Acrow acquires Natform to create one-stop formwork solution

Acrow Formwork and Construction Services ASX ACF acquires Natform
Acrow has acquired Natform Pty Ltd, a leading designer and hirer of screen systems for the construction industry.

Sydney-based Acrow Formwork and Construction Services (ASX: ACF) has announced the $15 million acquisition of privately-owned construction screen design company Natform Pty Ltd, as part of its strategic move to provide a one-stop solution to common customers across the construction and civil sectors.

The financial year 2019 accretive acquisition will have an initial consideration of $10.5m, consisting of $7m cash and $3.5m of Acrow shares (issued at $0.35 per share and under 12-month escrow) and representing a multiple of 2.8 times Natform’s earnings before interest tax depreciation and amortisation (EBITDA) for the 12 months to end June 2018 of $3.8m.

Initial consideration will be funded by existing cash and debt funding, with completion targeted for month end.

There will also be a deferred consideration of $4.5m paid over two annual instalments of $2.25m (funded by cash flow), equating to a total acquisition consideration (pre earn-out) four times greater than Natform’s 2018 EBITDA.

Also available to Acrow will be an additional earn-out of up to $1m per year until 2020, subject to Natform achieving an EBITDA of $4.5m and $5m in financial years 2019 and 2020 respectively, with an option for Acrow to take the earn-out as cash or shares at a share price of $0.40 per share and $0.60 per share respectively.

Natform specialises in the dry hire of screen-based formwork systems to support the construction of commercial and residential high-rise buildings and civil infrastructure.

Focused on markets along Australia’s eastern seaboard, Natform has reportedly experienced “strong growth and broad market acceptance” since launching in 1989.

Under the terms of the acquisition, Natform founder Margaret Prokop will join the Acrow board of directors.

Record financial results

Continued strength of the east coast civil infrastructure market as well as signs of reinvestment in Western Australia’s resources sector have contributed to strong 2018 financial results for Acrow.

The company today reported record high revenues for the period to 30 June 2018 of $65.3 million – the highest since 2013 – and an EBITDA of $10.8m, representing a 21% growth on the previous corresponding period.

Its Formwork Hire business was the biggest earner with a reported $15.6m in revenue – up 23% on the previous period and the highest it has been since Acrow divested its Boral interests in 2010.

Operating cash profit for the period was up 37% to $9m and Acrow’s year end cash balance was $4.9m with nil debt.

The company’s capital expenditure for 2018 of $3.8m was shared between an IT platform upgrade ($0.2m) and further investment to expand its fleet of GASS-branded shoring equipment ($0.9m), currently in high demand by the construction market.

The remaining expenditure was on new scaffolding and formwork equipment to service the high-growth infrastructure sector.

Listing on the ASX

Managing director Steven Boland said the results have been positive for the company, which listed on the ASX in April via a reverse takeover of NMG Corporation.

“We are seeing [a continuation of] the excellent improvement in earning trajectory of the past few years,” he said.

“On a full-year trading basis, almost all of the important financial metrics of our business are at the highest point [they have been] for a number of years.”

Mr Boland said Acrow’s outlook for the 2019 financial year remains strong, with a growing order book and new business wins in the east coast infrastructure market.

New dividend reinvestment plan

On the back of its financial results, Acrow has launched a dividend reinvestment plan for its shareholders in Australia and New Zealand.

The plan coincides with Acrow’s announcement of a maiden $0.005 cents per share unfranked dividend for the year ended 30 June 2018 and will be available on a voluntary basis, for full or part participation.

Shareholders electing to participate in the DRP will be able to reinvest their dividend in Acrow shares at a 2.5% discount on the market value.

Where shareholders elect to participate in only part of the DRP, the remaining dividend entitlement on Acrow shares will be paid into a nominated bank account.

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