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Environment The Suite Spot for PEH
BY JAMES DUNN - 06/05/2016 | VIEW MORE ARTICLES BY JAMES DUNN

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PEH - PACIFIC ENVIRONMENT LIMITED


“Caring for the environment” is something virtually everyone says that they do: it’s not something you can be against. But few companies live the mantra like environmental technology and consulting company Pacific Environment Limited (PEH) – its business gives companies and governmental organisations the actual tools they need to care for the environment, and minimise their impact on it.

PEH provides environmental consulting, monitoring, predictive management and reporting solutions. The company began as a consulting business, but in 2011 it launched a technology product that incorporated a lot of its consulting expertise, developed in the field. The product, the EnviroSuite software platform, was developed to monitor, gather and collate environmental data from across an organisation’s operations, so as to diagnose and predict problems, and automate management responses.

The original expertise of Pacific Environment was in the air quality sector, but the acquisition of New South Wales-based environmental services group DLA in September 2014 expanded the service offering from air-quality to the soil and water assessment and remediation segments of the market. This expertise was immediately built-in to EnviroSuite.

EnviroSuite had found a ready niche in the resources industry, but also gained traction in the heavy industry, ports, hospitals and government sectors. Its client list includes BHP Billiton, Rio Tinto, Anglo American, Gladstone Ports Corporation, Wollongong Coal, Canterbury Regional Council (NZ), Sibelco Australia and New Zealand, The Wesley Hospital (Brisbane), Incitec Pivot, Pacific Aluminium, Origin Energy, Glencore Xstrata, Hancock Prospecting, WestConnex motorway and the City of Sydney.

Two years ago, Pacific Environment looked at its business and realised that it was top-heavy. More than 90 per cent of its revenue came from consulting, and more than 90 per cent of revenue came from Australia. The company set itself the goal of turning those around, with EnviroSuite as the vehicle.

In doing so, Pacific Environment is in the process of transforming itself.

The critical change was to take EnviroSuite to the cloud. Accordingly, Pacific Environment spent the 2014-15 financial year re-engineering EnviroSuite from a server-based platform to a cloud-based Software-as-a-Service (SaaS) application, comprising seven modules, each designed for a specific application.

The modules are:

  • Customised weather forecasting
  • Air quality
  • Noise
  • Water (surface water, groundwater and soil moisture)
  • Complaints management
  • Blasting operations management
  • National Greenhouse and Energy Reporting (NGER) and National Pollutant Inventory (NPI) reporting

EnviroSuite gives organisations instant access to real-time environmental data, collected from multiple monitoring systems, across all of its operations, wherever they are in the world. Archived, real-time and predicted environmental data is stored in the cloud and is securely shareable on a desktop, tablet or smartphone.

The system allows automated reporting and the ability to provide instant analysis of conditions, such that team members anywhere in the world can be looking at the same data or reports. Team members can be alerted to any issues – or predicted potential issues – by SMS or email. Customers are able to take only the modules they need.

EnviroSuite’s prices are based on a facility basis, per site. The company says a typical site, which might have two or three modules, would pay $60,000 to $80,000 a year.

EnviroSuite’s prices are based on a facility basis, per site. The company says a typical site, which might have two or three modules, would pay $60,000 to $80,000 a year.

The first international sale for EnviroSuite came in December 2014 when Canterbury Regional Council took up the service. Based in Christchurch, the council is responsible for servicing New Zealand’s largest region. In October 2015 the company made its first sale into Asia, with Thai gold miner Akara Resources (a subsidiary of the ASX-listed Kingsgate Consolidated Limited) signing on.

That was followed in December 2015 with the signing of the first US customer, Sigma Space Corporation, which produces next-generation lidar (light detection and ranging), laser ranging, spectroscopy, and radiometry instrumentation for remote sensing, for a range of private and government clients, including NASA and the US Department of Defense.

In February this year, PEH made its second sale in Asia, adding a deal to supply EnviroSuite to a multinational mining corporation for its mining and processing facility in Indonesia, to improve the management of sulphur dioxide emissions from the facility and its impact on nearby communities. In the same month it signed new contracts for the supply of EnviroSuite to three neighbouring coalmines in New South Wales.

But possibly the most influential deal will be the one signed in March 2016, with the adoption of EnviroSuite by Thames Water, the UK’s largest water and wastewater services company, which services the Greater London region. Thames Water is trialling EnviroSuite at two sites that have odour problems.

PEH secured the Thames Water contract through a competitive tender alongside its Dutch partner Odournet, which signed on in August 2015. Odournet is an international consulting and technology group in odour, air quality and acoustics, and is the global leader in the design and development of odour measurement and testing equipment.

Robin Ormerod, founder and head of science and innovation at Pacific Environment, says Thames Water is an “exciting deal” for the company. “When we looked at overseas markets we identified the wastewater sector, which is an industry that has more than 100,000 public wastewater facilities globally, and effectively doubles the size of the global addressable market for EnviroSuite.

“The thing about Thames Water is that while it is only a small trial, Thames Water is the gold standard for water treatment worldwide – people certainly take notice of what they do. There are some great opportunities for us if things go well there,” he says. “This project has the potential to set the benchmark of environmental management technology in the wastewater industry.”

With these promising early international sales for EnviroSuite, Ormerod says Pacific Environment is “in the early stages of take-off” to a future where the technology side of the business will be dominant. Consulting has been a tremendously valuable foundation, and it is the wellspring of the ideas that feed into technology, from the practical experience the consultants get; but we do see technology being 90 per cent of revenue within three to four years. The other thing to remember is that we can build consulting opportunities around sales of EnviroSuite.”

Ultimately the trend of environmental regulation is rising, says Ormerod, and that probably won’t let up in the future. According to research firm MarketsandMarkets, the global environmental monitoring market is poised to grow at a compound annual growth rate of 7.5 per cent during 2015 to 2020, and is expected to reach a value of about $US20.5 billion in 2020.

“But we can demonstrate to customers that there is a very clear business case for using EnviroSuite, quite independent of the rising regulatory burden. There are two separate drivers – the regulation is one thing, but the improvements in business efficiency, and the lowering of costs, which lead to demonstrable bottom-line improvements, is quite another,” he says.

In 2014-15, Pacific Environment lifted revenue by 54 per cent to $14.8 million, while net profit from continuing operations rose 43 per cent, to $1.8 million – the company’s third consecutive year of net profit. While it is profitable, the company is yet to pay a dividend: Ormerod says a dividend “will be on the cards” as PEH builds sustainable profits. “At the moment we would represent a capital-growth story,” he says.

The twin transformation of revenue from domestic-dominated to international, and from consulting-driven to technology-driven, will drive this. While this transformation has made a promising start, PEH has to convince the sharemarket. Listed at 50 cents in February 2008, the share price peaked at 54.5 cents in May 2008, but subsequently slid to as low as 2.5 cents in October 2012. PEH stock recovered to 20 cents in October 2015, but now sits at 9.9 cents, which capitalises the company at $14 million.

In the half-year to December 2015, PEH lifted revenue by 34 per cent to $9.7 million, but turned an interim net profit of $485,000 the year before to a $1.1 million net loss, reflecting favourable tax effects in December 2014 and the subsequent ramp-up of investment in international growth. In May 2016 the company raised a further $2.15 million to fund ongoing development for EnviroSuite and international expansion in the key target markets. Shareholders will be watching the PEH announcement feed closely, looking for more news of international successes for EnviroSuite – that is what will drive this stock higher in the medium term.



View More Articles By James Dunn

James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au



 

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