Green Compliance goes for growth

Refocused property regulation business Green Compliance, chaired by Bob Holt, has raised £10 million from enthusiastic City backers to finance acquisitions in attractive ‘blue-collar’ compliance markets. Holt, famed for creating substantial value with social housing maintenance star Mears, has enticed proven support services entrepreneur John Prowse to join as CEO, in a development that suggests this small business is on the verge of big things.

Formerly named Wyatt, Cirencester-based Green Compliance lost more than £1 million in the year to last March. However, its recent corporate transformation leaves it well placed for profitable growth in some growing compliance markets. 2008 saw the group make an exit from delivering online fire assessments for smaller companies, a move leaving Wyatt focused on the employment services sector. The subsequent acquisitions of HIP, a supplier of property sector home information packs, and energy certificates specialist CEPP in April last year established a growth platform in property regulation and resulted in a name change to Green CO2.

Yet the developments that really got the market talking occurred at the end of last year. Green CO2 announced that it was offloading its loss-making employment services division to management, wholly focusing the business on energy services – hence its new moniker, Green Compliance. In addition, a share consolidation occurred and Holt had no problems in placing £10 million worth of shares with investors convinced by the new strategy.

The energy services division helps clients comply with energy and air conditioning certification requirements under the EU Energy Performance of Buildings Directive. Though this part of the business has hitherto lost money, profits are approaching.

Prowse’s appointment, to oversee the core business and a new acquisitive push, represents a real coup. Between 2000 and 2007, Prowse was managing director of Iron Mountain’s European operations within records and information management. He went on to head up the compliance division of stock market darling Connaught.

Now, armed with its placing funds, Green Compliance will look to make acquisitions taking it into other ‘blue-collar’ compliance markets. These will be in ‘our stated target areas of pest prevention and control, water hygiene or fire prevention’, says Holt, ‘and you can expect us to be making two or three acquisitions in the first quarter of 2010, while continuing to grow our property regulation business’.

He insists that water, pest and fire are highly fragmented markets in which Green Compliance can potentially take market share by offering a superior service at a competitive price.

Meanwhile, increasing urbanisation and a growing rat population should ensure the onset of increasingly onerous regulation in pest prevention and control, while the fire prevention sector offers Green Compliance yet another splintered market ripe for exploitation.

While Green Compliance’s recent financials have hardly set the world alight – an overall loss of £1.052 million was incurred for the half to September – it has since shed non-core, loss-making operations and already undertaken the necessary investment in marketing its property regulation businesses.

If knowledgeable support services operators Prowse and Holt can deliver the goods on the acquisitions front, Green Compliance’s market value should begin to grow at a rapid rate. At that point, the duo should have little problem financing further earnings-accretive deals. ‘We are a growth story,’ assures Holt, ‘and you can expect us to be going back to the City.’ With those words in mind, the shares are well worth buying and locking away for the long term.