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Aggregated Micro Power Holdings plc: THE INVESTMENT CASE

Aggregated Micro Power fills in northern gap with Billingtons buy

AMP acquired Billingtons from Drax for £2mln. Of that, £1.6mln is being paid in shares to give the power station operator just over a 4% stake
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INVESTMENT OVERVIEW: AMPH The Big Picture
Billingtons has four depots

Aggregated Micro Power Holdings PLC (LON:AMPH) is a classic study of a vertically integrated business.

The group installs commercial size biomass-fuelled boilers used by schools, care homes and business parks.

WATCH: Aggregated Micro Power acquires wood pellet group Billingtons

These are financed by two special purpose vehicles AMPIL 1 and 2, a method that frees up capital to fund more new projects.

AMP provides fuel for the boilers (wood chip and wood pellets) and commissions and installs them on a long term contract.

Billingtons fills northern gap

The acquisition last year of Forest Fuels made it one of the UK’s largest woodchip suppliers.

Recent acquisitions have taken it deeper into wood pellet supply.

Latest purchase, Liverpool-based Billingtons, fills a gap in the network in the north-west, chief executive Richard Burrell told Proactive.

“We can now serve most customers in most prices at very competitive prices and quality.” 

Peaking plant progress

AMP is also branching out into power supply and has over 80Mws of grid balancing projects with planning permission and grid connection offers. These peaking projects kick-in when demand is overwhelming the grid.

In January, funding (£14mln) came through for its first peaking plant in Kent, a project that will comprise some 21Mw of natural gas reciprocating engines.

The finance is being provided by funds managed by Triple Point Investment Management.

“AMPH will earn project development fees, on-going operation and maintenance fees and has shares in the project which are subject to a hurdle return being achieved by Triple Point,” said Burrell.

Drax now a shareholder

AMP acquired Billingtons from Drax for £2mln. Of that, £1.6mln is being paid in shares to give the power station operator just over a 4% stake.

Based in Liverpool, Billingtons supplies 40,000 tonnes of premium wood pellets a year to more than 1,500 commercial customers from four depots. 

WATCH: Aggregated Micro Power's' Richard Burrell 'delighted' with full year results

Revenues in 2016 were £6.8mln with a loss before tax of £430,000, including a management charge to Drax.

Burrell said Drax would be a long–term investor and the two companies will work together on a number of projects and it was an excellent fit with Forest Fuels.

A month previously, AMP acquired the wood pellet assets and customer base of CPL Distribution, a business turning over £5.1mln annually.

Last year Forest Fuels reported revenue of £15.8mln and profit from operations of £426,000 including a tax credit, but adding CPL would mean an additional profit of £137,500, AMP said at the time.

Acquisitions a kicker

Total revenues in the year to March 2017 overall jumped to £19.7mln (£1.3mln for 15 months), while the AIM-listed group also posted a profit of £930,000 (£7.7mln loss).

Burrell said acquisitions over the past year had driven the improvement and will give sales a further kicker in the current year. 

"The acquisition of three fuels businesses, which will see further turnover growth next year reflecting a full year's trading, has made for a transformational year at AMP.”

Assets under management grew to £66m comprising operational boilers, in-development peaking plant assets and other biomass assets on long term contracts.

Shares rising

Investors have started to recognise the progress being made with the shares up by 21% this year to 97.5p and valuing the group at £37mln.

 

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Aggregated Micro Power Holdings plc Timeline

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