Helesi

Source: Stock Market Digital

Date :26/07/2007 14:34:04

Though based in Greece, the high-growth waste management company Helesi PLC saw the UK as a stratgic place to locate production, then to raise funds on London’s AIM market.

Written by John O’Hanlon & produced by Kiron Chavda

Helesi is one of the world’s largest suppliers of the now ubiquitous waste receptacles that we know in the UK as ‘wheelie bins’. The company was founded in 1997 by Sakis Andrianopoulos who has been in the waste management industry for a very long time, first as a researcher then as a management consultant, before moving into the private sector.

Its first production facility, in the north of Greece, started production in 2000, and in the intervening period it has grown from being the smallest player to the fifth largest, ranked with Sulo and Plastic Omnium, the best known names in the UK (have a look at yours!)

Greece needed domestic waste bins, so the company started by producing an injection moulded model that met the needs of that market. With the help of grants it doubled in size every 18months and now has the capacity to manufacture a million bins a year – or rather, a million units, based on the familiar two wheel model, since there is a demand for all sizes from the standard 50-litre bin to a 1,200-litre four-wheeled container for blocks of flats and commercial waste collection.

Helesi is now well established in the Balkans, which along with Greece, Cyprus and Turkey it classes as its home market, the UK, where it has a production facility and in Western Europe generally. Now, according to its Chief Financial Officer Apostolos Binomakis, it has its sights fixed on the Middle East and beyond. “The Middle East is a high value market but quite developed, however Far East has a lot of opportunities and we are eager to explore it.”

Helesi in the UK

Helesi UK was established in 2004, and a new £7 million factory built on a greenfield site at Bradford. Running at 90 percent of its capacity that factory now produces more than 400,000 bins a year for the UK, Scandinavian and Irish markets. “We chose Bradford for two reasons,” says Binomakis. “Firstly, it is in the heart of the UK, between the two ports of Liverpool and Hull which give excellent access to Ireland on one side and Scandinavia on the other. The second was because the European market, though mature, is far from saturated, and the UK in particular is under pressure to meet EU targets for recycling.”

In 2003 the EU came up with stringent directives for all EU countries, to meet certain recycling targets by 2010 as well as measures for waste management and treatment. “But every recycling initiative starts with a bin, because the first step is separation at source,” says Apostolos Binomakis. “The citizen has to separate the waste before it is collected. The target for this drive is to have up to four bins at each household, so you have better separation of waste to make the life of the municipality easier when it comes to treatment.”

At present, local authorities in the United Kingdom rely much more on landfill for municipal waste disposal than many other European countries. According to an Audit Office report of July 2006: “The United Kingdom’s historic reliance on landfill left it poorly positioned in relation to many European countries who have already achieved their targets to reduce their reliance on landfill, partly due to geological, cultural and historic differences in approach to waste management.” It concludes that: “The targets for the United Kingdom are to reduce by 2010 the amount of biodegradable municipal waste sent to landfill to 75 per cent of that arising in 1995, with further reductions to 50 per cent by 2013 and 35 per cent by 2020.” Helesi UK is counting on being able to win more contracts like the €18.5m three year contract it won last year with the Eastern Shires Purchasing Organisation.

AIM for the environment

All this adds up to a buoyant market in countries which, like the UK, Greece (which still sends 91 percent of its waste direct to landfill) and Italy, fall seriously short of their targets. It is also one of the reasons Helesi chose London as the locus of its flotation in November 2006. “We are in an international market and that helps with our international profile, but the main reason for choosing AIM was a financial one,” he reveals. “We decided, and in retrospect rightly, that we would be better able to attract attention from institutions that have a green, a social responsibility or an environmental angle to their investment policy, and this would not have been possible had we listed in Greece. Also, these investors have deeper pockets and they understand the dynamics of the industry. It is interesting to note that we have investors lining up, waiting for us to expand so they can invest in new projects.”

At the time of the float, Sakis Andrianopoulos said: "Admission to Aim will provide us with a platform from which to strengthen our existing market position, expand our operations and enter new high-growth, high-margin markets." Binomakis naturally agrees. “It is a matter of the audience you talk to. In the UK we feel we are able to attract the attention of some of the more specialised investors who understand the environmental game,” he says.

The flotation raised €17 million gross, a sum that could have been raised in a number of other ways, but exposure to the equity market was kept at a minimum because, as Binomakis puts it, “we didn’t want to dilute the main shareholding at the time. We are hungry fro more capital but we are very careful about accessing it from the equity market. There is definitively room for more leverage.”

