Francis eyes Zenith renaissance
Article Date: Aug 19 2005
‘We were already in the nursery sector, but not in a big way,’ explains Ringo Francis, chairman and chief executive of cleaning products supplier Zenith Hygiene – a business he believes can reach £100 million of annual sales within four years, both organically, and through the right acquisitions.
Identifying the opportunities
This week Zenith, which floated on AIM with an oversubscribed £4.5 million placing at £1 earlier this year, strengthened its hand in the growing healthcare and nursery sector with the £500,000 cash and loan note acquisition of Renaissance, a supplier of laundry and cleaning products.
‘It’s a huge market, and one that is not dependent on the commercial economy, because we are all getting older, and we all want good nursing homes,’ he adds.
For Zenith, which typically focuses on the food service and hospitality industries, the deal adds another growth string to its bow. Francis says Renaissance will enhance earnings in its first full year under Zenith, and its largest customer, accounting for the bulk of sales, is a major (as yet unnamed) leading UK nursing home operator. Clearly delighted with the transaction, he says Renaissance has some product crossover with Zenith and reckons this will allow him to examine the combined range and ‘adopt the best in class products’.
Furthermore, Francis insists he can drive margins north by manufacturing Renaissance’s laundry chemicals in-house at Zenith’s plant at Lisburn in Northern Ireland, a facility brought on board through the ‘critical’ 2004 acquisition of SB Chemicals. He also intends to enhance the return on sales by stripping out duplicated distribution and head office costs.
Back in May, Zenith cheered the investors that had backed its February IPO with strong maiden interims to the end of February, revealing a 23 per cent leap at the top line to £10.5 million. Underlying pre-tax profits grew to £294,000 (£44,000), swelled by business with a raft of household names such as ASK Restaurants, Nandos and Pizza Express.
Acquisitions continue
Aside from the SB Chemicals deal, two further acquisitions were made in March, namely Kent-based Quantum Hygiene (which brought a customer base with an excellent strategic fit) and MP Chemicals.
Acquisitions remain a key part of Francis’ growth strategy. ‘We think there are 300 competitors out there, of which many are strong regional players,’ he muses on the acquisitive landscape. ‘Of those, there are around 50 that are coming to us or that we are looking at.’ Francis says unrealistic pricing remains an obstacle, with most vendors starting off with a £1 million asking price, doubling to £2 million if they have a business partner.
The market believes Zenith’s growth path is assured, with the shares trading well above the issue price at 159p. Forthcoming full year results to August, which are traditionally stronger in the second half, should be accompanied by a dividend. Analysts expect sales to reach £25.5 million, with operating profits coming in at £1.5 million.
