MIDAS shared tips: It’s a nasty job… but crime scene organizers React Group can help you clean up, too

There are approximately one million violent crimes committed each year in the UK. Many occur at home, although incidents frequently break out in bars, clubs and street corners. Once the police are called and the forensic teams have finished their work, the crime scene must be cleaned and disinfected. The task can be messy, difficult and painful but it must be done.

Group reaction Specializing in emergency cleaning of every color. The shares are worth just 1.25p and should go far under veteran Mark Braund.

React does the kind of work no one likes to think about, like cleaning up after accidents, from highway pileups to prison brawls. When squatters are evicted from homes, React teams are tasked with removing dirty needles, dirty furnishings and damaged fixtures, cleaning every surface along the way.

When cities flood and sewage spills, React is called upon to make properties safe and dry. When deaths occur on the railways — suicides, employees, stray deer — React is responsible for cleaning up the tracks and trains, a harrowing task.

Cleaners also rush to the scene when dangerous chemicals or germs escape into the atmosphere, a service that has been in high demand during the Covid pandemic.

Chaotic actions: React Group rushes to emergency sites to clean up after violent crimes and accidents

Chaotic actions: React Group rushes to emergency sites to clean up after violent crimes and accidents

This work is not for the faint of heart. Staff must be properly trained, mistakes can be risky and quick, and efficient service is crucial. This business is also lucrative, and few companies offer it on a large scale. But emergency cleanup is inherently unpredictable, and when Brund began advising React in 2019, the group was struggling, amid persistent losses and a share price of less than 0.5p.

As Brown got going, React’s fortunes slowly began to improve, and in December 2020, he was named president. The company has changed fundamentally since then, winning major contracts and making two major acquisitions, Fidelis in 2021 and LaddersFree a year later.

Fidelis specializes in deep cleaning, from hotels and restaurants to schools and hospitals. This type of service is very different from daily tidying up, as it is not optional and cleaners need to be carefully vetted, especially those working in education and health. Contracts also tend to be long, from three to seven years, giving React the predictable revenue it sorely lacked before.

LaddersFree also takes advantage of long-term contracts. The company is one of the largest window cleaning companies in the country, and as the name suggests, there are no stairs. Instead, operators use deionized water and tall poles that allow them to clean buildings up to six stories high without having to use ladders or other equipment.

Clients include Lidl, Next and Costa Coffee, and business is booming.

The 2023 results, revealed last week, were impressive. Revenue rose 43 per cent year-on-year to £19.6m, while profits rose from £700,000 to £1.8m. Nor are these numbers just a flash in the pan. Over the past four years, sales have risen more than six-fold, and the group has moved from losses to profits, supported by a healthy bank balance, with more than £2 million of cash on hand.

Brown has high hopes for the future too, aiming to lift revenues to £50m in the next three to five years, while increasing profits alongside. Success must come from a combination of small acquisitions and organic growth. Specialty cleaning is a fragmented market, populated by hundreds of small businesses operating in their local area. This provides Braund and his team with rich options, especially since React has developed a reputation for nurturing companies that buy them.

Larger companies often prefer to work with suppliers that can meet all of their specialized cleaning needs, so acquisitions should be fruitful. There are plenty of cross-selling opportunities too, cleaning properties inside and out for clients.

LaddersFree should also benefit from plans to make the business smarter and digital, reducing paperwork and enhancing communication between window cleaners and their customers.

Brokers are bullish on React, and expect continued growth for the next several years. Brown also inspires confidence. Having gained extensive experience at IBM, he has spent the past two decades as an entrepreneur, where he founded a successful recruitment company with his wife and masterminded several turnarounds.

The rule of Midas: React Group is a small company in a big market, so there is a lot of room for growth. Braund and his team have shown they can deliver results, have attracted support from major investors, and the shares, at 1.25p, should be rewarding.

Traded on: Goal Indicator: to reply communication: reactsc.co.uk or 01283 550503

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