Beyond the wheelie bin

The funds raised were used to finance (with heavy subsidy from the Italian Ministry of Economic Development) the building of a €26 million plant at Pisticci on the instep of Italy, for the manufacture and marketing of plastic containers and packaging, to be used principally in the environmental sector for rubbish collection. This plant will also manufacture pallet boxes for agricultural logistics, to meet a new market driven by EU food hygiene regulations. The plant will start production, with 53 employees, in the third quarter of 2008.

This is the latest of the company’s diversifications that make use of its existing plant and processes without too much modification. In Greece it has already developed a valuable sideline in VIP seating for sports stadia, completing a €2.5 million contract for the supply of plastic stadium seats for Jaber Al Ahmed Kuwait International Stadium in Kuwait, UAE, as well as providing seats for the Caribbean stadia that hosted this year’s Cricket World Cup.

However the company’s first move outside its plastic injection moulding operation was also potentially its most profitable diversification. In Greece, over 55,000 tonnes of used tyres are disposed of each year, a figure that is only expected to increase in the coming years. Around 90 percent of tyres’ component parts are recyclable, and, identifying an opportunity, Helesi invested in building a tyre recycling unit, completed in April 2006, within its Komotini production plant. Helesi entered into an agreement with Ecoelastica, an NGO established in 2004 by major tyre manufacturers, such as Michelin, Goodyear, EMA, Elastrac and Pirelli, to tackle tyre waste in Greece. Under the agreement, Helesi collects, transports and recycles all used domestic and industrial tyres in Northern Greece.

The recycling unit mechanically separates out the metal and synthetic fibres in the tyres, processing around 2.5 tonnes of tyres per hour. The rubber granules produced in the recycling process have a wide range of uses such as in the construction of sports grounds, roads and the manufacturing of various plastic products. Helesi has gone one step further and, through its in-house R&D department it has developed a unique methodology to utilise the rubber granules to produce wheels for its range of two wheeled bins, at a considerable saving. It is one of the few vertically integrated recycling facilities in Europe, says Binomakis, “We have developed a process where we can recombine the rubber granules and bond them into a product that is equivalent to the wheels we are buying at present, made from virgin rubber. Some of the wheels we sell in the UK come from 100 per cent recyclable material. It is one of the newest facilities in Europe and very impressive to see in operation.”

Global and local

The bin market is driven by recycling efforts in the western world and by the implementation of mechanical collection in countries that don’t have it yet, thus the Balkans and the EU accession countries of Eastern Europe present a huge opportunity. Apostolos Binomakis makes an interesting comparison: “Germany and Turkey have about the same population, 70 million. In Germany there are 50 million bins on the street, in Turkey 500,000! As nations become wealthier they can’t avoid prioritising hygiene. If Turkey were ever allowed into the EU, that would give us a big advantage. Our factory is in fact closer to Istanbul than to Athens or Salonika!”

The bin market is global, and Helesi is a global player. It is one of what must surely be a very select band of European countries that is able to economically export manufactured goods to China. Two factors make this possible, firstly the highly automated manufacturing system, in which labour costs are not significantly higher than those of local producers, and secondly the fact that freight is so cheap. As long as Chinese goods are being shipped westward in huge quantities, there will be plenty of fresh air in the holds going the other way.

But another market it intends to pursue very aggressively is strictly local. “We aspire to be global on the product side but given our size and our competencies we think it would be better for us to compete locally on services,” says Binomakis. “We are talking here about integrated waste management services – outsourcing of the publicly run waste collection, its treatment, and then its transport to landfill.”

It has the capacity and know-how to do bin collection and transportation, but lacks the ability to set up treatment plants. However it has formed an alliance with Urbaser of Spain, one of the largest waste management operators in Europe, to supply this technology.

In 2004, Perivallontiki, Helesi’s waste service subsidiary, formed a joint venture with Urbaser to provide waste management services during the 2004 Athens Olympic Games. A year later, Helesi was also awarded the contract for the supply of waste bins to the city of Turin and the 2006 Winter Olympics. If, as Apostolos Binomakis would like, the company can pitch successfully to the 2012 London Olympics, then we could see a much faster expansion of the Bradford factory than has been planned to meet organic growth in the UK, Irish and Northern European markets.