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ACQUISITIONS: Torre capitalises on acquisition strategy

 



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NEWLY formed Cape industrial conglomerate Torre Industrial Holdings looks set to remain firmly on the acquisition trail after managing to put R80m of new capital in its tank last month.

Torre managed to raise the fresh capital fairly quickly after institutional investors and well heeled backers rushed for the new shares on offer.

This suggests investors are backing Torre’s prime movers to assemble a portfolio of industrial services that is capable of riding through the various (sometimes vicious) industry cycles.

Torre – which was founded on the SA French crane hire business – made its first acquisition last year with the purchase of Cape Town based forklift hire specialist Forktech.

Last month Torre also confirmed the acquisition of Tractor and Grader Supplies (TAGS), and hinted strongly that more niche acquisitions were on the cards.

Torre is the brainchild of Charles Pettit, who runs the SA division of Mauritian corporate financier Afrasia from offices in Constantia. Pettit initially engaged with Torre subsidiary SA French in terms of formulating a turnaround plan.

In order to remove the cyclical nature of the crane business, Pettit decided to pursue a strategy of broadening the company’s industrial services offering.

In a recent statement to shareholders, he noted Torre’s strategy was to build a diversified portfolio of quality businesses in the plant and equipment, engineering services and trade and asset finance sectors.

Pettit noted TAGS provided immediate scale and earnings power for Torre.

Besides being significantly earnings accretive from the outset, TAGS also resulted in a more “defensive bias” in the Torre portfolio.

TAGS could not have come at a better time for Torre as the interim results to end December showed some strain at the crane business.

Aside from trading in a weak economic environment, turnover for SA French for the six month trading period came under pressure due to labour unrest, together with the on-going delays at the Medupi and Kusile power stations.

But in February 2013, the Torre board approved a new R15m term loan that allowed the company to buy a 100 ton mobile crane for about R7m.

Pettit said a mobile crane had been identified as a key priority to reduce costs and improve service delivery at SA French.

Things fortunately also look a little brighter at Forktech, which has seen an increase in enquiries. Forktech also managed to secure the Nexen distributorship, which allows the company to not only expand its national footprint but also to increase its product offering.

Pettit believed the signs of improvement in the lifting and materials handling industries boded well for 2013. “A much anticipated increase in demand in key industries has translated into increased enquiries for new sales and rental contracts that are expected to materialise in the next period under review.”

But he conceded challenges will remain in the short term with key customers delaying capex decisions due to the uncertainty in the global economy.


 
 
 
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