Issue link: http://resourceworld.uberflip.com/i/162873
Enterprise Group builds growth in the energy services sector by Mike Kachanovsky T here is something to be said for companies that are capable of operating lean and mean, to make the most of profitable opportunities in the market. However, when a management team can create integrated business units to identify and exploit several such opportunities within a larger overall corporate framework – then indeed there is potential to achieve something special. Enterprise Group Inc. [E-TSX] has emerged as a solid growth story based on this strategy. Headquartered in Alberta, the company combines technological advantages with the ability to rapidly expand in niche markets, providing services in its own backyard to the energy sector. Success has come largely as a result of key acquisitions to position the company with a head start in high demand, growth areas. For example, the company acquired a patented technology to provide flameless heating units in the field for pipeline construction in cold climates. This provides a safer and more efficient means for construction contractors to operate in northern extremes during the winter months. Artic Therm International Inc., a division of Enterprise Group, is able to command a high premium renting these units out to capture robust profit margins, and the company is engaged in an expansion plan to build more units in time for the coming winter months. However, to keep the money rolling in during the warm months, Artic Therm is also building its customer base to deploy units for maintenance of energy storage infrastructure. Oil storage tanks must be emptied and cleaned on a regular basis to allow for inspection and maintenance. The presence of fumes and residual oil would make such work extremely dangerous with conventional drying units, but the Artic Therm advantage of providing heated air flow without combustion makes the technology ideal. This is another high growth opportunity that will enable the business unit to smooth out the seasonal earnings and improve its bottom line. This serves as a case study on how Enterprise Group management has been able to seize competitive advantages to grow the company. 46 www.resourceworld.com Enterprise Group recently announced another significant transaction, as the company completed the acquisition of Calgary Tunnelling & Horizontal Augering Ltd., a trenchless underground contractor. This will establish a business unit with leverage to a highly specialized construction and utility services subsector that is rapidly growing. By employing tunneling, a contractor is able to advance pipelines or communications conduits safely under highways, through mountains, or in areas of dense urban infrastructure where precision is a necessity. This requires special equipment and highly trained individuals with a unique skill set and therefore it represents a highly profitable business opportunity with few competitors. Enterprise Group also operates EOne Limited, a division that provides rentals of excavators, bulldozers, and pipe layers to contractors involved in infrastructure and construction projects. Because heavy equipment represents a high capital investment, many contractors prefer rental agreements on a pay-as-you-play basis that reduces the upfront investment, and allows for reduced commitment to maintenance costs. They are willing to pay a hefty rental fee and the division is yet another high margin operator with a healthy bottom line, given the intense pace of oil field development projects underway in Alberta. This is a solid business unit that helps even out the cyclical nature of the revenues for the group as a whole. A fourth and final division, TC Backhoe and Directional Drilling, is a contractor providing construction and maintenance services, primarily for power and utilities providers, along with cable companies. Operating as a smaller and more focused contractor, this business unit competes to win contracts based on advantages to provide greater efficiency and cost control in the field. Again, a lean and mean approach is often a critical component of a successful player in this sector. While each of the four business units are able to operate independently, management has built a much stronger overall company by ensuring the individual divisions are able to support each other. For example, TC Backhoe may opt to use heavy SEPTEMBER 2013