UPDATE - Ex-British Gas service arm mulls flotation
Date: 08-Oct-01
Country: UK
Author: Andrew Callus
GasForce chairman Jack Fallow, who led a 1996 management buyout, would not be drawn on the timing or value of any flotation, but he is not phased by the harsh business climate that has caused a raft of initial public offerings to be pulled or delayed this year.
"We are considering a range of options and are not ruling out anything which may offer attractive opportunities for future growth," Fallow told Reuters in an interview on Thursday.
Fallow sees the group fitting "fairly and squarely into the support services sector," though it has no real peer group with which to compare itself. We are the only national service company of our type in the UK," he said.
UK support services companies trade on an average historic price earnings ratio of about 18 times earnings. Adjusted for a 200,000 pound distribution to employees, GasForce made a net profit of about one million pounds ($1.5 million) last year, putting the potential value of the company at around 18 million pounds.
Fallow and his shareholding employees believe they have transformed a business that haemorrhaged cash under the old British Gas empire into a leading specialist in design, installation and maintenance of heating systems for commercial, industrial and public service premises.
In the year to May 2001, sales grew by nine percent to 23 million pounds and operating profit by 37 percent to 1.1 million. This year it sees operating profit of 1.5 and 1.6 million.
But for Fallow, this is just the beginning.
GREEN PLAYER
The UK's Climate Change Levy that taxes business energy use, together with enhanced capital allowances for companies that make energy saving investments, leave GasForce at the epicentre of a growth industry in energy saving products and services, he says.
"This is a particularly exciting time in the development of the energy market," he said. "GasForce is well positioned to capitalise on the growth that will come from these structural changes."
According to industry sources, the group is on the verge of announcing its first contract in this area with a major UK company that is already one of its 70,000 customers.
The customer is to invest in GasForce's Burner Management Units (BMU) technology, which can reduce a boiler's burn rate by up to 20 percent without affecting its heat output.
GasForce has also come up with a special payment package to tempt customers. It is called Zero Cost Option, under which customers pay their installation bill at a quarterly rate that reflects projected energy savings.
DOWNTURN GOOD FOR BUSINESS
Even the gathering clouds of economic slowdown are good for business, Fallow says.
"In a recession, firms pull back on capital spend. For GasForce, that means that there is more old plant around and that means more servicing and breakdown work."