Shares in RCR Tomlinson Ltd climbed over 7 per cent today after announcing it had reached conditional agreement to acquire three businesses for $14 million, adding more than $40 million to annual revenue.
Shares in RCR Tomlinson Ltd climbed over 7 per cent today after announcing it had reached conditional agreement to acquire three businesses for $14 million, adding more than $40 million to annual revenue.
At market close, shares in the engineering company were up 14 cents to $2.04.
The purchase price will be payable through the issue of 3.05 million RCR shares at $2 per share to raise $6.1 million, and $7.95 million in cash. The shares issued to vendors will be restricted from trading for a period of six months.
JG Engineering (purchase price $4.8 million) is a site maintenance business, with workshop located in Gerladton, while VRBT Group (Purchase price $5 million) is a specialised inspection and maintenance services company. Australian Crusher Repairs (purchase price $4.25 million) operates facilities in Queensland, New South Wales and Victoria.
According to RCR, the combined sales of the three businesses for 2005/06 was $42 million.
RCR Tomlinson chief executive officer John Linden believes the strategic acquisitions would play an important role in the growth of RCR Tomlinson.
"RCR is in a period of the strongest trading conditions of any time in its 15-year history. All of the company's divisions continue to run very well, with most divisions enjoying high levels of capacity utilisation, strong organic growth and a significant number of tenders outstanding.
In particular, the RCR Site Maintenance Division is exceeding the company's expectations, rapidly growing its client base and earnings,"Mr Linden said.
"To ensure we maximise the opportunities associated with these strong trading conditions we have taken a strategic view to grow our operations organically and via well-timed acquisitions such as these.
Mr Linden said each of the bolt-on acquisitions represented a growth in the reach and type of services able to be offered by the company on a national level.
"We now have over 1,300 staff across 22 facilities in Australia and New Zealand," he said.
"Importantly the three acquisitions will be funded out of internal resources and existing banking facilities."
Completion of each of the three acquisitions is conditional upon the satisfactory completion of final due diligence and documentation, and RCR Board approval. RCR anticipates completing all three acquisitions in July 2006.
In April, RCR was awarded a $25.5 million contract for the installation of a utilities package for the Yabulu Extension project in Queensland.
For the December half year, RCR made a net profit of $7.6 million, up 153 per cent on the corresponding period last year, while its earnings before interest and tax were up 72 per cent to $8.6 million.
At the time, the company said last year's acquisitions, including New Zealand-based Easteel Industries Ltd and Advanced Cutting Service in Queensland, and organic growth primarily in its site maintenance and construction division helped boost sales to $123.2 million for the period.
Below is the RCR announcement:
RCR Reaches Conditional Agreement to Acquire 3 New Businesses
Highlights
J G Engineering
- Established in 1976
- Site maintenance business, with workshop located in Geraldton
- Exposure to fast developing Mid West and Geraldton Port facility
- Sales of $14 million in 2005/06
- Purchase price $4.8 million of which $1.8 million cash and $3 million in RCR shares at $2.00 per share
VRBT Group
- Established in 1990
- Specialised valve, safety valve and turbine auxiliary overhauls and engineering services provider
- Synergy with RCR Stelform Construction in Newcastle
- Sales of $12 million in 2005/06
- $10 million in forward contracts
- Purchase price $5.0 million of which $2.5 million in cash and $2.5 million in RCR shares at $2.00 per share
Australian Crusher Repairs
- Established in 1990
- Crusher repair facilities in Queensland, New South Wales and Victoria
- Synergy with RCR Wacol operations
- Sales $16 million in 2005/06
- Purchase price $4.25 million of which $3.65 million in cash and $0.6 million in RCR shares at $2.00 per share
J G Engineering
J G Engineering was established in Geraldton over 30 years ago and acquired by vendor Greg Anderson in 1988 and today employs over 100 staff including project managers, supervisors and tradesmen.
The business supplies both site maintenance and construction as well as workshop repair and maintenance services to the fast growing mid-west mining industry and local infrastructure suppliers such as Port Development Projects. RCR has utilised J G
Engineering as a subcontractor for a major RCR client for some time.
