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What has happened at WR Refrigeration should serve as a wake-up call to us all

As the WR business is broken up, the last fortnight’s events should give us pause for thought as to what the cooling industry needs to do to survive into the future

As predicted, the administrator PwC elected to move quickly. Now there is a new major name in supermarket contracting in the shape of Integral, although of course many of the personnel will be the same, since a third of WR’s staff were taken over to service the contracts of the likes of Tesco and Waitrose, along with the Lokold display case business.

I said in the magazine that the cooling industry needs a company like WR up and running for three reasons; to service the contracts and to pay the suppliers; to keep a large number of engineers employed; and to continue its work in supporting the whole culture of training, apprenticeships and engineering careers. Now that WR is broken up, we can only hope that all three of these elements come to pass.

Sadly, in the apparent absence of other white knights, PwC moved almost as quickly to make the vast majority of remaining WR engineers redundant. One would like to think that since all these folk were busy on contracts only two weeks ago, that the same amount of work still needs to be undertaken and therefore whichever company is taking on the additional work will be taking on the equivalent amount of engineers, rather than seeing an opportunity to seek ‘efficiencies.’ That is what we all hope anyway.

Given the large number of suppliers that have supplied equipment and services, the payment issues are perhaps the most serious concern and so again, for the future health of the industry, we would all hope that goodwill and good sense will prevail. We all know that cooling is a tight-knit industry but it is only in crises like this that we realise how closely linked the fortunes of many companies are. Sadly it also emphasises the value of credit protection insurance in the current economic climate

Of course, the very fact that WR was crowned Contractor of the Year just weeks before calling in the administrators will no doubt prove a talking point.

For my part – and as I say, it is too early to know all the financial detail - I think it again highlights the perilous financial landscape that this industry has to negotiate. I would add that it shows the speed with which WR’s financial crisis took hold – certainly when the competition was judged back in July, there was no hint of the impending crisis amongst the judges – and as you know we have a lot of judges.

But this situation certainly gives an added poignancy to the article in this magazine by WR’s Mike Nicholas on the impact of the extreme summer temperatures on the service sector. The article highlights the way that the retailer-contractor relationship was stretched in the summer, and in conclusion, Mr Nicholas calls for a debate on the way contracts are awarded and paid.

The recent past has been studded with big cooling contractors falling – Peak, Denman, Project First – so at a time when everyone has austerity budgets to deal with, perhaps the cooling supply chain needs to come together to look afresh at its economic fundamentals. With the real possibility that the new F-gas regulations will bring more cost into the industry, the timing may be crucial.

It will certainly be a talking point at our Retail Question Time next week.

Readers' comments (8)

  • The sentiment that the WR situation has come upon us as very rapidly is concerning. Those closely involved with the industry have been predicting this for a while. Does this mean that the RAC is not close enough to the market it serves?

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  • Totally agree with the earlier Anonymous comment - this didn't come about quickly at all. WR have had financial worries for a long time but those who knew didn't publicly voice these concerns because, unfortunately, rumours about financial worries soon get blown out of all proportion and become major issues, exacerbating the problem.
    It's also no surprise considering the behaviour of the big clients - the supermarkets well known practice of continually screwing down their suppliers' prices was never sustainable at a time of large scale retraining and investment.
    Shame on the supermarket clients who created this situation. Hopefully the laid off staff of WR get jobs soon and their creditors get what's due to them.

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  • Thanks for the vote of confidence Anonymous1!
    The point I was trying to make was that the final fall into administration came about rapidly. Yes, the fact that WR was servicing a large debt was well known, but debt repayment plans were in place and so many people accepted that business could trade its way out of it.
    Or how else do we explain the fact that there are so many companies who have now been left being owed large sums, having supplied equipment and services in good faith.

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  • Having been a supplier to WR for a number of years , it came as a big surprise that they went into administration after receiving an order for £20k the week before and W R taking delivery the day before they went into administration. The former directors are responsible to the demise or WR. More fools Integral for taking on the Directors, I have worked with Integral in the past and they are a good FM company . Why have they let themselves be hoodwinked into entering the refrigeration business. Give it two years and Integral will be in the same position as WR. I find it difficult to understand how a company with a turnover of £78m this financial year can have debts of £60m. The former Directors should hold there heads in shame and retire from the industry.
    Good luck Integral,

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  • The supermarkets have been screwing this industry for years and are still doing it now. Even after a major player has gone down they are still playing contractors against one and other. When big contracts are won or lost for a couple of grand and these supermarkets are making billions, something is very wrong. They must look at the bigger picture for the future of this industry. There are very few apprentices coming through and without investment from the refrigeration company's due to the supermarkets screwing the prices down something has got to give. They need us as much as we need them but this can not be done in the current climate. The WR situation may be in some way be down to bad management but some blame must be taken by the supermarkets as well.

