A customer-centric company that provides customers with an effortless experience.
Research Report – Corporate Connect; 7 July 2022
Uncategorized September 27, 2022
Acquisitions underpin strong near term growth opportunities not reflected in share price.
- SGI provides direct exposure to the growing industrial consumables market,
driven by favourable conditions across key industries, expanding
industrialisation and improving workplace safety regulations. Around 95% of
revenue is attributable to non-discretionary items. - Over the near term, SGI will benefit from increasing contributions from
several recent acquisitions, including C&L Tool Centre (Dec 2020), Skipper
Transport Parts (Aug 2021), and United Tools (Mar 2022), which in
aggregate add $40m annual revenue. - The company also expects to progressively extract significant synergies from
these acquisitions, including $34m+ incremental revenue and at least $0.5m
in costs. We expect the resulting material increase in the scale of the
business will enable it to deliver significant additional benefits in time through
greater purchasing power and other economies of scale.
Milestones
Key events and data points to track the company’s progress over coming periods include the following;
- Upcoming FY22 result due in August.
- Demonstrated progress with integration of previous acquisitions C&L Tool Centre (Dec 2020), Skipper Transport Parts (Aug 2021), and United Tools (Mar 2022).
- Progressive delivery of expected acquisition synergies, including $34m+ annual revenue synergies and at least $0.5m in costs.
- Successful ramp up of new contracts, boosting revenue by >$18m.
- Meeting $100m+ annualised revenue target (including full year acquisition contributions, but excluding synergies) in FY22/FY23.
- Progressive margin improvement driven by scale benefits and reaching medium term 8% EBITDA margin target in FY25.
- Declaration of maiden dividend.
View the full report here.
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