ALS 0.00% $1.63 alesco corporation limited

ferrets stock to watch: alesco corporation lt

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    Ferret's Stock to Watch: ALESCO CORPORATION LIMITED
    08:38, Friday, July 06, 2007

    Sydney - Friday - July 6: (RWE Aust Business News)
    **************************************************

    OVERVIEW
    ********
    Today Alesco Corporation Ltd (ASX:ALS) supplies strong
    industrial brands to niche markets in Australia and New Zealand.

    Its customers include businesses in the building and
    renovations, mining and construction and scientific and medical sectors.

    The company has a clear focus of investing in and developing
    industrial businesses holding leading industrial brands with high market
    shares in niche markets.

    Lincoln Sentry Group is one of Australia's leading suppliers,
    distributors of hardware and components to the cabinet and furniture
    making industry and the window, door and glazing industries.

    Parbury manufactures and markets a wide range of surface
    solutions for kitchen, bathroom and commercial applications.

    Manufactures and distributes kitchen rangehoods, canopyhoods,
    ducting systems, laundry tubs, ironing centres and food waste disposers
    in Australia and New Zealand.

    On Wednesday Alesco Corporation announced to the ASX that its
    Lincoln Sentry business had entered into an agreement to acquire the
    Joinery Products Hardware Supplies Pty Ltd business for $10.7 million.

    Joinery Products has been operating for almost 20 years as a
    leading supplier of hardware accessories to door and window
    manufacturers.

    It distributes through a five branch Australian network
    generating annual revenue of approximately $17 million.

    The company is the exclusive supplier of Truth Hardware, a
    leading North American manufacturer of hardware for the timber and uPVC
    window market.

    In addition, the business markets an extensive range of products
    from leading suppliers, including Lockwood and Whitco security and
    commercial hardware, Savio Hardware, Winhaus and Intek Plastics, and
    other associated products for the domestic window and door industry.

    "Joinery Products is an attractive bolt-on acquisition for
    Lincoln Sentry's rapidly growing Window, Door & Glazing division," said
    Alesco's CEO Justin Ryan with some tongue in cheek.

    But in a more important vein he added, "Lincoln Sentry is
    already well placed to benefit from the increasing focus on
    environmentally sustainable window and door products and systems,
    including double glazing, and the addition of the Joinery Products
    business will further enhance this position."

    Joinery Products has a diverse and active customer base with
    more than 1,100 trade customers across the southeastern region and will
    trade as a stand alone company within the Lincoln Sentry Group with the
    existing management team based in Thomastown.

    The business will report to Lincoln Sentry general manager Jim
    Brennan.

    "The business allows Lincoln Sentry to further expand into the
    Victoria, New South Wales and South Australia markets," Mr Brennan said.

    The purchase price of $10.7 million (on a cash free, debt free
    basis) represents a multiple of approximately six times FY08 EBIT (pre
    synergies).

    Settlement is subject to a number of conditions precedent, with
    completion scheduled to occur on July 31.

    This acquisition will be funded through existing debt
    facilities.

    Results for the year have still to emerge but based on the first
    half to November 30, the result should be good.

    Net profit rose 12.2 per cent to $26.9 million on a revenue of
    $53.3 million, up 14.3 per cent on the previous half year.

    The construction & mining and scientific & medical divisions
    within the portfolio have experienced strong demand while the new home
    market, in both Australia (in particular NSW) and New Zealand, continue
    to experience difficult trading conditions.

    The company reported record earnings per share pre amortisation
    of intangibles of 41.5c per share (cps), up 10.1 per cent (Nov 2005:
    37.7cps).

    Interim dividend was 27.5cps (fully franked) up 10 per cent (Nov
    2005: 25cps).

    The acquisition program contributed to earnings growth,
    offsetting the subdued new housing market.

    Acquisition of Promedica ($21 million) and App-Tek ($3 million)
    were completed during the half.

    Acquisition of Lincoln Sentry Group for $84 million, Flextool NZ
    for $6 million and EnviroEquip for $9.1 million all announced subsequent
    to half year balance date and will contribute positively to second-half
    earnings.

    The improvement in all key ratios continues to reinforce
    Alesco's strategy of building a strong and diverse portfolio of leading
    brands in niche markets.

    The strong improvement in the return on equity compared
    to the prior corresponding period has been enhanced by the earnings
    growth from debt funded acquisitions.

