Wednesday, 25 August 2010

Bglobal in green energy drive

Our need for energy - secure, sustainable and, crucially, affordable - has
never ranked as highly on the global political agenda. These exceptionally straitened times are causing organisations large and
small to rigorously examine their outgoings. So it stands to reason that any
company that can help businesses both cut costs and reduce their carbon
footprint should be well placed for profitable growth.

Bglobal, the smart metering specialist floated on AIM in 2007 with a £7.75
million fundraising at 50p, is one such case in point. Led by CEO Tony
Barnes, Bglobal blazed the trail by establishing smart metering as a viable,
low-cost opportunity for every business in the UK.

Capitalised at a shade over £40 million, this is a company on an impressive
growth curve as it rolls out smart meters
and data management services that
are pivotal to the development of a low-carbon economy and the so-called UK
'smart grid', one of the utility sector's current buzzwords. Its technology
and services are also helping an ever-broadening array of businesses comply
with energy management targets and the Carbon Reduction Commitment (CRC).

A slow burner on AIM to date, Bglobal has successfully passed through the
pilot phase with customers and looks well placed to profit from
international energy efficiency drives and the green agenda. Not only does
smart metering have the support of the new coalition government, but energy
suppliers are now implementing smart metering 'business as usual' strategies
in industrial and commercial markets, while formulating strategies for the
residential market.

Having traded profitably since October and won a succession of valuable
contracts over recent months, Bglobal is worth buying for its growth
prospects in the smart metering market as well as the ambitions of
management, who hope to grow the business overseas and eventually take it
into the FTSE 250.

'Our business has an opportunity as we move toward the world of the smart
grid,' opines Tony Barnes, 'and while we are currently focused on the UK
market, with 1.5 per cent of all the power in the UK now being settled by
our meters, we are very much a global play.'


Though still small, Lancashire-based Bglobal has nevertheless made a huge
impact on its chosen industry. Before it entered the energy market fray,
there was no model for delivering smart metering economically and
efficiently to millions of UK businesses. Only the largest UK electricity
consumers could benefit from accessing energy profile data. Everyone else
was on estimated, often incorrect, bills, bereft of the data that could give
them real control and drive down costs.

It is no exaggeration to say that the company has completely changed the
market landscape, since it provides remotely read, fully automated meters to
businesses, large or small, at a fraction of the price. Bglobal has already
installed more than 100,000 business meters and become the number one UK
provider of smart metering in the so-called non-half-hourly market, covering
most of Britain's homes and businesses, helping them to reduce costs, cut
carbon emissions and gain real control over when, where and how they use gas
and electricity.

As the enthusiastic Barnes explains, 'The model we pioneered has been
universally adopted. We brought the whole "end-to-end" proposition to the
market, we have first-mover advantage and still, to this day, what we are
doing is groundbreaking stuff. There really isn't a company like us in
either the UK or Europe'.

Under Barnes, Bglobal's strategy centres on the cementing of its position as
UK market leader in smart metering solutions by installing meters and
signing up lucrative contracts. In an impressive year to March, the group
installed more than 40,000 meters (taking the number of meters in operation
to 100,000), while its services revenues burgeoned by more than 130 per cent
to £2.26 million.

Services sales will grow again strongly this year on the back of further
meter installations following a busy period for contract wins last year. New
smart metering services deals were signed with British Gas Business and
Npower and sizeable orders won with new entrants, all with smart metering at
the heart of their strategies, into the UK electricity market - namely
Gazprom, Dual Energy Direct, MA Energy and BES Electricity.

Besides deals with energy suppliers, Barnes and his board place much
strategic emphasis on smart metering deals secured directly with clients
across an array of sectors. Some 45 new direct contracts were clinched last
year, with the likes of Transport for London, Aviva, Capgemini, Land
Securities, Greater Manchester Police, Dorset Fire Brigade, JD Sports and
Manchester Metropolitan University.

