APC Technology (LON:APC) is the Rochester based specialist distributor of electronic components and sustainability / energy saving products and services. Founded in 1982 and listed on the AIM market, APC Technology is a company I have been interested in for years, however, it is vastly different now to the company I originally invested in.
The components part of the businesses split into a number of autonomous units, which supply a wide range of specialist components and equipment to a range of customers within different sectors such as, aerospace, defence, display technology and specialist industrial and commercial markets.
It’s the strategic manoeuvers to capitalise on the energy savings and sustainability sector that interests me most about APC Technology. Following the recent news that the WM Morrisons orders are now back online and the completed company fundraising, Mark Robinson, the CEO of APC Technology has kindly taken time out to discuss various aspects of the business.
Q1. Hearing news that the WM Morrisons orders had restarted is most encouraging, could you please remind us of the reported value of previous orders from this customer and what the new orders involve.
Total value of historic sales to Wm Morrisons is in excess of £10m. This time around the nature of the work on the new orders is the same, though the ordering process has been modified a little. In the past they tended to place blanket orders for that would be delivered over a number of months, but this time around they are placing shorter term orders controlled by an overriding supplier agreement. This doesn’t give us quite the same visibility but the relationship is good and we are working together to make it work.
Q2. Are you seeing any growth yet from the North America arm for the products and/or services on offer by the company?
Yes, we are now seeing regular order intake from both sales teams; one based in Waterloo, Ontario and the other in Miami, Florida. The pipeline of opportunities has swelled over the past three or four months, partly as a result in us expanding our Americas operations and partly because of a changes in structure which has seen us appoint a CEO with a high tech, high growth background.
Q3. Bar the WM Morrisons orders, are you seeing this level of business or relationship from other customers?
Whilst I understand the fixation some investors might have on WM Morrisons, it doesn’t dominate our Minimise revenues to anywhere near the same extent that it has previously. There are several customers which we are now engaged who might well generate greater revenues in future. We’ve mentioned Royal Mail, Canary Wharf, Network Rail and there are many others that are now either customers or who could soon be customers.
Q4. Could you please summarise the sustainability products/service offering now available from APC Technology?
We are taking a finance driven approach to the sustainability sector and increasingly refer to sustainability first and foremost in terms of helping our clients develop ‘sustainable’ business models. To remain profitable, it is increasingly necessary for all commercial organisations to create strategies to improve operational performance by reducing costs and risks associated with the consumption of centrally supplied energy and water. These strategies should include buying better, managing consumption and, where possible, generating energy and collecting water onsite. We have expertise in each of these disciplines. We address the financial business case first with the environmental benefits coming as a natural by-product.
Our Minimise Group creates and implements sustainability strategies to improve financial performance and help meet environmental, corporate and legislative targets. Through our five specialist subsidiaries, we deliver an integrated range of innovative technologies, products and services, including energy efficiency, energy generation, water management, sustainability consulting and project financing – each with demonstrable ROI and designed to enhance both financial and environmental performance.
Our model is new and is differentiated from the many companies who promote individual products or services to the sector as we provide a single point of contact to address the whole problem;
- Minimise Solutions helps increase profitability by identifying ways its clients can meet energy efficiency, generation, water and waste reduction targets and to fulfil legislative and reporting requirements. Its experts assess businesses from an economic, environmental and social viewpoint, producing a detailed report and roadmap of recommendations that identify a path to increased profitability. It can help with budget allocation, performance monitoring and implementing educational change programmes to empower staff and help deliver maximum ROI. In partnership with the Open Energy Market Limited, also part of the Group, it offers the UK’s only fully transparent, online energy buying platform for commercial energy users. It can also advise on verification and compliance, in particular for ESOS, the Government’s Energy Savings Opportunity Scheme.
- Minimise Energy offers innovative energy efficiency technologies to help achieve on-going energy reduction goals and enhance profitability. Working in partnership with its clients, it provides an integrated range of products and services that can develop in line with an organisation’s evolving needs. These include LED lighting, energy monitoring and reporting, contactless power systems and optimisation for electric motors, gas and electric boilers as well as for air-conditioning systems. It delivers substantial savings and quick ROI, for both single and multiple sites.
- Minimise Water offers a complete range of water management and air hygiene technologies and services that help customers reduce the cost of compliance and save money on operating costs. With over 30 years’ specialist experience in these areas, its market-leading expertise enables it to gain a full understand its customers’ individual requirements and help them identify and minimise risk to keep properties, assets and people safeguarded. It does this by providing bespoke packages to meet the specific needs of each client, helping to drive savings across services including water treatment, water hygiene and Legionella control and air ventilation, indoor air quality control and local exhaust ventilation (LEV) testing.
- Minimise Generation takes advantage of opportunities for on-site energy generation using renewables. It maximises the potential to generate energy on site, drive operational savings, reduce carbon emissions and help meet carbon reduction targets. Its services span consultancy, design, supply and installation and its expert technical knowledge enables it to create the most efficient renewable energy solution for the location. With careful analysis and understanding of a business’s requirements, it builds tailored renewable energy solutions to give that business a competitive edge. Its product offering includes PV, Solar Thermal, PV-T, Heat Pumps, energy storage and CHP; all of which can be used in isolation or as part of an integrated renewable energy package.
- Minimise Finance funds energy efficiency and renewable energy schemes from the savings made in energy, maintenance and related costs. The clients enjoy significant cost savings with limited or no capital expenditure, as the investment is repaid from the savings it identifies and helps make. The finance is structured to enable the client to share in these savings from the outset, delivering immediate financial benefit.
Critically we deploy technologies owned within the Group rather than outsourcing products which are generally available elsewhere. By designing the system, supplying the product and carrying out the installation the supply chain is shortened and responsibility for performance sits clearly with Minimise, a clear advantage when capital costs are covered by third parties and recovered out of the savings achieved.
This model is the first of its kind and has the potential to accelerate the rate of deployment of ‘cleantech’ both in the UK and across North and South America.
Q5. APC Technology has recently raised a further £1.5m to strengthen working capital barely two
months after raising £2m in working capital, is the increased cash burn due to the recent Green Compliance acquisition?
The fund raises have been nothing to do with Green Compliance whatsoever. That business, similar to our distribution business, is very stable and has fairly predictable cashflows. The Rest of the business has been less predictable primarily because of the rate of new order receipts. The resumption of shipments to WM Morrisons plus significant business to Royal Mail Group and other customers for monitoring & control and LED lighting products generated a significant working capital requirement. This was supported by our institutional shareholders. Following the acquisition of Green Compliance we had sufficient working capital for what we anticipated in terms of revenue growth but our expectations were exceeded both before and after the end of 2015 so we raised more cash for the right reasons.
Q6. The past 12 months has been tough for the retail investor, what can they expect over the next 12 months from APC Technology?
The retail investors are not alone…the last 12 months have been painful for all our investors. At times it’s been very frustrating but I can honestly say that I’ve never been more excited about our prospects. We have a business model that the whole of the Company believes in and our marketing is being refined to ensure that our customers quickly understand the proposition and the advantages it offers them. We are creating huge potential and believe that we’re seeing the first signs of the revenue growth that we are aiming to develop over the coming months and years.
In terms of expectations, we have set ourselves aggressive revenue growth targets which, when achieved, will translate into steady earnings enhancement in future periods.
Ticker code: APC, Shares in issue: 90.59m, Current SP: 25.25p, Market Cap: £22.87m, 52 Wk Low: 21.25p, 52 Wk High: 59.88p
Thanks Mark for taking the time to discuss the various business aspects and for sharing your thoughts.
The interviewer holds shares in APC Technology.
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