    Since the end of the prior corresponding period the company
    continued to invest in new businesses with the acquisition of the
    Concrete Technologies, Flextool and Promedica businesses, and this is
    now delivering an improved return on equity.

    SHARE PRICE MOVEMENTS
    *********************

    Shares of Alesco yesterday fell 13c to $13.87. Rolling high for
    the year is $15 and low $11.18. Dividend is 58.5c to yield 4.22 per
    cent. Earnings per share is 65.13c and p/e ratio 21.3. The company has
    71.1 million shares on issue with a market cap of $987.3 million.

    In an interview with Corporatefile, chief executive Justin Ryan
    said the acquisition of Lincoln Sentry Group was to increase the
    company's exposure to the growth trends in the Australian kitchen,
    bathroom and laundry marketplace, particularly the growing renovation
    segment.

    "We consider the prospects for growth are strong in both the
    medium and the long term," Mr Ryan said.

    "This is an area where we are already active through our Parbury
    and Robinhood businesses, and this acquisition will enable us to capture
    more value more quickly than we could through organic growth alone.

    "Over the past four to five years there has been a trend towards
    renovations as a proportion of total building spend."

    Mr Ryan pointed out that currently, for every three kitchens
    built, one is a new build and two are renovations, with this proportion
    growing in favour of renovations as housing stock matures.

    "An attraction to us is that renovations, unlike new build are
    not cyclical," he said.

    "In addition to these trends, the actual proportion of
    renovation budget being spent on kitchens continues to increase as
    kitchens become ever more central to our lifestyles.

    "It is a very attractive growth segment of the market," Mr Ryan
    declared.

    He said there were several ways that the company sees the
    acquisitions fitting into Alesco strategy.

    "A key goal we have is to develop industrial businesses in niche
    markets and certainly Lincoln Sentry fits that description."

    The CEO added that Alesco intends to develop a dedicated and
    focused hardware business to be consolidated under the Lincoln Sentry
    brand.

    This will also provide a dedicated and focused decorative
    surfaces business under the Parbury brand.

    As a result, the hardware business that is presently part of
    Parbury will be transferred to Lincoln Sentry.

    Integration planning will take place between now and completion
    of the deal.

    BACKGROUND
    **********

    The origins of Alesco can be traced back to the last decade of
    the 19th century in Western Australia.

    Originally known as Atkins Carlyle, the company changed its name
    to Alesco Corporation Ltd in 2001.

    In 1896, Charles Atkins & Co Ltd, Oil and General Merchant
    Importers, opened its WA premises in Fremantle.

    In 1971, Charles Atkins & Co. merged with another longstanding
    West Australian-based company, Carlyle and Company, to form Atkins
    Carlyle.

    On June 13, 1979, the company listed on the Australian Stock
    Exchange.

    In the 1990s Atkins Carlyle began a program to move its
    business away from the traditional base as distributors of commodity
    industrial and automotive products.

    In 1996, McLeod Accessories, a leading distributor of motorcycle
    accessories was acquired. The group's activities in this area were
    expanded with the acquisition of Conco Trading and London Trading in
    2001.

    1997 saw the acquisition of Fennell Tyres, a leading specialist
    distributor of earthmoving tyres, followed by the purchase of Marathon
    Tyres in 1998. A number of smaller earthmoving tyres acquisitions were
    subsequently made and from 2000, the business has traded nationally
    under the Marathon Tyres name.

    In 1999 Ingram Corporation, a leading distributor of specialist
    automotive electrical and air-conditioning components was acquired.

    2000 saw Parbury Ltd purchased by a public takeover. Parbury is
    a branded building products group and has operations in supplying
    decorative panels and hardware products to the cabinet, furniture and
    shopfitting markets and supplying specialist chemicals to building and
    construction markets.

    2001 was a pivotal year in the group's development with the
    final exit from the commodity automotive parts business and the sale of
    the original industrial consumables business of the company. Following
    the sale of trading name Atkins Carlyle with the industrial consumables
    business in July 2001, the group changed its name to Alesco Corporation
    Ltd in 2001.

    Lincoln Sentry is one of Australia's leading suppliers and
    distributors of hardware and components to the cabinet and furniture
    making industry and the window, door and glazing industries.

    The business markets an extensive range of leading domestic and
    global hardware and component brands, including Blum, Assa Abloy, 3M and
    Dow Corning. It was acquired by Alesco on February 1.

    ENDS

    Copyright © 2007 RWE Australian Business News. All rights reserved.
 
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