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  • It's too simplistic to blame the supermarkets for screwing the RAC industry. We all have to work in the real, highly competitive, world. The supermarkets would not be doing their job if they didn't press for the best price. The problem is that there is always a contractor who's prepared to chase the work at any price and then either cut costs by not, for instance, investing in training, or by operating at a loss (intentionally or otherwise). Even supermarkets can be persuaded to pay for added value. Contractors need to focus on offering services that deliver a tangible return on investment (RCM, for example - actively reducing downtime, improving energy efficiency, extending commercial plant life, etc.

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  • I have been in the RAC industry for over 40 years both in contracting & manufacturing.
    I`ve seen the demise of REA Bott, NRC, Strategem (who blamed NRC for there demise) etc,etc - all of these connected mainly with the supermarket retail industry. I`ve seen all the hype related to so called innovations - which is intended as a "look what we`ve done" hype - only to disappear without trace as soon as the innovation fails. I`ve attended multi company meetings where the directors cave in to all too easily to the demands of the retailer - when they should have said "NO", but they said yes even though it meant losing money - why? As a "group" of companies certain standards of pricing can be set - its not rocket science to realise that going in cheap will only serve to cut corners - resulting in poor standards of design,installation & after sales servicing. If you shop in a supermarket you pay the price on the ticket if you want it on the day- you don`t ask for 60 days credit - why should our services be any different? Retailers are using "buyers" for procurement more & more now - these people don`t know one end of a fridge circuit from the other - "why do we need this refrigerant" was one comment I got!! - they are on a bonus - the more they screw you down its one more step toward there bonus. Somerfields at one point had the right idea - they invited participating contractors to draw up an installation cost matrix - all these costs were put up on a flip pad in a highest to lowest order - some of the differences in costs were frightening. on the day though, a good compromise between highest & lowest was achieved & the work was issued to the various contractors according to site location. What we need is a proper regulator to monitor costs & standards & also to inject some transparency of information so all can benefit - otherwise we shall see more of the WR syndrome.

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  • Andrew, good blog. You have stirred up an interesting debate.
    “The supermarkets employ professional buyers”. - Well good for them. Are we saying that we don’t employ professionals? Perhaps it is time that we should if that is what we are saying.
    “The supermarket buyers do not know one end of a fridge system from another” – Well why should they? Isn’t that what they are buying from us - the fact that we do know a fridge system?
    “The supermarket buyers do not know the value of the RAC related items they are buying”. – Well there is a surprise. Of course they don’t know the value, but we do. We know the value and the cost of our services and our products. What the buyers do know is the market rate. Who sets the marker rate? – we do, the people selling it. If the buyers can only buy at a higher rate, that becomes the higher rate. If we as an industry, or as individual companies continue to sell our expertise, our knowledge, our skills, our services, our manufactured products, etc for less, that will become the market rate. Don’t blame anyone else.
    Will what happen to WR act as a wake-up call for this industry? A better question would have been, ‘what is now happening to all the suppliers and employees of WR act as a wake-up call for this industry?’ Running a company is a complex business I am sure. That is why senior managers are highly paid. They have to shoulder the responsibility for the continuation of a profitable business. I do not know what happened at WR but as an outsider, I think the only people to blame are the management for not managing the company. There is no one else to blame.
    And as for blaming HMR for collecting overdue taxes? Well, as a tax payer I am glad that they are doing their job. How can we blame them for that?
    Are there lessons to be learned? Yes, employ professional managers next time. Are there lessons to be learned by the industry as a whole? Yes, be careful of extending credit to companies that are in trouble. You can lose your shirt.
    As for WR consistently winning so many awards. That is a difficult one. The judges have to take a long hard look at their processes and themselves. There were 7 other companies on the short-list for this year’s award of Contractor of the Year. Were they really so bad that they lost to company about to go pop?
    The question has to be asked – and I hope you print this – was WR being a sponsor, and Mike Nichols being one of the judges a factor? I would hope not, but the Cooling Industry Awards should not have even put themselves into a position where people can ask such basic questions.
    Good blog Andrew

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