At its first lunchtime roundtable debate, H&V News explored the options for gaining more value from HVAC services operations
David Cresswell - Eon
Matt Edwards - Swale Heating
Steven Hale - Crofton Design
Chris Harvey - Stelrad
Steve Honnor - Kier
Will Smith - Smith & Byford
Chris Wollen - Ergro
There are numerous tried and tested means of extending business opportunities for HVAC companies in the domestic and contract markets. Perhaps the most common are service contracts, providing clients with regular maintenance while the provider benefits from regular income.
The first H&V News lunchtime roundtable examined how to extend this further. The first proposal was offering to upgrade radiators when fitting new boilers.
Matthew Edwards of Swale Heating agreed that this could be effective, especially if the radiators were of the design-led variety and therefore offering improved margin. The downside was that customers were often unwilling to spend more than they had to.
“Other than a chrome tower in the bathroom, they will often stick to the standard offering,” said Mr Edwards.
Eon’s David Cresswell raised the need to increase water content within the system when fitting renewable energy solutions, such as heat pumps. His company was finding it necessary to fit water tanks to raise systems’ water content. “If we could have much higher water content radiators, we might be able to remove the tank from the design.”
Steve Hale from Crofton Design reflected on his experience of a project that incorporated social and private housing. The contractor specified underfloor heating (UFH) for the private dwellings, but used a conventional system for its social housing. The UFH option was considered to be as cost-effective, he said. Mr Cresswell emphasised the importance of correct design to ensure that all elements of the system worked together effectively.
Kier’s Steve Honnor said his company was seeing increased demand for renewable energy options. He agreed that the market continued to be affected by the recession and that customers’ main focus was on keeping costs low. “I think renewables are really two or three years away from really taking off, when hopefully the market comes back to somewhere near normality.”
Mr Hale said the Green Deal showed potential to increase trade. “The Green Deal is the one that will actually change the market, because if it’s done right, the consumer doesn’t see the cost and gets a new heating system, and when they sell the house, [the loan] stays with the house.”
Ergro’s Chris Wollen highlighted the growing number of non-HVAC companies training their staff to fit renewable energy solutions. While this could provide heating and plumbing businesses with the opportunity to work in partnership, especially when roof work is required, it could lose them business if suppliers of traditional systems ignored the need to train for renewables.
The potential for property owners to earn a better return on their investment was cited by Mr Edwards. “If you’ve got cash in the bank and it’s earning you 1.5 or 2 per cent, you’re going to drastically increase your return if you can shift £10-£12,000 out and get yourself a decent PV system.”
His company had recently advertised its photovoltaic systems on television, which had received a good response and supported his argument that PV was the most cost-effective renewable option at present.
The discussion then turned to the various issues surrounding the sourcing of PV panels. While some could be purchased from merchants, a number of new suppliers dealt directly with HVAC companies. The concern of delegates was how to ensure they received sufficient aftersales support. The danger was that the supplier would not be in business in a few years to resolve any quality issues that might arise.
Mr Wollen suggested renewable energy suppliers seemed to be concentrating more on supplying product for the domestic than the commercial market. Mr Edwards said it had been difficult to source product 18 months ago, but the situation was improving. Mr Wollen gave the example of air-conditioning equipment, which had taken several years to match purchasers’ expectations on quality, price and supply.
Lack of understanding
Stelrad’s Chris Harvey said many installers did not understand the requirements of renewable energy. His company had received many calls asking for advice but the callers did not understand the questions they were asking or needed to ask. Training is now extremely important, he said, combined with clear information from suppliers.
Rather than increasing the size of radiators to match renewable energy systems, these could actually be reduced in buildings with high levels of insulation, said Will Smith of Smith & Byford.
He used the example of structures with Code Level 4 ratings, where radiators were often found to be oversized. Replacing them with smaller units could provide more business for installers and contractors and provide occupants with more wall space, he said.
“You can also put a whole-house heat recovery into these properties as well and it’s actually very environmentally friendly,” he said. Mr Wollen agreed that there were considerably more options emerging for the application of heat recovery.
Mr Honnor highlighted the advantages of diversifying by explaining how his company’s initial contract to supply services to Sheffield Council had expanded dramatically. “If you don’t see a Kier van driving around Sheffield in a 30-second period there’s something wrong. We’ve got something like 600 vans in the area.”
The contract had grown from £65 million to £100m and resulted in a significant growth of service operations provided by Kier. The company had set up extra facilities, including stores and double glazing operations to provide rapid response to service calls.
The subject of adding value to the HVAC offering through field engineers was used by several delegates to increase business. Mr Wollen said his company’s engineers are trained to look at all aspects of the HVAC system, regardless of whether this is included in their service remit.
Anything that needs urgent attention is passed directly to the client, with other faults sent back to the office. “But you have to strike a happy medium, otherwise the client will think you’re just trying to extract as much money out of them as you can,” he said. It was essential to establish the correct level of fault reporting and allow the client to choose how they would respond.
The discussion returned to the subject of staff training, which was seen as essential for companies to be able to offer renewable energy solutions and increase potential for new business.
Most companies were retraining their employees, rather than recruiting new people, to maintain lean operations. Messrs Harvey and Hale agreed that the practice of pairing younger or trainee engineers with their older colleagues could provide advantages for individuals and business alike.
For those taking on new business, a note of caution was sounded by several delegates, especially for public sector contracts. They had noticed an increase in clauses that required service provides to accept unlimited risk. This was not insurable and a potentially dangerous situation that could have serious financial implications.
Mr Hale said: “Since the demise of the PSA, there actually aren’t any construction professionals in government procuring construction activities, are there? Procurement experts don’t understand our industry very well.”
Further topics of conversation included working in as many areas and sectors as possible to avoid being too badly affected by downturns in one market.
Bad debt had increased and the consensus was that this had to be managed closely to keep on top of the situation. Although the recession had increased instances of bad debt, many businesses had increased the efficiency of their operation and were stronger as a result, it was agreed.
Another means of increasing the value of each HVAC operation was to ensure the efficiency of engineers in the field. For Swale Heating, Mr Edwards said implementing tracking software through engineers’ PDAs had proved highly effective.
This had also helped the firm satisfy HMRC requirements. Mr Smith stated that the use of tracking had also helped his company to reduce its fuel bills. However, Mr Wollen preferred not to use tracking, to show his engineers that the company trusted them.
The delegates agreed the use of mobile technology had many benefits when used correctly. This was particularly true if it increased contact with the client by allowing them to book service calls online, while also allowing engineers to order parts quickly and easily.
It could additionally help in completing timesheets and reducing paperwork. The use of tracking software in particular had allowed Kier to direct the nearest available engineer to call-outs, saving time and fuel.
Mr Cresswell returned the debate to training, but expanded the focus to include the subject of investment. Companies need to be invest wisely in the correct training and resources to ensure that they remained in a strong position to take advantage of improved trading conditions, the delegates agreed.