The road to public markets has been fast, yet controlled, and the company is positioning itself to satisfy investors and consumers by offering a network of home services businesses that are grounded in similar best business practices and philosophies.
Jim Abrams, VenVest's president and chief executive officer, talked with The News about the current state of affairs within VenVest and One Hour and discussed how One Hour is laying the groundwork for the IPO.
"We've made five significant acquisitions of air conditioning companies in the U.S.," Abrams said. The list includes three companies acquired for cash: Service Experts of Winter Haven, Fla.; Denico One Hour A/C in Melbourne, Fla.; and Continental Air Conditioning in Beverly Hills, Calif. Those acquired through merger include Ballard's in Riverside, Calif., and Service Experts of Palm Springs, Calif.
"These acquisitions represent a total growth of $26 million in additional sales for our retail operations," Abrams said.
Abrams believes One Hour has been able to grow at a pace where annual sales will soon represent enough critical mass to take the company to the next step. His target is a $150 million company, and he is on track to realize those figures soon.
"We've had great growth from $2.4 million in 1999, and this year we'll finish in excess of $139 million," he noted. "It is great growth, but not substantial enough to go the public markets yet.
"There are so many things that affect the stock market, but I believe our window will be between the third quarter of this year and the first quarter of next year."
One reason Abrams is confident of his projections comes from the recent formation of a company called Clockwork. Fifteen contractors, representing $43 million in annualized sales, formed the group in October 2004 with the intent of merging with One Hour before or at the time of the public offering.
"Clockwork had to rebrand their businesses, becoming One Hour Air Conditioning overnight," Abrams said. "They had to agree to merge with us at any time we called it. This will give us the critical mass that we need to talk with Wall Street."
VenVest GrowthAbrams said that One Hour has seen significant growth in the last year, mostly coming from the United States. The year before that most of the growth came from Canada.
"We [VenVest] may purchase as much as $80 million more before the end of 2005," he said.
"We are looking at plumbing, electrical, and HVAC companies. We have almost 1,100 contractors [from all services] in our total pool representing $3.6 billion in annualized sales. Many are using the same software, using similar systems and procedures, and have been taught how to run their businesses effectively and how to price effectively. We have a big underlying base that we are able to communicate to on a regular basis."
Abrams has been through the public offering experience before. In 1996, he steered Service Experts into the public sector as company president. He said the Service Experts consolidator model succeeded for a while because the company plan was to remain strictly residential.
When Service Experts moved away from that plan and into commercial and new construction, Abrams said the company shifted to unproven ground. "But it remains the largest residential service company in the world today, with $700 million in sales," he said.
Abrams plans for a consistent approach with One Hour. He wants it to remain nationally branded in the residential home services market. And, if anything, he plans to expand other similar models in the plumbing and electrical trades.
"The next step up the ladder is our franchise initiatives including One Hour, Ben Franklin, and an electrical group," he said. "Within our [HVAC] industry, we are the fastest growing franchise ever. Within the world of franchising, we are in the top 20 of faster growing right now.
"Today our franchisees represent about $350 million [One Hour $210 million] in annualized sales. Many of them have an interest in merging or selling their businesses to us. We project to have 115 One Hour franchisees by the end of the year."
"Our story is one of pre-integration, so contractors have everything in place before we ever merge or acquire. The second initiative is our branding. Branding has been very effective in generating new business."
Keys To SuccessAbrams feels that One Hour contractors' goals are the same as their customers - and that neither can lose. "Our proposition to the consumer is that we are on time and they [consumer] cannot lose with our exceedingly competent labor force," he stated.
"We are paying top wages and offer benefit packages that are the best in the industry for our techs. We deploy our people quickly, and the customer is guaranteed the best, timely service or they get their money back. Consumers like it - and they get it."
Never at a loss for giving advice on how to grow profitably, Abrams talked about two important keys to success for all HVAC contractors who bemoan mild weather as a reason for slow sales.
"One key is to have a very high conversion of customers over to service agreements," he said. "Consumers don't want to pay anything more than a fixed amount each month. For example, for $30 a month I can put a monitor on their HVAC equipment and deliver a person out to their home before they even know they have a problem.
"The second is direct marketing campaigns. We get into consumers' minds that they really need to take care of things before they need to take care of things."
Right now One Hour is in the minds of many people on the eve of going public. "We have a lot of financial interest in what we are doing right now," noted Abrams. "We have shown up on a lot of radar screens."
Publication date: 06/20/2005