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APC Technology Group PLC Trading Statement November 2014


Click here to listen to the interview with CFO Richard Hodgson


APC Technology Group PLC (“APC” or the “Group”)

Trading Statement


APC Technology Group plc (AIM: APC), the provider of technologies and services intended to help improve organisational sustainability and specialist distributor of electronic components, is pleased to provide an update on its current trading and anticipated results for the year ended 31 August 2014.


Highlights



Financial Performance


The Group is pleased to report that its results for the year ended 31 August 2014, which are expected to be released in January 2015, are in line with market expectations.


Working Capital


The Group is also pleased to announce that it has agreed a new £6m working capital facility with ABN Commercial Finance which will allow it to consolidate all of its working capital facilities. Negotiations are also underway to consolidate all of its clearing banking arrangements.


Customer wins and recurring revenues


During the period under review, the Group’s energy efficiency-related business, Minimise Energy, made significant progress in its objective to further expand its customer base and reduce reliance on any one customer. A number of initial orders, received from one of the UK’s largest food and clothing retailers and one of the country’s foremost high street banks, have been supplemented by further orders post year-end from those same customers. In addition, a contract has now been received from the UK’s largest logistics company and from a number of organisations in North and Central America, including a mid-sized food retailer and a national restaurant chain. This new business includes orders for LED lighting in combination with monitoring and control systems.


While the relative scale of these contracts is, in some cases, significant in its own right, it is important to recognise that a number of them include a sizeable element of recurring revenues. These recurring revenues relate to the generation of energy-related data and the provision of consulting services. These services enable clients to utilise the data in order to drive a reduction in their consumption of utilities through the implementation of technology and behavioural change, and are typically long term contracts extending to a minimum of three years.


Strategy


During the past year, the Board has clearly defined and begun to implement an expanded strategy for APC’s sustainability-related businesses. The success of Minimise Energy in LED lighting and energy-related monitoring and control systems has funded the investment required to enable the Group to capitalise on the increasing interest in the wider sustainability agenda, with the energy efficiency focus of Minimise Energy now supplemented by the water management capabilities provided by the now wholly owned subsidiary, Green Compliance Limited, and the addition of sustainability focussed consulting and project financing services. The recent contract win at the UK’s largest logistics company contains a significant element of recurring revenues from long term energy management consulting, which the Board considers to be a critical part of a wide sustainability service and technology offering. The Group is in the process of developing proposals for energy efficiency service agreements (EESA’s) for a number of customers which, if successful, would lead to significant roll out of energy efficiency-related technologies over the next few years. The Board believes that these very positive recent developments represent a strong validation of the Group’s overall strategy.


Expansion & Integration


Overall, the Board considers that the variety of products and services involved in new contracts in the UK and elsewhere is evidence of early success in the delivery of its strategy to expand the product and service offering and to extend operations internationally. The Board remains committed to strengthening the Group’s technical capabilities and anticipates the release of a number of new products and services during the current financial year. Additionally, the Board is now planning to increase investment in order to drive further progress in North and Latin America.


Following the acquisition of Green Compliance, significant steps have already been taken to drive down the operating costs for the enlarged Group. The additional costs to be incurred by strengthening the senior management team are expected to be more than offset by cost reductions elsewhere across the Group. These changes, which remove a layer of management, are providing attractive career development opportunities for key individuals already within the Group. In addition, a number of integration activities have been initiated. Cross-selling activities across the Group are underway and have already resulted in the creation of a number of proposals for energy-related products and services plus water management-related monitoring systems. Accordingly, the Board is very satisfied by the progress that has been made since the transaction was completed on 12 September 2014.


Strengthening of the Senior Management team


In addition to the previously announced appointment of Richard Hodgson to the role of Group CFO and as a Director of the Company, the Group has moved quickly to further strengthen the senior management team with the appointment of Andrew Shortis who assumes responsibility for APC’s sustainability-related subsidiaries and associate companies as well as direct management responsibility for Minimise Energy.


Also, considering the aforementioned successes in the Americas, the Board has moved to strengthen operations there with the appointment of Rod Foster as Chief Executive of Minimise Energy Americas. This appointment is part of a strategy to increase investment into business development across North, South and Central America which together consume an estimated thirteen times more power than the UK.


Current Outlook


Trading in Advanced Power Components, APC’s electronic component distribution business, and in the recently acquired Green Compliance, continues to be stable and is in line with expectations after the initial two months of the new financial year.


Minimise Energy continues to make progress as it builds revenues across an ever-expanding customer base. With the scale of contracts under negotiation increasing, and the coordination of sales activities with Green Compliance already well underway, the Board remains very optimistic as to the Group’s future prospects.


Mark Robinson, CEO of APC Technology Group PLC, commented:

“The momentum in the business is encouraging and I firmly believe that we are still only scratching the surface in terms of capitalising on the market opportunity which exists across the sustainability sector. The Group has continued to benefit from an ever-increasing demand for its services and has ambitious plans for further growth which I look forward to reporting on in the coming months.”



Mark Robinson

Chief Executive

APC Technology Group plc