27 Jul 2017 | 02.41 pm
Interview: Shane Finnegan, Harp Renewables
BDO comes on board with equity injection
27 Jul 2017 | 02.41 pm
Navan entrepreneur Shane Finnegan built a sizeable electrical services company through the 2000s but he was wary of his eggs being in one basket. A chance to segue into renewable energy practically fell into his lap in 2012, so alongside Harp Electrical Engineering he established Harp Renewables.
Harp Electrical Engineering deals in electrical control panel manufacturing and electrical contracting, with customers across Ireland and the UK. The company booked a net profit of €314,000 in 2016 and had net worth of €1.2m at year-end.
Harp Renewables sells and leases organic waste digesting machines, biomass burners, LED lighting and other green energy products and services. The UK is its main market, accounting for 70% of turnover. The company’s customers are facilities management companies, large schools, hotels and shopping centres.
The Meath entrepreneur’s interest in renewables opportunities was piqued in 2013 when he was approached by UK company Bionova Recycling, which was seeking an Irish distributor. Founded in 1999, Bionova sold and installed digesters that transform organic and agricultural waste into biogas and by-products such as compost.
The technology sounded promising to Finnegan, but the business pitching it didn’t. “We did our own due diligence and it transpired that they were pretty much insolvent,” Finnegan recalls. At the end of 2012, Bionova Recycling had amassed liabilities of £565,000 and had a net deficit of £257,000.
Bionova Recycling Ltd went into administration in 2014, owing creditors £970,000 and Finnegan swooped to buy its assets and IP. It subsequently transpired that three of the directors at the Devon-based business obtained a £250,000 loan in 2013 by false pretences, manipulating the company accounts to make it seem as though they secured matching investment.
The directors borrowed £50,000 from an associate and passed it repeatedly through the company’s bank accounts before paying it back. The directors then used bank statements showing all the receipts but not the repayments to persuade the lender that the required matched funding had been introduced.
In reality, the directors had introduced no matched funding at all. The lender made the loan and when the company subsequently failed the lender never got its money back. In November 2016, three Bionova Recycling directors were disqualified from acting as directors for periods of eight to ten years.
Shane Finnegan had no idea this was going on, and his hunch to steer clear of direct dealings with Bionova was spot on. However, he knew what exactly was on offer when the administrators put Bionova’s assets up for sale. “We had trialled their technology for a few months and we were happy that it had good potential,” says Finnegan.
“The process of buying over the IP was complicated, with a lot of legal consultations and other negotiations. We managed to bring a lot of Bionova’s customers over with us too when bought the business.”
Bionova’s waste digesters were originally developed by Lars Ebertsson, and the Swede was hired by Finnegan to further develop the technology. Under the new guise of Harp Renewables, the venture is set to scale up, after receiving a €1m equity investment from the Davy/BDO EIIS fund, with a first tranche of €750,000 in July 2016 and a second tranche of €250,000 in December 2016.
BDO partner Sinead Heaney says that Harp Renewables’ “innovative products, international growth opportunities and capable management team” match the fund’s investment criteria.
Finnegan says that the equity injection will be used for working capital and cashflow in the main – the business has some €600,000 tied up in debtors – as well as for growing its customer base across the water.
“Raising the funds was a slow burn but once it got approved, things moved more quickly,” Finnegan explains. “We plan to keep doing what we’re doing, so not much will change because of it, other than having to provide investors with management accounts and data like that.”
Born into a dairy farming family in Meath, Shane Finnegan says that he always wanted to own his own business. After working as an electrician in Dublin, he established Harp Electrical Engineering in 2002.
“Initially we focused on the Navan area, where our customers included some waste contractors. I dabbled in a bit in automation in my free time and became self-trained in that too. Around 2007, I got the opportunity through a local engineering firm to automate some projects for them in the UK. That helped us to grow steadily, working with engineering firms and doing their automation. We grew because they grew.”
Profits in the electrical engineering business nosedived in 2009 as the recession took hold, before recovering from 2011. “The UK work got us through the downturn, that and the work we were getting from engineering firms,” says Finnegan. By 2012, Harp Electrical Engineering was booking annual profits north of €200,000, a run that has continued. That allowed Finnegan to look around for other business opportunities.
Brexit is naturally a worry for Finnegan, with currency exchange losses and a potential turn inwards for UK businesses being the biggest concerns. “We’re looking closely at how the situation develops.
“We have a base in London and a company registered in the UK, although we trade from Ireland. If it turns out that businesses in the UK want to work more with fellow UK-based companies, we can trade from our UK-registered business.”
The two Harp ventures employ 30 people at a premises in Kentstown, just outside Navan. Shane’s brother Brian Finnegan is a minority shareholder in the two companies. Says Shane: “I’m the one on the road while he’s in the office, handling the cashflow, credit control etc. We try not to talk shop outside work.”
Finnegan splits his time between the two Harp businesses. “I like to keep hands-on in both. I imagine that the electrical business will eventually level out in terms of growth, so the biggest potential will be in the renewables.
“Businesses in Ireland are becoming more aware of the potential for cost savings with renewable energy, though the government could do more to provide subsidies to companies looking to use green energy.
“For us, the challenge is to stay on top of renewables technology. It’s fast-changing, so we have to look at it daily, searching for ways to renew and update our business.”
Photo: Shane Finnegan with BDO’s Sinéad Heaney