Operator Profile - Paul Ragan, Veezu
This time last year, we’d not heard of the company. But some time in the next 12 months it will overtake Addison Lee’s 4,500-strongh fleet and top the ProDriver 100 as Britain’s largest private hire operator. How did that happen? And just how much of a game-changer will Veezu turn out to be?
Since making its first acquisition in 2013, Veezu has built a portfolio of five major fleets totalling 2,400 cars. By the end of the year, Paul Ragan, the entrepreneur behind the business, expects that to double. And Veezu won’t stop there – Ragan’s short-term plan envisions five regional “hubs” each operating up to 2,000 cars, giving Veezu a fleet of 10,000 cars in total.
Already three of the hubs are up and running. Leeds, Birmingham and Veezu’s South Wales home territory. They’ve been built through acquisition, and the scale of the purchases reveals the extent of Veezu’s ambition. The Birmingham hub is centred around Solihull-based A2B Radio Cars, with 550 cars. A2B is the biggest operator in Birmingham, and ranks number 14 in the ProDriver 100.
In South Wales, Dragon Taxis of Newport and Bridgend Radio Cars have been joined by 500-car Dragon Taxis of Cardiff, while in Leeds, one of the giants of the UK private hire sector was acquired in 2015. Amber Cars’ 850 vehicles makes it Britain’s fifth-biggest taxi fleet. Overall, Veezu’s turnover has soared from £1 million in 2013 to £22m last year. Impressive stuff.
Further acquisitions are planned – indeed, in Paul Ragan’s office, a wall map of Britain is peppered with coloured pins – the red ones show the existing companies, the other colours denote targets, or potential hub locations.
Paul Ragan is a serial entrepreneur – over the past 25 years he’s owned business as diverse as insurance brokers and Ice Hockey clubs, and admits he wasn’t looking to get into the taxi business until after he sold his insurance business in 2008 and a contact suggested he took a look at a small operator in Bridgend.
“Why would I look at a taxi business?” he muses. “But I was convinced to buy this business as an investment. It had 100 cars, the biggest in the town, and had been trading for 47 years. I left it alone as an investment.”
A couple of years later, another slightly larger 225-car business in Newport came available, so Paul bought that one too, and let it deliver a profit too, without going near the day-to-day operations. And he probably wouldn’t have done, had not the manager sadly died of cancer in 2012. Paul went into the business, and started running it, completely hands-on. “I spent three months there, and the dynamics were great. I thought to myself, is there a bigger opportunity there?”
After six months’ research, Paul decided there was. “I was gobsmacked,” he said. “Apart from what Addison Lee had done in London, there was no consolidation whatsoever in the industry. You could see there was a real issue around the lack of tech-savviness, and many of the businesses were what I’d call ‘lifestyle’ businesses.”
To Paul, this struck a chord. He sees parallels with the insurance market of 20 years ago and what’s happening in the taxi world now. “I remember when Direct Line started, and all those brokers found out that their business was declining. Many of those businesses were comfortable and working part-time. They had to decide whether they were in or out, and many got out. The market went from 35,000 brokers to 3,000 – consolidation took a grip, because market forces were changing. But change simply brings an opportunity.”
The UK taxi market is worth around £9 billion a year – “on a par with buses or trains”, Paul believes. “But most of the business is made up of fleets of 70 cars or less. Those small businesses aren’t going to change the world. And the public perception of the business wasn’t going to attract major investors.”
The plan for Veezu was formalised in 2013, and the first acquisition, A2B, was completed in July 2014. Originally the plan was an acquisition a year, but as Paul explains: “The experience was so good in commercialising that business meant we scrapped the original plan and decided to kick on. We were lighting the torch paper or consolidation.”
One major driver for growth is technology, especially the use of cloud-based systems in place of what Paul calls “clunky” old data systems. “The industry was complacent – and that creates opportunity.”
Further funding from Santander’s growth capital arm allowed further acquisitions in Cardiff and Leeds. The Cardiff deal gives Veezu three businesses in South Wales with 900 cars, with a similar number acquired with Amber Cars in Leeds. But this acquisition has brought a lot more to the party. “We were impressed by Amber’s ability to compete with Uber, its use of technology including its own app and some really talented people.”
In particular, Amber Cars was using the iCabbi system, which is now being adopted across all Veezu businesses. Amber Cars’ founder Andy Pennock has joined the Veezu board, with the responsibility for integrating technology throughout the Veezu. Leeds is very advanced in terms of online booking too – 40,000 bookings per week are via Amber Cars’ app, one of the most advanced in the UK.
In fact, switching businesses to iCabbi is among the first things that Veezu does with any acquisition. “It means they can compete,” says Paul. This is followed by an analysis of costs, plus proper business analysis of Key Performance Indicators – how many calls are answered, for example. “In three months you can very quickly improve the performance of the business.”
After that, it’s a case of commercialisation. Better training, dress codes, garages in each ‘hub’, and so on. And those KPIs can be generated from the iCabbi system, so the performance of the different hubs can be compared.
