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Company Profile: Diffusion goes on the acquisition trail

For years now, Diffusion has been used to prop up other parts of the parent company’s empire. Now, its new owner is on the acquisition trail, building on the company’s success. Leigh Stimpson, managing director, talks to Paul Braithwaite
Company Profile: Diffusion goes on the acquisition trail
LEIGH Stimpson, managing director of Diffusion Heating and Cooling, will be the first to admit the last three years have been a rollercoaster ride for his company.

However, he says, Diffusion has come out the other side and has been profitable for the last year or so.

“Last year, turnover rocketed by around 40%. This year Diffusion turned over £8million and made a decent profit,” says Leigh.

And he expects the business to grow to £11million or £12million in the next two years – organically.

“Diffusion certainly has the products.”

For the two years before that the sector had been virtually in recession.

BISRIA figures say the downturn wiped £6million off a sector which had been worth £35million.

Diffusion manufactures air curtains, fan coils and convectors.

For now!

It is, effectively, part of the Consensus Group which has a huge property portfolio.

Consensus is also acquisitive and Leigh’s part of the business should benefit. He says Consensus is in discussion with a number of businesses which could fit nicely alongside Diffusion.

“The idea is a group of well-run allied companies based around Diffusion which could offer a wider range of products.”

Leigh believes the sector of the industry his company is part of is very fragmented and it would be good to aim at a degree of consolidation to give sales staff a broader product base.

“There is only one way for a public company to go – albeit a small public company – and this is to become bigger organically and – especially in Diffusion’s case – by acquisition.”

That said, Leigh adds, his company has a strong order book which is full to March and the factory is working 24 hours a day. In fact he believes his expansion is being held up by skills shortages.

He would like to employ more area sales managers, internal sales engineers and production engineers. He has vacancies for around four people and although he has had applications, they have been from people who live on the wrong side of London and are unwilling to move.

Leigh says Diffusion is willing to pay moving expenses too.

Diffusion is investing in new test facilities which will double the company’s capacity. “When this is ready, Diffusion will have one of the best test facilities in the business”.

Leigh says Diffusion has been a highly profitable company during its lifetime but owner after owner has used the money generated to prop up other parts of their empires. Now Consensus is allowing Diffusion to reinvest the profits, hence the state-of-the-art test facility.

Plus there is a new range of energy efficient fan coils, set for launch in January.

“Energy efficiency is our biggest challenge in the coming months. It is clear to us that every last Watt will have to be accounted for,” said Leigh.

He acknowledges that the use of DC motors will help with the energy efficiency of the units but the brief to his technicians has been to look at every aspect of the unit.

“Diffusion’s airside unit is already the most efficient in the market.”

Leigh says Diffusion technicians have checked this statement.

“For instance, in the airside unit, the heat carry-over is far, far less than any other,” he insisted.

In the 30 years the company has been making fan coils, it has amassed a huge library of knowledge and data. Yes, there are plenty of companies which make fan coil units – and cheaper – but Diffusion’s expertise is in working with specifiers and contractors to meet difficult criteria.

“For instance, we have worked with Land Securities for about 25 years. It often has difficult buildings and we have to produce a hybrid solution in many cases.”

Leigh insists he gets a lot of repeat business because Diffusion has a good reputation for quality products. However, he insists, when things go wrong – because invariably they do – Diffusion replaces the unit or fixes it quickly.

For the future – a foray into distribution with a number of air conditioning suppliers was aborted during the mini-recession – the business wants more products with the same route to market, hence the fact that the parent company is talking to potential acquisitions.

“If representatives are visiting consultants and specifiers, then it makes sense to have more products to show them.”

Of the 70 people employed by Diffusion, 40 of them work in the factory and seven are sales engineers.

“These sales engineers are our strength. We have degree engineers who are able to discuss specifications with consultants. They can also size a project and bring it to fruitition.”

There is a list of prestigious jobs; Ascot Racecourse; Armouries Museum, Leeds; Portcullis House; Savoy Hotel; Claridges and some of the work on the Eden Project.

One of the quirkiest projects was for one of the dealing desks at City dealer BZW with the unit made to fit under the desk. It could then be taken out so that work was not interrupted for repair or maintenance.

The City Inn Westminster hotel was also an interesting job. Diffusion’s top-of-the-range Ambassador units were specified. These carried other services such as lighting and also talk to a BMS.

Leigh sees his products have been at the quality end of the spectrum with a high level of engineering but competitively priced. Which is why they last for a long time.

“We keep spares on the shelves for units which are up to 25 years old, well beyond their natural life.”

Leigh says recently one of the sales engineers was called into a building to look at the possibility of refurbishing the existing fan coil units. The engineer thought it better they be replaced even though the units were made by Diffusion.

“Even we had to draw the line under units which were installed in 1962!” he laughed.

Leigh admits the mini recession had curtailed training but now the company is willing to turn up at customers’ premises to explain in more depth – things such as application and performance – to those who want it.

Leigh maintains: “Diffusion’s philosophy is ‘Get it right first time’.” That is because if you get the fan coil unit wrong, there are, in a fair-sized building, some 350 time bombs, all of them behind suspended ceilings.”

Further, he says, the cost of changing or repairing the units is often prohibitive as the work often has to be done during weekends so there are extra fees for that.
1 December 2006

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