PassivSystems: Intention to float on AIM

April 1, 2014
Posted by in Energy Efficiency, Investment, News | Tagged , , , , , , , , , , , , , , , , , , , , |

PassivSystems, a provider of intelligent connected energy services for residential homes and for optimising solar PV assets, today announces its intention to seek admission of the shares of a newly formed holding company, to be named PassivSystems Group PLC, to trading on the AIM Market of the London Stock Exchange.

Dealings are expected to commence on AIM in April 2014. Altium Capital is acting as Nominated Adviser to the Group and Oriel Securities is acting as Broker.

PassivSystems was founded in 2008 by the Group’s CEO Colin Calder, a telecommunications technology entrepreneur and headquartered in Newbury, Berkshire. At a time when the UK consumer is under an ever increasing financial strain with respect to energy costs, the Group recognises that there is an opportunity in the home energy and appliance control market for the right combination of hardware and software as a service to deliver savings for consumers.

Software platform for advanced home energy management services

PassivSystems’ software platform is built to support a range of applications, with immediately deployable solutions available for home heating, hot water and solar photovoltaic (“PV”) management. The platform connects homes and the heating equipment used in them to a central platform to enable optimisation of energy usage, improve comfort levels and deliver control and guidance in a convenient manner to users.

Key products and services

PassivSystems currently provides two product lines:

  • PassivPro – a software platform for monitoring solar PV assets and helping to maximise solar PV yields and financial returns; and
  • PassivLiving – a software platform for managing domestic heating and energy costs and consumption, which a PassivSystem’s study shows an average of approximately 23% savings on a customer’s annual heating bill.

PassivPro supports over 15,500 homes and the Directors believe that the Group has assembled the largest collection of irradiance-adjusted data on rooftop solar PV in the UK optimising financial returns for asset managers and investors. The Group is working with a number of solar PV infrastructure investors and asset managers including its latest significant customer, Macquarie, to seek to expand its monitoring solution and extend the range of services it can provide to owners and managers of rooftop solar PV assets.

There are currently c.5,000 PassivLiving systems that have been installed. PassivLiving enables users to manage heating and hot water from any internet enabled device, optimising residential heating systems using algorithmic learning of a home’s thermal efficiency combined with information about the home’s occupancy status and external weather conditions.

In addition the Group provides a “managed services” offering for retailers, home infrastructure providers and off-grid oil suppliers, whereby PassivSystems provides and manages the installation of replacement heating controls and boilers with the inclusion of PassivLiving on a white label or joint branded basis. PassivSystems uses its connected platform to optimise installation procedures, minimise revisits and measure field operative performance.

Financial model

PassivSystems has multiple revenue streams and in the year to 31 December 2013, the Group had revenues of £3.5 million and made a loss after tax of £4.3 million which reflects the continued investment in the platform through increased development and staff costs.
Contracted recurring revenue – PassivPro Subscription Services: Over time PassivSystems’ solar PV monitoring and related services will continue to build an increasingly large and valuable subscription base, providing annual recurring revenue and margin. These solar PV portfolio monitoring services are typically on minimum contract terms of five to ten years.

PassivLiving Subscription Services: Sales of the PassivLiving services generate both hardware and subscription revenues. Many of PassivSystems’ competitors rely on hardware revenues only, however the Group believes that the continued customer relationship that a subscription-based model provides, presents the opportunity for reseller partners to provide value added services to their customers.

Hardware sales – sales of GSM meters and in-home devices by PassivSystems and its business partners generate up-front revenue and working capital benefits.

Short payback time – PassivSystems’ products provide opportunities for significant cost savings for their users. PassivSystems has continually value engineered the PassivLiving product to ensure that it has a well differentiated product in the market. Based on an average annual gas bill of £755 and an average of 23% savings, PassivLiving Heat payback time is now circa 18 months.

Highly experienced management team

Colin Calder is the founder and Chief Executive Officer of PassivSystems and founded the Group in 2008 following twelve months of extensive research into zero-carbon homes in Italy. Colin has 30 years of experience in the software and technology sectors, with a significant proportion of his career being involved in the bringing together of mobile and the internet. In 1996, Colin founded Paragon, a software company focused on synchronising data between mobile phones, desktop applications and web-based services, which he sold for US$500 million to phone.com in 2000.

As part of the IPO process PassivSystems has appointed Sir Roy Gardner as Non-executive Chairman of PassivSystems. Sir Roy was formerly Chief Executive of Centrica plc and was knighted in 2002 for services to the Gas and Electricity Industries. Sir Roy is also Chairman of Mainstream Renewable Power, a Non-executive Director of William Hill plc, a Director of Willis Group Holdings Limited and a Senior Advisor at Credit Suisse.