Moreover, Bglobal's growth prospects have been seriously enhanced following
the recent £12.8 million takeover of energy data management concern
Utiligroup, an acquisition financed with the help of a £6.76 million funding
at 38p. Utiligroup, the parent of Utilisoft, from which Bglobal was originally spun
out, has secured recent new business with EDF Energy and Western Power
Distribution and should enable Bglobal to position itself as a so-called
'end-to-end' solutions provider, with the ability to develop propositions
for new revenue-generating activities including micro-generation feed-in
tariffs, pre-payment metering and pay as you go.


Non-executive chairman Peter Kennedy, a Lancashire-based serial
entrepreneur, established forerunner Bglobal Metering in 2003 from within
the aforementioned Utilisoft, the specialist in energy market
business-to-business transactions in the UK, Australia and Europe, which he
had co-founded in 1997. An entrepreneur of proven value-creation
credentials, he enjoyed earlier success with QCL Systems, which he
co-founded in 1983 and where he was managing director before its eventual
sale to Optim in 1988.

Exuberant hot seat occupant Tony Barnes has spent more than a decade
managing high-growth technology businesses, having previously been managing
director of Utilisoft. Barnes, a former Granada TV newsreader, boasts
significant experience in the technology, media and communications
industries of Europe, the Far East and Australia, is highly motivated and
has global ambitions for Bglobal.

Overseeing the group's increasingly attractive numbers is finance director
Nick Kennedy, an Oxford graduate who earned his accountancy spurs with
Deloitte & Touche and added further strings to his bow during a two-year
stint with Grant Thornton Corporate Finance. Kennedy knows the business
inside out, having joined Bglobal Metering as financial controller at the
tail end of 2005. Today, his key responsibilities for Bglobal encompass
everything from forecasting to sourcing its meter rental securitisation

Bringing a high degree of quoted company experience to the boardroom table
is James Newman, who chaired the business from IPO until April 2009 and now
acts as senior independent non-executive director. Newman currently chairs
two AIM-listed businesses, the recycling products play Straight and pubs and
petrol forecourt monitoring systems specialist Brulines. His CV also
includes spells as chairman of Waste Recycling Group and as a non-executive
director of Richmond Foods, before their respective takeovers in 2003 and


It hasn't all been plain sailing for investors since Bglobal's IPO. As well
as a slower than expected take-up of smart metering in the market, progress
towards profitability was interrupted by the withdrawal of one of the
group's meter funding sources in 2008, causing a delay in rolling out
orders. However, recent trading and growth rates have proved highly
encouraging, with annual figures to March meeting the market's expectations
and showing substantial top-line growth once again as smart meter
installation volume targets were achieved.

Sales were more than 99 per cent ahead at £13.23 million and Bglobal, which
has traded profitably since October, reported an 84 per cent reduction in
pre-tax losses from £4.28 million to £670,000 and closed the year with £2.2
million cash in its coffers. According to Barnes, last year's progress
reflected the fact that 'several energy supplier customers moved their
commercial and industrial smart metering activity from trial phase to

In a further positive development, high-visibility services revenues grew by
more than 130 per cent to £2.26 million and should continue to build
strongly following high volumes of meter installations as well as the
Utiligroup takeover. Prospects at Bglobal are further underpinned by an
order book that already covers analysts' forecast revenues for the current
year following the aforementioned raft of contract wins. And Barnes believes
further deals will follow, stating that 'we are now working on building
orders for FY2012 and beyond'.

It is also important to note that existing forecasts ignore the potentially
huge, though certainly longer-term, opportunity in the emerging residential
metering market. Indeed, Barnes and his team are developing a fully funded
smart metering 'rollout and read' proposition, in order to leverage the
company's expertise in the business market.


For the current year to March, house broker Charles Stanley forecasts
dramatic growth in turnover from £13.2 million to £29.6 million, from which
Bglobal should swing strongly from losses to pre-tax profits of £4.4
million. By March 2012, the broker believes the top line could surge to more
than £39 million, driving pre-tax profits north to £6.2 million.

Based on forecast earnings per share of 4.3p this year and 5.95p next,
Bglobal shares, which have traded between 52-week highs and lows of 56.25p
and 20.75p, are currently swapping hands on a lowly prospective p/e of just
over ten times, which drops to roughly seven and a half times for the
following year.

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