Skilled Engineering is still a controversial company with unions and others in the community; but that hasn't stopped it being successful and profitable, as we saw with yesterday's release of the 2006 profit and upgrade for 2007. Some in the movement still describe it as a 'labour hire' firm or 'body snatchers', almost on a par with 'scabs' and strike breakers.
Skilled’s activities have lessened the hold of the unions over workplaces (and so has its competitors) but employee/contractors must be happy, there seems to be no shortage of people wanting to work for companies through Skilled.
What Skilled has shown is that a company can take advantage of the changing nature of the labour market in Australia, despite some hiccups along the way because clients on both sides of the arrangement (employee/contractors and hiring companies) want it to happen. Flexibility is a key interest for both sides.
Like some of the equipment hire groups, such as Coates and National Hire, and the contractors, such as Leighton, United, McMahon and even Portman and Downer EDI, Skilled as evolved and grown as the Australian economy has changed with the booms in infrastructure, resources and contracting driving their businesses.
Skilled is now a company with more than $968 million of revenues at June 30. In a year's time that will be well over a billion, probably heading to $1.1 billion after two takeovers in the past week: Catalyst Recruitment in a $47 million dollar on market offer and yesterday smaller rival, TESA, with a $61.9 million acquisition.
TESA supplied skilled labour to the mining, manufacturing and infrastructure industries. The company can certainly justify the moves. Debt at the end of the June year was a mere $3.2 million or 2.7 per cent: after these two deals go through at a cost of around $109 million, gearing will jump to 53 per cent and then fall to around 47 per cent by June next year.
The company's shares benefited from the thinking behind the two deals and the comments from directors in yesterday's profit statement which pointed to another strong year coming up.
"The Board is pleased with the performance of the Group and remains optimistic about the future. Based on current trading conditions and our view of the year ahead the Board is forecasting organic EBITDA growth in the range of 10 to 15% from $47.5 million EBITDA in 2005/06.
"In addition, we expect incremental EBITDA from acquisitions of approximately $10 million in 2006/07," the company said
That means EBITDA could be over $60 million by the end of 2007. No wonder the shares jumped 39c after the result to $5.34, just 5c shy of the 52 week high of $5.39.
The deals and forecast took some of the attention away from 2006 results which featured a strong rebound.
Excluding profits from divestments, net profit was up 65 per cent to $24.7 million, compared to $14.9 million in 2005: final dividend is up to 12 cents, from 10 cents previously, taking the full year payout to 19 cents, compared to 16 cents in 2005.
Earnings per share were 24.03c, a niggle under the brokers’ consensus forecast of 24.2c Analysts forecast 28c a share next year but that will have to be recast after yesterday's guidance on the $10 to $17 million rise in EBIT forecast.
SKE Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
