homes, React teams are tasked with removing dirty needles, filthy upholstery and damaged fixtures, scrubbing down every surface along the way.
When towns are flooded and sewage escapes, React is called in to make properties safe and dry. When deaths occur on the railways – suicides, staff, stray deer – React is responsible for cleaning the tracks and trains, a grisly task.
Cleaners also rush to the scene when hazardous chemicals or germs escape into the atmosphere, a service that was much in demand during the Covid pandemic.
Messy business: React Group rushes to emergency scenes to clean up after violent crimes and accidents
This work is not for the faint-hearted. Employees have to be properly trained, mistakes can be perilous and fast, effective service is paramount. The work is lucrative too – and few firms offer it at scale. But emergency cleaning is unpredictable by nature and when Braund began to advise React in 2019, the group was struggling, amid persistent losses and a share price of less than 0.5p.
As Braund set to work, React’s fortunes began slowly to improve and in December 2020, he was appointed chairman. The company has changed materially since then, winning substantial contracts and making two key acquisitions, Fidelis in 2021 and LaddersFree a year later.
Fidelis specialises in deep cleaning, from hotels and restaurants to schools and hospitals. Very different from everyday tidy-ups, this type of service is non-discretionary and cleaners need to be thoroughly vetted, particularly those working in education and health. Contracts also tend to be long, from three to seven years, giving React the predictable revenue that was sorely lacking before.
LaddersFree also benefits from long-term contracts. The company is one of the largest window-cleaning firms in the country and, as its name suggests, no ladders are involved. Instead, operators use deionised water and long poles that allow them to clean buildings up to six storeys high without the faff and expense of ladders or other equipment.
Customers include Lidl, Next and Costa Coffee and business is brisk.
Results for 2023, unveiled last week, were impressive. Revenues climbed 43 per cent year-on-year to £19.6 million, while profits soared from £700,000 to £1.8 million. Nor are these figures a flash in the pan. Over the past four years, sales have climbed more than sixfold and the group has moved from losses into profit, bolstered by a healthy bank balance, with more than £2 million of cash at hand.
Braund has high hopes for the future too, aiming to take revenues to £50 million in the next three to five years, with profits rising alongside. Success should come from a blend of small acquisitions and organic growth. Specialist cleaning is a fragmented market, populated by hundreds of tiny firms operating in their local area. This provides rich pickings for Braund and his team, especially as React has acquired a reputation for looking after the businesses it buys.
Big companies often prefer to work with suppliers that can service all their specialist cleaning needs so acquisitions should prove fruitful. There are plenty of cross-selling opportunities too, cleaning properties inside and out for customers.
LaddersFree should also benefit from plans to make the business nimbler and more digital, reducing paperwork and enhancing communication between window-cleaners and their customers.
Brokers are optimistic about React, expecting continued growth for several years to come. Braund inspires confidence too. Having cut his teeth at IBM, he has spent the past two decades as an entrepreneur, founding a successful recruitment business with his wife and masterminding several turnarounds.
Midas verdict: React Group is a small business in a big market so there is plenty of room to grow. Braund and his team have shown they can deliver results, they have attracted support from large investors and the shares, at 1.25p, should prove rewarding.
Traded on: AIM Ticker: REAT Contact: reactsc.co.uk or 01283 550503
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