WESTERN Australian non-bank finance outfit Financial Resources Limited is seeking to raise additional working capital of $1.45 million, which can be extended by a further $1 million.
Company founder Barry Samuels has agreed to stay on as managing director of the company as it embarks on an ambitious growth campaign both organically and through buyouts.
He is also a non-executive director of Australian Manganese Ltd and Jetset Travelworld Limited.
Mr Samuels, who started the company in 1994, said that in order to survive in the industry it was crucial to maintain a strong balance sheet and look out for potential targets.
With a net tangible asset backing of around $8.3 million, and a number of niche businesses in the industry looking for an exit, Mr Samuels said he believed Financial Resources Limited had what it took.
“We see that we have a product that is quite unique in WA. We are not just one of the technology wrecks and have been successful for some time,” he said.
The board is complemented by Keith Robertson and William Ryan, the current chairman of PCH Group Limited and Adventure World Pty Ltd, both as non-executive directors. Former Town & Country Bank managing director Raymond Turner is non-executive chairman.
Previously, Mr Ryan established Ryan Forklift Sales Pty Ltd, which was sold to Brambles Industries Limited in 1993.
The business’s beginnings were created around the provision of equipment lease financing to small and medium-sized companies.
The leasing business still represents around 42 per cent of the company’s business.
However, since a joint venture arrangement was reached with the property development group Kareelya Investments Limited, where Financial Resources has agreed to acquire the Kareelya loan book, the property sector now represents around 34 per cent of the company’s business.
In the past 12 months it purchased loans from Kareelya totalling $4.25 million.
The public offer is part of a strategy to acquire further loans from Kareelya of up to $9.55 million.
A research report compiled by sponsoring broker Hogan & Partners states that based on the public offer price of 20 cents per share, the company is priced on 8.3 times 2004 forecast earnings and a dividend yield of 7.2 per cent. It says the receivables book of $28.5 million currently comprises 321 active accounts with an average balance of $88,704 gross or $47,651 net.
If the money is successfully raised, the company is expecting to lift profit before tax from an expected $1.9 million in the current financial year to $2.2 million in the 2004 financial year.
“FRL has successfully increased its product range over the past 12 months while maintaining strong gross margins,” the Hogan & Partners report says.
“These markets have not been aggressively targeted due to capital constraints and the current high level of business generated.”
