ifs construction services ltd

RESULT PREVIEW

n IFS CONSTRUCTION SERVICES LTD (IFS)



BACKGROUND

IFS Construction Services (ASX:IFS ) (formerly Advanced Ocular Systems Ltd ) was listed on the ASX on 14th July 2009 following the merger with Avanced Ocular and the successful raising of $3m from a prospectus.



THE BUSINESS.

IFS specialises in the world supply of scaffolding,access and formwork equipment as well as design and management services and site safety systems .



FORMWORK – has been used from the earliest time to tempoarily mould, shape and support new building construction.

Temporary containment moulds are used to form vertical walls or columns and horizontal floors or slabs.

With the creative advances in architectural design and aesthetics the design of formwork products are becoming more innovative and demanding,requiring continuous improvement in safety.

SCAFFOLDING –is like a temporary chain of access platforms on the outside of multi-story buildings providing safe and efficient access for workers.It is also used to facilitate the construction of formwork.

The product range offered by IFS is multi-functional and all products utilise high strength steel and galvanised protection.

IFS DESIGN AND ENGINEERNG SOLUTIONS --.This area provides a specialised in-house formwork and scaffolding design and engineering service.These services provide a value added service to clients.

This area of the business ensures optimal on-site productivity without compromise to safety.Their ability tomeet challenges with innovation has clients engaging in their services at tendering stageand at the earliest phase of construction.



In it’s short history, IFS has achieved excellent market penetration working on major projects in Australia, South East Asia and the Middle East.

IFS was incorporated in Australia in January 2008 and established by Doug Weir who is a 30 year veteran in the international formwork industry He previously managed operations for the UK’s scaffolding Great Britain (SGB) in Saudi Arabia, Singapore and Indonesia and has been responsible for a group of SGB companies operating across the Middle East.



From 2005 to 2008, Mr Weir joined PCH Group Ltd as there formwork director , extending this company’s operations internationally. In early2008 Mr Weir established IFS after PCH was acquired by Cape Group of South Africa for a healthy premium.



Aside from Doug IFS has an outstanding team with an enormouse depth of experience. Since the inception of IFS,it has swiftly established itself as a strong global enterprise.



CAPITAL STRUCTURE.

Listed Ordinary shares on issue (IFS) 161,823,655

Listed Options ex price $0.27,30th June 2012 (IFSO ) 70,073,673

Listed Options ex price.$0.40,30th September 2010 26,942,512

Market Capitalisation @ 7.5c $12.136m



MARKETING PRE FLOAT AND THE NUMBERS.



IFS MANAGEMENT FORECASTS

F/Y

31/12/09

($A000)

FORECAST REVENUES

34,647



EBITDA

8,078



EBIT

7,242

EBT

6,843

NPAT

4,790

MARKET CAP AT ISSUE PRICE OF $0.20

31,849

ENTERPRISE VALUE --ASSUME MAX 3M DEBT

34,849

EBIT MULTIPLE

3.94X

PE MULTIPLE

6.65X

GEARING RATIO

9.4%




It is fair to say that when IFS listed on the ASX on the 14th of July 2009 it had far from an auspicious debut.

A series of excuses were given for this not the least of which was selling by the old AOS (advanced ocular systems shareholders ) who had long been suffering and took the opportunity to sell without realising the potential of the new vehicle.

If you assume that the marketed numbers were correct ,when the stock halved on listing, the PE came back to 3.3X which obviously appears rediculously cheap !



WHAT WERE WE MISSING ?

As a way of placating shareholders IFS provided a trading update.that stated that the Board was pleased to report that trading across the Company’s formwork and scaffolding divisions had been solid and above internal budgets for the 2009 financial and calendar year.Unaudited management accounts for IFS for the 5 months to31 May 2009 reflect Group revenues of $9.818m and EBITDA of $2.769m.

They discussed growth of the order book and gave examples of recent contract wins.

In summary IFS declared that at this stage IFS was on track to achieve projected targets for the year which,was a remarkable effort given that IFS was launched in Singapore only 18 months ago.



THE JUNE ½ RESULT (CALENDAR YEAR END )

Total revenue for the half year was $11.5m while normalised EBITDA was less than anticipated at $2.498m …(N.T.A.stated as being at 13c) IFS still held the line that this was an exceptional result during a period where the company was continuing to build it’s base hire stock as well as meeting the challenges of the economic downturn.As a result whilst. still profitable we will fall short of management forecasts for the year stated John Yeudall ,the Group Managing Director.

The major item which affected the normalised operating EBITDA from the reported EBITDA were the one off costs of $702k.These were primarily merger costs associated with the reverse takeover,capital raising and ultimate re-listing on ASX as IFS This wasa combination of corporate advisory success fees as well as legal costs.