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Moving on up

Cold Service is bucking the trend and expanding geographically and organically. Andrew Gaved hears how the firm plans to do it

In these economically straitened times, when phrases such as consolidation and belt-tightening are the order of the day, anyone who talks about diversification and even expansion is guaranteed to get a hearing. When that talk comes from a refrigeration contractor, a sector all too well used to having margins squeezed left, right
and centre, it is all the more attention-grabbing.

While the economy has been slowing, Ringwood based contractor Cold Service has been putting together a strategic plan that will allow it to step upwards and outwards beyond its current regional commercial refrigeration heartland and better position itself for dealing with an increased client base.

A sponsor of the Cooling Industry Awards and Student of the Year, the company has been busy cementing its reputation as a major player in recent years, servicing large regional territories for some of the country’s top food retailers. But this has been largely in the south of the country. Now chairman Peter Grimes believes the time is right to step up to compete for more business on a wider stage.

So how can a firm anticipate expansion in times like this? The answers are, according to Mr Grimes, first put the appropriate financial controls in place to ensure the growth is built on sound foundations; next ensure you have a strong senior management team with clear objectives and goals; and then position the business to deal differently with a variety of markets and customer types.

The contractor’s answer to the widely differing demands of national supermarkets and local business owners is to effectively split its business offer into two - Cold Service Commercial and Cold Service Local - run by separate management teams and offering very different approaches.

Mr Grimes says: “We went back to where the business was built, offering the very best customer service to clients within a 100-mile radius.”

Cold Service Local is headed by Colin Saunders. It targets companies in and around the southern counties, with a varied workload taking in not only high streetbusiness, but also pubs, engineering firms, universities, schools and so on. “We identified it as a different animal entirely, so it needed an alternative structure and engineers with different skill sets,” Mr Grimes says.

By splitting up the local work, the rest of the business is then well-placed to look at its own forward strategy. The Commercial senior management team has been central in leading the recent success, and includes Adrian Westrup, national accounts; Danny Ryan, contracts and installation; Peter Cutcliffe, design and applications; Gary Mallett, service and maintenance; and Roger Watts, finance. Last year experienced consultant Stephen Clarke was drafted in to help build the strategy that will assure the contractor’s diversification and controlled growth.

So Cold Service is pursuing a more diverse operation, which will serve the dual purpose of being able to tender for a wider workload from its existing customers and turning up new specialist business.

Step one is the expansion of its current airconditioning business to target the public and private sectors and to expand new business on a national stage. Nigel Hillier has been recruited from Daikin to spearhead the air-conditioning operation. Mr Clarke says the division is ripe for expansion: “The current £4 million turnover that Cold Service achieves locally can easily be grown by increasing the offer.” The division will also be targeting more high street business such as retailers and banks.

The second step away from pure commercialrefrigeration, but a step which has clear knock-on benefits for the rest of the Cold Service business, is the launch of the electrical division. Headed by Steve Barnes, it will offer electrical consultancy, design, installation & maintenance. Along with allowing the company to chase new business away from traditional commercial refrigeration, it will improve cost management for the service and contracting divisions, and eventually allow Cold Service to present a more comprehensive package to all its customers.

“Our aim is to offer our clients innovative, energy-efficient and environmentally acceptable solutions for all their cooling requirements”, says Mr Grimes. But he believes that there is another key to transformation from a successful large regional contractor to the big league: financial prudence. Prime minister Gordon Brown’s mantra has been vigorously pursued by financial director Roger Watts to ensure the contractor has the controls in place to grow profit as well as turnover.

Mr Grimes says: “The financial strength and accounting control is down to a huge extent to Roger, and he has brought it to the entire business, drilling down to see what we are doing and how we can achieve it better. So every job tender will undergo a financial appraisal to see whether it meets the Cold Service hurdle rate. And as the job progresses, there is a review between each engineer and the accounts department to ensure project performance.

“We have never chased turnover at any price, but this added financial strength and control has brought the whole business a new focus.”

And the work appears to have paid off, for in the last financial year Cold Service reported strong year-on-year profit improvement on significantly higher turnover. The firm believes it is enough to pitch Cold Service into the top five of commercial refrigeration contractors, when its rivals’ noncontracting revenue is stripped out.

“We have reached the premier division of contractors,” he says. And now the company has got there, the combination of financial efficiency and a more diverse portfolio will allow Cold Service to compete for more work, building on its achievements with major food retail clients as a well-regarded service, maintenance and installation contractor.

The Cold Service recipe has proved very successful, and food retail now accounts for what Mr Grimes describes as a “significant” proportion of the contractor’s current revenue. But like any prudent business practice, the pursuit of business with other clients would clearly spread the exposure, as well as expanding the operation geographically. London is the number one priority for expansion and plans are well advanced, he says.

But the Cold Service team is all too aware that doing more of the same will not necessarily be enough to woo other clients. So they are looking at collaborations with suppliers, particularly in areas such as natural refrigerants. Mr Clarke has encouraged the business to identify potential innovations, products and partners.

When you add in the fact that the Cold Service Local operation is also designed to be a model that is repeatable in other parts of the country, there is no shortage of potential for Cold Service to aim for. Any reference to Cold Service as a ‘southern contractor’ will no longer be tolerated.