Babylon Pump & Power reports increased business activity following acquisitions
Babylon finalised its acquisitions of Resource Water Group and RBH Engineering during the December quarter.
Specialist resources services provider Babylon Pump & Power (ASX: BPP) has reported a 55% improvement in operating cashflows for the six months to December 2022, fuelled by the transition to a positive earnings before interest, taxation, depreciation and amortisation (EBITDA) for the last three months of the period.
The company made sound progress advancing its strategic imperatives during the December quarter, which included building a specialist water management business and finalising the dual acquisition of Perth-based test pumping and project water management specialist Resource Water Group and local rental pump provider RBH Engineering.
The increased business activity, together with the timing of certain payments, resulted in negative operating cash flow for the quarter.
Nevertheless, the company recorded a 55% improvement in operating cash flow for the current six-month period compared to the previous corresponding period.
Operating cash flow was in line with stronger trading results and is expected to become positive in the second half of this financial year.
Acquisitions
In August, Babylon spent $3 million to acquire Resource Water Group, expanding its higher margin water management services offering to the mining sector.
The acquisition brought in bore field test pumping equipment and related data collection services as well as a range of water management disciplines to complement Babylon’s existing operations.
The purchase price was believed to represent a multiple of three times the expected net EBITDA contribution from Resource Water Group’s assets.
In December, Babylon announced it would spend another $3 million to acquire all the shares in RBH Engineering, providing an immediate earnings contribution through the ongoing high utilisation of the RBH’s pump rental fleet.
The acquisition is being partly financed by the vendor, with $1.8 million due at completion and $1.2 million of deferred cash to be paid in monthly instalments over a 12-month period.
Interest at 8.5% per annum will accrue and be payable by the final deferred consideration payment date.
Babylon said both acquisitions have been absorbed into its existing operational base with minimal incremental overheads, resulting in high net margin contributions to financial performance.
Company relocation
This month, Babylon finalised its relocation to a purpose-built facility in metropolitan Perth, consolidating its operations into one building and bringing to an end multiple separate leasing arrangements across the city.
The new premises provide extra capacity, and the consolidation will eliminate the frequent movement of equipment and staff between operational sites.
Financials
At the end of the quarter, Babylon had $4.2 million in cash and undrawn debt facilities and $5.2 million in receivables from a blue-chip client base.
The company said these balances place it in a strong position to fund growth initiatives in the second half of the financial year.