The acquisitions will continue, says Paul. “We anticipate there will be two or three big acquisitions this year,” he says. “I expect us to be around 5,000 cars by the end of the year.” The problem is finding enough funding to fund growth of this pace – so some time in the next 18 months, Paul expects a major financial injection, possibly through a private equity investment. “How quick we grow depends on the level of backing we get,” he says.
“We’re very successful at what we’re doing, but the opportunity exists to buy many of these businesses, and we want to do that at a rate that fits with the scale of how fast we can go. We have to keep control, as there’s a lot of risk attached to the level of debt we carry.”
Acquisitions take two forms. The big deals are “hub” purchases – where one of the biggest operators in a city is bought and becomes the centrepiece of the new Veezu hub. Ideally Veezu would buy the largest operator in the target city, as “we need to be in a position of dominance” Paul says.
Then there are “tuck-ins”, where smaller operators in the same region are taken over and become part of the bigger operation, maybe extending the area into a neighbouring town.
Hand in hand with the growth comes a recognition that it is the drivers that make the business work. “We have to treat the drivers with more respect,” says Paul. “Drivers shouldn’t be dealt with by admin staff. They should be dealt with by sales. They’re as important to us as our customers are.”
On the other hand, the drivers need to realise that if their earnings rise, so must the quality of service they provide. “We will be investing in educating. We expect them to get out of the car and help the customer.” And consolidating the industry by reducing the number of taxi firms in a city means drivers are less likely to jump ship to other operators, as there are fewer local alternatives.
The owner-driver model will be maintained rather than a major move toward an Addison Lee-style model, where cars are leased in and rented out to drivers. However some cars are now Veezu-owned and driver-rented, and this could grow to between 10 and 20% of the total fleet. “We’d rather the driver rented a new car from us than buy a secondhand one,” says Paul.
In addition, an incentive programme for drivers is being developed, so those who put more effort in get a better reward in return. “We have to get more drivers in, and we need more full-time drivers splitting their work between peak and non-peak times. We don’t need to be dictatorial, but we have to offer carrot rather than stick.”
So far, Paul is pleased with progress. “Some of the timings on acquisitions have slipped a month or two, but that’s just due diligence, lawyers and all the usual stuff. But we’re bang on where we said we’d be number-wise.”
One part of the UK is free of coloured pins on Paul’s wall map: London. “We’ve no appetite to go there at all,” he says. “London might as well be Mars, as it has a completely different dynamic. We leave that to the likes of Addison Lee who have experience there.”
While Veezu is the investment vehicle, Paul has decided that each hub will trade with a strong local brand. So Amber Cars will remain in Leeds; A2B will be the Birmingham brand, and so on.
Cardiff is the first hub to be upgraded. The Dragon Taxis brand is, coincidentally used on two of the Welsh operations, and Dragon will be the South Wales brand – Radio Cabs of Bridgend will be renamed.
At the Cardiff Hub, director Ryan Owen says he’s already feeling the benefit of Veezu’s corporate input, as expertise in HR, IT has helped him focus on the business. “It gives us a fresh look at everything across the board.”
Regular monthly meetings are held with the different hub bosses, so ideas are shared around. “It’s a great opportunity to work toward best practice,” Ryan adds. “We might have been hesitant to try something, but we find someone else has already done it – so we gain the confidence to do it too, and the whole business moves ahead.”
Corporate identities will be tidied up and modernised, with a degree of consistency. “We’ve got two different Dragon logos – we’re developing a new one to replace them both.”
“A Veezu company” may also feature in the future as a form of trustmark. “We may ease it in on some of our corporate branding,” Paul says. One option is a “sonic tag” like Intel or McDonald’s, on radio advertising.
Using Veezu everywhere was considered, but this strategy has downsides too. Take Uber, for example. “If something bad happens to Uber in Singapore, it affects the brand in London,” says Paul. “Some of our brands have been around for 50 years, so why do we want to take that away? We’ll strengthen and professionalise them, with rebrands, new websites, new apps.”
Also in the pipeline is the ability to offer a tiered service, with an executive level for business clients. The dispatch system allows this, and the app can be adapted, says Paul.
Courier work is also an area of expansion deliveries can be carried out by the same vehicles when there’s less demand for taxi work. Parcel companies, or even Amazon, could link in to Veezu’s system. And a more flexible service can be offered than most courier companies, as the cars are running 24/7.
It’s an area where the Veezu brand could be used, and Paul is adamant that any extra operations such as courier work must not impact negatively on the core taxi business. “You need to focus on the core,” he says. “Some businesses fall over when they try and do too many different things.”
Uber has set up shop in most major UK cities, and therefore is a direct competitor in each Veezu hub. But Paul is not concerned about what Uber does – or any other rival, for that matter. “We are not concerned about how they progress. We have to focus our energy on what we do. We’re not Uber. We’re Veezu, and we have our own mission.”