Nobody said running a modern taxi business was going to be an easy gig
… nevertheless, the boss of Addison Lee is confident about its prospects down the road
From the regulators and environmentalists who think the tools of its trade are toxic; via the lawyers and trade unions who think its workers are being treated illegally and the disruptive competitors with deep pockets who want to steal its customers; to the neverending need to invest in the latest technology. Is there any facet of the minicab trade that makes it a remotely attractive investment?
There must be, because the chief executive of Addison Lee, London’s biggest taxi service that is not either a black cab or an Uber, promises that it will double in size within the next three years. He also has persuaded his private equity backer, America’s Carlyle Group, to double down on its bet that it will do so.
Addison Lee, to quote Andy Boland, its chief executive for two and half years, is “a minicab firm on steroids”. In the capital it operates 5,000 cars, most of them diesel: 1,000 executive Mercedes-Benzes, 3,750 Ford Galaxy people carriers and 250 Toyota Prius hybrids. It does 25,000 jobs a day and claims to be ten times larger than the next biggest minicab operator and two and half times larger than its nearest rival in the higher-end market, ferrying bankers, brokers, accountants, lawyers and marketing folk. This business-to-business market accounts for two thirds of Addison Lee’s income. The other third is from the person in the street, half of whom pre-book, half of whom order on demand.
It has about 10 per cent of the £3 billion London taxi market and is the largest player in a fragmented sector behind traditional back cabs, which account for about a third, and Uber, which has about 20 per cent.
How Addison Lee got here belongs to Book One of the company’s story. It was born in the back streets of south London in the 1970s, but then four things happened around the turn of the millennium that changed everything: minicabs became legitimate under a new licensing regime; the motor industry came up with the MPV, the people carrier; GPS satellite telecommunications meant that drivers could use satnav and controllers could keep track of the drivers; and John Griffin, Addison Lee’s then proprietor, decided to take out the opposition and expand his empire by acquisition.
In 2013, a year after Uber was launched in London, Carlyle paid £300 million for a majority stake in Addison Lee. The founding family pocketed £150 million, the founder retired and left his part-time motor racing son Liam in charge. Within two years, Liam Griffin had stepped back to a non-executive role and the finance director who had been hired that year, Andy Boland, took over.
At that stage Addison Lee was turning over £300 million a year and making profits of more than £30 million. The full onslaught of Uber and all the other app-enabled ride-hailing operations hit hard and Addison Lee’s revenues and profits plunged. Recently filed 2016-17 accounts tell an evolving story. Revenues are back, up nearly a third to £345 million, but the company was £20 million in the red as it tooled up — technologically and by acquisition — to take on Uber.
The order-by-app revolution meant that Addison Lee had to raise its game, or “replatform” in the argot of Mr Boland: “The ride-hailing era [hit us], especially on the consumer side of the business. It has been the impetus for market change as a whole and especially at Addison Lee. The whole consumer front-end technology hadn’t been there in the [traditional] industry and was underdeveloped at Addison Lee. The [customer] engagement model has moved on dramatically. We have had to modernise and digitise to drive growth in arguably the most competitive market in the world.”
Carlyle has put in another £100 million to support that technology investment, set up an Addison Lee operation in New York and buy Tristar, an international chauffeuring business, to enable Addison Lee’s globetrotting customers to pre-book for whenever and wherever they get off a plane. All this plus plans to take the Addison Lee model to other big US cities will, it is said, take the company to annual revenues of more than £700 million by 2020.
Carlyle, as private equity does, will think about exiting at some stage. In that context, the appointment of Mr Boland seems no coincidence. He had been six years as finance director at the private equity-owned AA roadside assistance and insurance company and went through its 2014 accelerated initial public offering on the stock market. He left soon after the arrival of new management at AA, which persuaded Mr Boland to conclude that his ambition to become a chief executive lay elsewhere.
The AA float made him financially secure, which he admits is important to someone who grew up in north Manchester knowing what it is like for a family to live from payday to payday. His escape to university and accountancy training was not the norm on his streets.
Yet if Carlyle is to sell Addison Lee successfully, hurdles need to be overcome. Sadiq Khan, the London mayor, like his counterparts in other world cities, has signalled that diesel engine operators such as Addison Lee are not welcome. The problem for Addison Lee is that the alternative is not yet viable. There is no carmaker producing hybrid or electrified versions of its workhorse, the Ford Galaxy, including Ford. And even if Addison Lee can convert to a fully hybrid plug-in fleet, as Mr Boland says it can within five years, where are the thousands of fast-charging points needed? And who will fund such a network?
Fighting three employment tribunals makes Addison Lee a case study in the gig economy. It says that its drivers are self-employed. The firm owns, insures and services the vehicle. The driver on average makes £850 a week from fares, out of which he has to pay the company £200 and buy fuel (it is generally “he”, as Addison Lee’s female drivers number only “in the tens” out of 5,000). Law firms such as Leigh Day and the GMB trade union do not agree, arguing that these are workers who qualify for holiday and sick pay benefits.
Mr Boland concedes that employment law has not kept up with 21st-century working arrangements: “For us there is a close relationship between happy drivers and chauffeurs with earnings on a fair and flexible deal, and the quality of the customer service they supply to our passengers. If that gets out of kilter . . .
“Listen, for a driver who logs on and off [for work] from a device, how do you start measuring that? One hour they might earn nothing. The next it might be £50. There is a debate to be had. Discuss.”
Who is your mentor?
Mike Kirkham at Taylor Nelson Sofres gave me my big chance as chief financial officer of a £1 billion FTSE 250 business in my early thirties.
What was the most important moment in your working life?
The best experience is forged in adversity. It was extremely formative narrowly avoiding administration with Cordiant Communications.
Does money motivate you?
Those that say money isn’t important have probably never been truly broke. Money was a motivator earlier in my career.
What’s your favourite television programme?
I don’t get to see my football team, Manchester United, that often these days so I impart my tactical advice to a television.
Who do you most admire?
Talent without dedicated application is a terrible waste, so I admire the most consistent professional sportspeople.
What does leadership mean to you?
Setting stretching and exciting goals that inspire your team and then doing everything you can to see them achieve those goals and personal potential.
How do you relax?
With four children, my family keeps me fully occupied outside work. I enjoy film, theatre and football. I’m a latecomer to skiing, too.
Cardinal Langley RC High School, Middleton, Manchester; Keele University, BSc physics and economics.
1992: Chartered accountant, Saffery Champness; 1995: treasury and corporate finance, WPP Group; 1998: finance director, Cordiant Comms; 2004: finance director, Taylor Nelson Sofres; 2008: chief financial officer, AA; 2015: finance director then chief executive officer, Addison Lee