In addition PassivSystems has also appointed Robin Taylor as Non-executive Director. Robin is currently Non-executive Director of a number of software companies including EMIS Group where he is Senior Independent Director and Chair of the Audit Committee as well as a Non-executive Director of Fusionex International plc and Phoenix IT Group plc. The Group is also delighted to appoint Andrew Bud as Non-executive Director. Andrew previously served as Non-executive Chairman of PassivSystems Limited prior to Admission and is an experienced technology entrepreneur and leader with a career spanning 28 years in mobile communications. Andrew is currently CEO of iProov which he founded in 2011.

Recent contract awards and developments

In February 2014, PassivSystems signed a ten year contract with a subsidiary of Macquarie for the provision of solar PV monitoring services and a UK exclusivity agreement in relation to these services with Macquarie. Macquarie is funding a major rollout of solar PV installations in the UK, estimated at 20,000-25,000 systems, to both private and social housing where it is working with a number of installation and development contractors.

In addition PassivSystems is continuing to develop a range of additional software systems and services that will enable the Group to provide solar PV asset owners and managers with document management, asset tracking, workflow, audit and other managed services such as revenue collection and accounting reconciliation services. PassivSystems expects all of these services to be rolled out to the market during the course of 2014.

Multiple routes to market

Property and asset managers – PassivSystems is focused on selling its PassivPro products and services to infrastructure funders such as Macquarie, asset managers such as Gentoo and Homesun and registered social landlords such as Nottingham City Homes and Bournemouth Borough Council who can capture efficiency gains and benefit from the sophisticated data analytics.

Oil heated households – Oil-heated households (of which there are 1.1 million in the UK, excluding Northern Ireland) are currently burdened by some of the highest energy costs and can therefore reap significant gains from the reductions in energy consumption that PassivLiving delivers. A considerable proportion of off-grid households purchase oil through fuel buying groups and as a result PassivSystems has developed commercial relationships with some of the largest of these groups.

Retailers and home infrastructure providers – Due to increasing competition in traditional retail markets, blue-chip high street retailers have begun to expand into the services market including energy and home improvement, to provide a broader service offering to their customer base. The Directors believe that a similar trend is also emerging from the alternative energy providers (non Big Six) who are looking to break the perception of energy companies not wanting to help consumers reduce their energy consumption. By offering PassivLiving as a replacement heating control or with a replacement boiler, the retailer (or alternative energy provider) can provide an added value consumer offering that results in regular contact with the consumer through a branded control application.

Direct sales – To target individual homeowners, PassivSystems has launched a direct to consumer sales channel with an accompanying ecommerce site (www.reducemyheatingcosts.com). This B2C sales platform can also be offered as a white label service to PassivSystems’ channel partners.

Sizeable and growing market

The Directors believe that PassivLiving is operating at the intersection of three major market trends, namely the ‘internet of things’ and prevalence of smart phones, rising energy prices and new business models for the delivery of energy services.

Internet connectivity in the home has grown throughout the UK with 21 million households (83%) having internet access. Mobile connectivity has followed suit with Office of National Statistics data revealing that just over half of all adults accessed the internet on their phones. The UK home improvement market is worth £27 billion per annum according to the 2011 report prepared for the Office of Fair Trading, with circa 1.3 – 1.6 million replacement efficient boilers currently being installed in UK homes per annum. In addition there have been more than 500,000 rooftop solar PV systems installed in the UK since 1 April 2010.

Commenting on the decision to float on AIM, Colin Calder, CEO and Founder of PassivSystems, said: “Since 2010 energy bills in the UK have risen by 37% at a time when average earnings have only risen by 4.4%. With heating and hot water accounting for nearly 80% of UK domestic energy consumption and the average UK domestic dual fuel energy bill currently around £1,385 per annum we believe that the UK consumer is under an ever increasing financial strain. With public and political attention heightened by these prices, there is a real opportunity for PassivSystems to provide the market with a product that provides significant savings to current energy bills.”
“The Board is delighted to be announcing our intention to list on AIM. PassivSystems is operating in an exciting and growing market, with significant growth prospects particularly in the UK, Europe and the Middle East.”

PassivSystems also announces the appointment of Sir Roy Gardner as Non-executive Chairman. Commenting on his appointment Sir Roy Gardner, said: “I am delighted to join the Board of PassivSystems as Chairman, where I will look to utilise a wealth of relevant sector knowledge as well as valuable experience of public company life to assist the Group in its ambitious growth plans. Our aim is to become the market leader in the provision of smart technology systems for both domestic energy use and micro-generation energy monitoring and optimisation.”

 


PassivSystems employs 70 staff and operates from its headquarters in Newbury. Further information on PassivSystems can be found at www.passivsystems.com