The business has increased sales steadily over the past five years resulting in sales of approximately $14 million in the year ending June 2006. Plant and equipment, stock, inventory and work in progress to be acquired is valued at approximately $1.6 million.
Under RCR ownership sales are expected to grow quickly due to an increased balance sheet capacity allowing larger contracts to be taken on and an access to a greater skills base.
Geraldton and the mid-west are going through a development boom across a number of sectors on the back of a number of large resource projects that are already in production and many more that are due to come into production in the next few years.
RCR will expand the range of services being offered by J G Engineering particularly through RCR's fast growing Site Maintenance Division which currently does not have a base in the mid-west region.
VRBT Group
Valves Refineries Boilers and Turbines (VRBT) was established by vendors Mark Benson and Tony Murray some 16 years ago and has grown steadily since that time, employing 30 permanent staff. Both Mark and Tony will join RCR as a result of this acquisition.
The business consists of specialised inspection and maintenance services for safety valves, turbines and pressure parts in chemical plants, refineries and the power industry. The site work is supported by specialised valve repair equipment in workshops located in
Newcastle and Brisbane. RCR will consolidate both the Newcastle and Brisbane workshops into RCR's existing facilities.
The business has grown steadily to record sales of some $12 million in the year ended June 2006. Contracts in hand are valued at more than $10 million. The business' sales growth has been significantly restricted by working capital constraints that will be
removed under RCR ownership.
With industry's increasing focus on safety in the workplace the services offered by VRBT are in great demand by power stations, refineries and chemical plants. These are exactly the same type of facilities that are serviced by RCR Stelform in Newcastle, providing RCR opportunities for taking on broader and larger contracts with existing clients of RCR and VRBT respectively.
Australian Crusher Repairs
Australian Crusher Repairs (ACR) was established by Tony and Greg Cross some 16 years ago and over that time the business has grown to employ some 80 permanent and 15 subcontract staff. Tony and Greg will both join RCR as senior managers and continue to
grow the business.
The business consists of the repair and maintenance of materials handling and crushing plants located in Queensland, New South Wales and Victoria. Major clients are in the quarrying and construction industry broadening RCR's existing Queensland client base
which is primarily the mining industry. The services provided are both on site at client premises and in workshops located in Brisbane, Newcastle and Melbourne. RCR will consolidate the Brisbane workshop into its own Wacol facilities.
Sales of the business have grown steadily to be $16 million in the year ended June 2006 and have been considerably constrained by the financial capacity of the business. Crusher repairs and materials handling is a core business for RCR in both Western
Australia and Queensland. With the continuing growth in the resource sector and greater demand for crushed aggregate the outlook for this business is extremely positive. RCR will consolidate these businesses out of its Wacol workshops in Queensland
providing a steady base load of work in crushers and materials handling equipment. Together with the recent acquisition of CGC Equipment RCR is now in a position to supply total crushing and screening plant solutions to the mining and quarrying industries.
Acquisitions Conditional
Completion of each of the three acquisitions is conditional upon the satisfactory completion of final due diligence and documentation, and RCR Board approval. RCR anticipates completing all three acquisitions in July 2006.
Financial Effect of Acquisitions
These three acquisitions achieved aggregate sales of approximately $42 million and an EBIT of approximately $4 million in the year ended June 2006.
The three acquisitions will be acquired for a total outlay of $14.05 million of which in aggregate $6.1 million will be satisfied by the issue of 3.05 million RCR shares at $2.00 per share, and $7.95 million in cash. The shares issued to vendors will be restricted from
trading for a period of six months. The three acquisitions will be funded out of internal resources and existing banking
facilities.
The RCR Business
RCR is in a period of the strongest trading conditions of any time in its 15 year history. All of the Company's divisions continue to run very well, with most divisions enjoying high levels of capacity utilisation, strong organic growth and a significant number of tenders
outstanding. In particular, the RCR Site Maintenance Division is exceeding the Company's expectations, rapidly growing its client base and earnings.
JOHN LINDEN
CHIEF EXECUTIVE OFFICER
