The market for Orwak Linley's refuse machines looks certain to grow along with industry's awareness of the cost of waste.
What recession? How many companies operating in Britain today - particularly small businesses - can pretend to be unaffected by the country's economic ills? The answer is virtually none. But here and there it's still possible to find the odd businessman who, through some fluke of good fortune, has escaped almost unscathed; who can put his hand on his heart and say, with 47 year-old Colin Harper, "We really aren't suffering from the recession".
So what's Harper's secret? His company, although it employs a mere 52 people, operates on a national scale. It has no exports, indeed it's an importer. (Well that, anyway, should surprise no one.) More specifically, it imports industrial goods. To be precise it's a distributor of imported compactors and balers of waste materials such as cardboard and plastics, also of crushers of hollow bits of scrap metal like beer and cola cans. Its stock in trade consists - in three words of its own choosing - of "refuse handling systems". It thus serves the needs of waste disposal and recycling. You could say that it is a standard-bearer in the green revolution.
Now the green movement has been the focus for a lot of attention in recent years. Yet most people would probably be surprised to learn that it had acquired sufficient force - least of all in the UK - to allow any business to stem the recessionary tide. Again they would probably be correct. Harper's company, Orwak Linley, has prospered for other reasons. While he himself can demonstrate certain green sympathies, his customers have far more often than not been driven by hard, practical, commercial, non-idealistic motives - like a compulsive urge to save money.
There was nothing remotely idealistic about Harper's own recruitment to the green cause. In any case that was back in the early 1970s when "green" meant edible, if not gullible. Harper had been an export salesman with the now defunct Wessex Industries, seeking to persuade the Swedes, among others, to buy battery-operated forklift trucks. When Wessex went into liquidation the boot was on the other foot. Harper was out of a job and was approached by a Swedish contact who claimed to have invented a device that would not only compress rubbish into something like an eighth of its original volume, it would at the same time stuff it into plastic sacks, so reducing dust and odours. The ingenious Swede wanted someone to sell his brainchild in the UK.
At first Harper joined up with two former Wessex directors who had obtained a number of agencies for US-built off-road vehicles. But after a year he broke away and formed his own business, based at his home in Poole, Dorset, which was wholly dedicated to selling the Orwak compactor. The name derived from the machine's inventor, ORW Akerberg. In equally whimsical fashion Harper called his company Linley Industrial Equipment, combining part of his first name, Colin, and that of his (then) wife Lesley. He mounted Akerberg's machine on a road trailer and, together with a partner Jason James, who was also an equipment salesman, toured the land giving demonstrations. ("It meant rolling your sleeves up and diving into other people's rubbish.") His wife did the telephoning and the paperwork.
But quite soon his new territory was itself much compacted. His Swedish principal was acquired by Electrolux which decided, not unnaturally, to market the product through its own commercial equipment subsidiaries around the world. Since they were already there on the ground, Harper and co were granted a sub-agency covering the south coast and up as far as London. In the six years or so that this arrangement lasted, says Harper, he and his wife and partner accounted for around 40% of Orwak's sales in the UK, "a significant proportion".
In the end it was decided that "compacting and baling didn't really fit with Electrolux". The freebooting inventor Akerberg had long since departed for new pastures. And Orwak in Sweden, along with manufacturing rights to the growing range of products, was bought by its general manager Sune Johansson. The giant multinational retained only the patents ("which gives us some comfort", says Harper). Linley Industrial Equipment was appointed distributor for the whole of the UK, acting directly for Orwak, and soon afterwards absorbed the Swedish name into its own in order to emphasise the fact.
The operation was at this stage still tiny, turning over £100,000 or so a year. But towards the end of the Electrolux period Harper made a breakthrough. He had a small compactor on trial with one of the major supermarket chains. After about six months and sundry modifications the prospective customer put in an order for 35 machines "in one bite". This was a product that normally sold in ones and twos - if at all - and the effect was dramatic. In the closing years of the '70s turnover was growing by 50% or more year on year.
After a brief pause at the start of the '80s the pattern was resumed. In 1983-84, again after a lengthy trial period and hefty modifications, the same supermarket group wanted 80 newer and larger machines - capable of holding cardboard and plastic simultaneously but separately - for 80 different stores. That year turnover put on 85%. Since then Orwak Linley has supplied almost all the big British grocery chains. "Just one to go," says Harper with a laugh.
The multiple grocers continue to place a lot of business, for the obvious reason that they have enormous volumes of packaging material to get rid of, from premises where space is always at a premium and hygiene always a priority. But the potential is by no means confined to food, or to retailing. "There is a huge market outside." Harper likes to boast that 72 of the names in the FT-SE 100 Index are Orwak Linley customers. However, "in many cases they do not have a lot of machines. We are not even scratching the surface."
There are Orwak compactors out in the North Sea, on oil platforms. They can be found on board ships, and in Antarctica with the British Antarctic Survey. All such machines are there mainly for environmental reasons backed by international agreements on pollution control. In shops and factories it's another matter. According to Rod Darrington, a former hygiene officer at Safeway who became Orwak Linley's sales director when Jason James retired, the purchase decision "usually has an economic basis". By the same token, says Darrington, economics are the product's chief selling point.
