Ian McKenna of eLight tells of his plans for after dark days of virus
Founder of LED efficiency firm eLight eager for projects to restart on May 18
THERE is light at the end of the Covid-19 tunnel, Ian McKenna reckons, even though it took him a while to see it.
His firm, eLight, installs high-efficiency LED lighting as a service. McKenna’s business takes in the up-front costs of installation and charges clients – generally big users of lighting – a monthly fee.
The business has been on a rollercoaster this year, even by lockdown standards. In January, McKenna led his business onto the AIM stock market in London. The resulting €1.5m might be modest by stock market standards but gives eLight an enviable level of security now among small firms.
Even so, McKenna admits the dramatic economic swings have proved stressful.
“I spent the first week of the shutdown in complete panic mode, to be honest. I was in here on my own thinking: What are we gonna do? What’s the move?”
Soon he rallied, transporting PCs, monitors and cables out to employees’ homes with a message that everyone should keep busy, if only on building databases or catching up on office administration.
When we meet he is sitting alone in eLight’s office in Malahide, Co Dublin, at a desk stacked with agreements and pitches for LED lighting systems in office blocks, schools and student housing, car parks and factories. Beyond the desk there’s a stunning view of Malahide harbour.
But the horizon that matters to McKenna is May 18 – when clients’ premises reopen for builders to get back to work. It cannot come soon enough.
“Before the crisis, we were booking a million euros’ worth of new business every month. That revenue has fallen to nearly zero. We haven’t lost a single contract, but everything has had to be put on hold,” he says.
McKenna has kept coming into the office through the shutdown, alone in the building, answering the phone and emails and ensuring that support for emergency lighting systems is maintained.
Other staff are working remotely. With its income hammered, the business has tapped the State’s emergency pandemic pay scheme but also is fully topping up that pay.
But there is work to be done. McKenna says he now sees a pile-up of jobs about to restart for an 800-strong Irish client portfolio that includes landlord Ires Reit, University College Dublin and the Blanchardstown shopping centre. New clients yet to undergo an LED transformation include Kilsaran Concrete and a large Northern Ireland school, eLight’s biggest deal north of the Border to date.
“From the 18th we will be back on site, with projects that had to pause – in some cases where we literally had to down tools and walk away. This will be a perfect time for schools to engage with us,” he says, noting that installation work could be more efficient in empty buildings.
Ever since McKenna founded eLight in 2009 as a one-man outfit working out of a Glasnevin warehouse, his sales model has been designed to offer clients an option to switch to higher efficiency commercial LED lighting without the high capital costs of converting systems.
Depending on the scale of installation, up-front costs can be five or even six figures – prohibitively high.
The model rolled out by eLight is to pay the client’s equipment and installation costs and recoup those expenses over monthly payments lasting five years or, in the case of many schools, seven years. The typical customer finds their electricity use and costs fall by 60pc to 80pc, more than covering that monthly bill, McKenna says.
On its side, eLight sources most of its equipment from Philips’ spin-off Signify and uses installation crews from Denis O’Brien’s engineering services group Actavo. McKenna says eLight’s operating margin exceeds 20pc on most contracts.
McKenna learned the art of negotiation and deal-making at his father’s side in the family business, McKenna Wholesale, which supplied scores of convenience stores, pubs, schools and sports clubs from the Airways Industrial Estate near Dublin Airport.
He started in client sales straight out of secondary school, aged 18 – learning to drive in his first weeks on duty. He succeeded his father as the firm’s director, growing its workforce from five to 30 and annual turnover to €12m.
Musgrave bought McKenna Wholesale in 1999 in a deal valued at around €3m. He spent a few years transitioning the business into the supermarket group’s operations – then went to work for one of the family firm’s longtime suppliers, Limerick-based Power Providers, national distributor of Philips lighting and batteries.
As its east coast salesman, he learned a lot about incandescent light bulbs – and how obsolete they were about to become thanks to the emerging technology of the light-emitting diode, or LED.
