A case for cautious optimism5 February 2014
The mood in the textile rental industry is becoming more optimistic, fuelled by growth in customer sectors such as hospitality and food service. At the same time, continued steep utility rises and competitive pricing present challenges that add a strong note of caution, Janet Taylor reports
After the troubles and challenges of recent years, the mood in the textile rental sector does seem to be changing for the better. Murray Simpson, CEO of the Textile Services Association, says that early signs of economic recovery are certainly evident and welcome. He believes that in many ways the textile rental sector can be seen as an indicator for the wider economy.
Tourism, hotel occupancy and restaurant bookings all seem to have increased, bringing higher volumes for textile rental businesses. Lower unemployment has been good news for workwear rental.
On a more cautious note, Simpson adds that the industry rarely seems able to increase charges to customers so margins are squeezed, threatening profits and future investment. Meanwhile operating costs continue to rise, particularly energy costs. Additionally, labour rates remain under pressure, with a focus on the Living Wage debate and unprecedented increases in textiles over recent years that are still having an impact.
Much of this association overview is reflected in reports from textile and workwear rental companies, albeit that individuals have their own slant on the situation.
The Brilliant Laundry Group acts as a co-ordinator for its partner laundries, providing a service to a national customer base, delivered at a local level.
Managing director Steve Clarke agrees that signs of recovery have certainly been seen this year although he says the market is still "challenging".
Going into detail he cites contract lengths as a challenge as they reflect a cautious approach from customers, who want to be sure they avoid mistakes. Both suppliers and customers are looking closely at their relationships with each other.
Customers want to avoid long contracts and suppliers need to be aware of the risks of lower-priced contracts, when costs are variable.
Brilliant listens carefully to customers to ensure it can provide the service required but Clarke does point out that this isn't necessarily what customers think they want.
Winning more customers while retaining existing accounts is an ongoing goal and essential to growth.
Robert Adam, managing director at White Knight, comments that feedback from large hotel groups suggests they are expecting good consistent growth and his company has noticed an increase in enquiries and conversions for pool service. However, the company has had to address the problem of competitive pricing in the laundry sector and noted that while hotel occupancy has been high, room rates have been squeezed and the impact of these has been passed on to the linen supplier.
White Knight's answer has been to invest in technology to reduce costs so it can stay competitive. The company was in the process of completing the installation of its £3.5million steam-free laundry at the Reading plant, which will optimise capability while minimising time and utility consumption.
Guy Other, director at Stalbridge Linen, part of the Johnson Service Group, says that hospitality customers have had a busy year, with revpar (revenue per available room) for hotels rising in most of the big conurbations and more people are eating out. Both trends have resulted in greater demand for Stalbridge's services.
Increased output leads to added pressure on any business but provided the company has invested well and has clear purpose it will flourish, as has happened with Stalbridge this year. However, the inflation in utility costs is a challenge and means that the company must reduce consumption both by investment in technology and by minimising waste.
Efforts to do so have been rewarded and Stalbridge was proud to receive the Energy Efficiency award at this year's Footprint Food Service Awards against strong competition from a broad range of suppliers and food service companies.
Workwear rental presents a slightly different picture. Peter Egan at Johnson Apparelmaster reports that food manufacturing and processing is still a sector that requires large volumes of workwear. He also quotes the CBI report that in the three months to October 2013 industrial manufacturing saw orders and outputs growing at its fastest rate since April 2010, but this growth has not yet trickled through to the laundry sector.
Egan also says that the while the overall economy appears to be recovering there are still risks relating to the Eurozone and the wider global environment and the textile rental industry must be aware of these and able to manage them. Economic activity is still not back to pre-recession level.
Gas and diesel prices have had a disproportionate effect on laundry costs. As far as possible, Apparelmaster has aimed to reduce the impact of this pricing by continual investment in plant, machinery and logistics.
Meeting the terms of the Climate Change Agreement continues to be demanding but Apparelmaster is well within its target.
The company has also had to spend time and money to ensure that all its drivers are CPC (Certificate of Professional Competence) standard by the September 2014 deadline.
Health and safety regulation has also affected costs and the requirement for automatic pension enrolment will marginally increase the cost of employing staff.
Although most companies feel there are some hopeful signs, Bates of London is more reserved when asked about the industry as a whole, David and Matthew Pantlin acknowledge that the market is growing but also point to overcapacity. They say that in the rush to secure a larger stake, many companies believe that turnover is sanity, a dangerous assumption.
Energy remains an issue with increased demands for businesses to be more efficient, while facing shortages and double-digit inflation. On a more positive note however, they say that the TSA has significantly improved communication and at long last businesses are discussing the challenges faced on a united front.
Ivan Kerry, managing director of Aspley Workwear, has a specific slant on the workwear and textile rental sector as his company, part of the Isa-Lea group focusses entirely on the PPE garment sector.
He does say that there has been "a more boisterous feel to the year" and has noted that his company's customers are optimistic about the future but he also says that caution is still influencing plans.
