Industrial supplies conglomerate Torre, which has endured a period of restructuring and consolidation following an acquisition spree between 2013 and 2015, is on the hunt for new opportunities again.
Speaking after the release of year to end-June results on Wednesday, deputy chairman Jon Hillary said a degeared Torre was on the lookout for smaller bolt-on acquisitions and would also evaluate larger deals.
“There are several bolt-on and standalone opportunities that we are currently reviewing … but, obviously, we won’t be as aggressive as we have been in the past.”
In the second half of the financial year, Torre made two small acquisitions — Top Class Automotive (for a nominal sum of R1) and Transformer Chemistry Services for R17m.
Top Class chipped in revenue of R11m and R1m to operating profit in the period from May to end-June. Chemistry Services contributed R2m to revenue and R500,000 to operating profit from April to end-June.
The commitment to pursuing selective acquisitions follows a relatively robust top-line showing by Torre in tough trading conditions. Revenue was pegged at R1.5bn, but improved gross of 37% (previously 34%) and operating margins of 5% (4.2%) resulted in gross profit up 8%, to R568m and operating profit up 20%, to R77m.
After skipping the interim payout, Torre paid a final dividend of 3c a share. The dividend is covered a conservative five times by normalised headline earnings of 15c.
Vunani Securities analyst Anthony Clark said Torre’s new executive team had put the firm on a sounder footing. “There’s net cash on the balance sheet and there is an ability to make small strategic bolt-on acquisitions, possibly in the water and food agriservices space.”
The star performer was the parts and components division, which includes automotive brands supplier TPC, Elephant Lifting and earthmoving equipment spares supplier TGS.
WATCH: Jon Hillary, deputy chairman of Torre Industries, speaks to Business Day TV about what its completed restructuring process means for business going forward.
Sales from parts and components rose 3%, to R907m, with profit up 14.5%, to R63m.
The smaller analytical services and capital equipment divisions experienced reductions in turnover to R271m (R295m) and R340m (R357m), respectively. The analytical services division experienced a 17% drop in operating profit to R40m, but the capital equipment segment swung R2m back into the black after a R1m loss in 2016. Hillary anticipated stable or improved earnings in the new financial year through organic and acquisitive growth.
He said Torre would invest in technology and systems that improved operating efficiencies. “We are essentially a stock management business. We procure, import and distribute stock.”
Hillary said the benefits of the restructuring initiatives were evident in the improved performance in the second half of the financial year. “Going forward, we believe we have the right management team in place and the balance sheet to deliver shareholder value through both organic and acquisitive growth.”