Typically, where a machine is sold, the buyer can expect to recover his money inside 18 months. Rental should bring an immediate return: "a £25-a-week rental can show a saving of £50 a week". The benefit comes not merely from the compacting of materials but from the more systematic approach to waste disposal that the process encourages. The effects are sometimes quite startling. The ICI paints division works at Stowmarket, Suffolk, used to generate about 1200 tonnes of dry waste a year, much of it in the form of cardboard, polythene shrink-wrap and empty paint tins. The arrival of a large baling press almost immediately reduced the amount of waste by a third, which meant fewer visits from the refuse contractor who was getting paid £20,000 a year. The other 400 tonnes are now recovered for recycling. Bales of cardboard are taken away for nothing by a scrap merchant, while the polythene and the pressed paint tins actually bring in some revenue. The factory management expects the installation to pay for itself within 12 months.
Harper is in no doubt that the market for his products will continue to grow along with industry's awareness of the cost of waste. The Environmental Protection Act which came into force last April, making companies responsible for the waste they produce, should concentrate some minds - although Darrington says that "no one is enforcing it yet". In any case, partly because of the shortage of landfill sites, charges made for removing refuse from commercial premises are rising much faster than inflation. Since these charges normally relate to volume, compaction should help to save money.
That still leaves recycling out of the equation. The British government has so far done little to stimulate the use of recycled products. Which is one reason why recycled paper is more expensive than paper made from wood pulp. Again, Harper believes that history is on his side: that schemes such as the EC's proposed levy on packaging will give recycling a fillip, and persuade firms to separate recoverable waste from trash. "At present 90% of the potential market is chucking everything out."
If materials are going to be sold for cash instead, they will almost certainly have to be compacted and/or baled. And Harper is standing waiting with the best known range of equipment for these purposes. His company is not without its competitors, but it confidently claims more than 50% of the UK market for compactors and balers for in-house use. Up to 12 months ago, incidentally, it had accounted for 35% of the total production of Orwak's ultra modern little factory at Savsjo, midway between Stockholm and Malmo. That percentage has since declined as a result of expansion elsewhere, but it's clear that Swedish Orwak and British Linley have a mutually rewarding relationship.
Until Electrolux dropped out of the picture Linley was allowed the dealer's customary discount on sales. As soon as an independent Orwak became its principal, the UK company was able to buy at an export price and apply its own fat mark-up, to give a gross margin of 50% and more in some years. "It's important that an overseas distributor should be able to work at a very healthy profit margin," Harper argues. Besides being good for his pocket, it makes it much easier to carry spares and to invest and expand.
In fact Harper and his two partners were always inclined to leave money in the business. In the wake of one of the big supermarket sales it became obvious, he says, that the company should have a proper service organisation; also that it had the funds available to begin creating one. So a service manager was appointed - Andy Andrews. Later he was made a director of the company. "From then on we consciously set out to establish local depots, and to carry spares on a regional basis." Today a chain of workshops extends from Falkirk in Scotland down to Poole, where the company head office shares its present modest home - on one of the many industrial estates - with the southernmost depot.
"We deliberately set out to expand service ahead of demand," points out Harper. The service department is responsible for delivering, commissioning and demonstrating machines on site. But aside from providing such occasional assistance to sales, it is "a genuine service department" and a useful source of revenue through service contracts. Only machines supplied by Orwak Linley are serviced and maintained, by the way. The agreement with Orwak contains nothing to prevent the company from selling or servicing non-competing equipment. Indeed the can crusher is not an Orwak product, and Harper is ready to find related machines from various manufacturers if required to put together a package. But he's no longer prepared to be "sidetracked" into handling electric vehicles and other industrial goods. "We intend to carry on in our niche and not to be diverted."
He does, it's true, have a couple of incidental interests. One is a small and struggling waste management company in central Scotland. "I wanted to do something positive where there was a high population," he says. "I'm a bit fervent about recycling of materials - eventually there won't be any trees to chop down." But selling balers and compactors is probably the most effective means of advancing the cause, as well as the most rewarding. Orwak's responsiveness to the market - to calls for modification, for example - could be another good reason for refusal to be sidetracked. The Swedish manufacturer has developed special machines for special applications: low models for cramped spaces, stainless steel for the food industry, and so on.
To be a single-minded distributor of well designed and robustly made cost-saving products occupying a distinct market niche may not, even so, be the complete answer to this recession. Orwak Linley's turnover slipped nearly 3% in the year to end-March 1991, from a high point of £4.4 million, and profit before tax fell by £86,000. Yet according to unaudited figures the company scaled new peaks last year; and up to September, at least, things were "going extremely well" in the current period. One possible explanation for this strange state of affairs, it's suggested, is that tight control of capital spending, combined with a tendency for decisions to be made at lower levels of management, is leading more customers to rent rather than buy - which Harper obviously welcomes for its effect on profits. ("Until two-and-half years ago we did this (ie rental) entirely from cash flow; now we can enter into back-to-back leasing.") At all events, it seems, the good times are not coming to an end. Not by a long chalk, in Harper's view. "A £20 million turnover is quite achievable in this company."
For reprints of this article, contact Anne Oakley (071) 413 4336.