Aspley Workwear operates its rental service on a charge per employee and when contracts come up for refit there are generally fewer employees so to maintain turnover it must increase its customer base.
As a supplier of PPE garments, one of the main challenges lies in a less formal approach to workwear as workers no longer want the traditional boiler suit.
To find a solution that satisfies both client and legislative requirements, the company must be aware of the fabrics available and the standards they can meet.
Off-shore manufacture increases the difficulty so the company works with its principle supplier to design garments that are then made in the UK with only bulk orders being sent to North Africa.
Asked about how external factors have affected his sector, Kerry says legislation is a very emotive subject when it is influenced by regulators in Brussels as well as those in the UK, but that while compliance is time consuming it is also necessary and the company has learnt to live with this.
Like most textile rental companies quoted here he highlights the constant battle to keep pace with rising utility costs."We strive to find additional savings in production efficiencies and labour costs by investment in plant only to find that utility costs can rise by three times the rate of inflation."
This is a continuous battle both for the sector as a whole.
However, Kerry also notes the achievements of an industry, that is of necessity energy intensive, in working tirelessly through the TSA Climate Change Agreement to reduce requirements. The company has pledged a target of 25% reduction, based on the 2008 benchmark.
The Brilliant Group's Steve Clarke also praises TSA's work on achieving a Climate Change Agreement and negotiating a substantial discount for those laundries that meet tough but achievable energy reduction targets. It has demonstrated some excellent leadership in this area.
Clarke says that health and safety has been another influential factor and a focus across the group. Partner laundries have been advised by health and safety specialists on how they can ensure workplace safety. One, Clean Linen Services, won a gold award earlier this year from the Royal Society for the Prevention of Accidents. The award recognised the commitment to preventing accidents and ill health as well as to overall health and safety management systems.
With some signs of recovery, underlined with much caution, what has the textile rental industry achieved this year?
Robert Adam at White Knight feels that from his company's viewpoint it has fared reasonably well in difficult conditions. As for the next year, he says that the sector will remain competitive and that there will be greater emphasis on added service. Quality environmental standards will become even more important throughout the supply chain and he says that ethical employment will also receive greater attention.
Guy Other at Stalbridge agrees that overall the textile rental industry appears to have coped well and more capacity is being put into the market.
However, this brings its own challenges as purchasing teams within the large hospitality brands have been quick to recognise and exploit the increase in overall capacity.
Looking ahead, he feels that 2014 will see businesses serving the hospitality sector facing pressures similar to those experienced this year.
Utility prices must be closely managed but textile rental companies that can afford to invest in plant will still
flourish as will those that implement improvements in quality and innovate.
On the downside, keen pricing will also continue and customers' purchasing teams will still have the upper hand when negotiating larger linen contracts.
Overall though, Stalbridge remains optimistic.
Peter Egan at Apparelmaster observes that the textile rental sector has generally handled the double-dip recession quit ewell. This year, the sector has been preparing for the economic upturn that appears to be coming.
Utility prices will be challenging in the future and innovation will be needed to make plant production more efficient and improve logistics.
As with hospitality, purchasing teams in the food market will use capacity to gain competitive pricing.
Kerry at Aspley predicts that 2014 will be another year of challenges but hopes that it will also be a full and prosperous one. As the government seeks more private input in the health service, this part of the textile rental industry enjoyed one of its largest growth periods. The challenge of satisfying both health and safety requirements for protective clothing and the desire for modern styling will also continue.
But the overriding priority will be to work with customers to support them as the economy continues to grow. As a company, Aspley Workwear is looking forward to 2104, hopefully to use as a milestone to a new UK.
A healthcare view
Lynn Fort, national secretary for the Society of Hospital Linen Services and Laundry Managers (SHLSLM) gives the society's view of linen services in the sector.
The NHS is being driven by the competing needs to improve efficiency, provide value for money and the need to improve patient care. The Francis Report into Mid Staffordshire NHS Foundation Trust, hospital inspections by the Care Quality Commission and PLACE (Patient-led assessments of the care environment) are driving improvements in patient care.
These include regular bed linen changes and appropriate clothing to preserve patient dignity. Patients and relatives will have their own judgements on the quality of the linen.
Proving compliance with the new health service guidance, CFPP 01-04, is a driving force in improving standards and this will continue for the future.
A majority of providers have opted for accreditation to ISO 14065:2002.
Healthcare linen is now predominately provided by the commercial sector. A number of hospital laundries were closed in 2013. However the plants that remain open are providing neighbouring Trusts with a further alternative for their linen service. The membership of the Society is reflecting this change by including members from the commercial sector and monitoring officers.
Linen loss and abuse is a big problem for linen service providers. It was discussed at a well-attended session of the society's annual conference and is also raised at regional meetings. This challenge is being met with a mix of education for ward staff and transponders to trace where linen is being lost. It is expected that the next GPS Procurement Framework will include financial penalties where it is proved that linen is being lost.
Training and information is vital to meet future challenges and SHLSLM will hold its 2014 conference next April.