Romag: a place in the sun for photovoltaic glass maker

Investors are getting interested in Romag“s potential thanks to its move into photovoltaics. Romag, based in Consett, in north-east England, started out making lenses for gas masks in the Second Worl…

Investors are getting interested in Romag“s potential thanks to its move into photovoltaics. Romag, based in Consett, in north-east England, started out making lenses for gas masks in the Second World War before moving on to produce toughened glass for banks and security vehicles. The company“s joint venture with BP“s solar energy division gives it a supply of photovoltaic (PV) cells at a fixed price. These are integrated into roof tiles sold by building ware suppliers Marley and Lafarge. The technology is called BIPV: building integrated photovoltaics. It is still early days for BIPV; sales in 2005 were just GBP 1.4 million. But the potential is enormous. Chief executive Lyn Miles said: “It will not solve everyone“s energy problems, but I believe it could be a serious player in the economy”. Germany, Spain and Greece already consider it a major part of their renewable energy strategy. Enthusiasts say equipping a three-bedroom house with PV glass can generate enough electricity to keep the lights on. A UK government grant will cover half the cost, which could be GBP 12,000. An “inverter“ is needed to enable the power generated to be fed into the national grid, giving the consumer a credit on the meter. Romag shares, floated on Aim in 2003 at GBP 0.45 have risen to GBP 1.235, valuing Romag at GBP 53 million. A steep climb, against total sales of GBP 16 million and pretax profits of just GBP 1.9 million. BIPV could change that. Broker Numis thinks the UK market could grow to GBP 33 million by 2010. If Romag wins 60% of the domestic market, its UK BIPV sales could be GBP 20 million and profits GBP 3 million. If it wins up to 5% of the much larger German market and makes sales elsewhere, Numis sees Romag“s BIPV side at GBP 0.95 a share, and the rest at GBP 0.43p, making a total of GBP 1.38. Ms. Miles stresses the importance of controlling the firm“s growth and improving its margins, which means Romag“s GBP 16 million sales will not shoot up in the next two years. However, she says: “I see growth further ahead. I am very excited about photovoltaics”. Some of this is already in the share rating: 40 times 2005/06 earnings, and 30 times that of 2006/07.