“From 2003 I was supplying the likes of Golden Discs and Woodies with Philips lighting and accessories. I remember the first LED lights coming out. They were nearly shipped in presentation boxes, they were so expensive. The dramatic thing to me was the serious energy drop. The price just didn’t work. They would have been 12 to 15 times the price they are today.”
McKenna spent years working out a business model to make LED adoption affordable, all the while selling Philips products on behalf of Power Providers. Once eLight launched, it would grow to become one of Philips’ biggest Irish customers via Power Providers.
But the initial years marketing a novel business proposition were a struggle. Few firms were willing to invest in new technology even when the costs could be spread out over years. Schools were the early key clients. Several meetings with pillar banks produced positive commentary – but no cash.
In part, this reflected Ireland’s
shell-shocked economy in the years of austerity and EU-IMF bailout.
“There was always an appetite from commercial clients for our offering, but we couldn’t get the funding to make it work. It was totally understandable because, in bad times, the last thing you want to do is write a cheque for anything. The hole in the roof has to be fixed. For anything else, the mindset is: ‘Is it still working? I’ll be OK until things get better.’ The whole country’s returned to that mode at the moment.”
He recalls pitching eLight’s business case “at the top floor of a very nice building overlooking Dublin in one of the
‘Before the crisis, we were booking €1m in new business every month. That has fallen to nearly zero’
‘This will be a perfect time for schools to engage with us’
pillar banks with seven toplevel bankers at the table”.
“I walked out thinking, well, that was either great or a complete waste of time. Unfortunately it was the latter,” he says with a laugh. “They told me: ‘your plans and cash flow look really good based on the projects you’ve invested in – but we’d like you to go prove the concept a bit more and come back in a year. Keep doing what you’re doing.’ I told the guy: I’m here because I can’t keep doing what I’m doing.”
AIB was persuaded to give eLight its first €1m in finance in 2015. The capital was doled out gradually over two years in portions tied to new contracts. “Every tranche of funding was like buying a new county in Ireland. You piled up documents that high,” he says, holding his hand a foot above his desktop.
But AIB’s support helped deliver LED lighting to scores of schools – and built sufficient market credibility to attract attention in London, where McKenna’s ‘lighting as a service’ business model looked suddenly attractive as firms faced mounting pressure from green-minded investors to find easy ways to slash their carbon footprint.
A Philips executive introduced McKenna to Harvey Sinclair, whose Energy Works firm in the UK was seeking a growth partner. They merged in 2018 under the eLight banner and hired merchant bank Cameron Barney to source growth capital.
Sinclair and McKenna mulled the idea of an initial public offering, but rejected it as wasteful for a small firm.
“It could cost a million quid to list. It’s quite intrusive and time consuming. You get so many people involved that the fees outweigh everything,” McKenna says.
Cameron Barney came back with a surprise proposal: a reverse takeover of a London AIM-listed firm called Alexander Mining.
Despite the name, Alexander Mining wasn’t actively digging or drilling for anything. Investors holding shares in that comatose firm needed to back a new enterprise quickly or lose their listed status. So they invested in eLight, which gained the AIM slot.
In January, Alexander Mining became eEnergy Group PLC, the AIM-listed parent of eLight. Sinclair is managing director for UK operations, McKenna for Ireland. They each own 16pc of the firm. It listed with a valuation of around €10m, knocked back since the Covid crisis to €7.5m.
Right now the Irish side of the business is bigger than in the UK – but McKenna expects that to change within months. He says the UK is at least three years behind Ireland in adopting contracted LED lighting services, particularly in its schools. He forecasts that UK revenues will reach €6m this year and could grow to €30m by 2024.
He and Sinclair are eyeing potential acquisitions, including a competitor in northern England to expand their geographic reach beyond their current bases in London, the Midlands and Manchester.
McKenna hopes eLight also can scoop up a bolt-on firm able to offer “a clever energy management tool, with a complementary client base”.