Owens Group Announces Sale Agreement For Hirepool
Owens Group Announces Sale Agreement For Hirepool And 2002 / 03 Results
Owens Group has today announced the conclusion of an agreement for the sale of its hire-equipment company Hirepool to a joint venture consortium involving JB Were (NZ) Private Equity Limited and Hunter Powell Investments Limited, in which Owens will hold a stake of 24.5%.
The deal which involves total consideration of $46.4 million (subject to completion accounts) for 100% of the business and its trademarks, follows a review of the Group’s operations, initiated by the Owens Board last year, which resulted in a shift in strategic direction and focus on its core logistics and supply chain management business.
“When we signalled increasing investment in acquisitions that would significantly grow our core business we said we would be looking to divest businesses which were either non-core or under-performing,” Owens Group chairman Norman Geary said today. “Hirepool was identified as a non-core business that we were interested in selling.”
“We believe the deal arrived at for the divestment of Hirepool is an excellent outcome from a very thorough sale process which generated strong interest in the company.”
The sale is subject to approval by Owens Group shareholders.
The partners in the joint venture intend to grow the business aggressively.
“Owens believes, on the basis of extensive discussions, the joint venture partners are compatible and have closely aligned objectives for the business. The Board considers that the new owners are well placed to expand the Hirepool business and improve its value,” said Mr Geary.
“Most importantly this transaction means that Owens can now totally focus on its core business, fulfilling its strategic goals, while retaining a stake in a growing and profitable, but non-core, business,” he said. “We will be able to use our greatly strengthened financial position to gain larger scale and build competitive advantage in our core business and drive shareholder value.
The sale will generate cash of $37.7 million which pending major acquisitions will be used to pay off secured debt. The transaction will result in a profit of approximately $17 million which will greatly strengthen the Company’s equity position.
The meeting to consider and approve the Hirepool sale will be held on 8 July 2003.
Mr Geary added that the Group has been working on a number of acquisitions for some months in its core business area. This includes the possible acquisition of Tranz Rail’s road transport and distribution business Tranz Link. The company is currently undertaking due diligence on a number of businesses and aims to achieve significant synergies from these possible purchases.
With respect to Tranz Rail, Mr Geary said that the Owens Group had signed a confidentiality agreement similar to others which contained a stand still provision and he was surprised that this had not applied to all interested parties. Realising that the rail tracks are an essential ingredient to the Tranz Rail business he was confident the Government would not be enticed into dealing with individual parties on a basis of preference.
“In the face of another demanding year, Owens Group recorded a satisfactory result in 2002 / 03. The net profit after tax and abnormals for the year of $2.781 million compares with $3.252 million recorded in the previous year” said Mr Geary.
It had been anticipated that the result would be close to last year’s but last-minute advice regarding some receivables had caused a lower result.
Mr Geary also noted that the company’s auditor, KPMG, had taken a different view from the board regarding the deferred tax asset of $3.4 million relating to the Australian subsidiaries and the virtual certainty test to be applied. This has resulted in the company receiving a qualified audit report. He pointed out that the auditor had only raised this technical issue at the eleventh hour of the audit without any preliminary warning and his board resolved, after reviewing the budgeted outlook, to report the original result, which it felt better reflected the company’s position to shareholders.
“Revenue for the year at $437.7 million was steady with the previous year ($446.9 million). It is pleasing to note that a number of significant new accounts were gained during the year and the benefits from these will be realised in future years.”
The shareholders’ funds at balance date were $33.5 million and total funds employed were $132.5 million. Shares on issue at balance date comprised 56,544,283 fully paid shares. There were no shares issued or redeemed during the year.
Directors have declared a fully imputed dividend for the 2002 / 03 financial year of 2.00 cents per share payable to shareholders on the register as at 5.00pm on 25 July 2003. The dividend will be paid on 30 July 2003. A supplementary dividend of 0.352941 cents per share will be paid at the same time on shares held by non-resident shareholders.
Chief executive David Ritchie said the Company continued to operate in a tough trading climate, but the New Zealand operations had performed well with strong trading performances from the international freight, transport and container services businesses. Hirepool also posted a strong result.
“The results from the Australian businesses remain disappointing and further restructuring including changes to the management team have been made. We believe the measures taken will be instrumental in improving our competitive position in this market.”
Strategic platforms for accelerated growth
Mr Ritchie said that following the Board-initiated review, which led to the fundamental shift in strategic direction and focus on the core logistics and supply chain management business announced last November, the Company had made considerable strides in advancing the strategy.
“We have begun implementing the five platforms that will deliver the strategy,” he said.
“The platforms are: Focus on our redefined core business Development of critical scale Market development Tailored customer solutions, and Employment of the best people.”
The core business is international freight-forwarding, contract warehousing, road and other domestic transport, and shipping agency services, covering Australia, New Zealand and the Pacific Islands.
In line with the strategy, the Company had already made some investments and was reviewing a range of other potential acquisitions that would enhance the core business. The Hirepool sale agreement was also a key element in the strategic change.
“By offering and leading the totally integrated approach to customers’ supply chains, we give them the ability to grow and get their goods to their markets in the shortest time at the lowest cost. That adds up to good business for them and Owens,” said Mr Ritchie.
The Owens Group also had a very strong management capability focus and recent appointments showed it was selecting people who were highly respected and experienced in their fields.
“We are continually reviewing positions with the view of ensuring that we have the right people in the right jobs to effectively provide a complete logistics and supply chain management service.”
Mr Ritchie said the Company had responded to the fact that customers were facing a more complex and competitive world, creating opportunities for the Company to differentiate itself and add value for its customers.
“We are now well removed from being a traditional transport company, becoming one that can take a lead coordination role in integrating all the services a customer wants – some of them ours, others provided by partners – for its business supply needs.”
Geary said that given the many significant changes that the
Group is likely to embark upon over the next few months, it
is difficult to be relatively precise at this stage as to
the results for the new financial year. The Company does
however anticipate ongoing improvements in its New Zealand
activities and significant progress in Australia.