Playing it cool
Warsaw-based Energy Investors (EI), a company specializing in the construction of heating, ventilation and air conditioning installations (HVAC), is planning to debut on a stock exchange by November of this year. The management board has not yet decided which bourse the company will eventually enter, though company officials say the Warsaw Stock Exchange has the edge.
Still, Mirosław Skowron, president of EI, says the company is "not excluding a debut on the London Alternative Investment Market (AIM). The final decision will be made in May."
Maciej Wiewórski, an analyst from CDM Pekao, believes that EI should float on the WSE. "I don't know whether investors in London will be able to appreciate the growth of the sector that we have ahead of us," says Wiewiórski.
Preparation stages
At the moment, the company is transforming its structure from limited liability to joint stock. The company is also in the process of choosing a brokerage house. According to Skowron, the issue prospectus will be ready by the end of September, but EI already has its development strategy ready.
"Our target is to become the leader on the HVAC market in Poland," says Marek Zdanowicz, chairman of Energy Investors' supervisory board. EI plans to garner some zł.15 million from the IPO, and wants to spend most of it focusing on its domestic operations.
"[We will] mainly [invest] in further development in Poland," says Skowron. "We want to open three new offices outside [the company's headquarters in] Brzeg and use the acquired funds to strengthen our professional personnel."
Additionally, the construction of three new factories will consume some zł.9 million. Once built, they will help the company compete in markets across the country.
CDM Pekao's Wiewórski cites that the intention to focus on the Polish market is another reason why EI should be listed in Warsaw.
However, company officials note that some of the acquired funds will also be invested in EI's Ukrainian branch. "For many years we've had a Ukrainian branch, which specializes in the construction of boiler houses and boiler installations. Currently, we are learning the specifics of the market. In the future, we want to implement our experience acquired in Poland and be prepared for the boom which will take place on that market," says Skowron.
Financing acquisitions
EI's management board emphasizes that the final value of the IPO has not yet been decided.
"We want zł.15 million for our organic growth in Poland. Apart from that, we are now negotiating mergers and acquisitions with four companies from the HVAC market in Poland. The final value of the IPO will depend on the results of the talks," says Skowron. "Then, we will also want to gain additional funds for further acquisitions in Poland."
EI plans to take advantage of the fact that the HVAC market is fragmented and is using the impending consolidation as an element of its strategy. The firm is interested in acquiring smaller companies consisting of around 50 employees. Currently, EI employs just twice that many. In terms of market share, Skowron says that depending on the source, EI's slice of the market ranges from 0.7 to 1.5 percent of the total HVAC market in Poland.
"There are no companies [in this sector] in Poland that are strong on a nationwide scale," says Skowron. "We want to use the acquired funds to take over firms which are strong in their local markets."
Steady growth
Over the past few years, financial results have steadily improved at EI. Christopher Jasiak, the firm's financial director, says within the last three years the company's turnover has grown sixfold. He credits the country's construction boom and the company's growing market share for the growth.
"We close the financial year in June, but we have already seen turnover double compared to the last [fiscal] year's figure" adds Zdanowicz.
During the current fiscal year (July 2006-June 2007), EI plans to obtain a net profit of zł.3.2 million on zł.52 million in revenues. This would constitute increases of over 300 percent and 94-percent, respectively, over the previous fiscal year, when EI made a net profit of zł.720,000 and earned revenues of zł.26.8 million.
"The large growth results from the fact that the company has concentrated not only on public orders, but also on private investors, where we provide HVAC installations and are a general contractor for complete projects. In 2007/2008, we expect the rapid growth to continue," says Skowron, but did not reveal any specific figures.
Building benefits
Skowron believes that over the next few years, the market will continue to grow thanks to Poland's construction boom. The company estimates the total value of the HVAC market could reach zł.2 billion by the end of 2010, compared to zł.1 billion this year.
Since its establishment in 2001, the company has provided solutions for over 60 construction projects for contractors operating in the residential market, public administration, health care, military complexes, factories and business.
"In 2006 we saw a 17.5-percent growth of the market. This year we estimate it will rise another 15.3 percent," says Sylwia Prośniewska from ASM - Market Research and Analysis Center Ltd. "The prospects for development in the sector are optimistic. This is confirmed by a high demand for apartments as well as the opportunity for EU fund absorption."
Skowron says the growth of the company may be influenced by European Union structural funds which are designated for thermo-modernization, but he expresses doubts as to whether the structural funds will be distributed properly.
Wiewórski agrees, saying the funds must not be wasted. "In each part of the construction sector we see double-digit growth. There are no risks in either the short- or medium-time perspective," he adds.
According to the Central Statistical Office (GUS), work connected with HVAC amount to some 13 percent of new investments. GUS and PMR Publication estimate that the value of construction installations will grow by some 14 percent over the next few years. In 2002 it amounted to zł.5.8 billion and in 2009 it may reach zł.11.5 billion
