Melbourne-based Labour hire company Skilled Group (SKE) has returned to the acquisition trail after a long absence and nailed a $75 million purchase in the oil and gas sector.
Skilled told the ASX in a statement that it has reached a deal with private company Broadsword Marine Contractors to buy its business, which supplies equipment and boats to offshore oil and gas companies.
Skilled shares were up 19c to $2.37 at the close yesterday, a rise of more than 8% and the strongest move upwards for a month or more.
The deal came after Skilled shares fell heavily in the past month – dropping from a high of $3.71 in May, to a low of $2.06 last week, as the shares were sold off in the great mining services rout as investors quit stocks involved in the mining investment boom.
SKE YTD – Deal stops slide in shares
As a leading labour hire services company, Skilled was seen as being a prime candidate for revenue and profit problems.
It is the first true acquisition by the company in more than two years. It did nothing last year and 2011 was spent selling assets, cutting costs and recovering from a debt binge that crunched the company.
It is the second deal in the marine and offshore area this year aimed at extending Skilled’s participation in offshore oil and gas logistics.
In February it announced that it had bought an additional 16.7% share in the Offshore Marine Services Alliance joint venture (“OMSA JV”) for $17.5 million. That took Skilled share to 50% when one of the two other partners in the original joint venture wanted to sell its 33.3% stake.
Yesterday’s deal involves a lot more money being paid by Skilled. It says it will pay $48.8 million now, and a further $26.7 million over the next three years for a total purchase price of $75.5 million.
Broadsword is based in Darwin, but also has offices in Western Australia and Queensland.
Skilled said in yesterday’s statement that the purchase should deliver up to $17 million in earnings before interest, tax, depreciation and amortisation in the 2013-14 financial year.
The company has worked on the Ichthys LNG project, and has also conducted environmental work for customers.
Skilled also told the market that there had been no change to an update given on May 1 at a Macquarie Bank investment conference.
"The outlook for FY13 remains the same as the previous market update (1 May 2013). Trading conditions remain challenging in some business segments with growth in others:
"Workforce Services: weakness in mining with continued price and margin pressure; weak employment conditions overall, with ‘pockets’ of strength e.g. telecommunications and infrastructure; and in some geographies e.g. Pilbara and metropolitan and regional NSW.
"Technical Professionals: reduced activity in mining and related engineering services, with growth in telecommunications and training.
"Engineering & Marine Services: continued growth supported by increased activity levels in oil & gas and maintenance services; the pipeline of oil and gas opportunities remains strong.
"Good progress on transformation and cost reduction expected to deliver at least $10 million in FY13; with further opportunity to reduce costs identified for FY14. The Group is well positioned to maintain a strong balance sheet and continued dividend payments while investing for future growth," the company said.
But there were no profit estimates in either this update or the one given on May 1.
Skilled said the $75.5 million cost of the deal will be wholly funded through the Group’s existing debt facilities. The Group’s gearing level post transaction, will remain less than 20%.
