Group strategy
Q: What is the Company’s vision?
A: To be a leading player in the long-term growth market of Secure Power. This will be achieved through a rigorous focus on innovation, flexibility and reliability, thereby providing industry leading solutions for the protection of critical applications.
Q: Can Chloride achieve the growth necessary to achieve its goals/vision over the long term?
A: During the five years to 2007, Chloride consistently grew organically ahead of a strong market for our secure power solutions. The markets we serve are forecast to continue to grow over the next few years with growth rates of at least 8%, driven by the mission-critical nature of secure power for business continuity. We are a well-balanced business – no single sector or market dominates our performance.
Financial
Q: Will the asset base grow and is the Company a heavy absorber of capital?
A: Yes, it will grow with profits and also as businesses are acquired. The Group is not a heavy absorber of capital. As a solutions and service business, the Group specializes in design, supply chain management and quality testing of product, with many products either subcontracted or assembled from bought-in components. In this way the capital expenditure requirement is minimized.
Q: What level of cash flow can the business provide?
A: The business has consistently converted c. 100% of operating profit into cash, enabling us to pay interest, tax and dividends and still retain cash for reinvestment in the business. We continue to target operating cashflows at approximately 100% of operating profit. This reflects the focus of the business on quality customers, with service needs and the further outsourcing of certain products.
Q: What levels of margins can you anticipate?
A: Operating margins have grown steadily to c. 12%. The operational gearing in the business model (sales growth, maintained product and service gross margins and careful overhead control) is such that continued top line growth should result in further growth in operating margins.
Customer focus
Q: What do you mean by customer focus?
A: All our businesses are committed to providing a first class service to their customers. This is achieved by listening carefully to our customers about their needs and expectations and then rigorously implementing the processes necessary to achieve these aims. We regularly monitor quality, on-time delivery of products and after-sales service and our response to customers. Our strategy is to differentiate ourselves as a customer-focused business delivering industry-leading quality and customer satisfaction.
Markets
Q: How large is the secure power market and at what rate is it growing?
A: The market size is estimated at $7 billion by Frost & Sullivan, the leading market research firm. The market has posted strong growth throughout 2002-2007. This is expected to continue over the next five years or so at levels around 8% per annum to in excess of $10 billion. This growth is driven by an increased awareness of power quality issues, high cost of downtime for mission-critical applications and the growth in electrical consumption.
Q: Who are your major competitors and how strong are your positions?
A: The most frequently encountered are Powerware (part of Eaton Corp.), Emerson-Liebert (part of Emerson Electric in the USA) and APC-MGE (part of Schneider Electric in France).
We are in the top two in our major markets of the UK, Italy, Germany, Iberia and Australia, number three in France, growing in the USA and have fast growing positions in Eastern Europe and the Middle and Far East.
Q: How is Chloride structured?
A: We are structured to ensure market and sector focus and swift implementation of operational efficiency measures.
The engine for growth is UPS Systems based in Bologna, Italy. This business provides R & D for products and software to ensure the best total solutions to potential power outages in a wide range of applications such as transport, government, finance, manufacturing and telecoms. It sells through Chloride local sales and service operations, and distribution partners, principally in Europe but also in the Americas, Middle East and Far East.
Industrial Systems based in Lyon, France provides tailored UPS solutions to the oil and gas, petrochemical and transport sectors.
Power Conditioning products are designed, manufactured and sold out of our Chicago, USA plant to customers who require high quality power, such as those manufacturing testing equipment in semiconductor or medical environments.
Q: Are you still at risk from a sectoral downturn?
A: Chloride sells into a wide range of industry, market and geographic sectors. We have focused efforts on a broad spread of industry sectors such as transport, government, education, health and retail and hence have diversified any downturn risk as far as reasonably possible.
Q: Who are your customers?
A: We serve major organizations in all of our markets, i.e.:
In Financial Services
Morgan Stanley, Goldman Sachs, Bank of America, HSBC, Russia Central Bank.
In Transport
The London Underground, The Channel Tunnel Rail Link, Terminal 5 Heathrow, Dubai International Airport.
In Retail
Bluewater, Carrefour, Sainsburys
In Energy and Petrochemicals
Hyundai, ELF, Kawasaki, Toshiba, BP, Shell
In Telecommunications
BT, Vodafone, France Telecom, and Telecom Italia
In Manufacturing
Siemens, BMW, Bosch and Pirelli
Operations
Q: What is your supply chain philosophy?
A: Specific product ranges are assembled and tested in Italy, France and the USA. We are focused on product design utilizing the latest electronic technologies, final assembly and test and quality control. Sub-assembly is contracted to a network of high quality suppliers. We also subcontract specific lower power quality rating products to third parties in the Far East. Software for connectivity and our LIFE.net remote monitoring offering is developed in the USA and Italy.
Q: Does the Company have a broad and up to date product range?
A: We have the broadest range of uninterruptible power supplies, power conditioners and static switches in the industry. Our products protect small PCs through a very wide range of applications and power ratings to large robust custom-built applications in energy, oil and gas, and petrochemicals. All our businesses use innovative technology to drive their solution offering. Nowhere is this more evident than in our UPS business where we are releasing a range of products based on Vector digital control, which is an advanced technology solution that provides us with significant competitive advantage. We offer our customers secure power to meet all of their needs. As part of our total solution we offer LIFE.net, our industry-leading remote monitoring and diagnostic system.