Another Skilled Acquisition

By Glenn Dyer | More Articles by Glenn Dyer

Skilled Group is showing no sign of losing its appetite for acquisitions after spending another $44 million buying a smaller competitor, Swan Contract Personnel to take its spend to around $170 million since last August.

It follows hard on the heels of a smaller $7 million purchase of Damstra Mining Services in late December.

These follow the $109 million spent in the last four months of the year buying the Tesa group for $61.9 million and the takeover of the listed recruitment group, Catalyst.

That’s$169 million and CEO, Greg Hargrave says Skilled has a number of other acquisitions up its sleeve.

Skilled said in a statement the latest purchase includes an initial cash payment of $19 million and takes on Swan’s existing net cash of $2 million while the Damstra buy will be a bolt on acquisition to the Tesa mining business SKE acquired in September.

These deals will take the half billion dollar (market cap) company well past the billion revenue barrier for a full year.

Mr Hargrave said in a statement that the purchase broadened the company’s exposure to new and existing markets.

“It’s just further confirmation of our strategy to acquire businesses in a range of markets or in the same markets because it gives us greater ability to service our clients and also gives us a deeper skill base,” he said.

“It (Swan) was a very good acquisition because the company has a strong track record.

“It has a good reputation, plus the exposure into oil and gas, which is a new market for us.”

In addition to the initial purchase, an 18 month earn-out arrangement has been structured based on a multiple of six times earnings before interest and tax (EBIT) for the 2007 and 2008 financial years.

Swan, which had revenues of $130 million in 2006, will be operated as a separate business and brand and founder Bill Beatty will continue as its head.

Swan provides engineering and technical professionals to about 45 oil, gas, mineral and mining companies throughout Western Australia and Queensland.

His optimism on the acquisition strategy can be seen from this Corporatefile briefing on the ASX around the time of the Damstra purchase late last month.

He told Corporatefile that “We’re confident of delivering growth in the range that we’ve indicated. The business is strong, and it’s tracking to our expectations. We’ve had some project delays in the infrastructure space due to lags in the timing of government spending, but we expect these projects to contribute in the second half.

“Mining and resources are still strong, but we are seeing continuing weakness in the automotive sector and also drought affected agriculture related industries including transport and storage. We have also seen some weakness in the NSW market.”

He said the Tesa and Catalyst businesses “are performing in line with our expectations. The black coal mining business (Tesa) in particular is performing strongly and we anticipate solid growth and opportunities in this sector going forward.

“As previously stated, in the first twelve months our integration costs will be higher than our synergy benefits.

“Our business has very strong cashflows, and as we reiterated at our AGM in October, we will continue to grow the business both organically and through acquisitions. With this in mind, we’ve recently locked in a new $225 million debt facility with improved terms and conditions from a syndicate led by the NAB, and including Westpac, and ANZ. We are continuing to pursue acquisition.”

The shares closed 14c higher at $5.00 yesterday.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →