Much has changed at Active Energy Group (LON:AEG) since Proactive Investors last published an in-depth profile of the firm.
Back then, in January 2010 when the firm was known as Cinpart, Active Energy was focusing on taking an early lead in the ‘voltage optimisation’ market while still operating its poorly-performing legacy businesses: Gasignition and Derlite.
18 months on and the firm has disposed of Gasignition and Derlite (saving it some £150,000 per annum in costs while raising much-needed funds for the group), and has taken over another business in a merger designed to transform Active Energy into a one-stop shop for energy efficiency services and products.
May’s acquisition of Red Line Engineering heralded a change of strategy for the group in which Active Energy now plans to turn itself into what it describes as “an end-to-end environmental electrical services and solutions business”.
The group’s new business model is based on offering integrated services that cover the broad spectrum of environmental issues including energy saving, renewable energy creation, recycling and carbon management.
Across these sectors, Active Energy will provide a fully-integrated process, starting with auditing and recommending solutions for clients through to installation of the appropriate technologies.
Of course, it will still be selling VoltageMaster – its range of transformers aimed at helping non-domestic customers save energy and to which it retains worldwide rights. But Active Energy now plans to sell a broad range of “best in class” energy-saving products such as energy-efficient lighting, for example.
Red Line already delivers complex engineering solutions, from design through to installation and maintenance, and the firm specialises in the rail industry. And because of this track record, Active Energy’s management team sees Red Line’s acquisition as allowing it to significantly enhance the firm’s recurring revenue streams.
“The increasing demand for environmental solutions across a broad spectrum of issues is creating the potential for significant growth,” says Gavin Little, who was appointed executive chairman of Active Energy at the time of the merger with Redline in April. “The group already has relationships and expertise, now including within the rail industry, and the board is confident that it is well placed to realise its growth ambitions.”
Little has joined Active Energy’s board to lead its growth phase. He brings 20 years’ experience in sales, marketing and general management experience to the company and he was most recently at British American Tobacco as chief executive officer of its Northern Europe region. There he was responsible for BAT’s strategy and operations, overseeing the restructuring and corporate development of the £700 million turnover business.
He has been joined by three new operational directors: Laurence Unwin as managing director, Andrew Smart as operations director and John Tarbet as new business development director. Active Energy says that all three men have extensive experience of winning and delivering major engineering and environmental projects.
As far as the firm’s voltage optimisation operation is concerned, it is business as usual with Active Energy having signed several new contracts this year.
In January, the firm – which focuses on the non-domestic end of the market – secured a new contract to supply five VoltageMaster units to the National Physical Laboratory at its site in Teddington, Middlesex, as well as signing deals with Norland Managed Services, a UK provider of facilities management support services, and Edinburgh Council.
Meanwhile, strategic partner SSE Contracting – a subsidiary of Scottish and Southern Energy – has been helping Active Energy to win new customers.
In total, the contracts signed in January will generate more than £400,000 in revenue for Active Energy during its current financial year.
SSE Contracting was also involved in December's winning of a contract with the National Trust to install VoltageMaster at Penrhyn Castle on the Menai Strait in North Wales – an attraction that had more than 230,000 visitors last year.
The National Trust has a target to reduce its use of fossil fuel energy by 50 percent by 2020, with energy efficiency forming a key part of its plans, so further VoltageMaster deals with the organisation should not be ruled out.
For those who do not already know about how voltage optimisation works, the theory is quite straightforward. It is simply a method of reducing electricity consumption by lowering the single-phase voltage that enters a building to 220 volts. This is a particularly effective means of saving energy in the UK because there is a national problem of ‘over-voltage’.
While the supply voltage is permitted to be within a range of 207V and 253V within Europe, in practice the UK grid’s voltage is supplied at 242V compared to the average European voltage of 220V. Given that almost all electrical equipment manufactured in Europe and the UK today is rated at 220V, there is an opportunity for electricity users within the UK to make energy savings of more than 10 per cent just by transforming the voltage that goes into buildings.
Results released by Active Energy late last month showed that in 2010 revenues from continuing activities almost trebled to just below £3 million (2009: £1 million) as the firm’s strategy to build a presence in the voltage optimisation market gained traction. The loss for the year also increased, from £0.9 million in 2009 to £1.4 million in 2010.
Cash balances at 31 December 2010 were down slightly compared with a year earlier – £652,044 compared with £840,122 – although the firm also raised £1.4 million during the year.
In May this year, the company also completed a placing to raise £1.8 million. These funds are being used to support delivery of Active Energy’s new strategy.
Active Energy is on what is turning out to be a long journey for its investors, which began when it decided to embrace the voltage optimisation market more than two years ago. Now that the firm has beefed itself up with the acquisition of Red Line, and a bigger team of managers with a track record of winning and delivering large engineering and environmental projects, those investors will be looking for Active Energy to pass some major milestones.
Market: AIM
Symbol: AEG
Price: 2.65p
Market cap: £5.2m