Within 12 months of opening its doors in February 2002, the Melbourne-based company – the largest of its kind in the Asia Pacific – bought out five of Australia’s privately-owned crane providers under its “growth through acquisitions” strategy, and business has, well, boomed.
In its first full year of operation (2003-04) and prior to listing on the ASX in October 2003 at a share price of 80c, the company amassed revenue figures of around $12 million and managed to grow that in 2004-05 to $133 million, or 13% of market share.
By the end of 2005-06, Boom hopes to have cracked the $200 million mark (17% market share) and secured a related increase in share price as a result of organic growth, the integration of its recent acquisitions and a string of new takeovers.
Boom’s acquisitions to date have helped it count the likes of BHP Billiton Iron Ore, Rio Tinto, BMA Coal, Caltex and Alcoa among its blue-chip customers. The company also has a growing presence among coal players in the Bowen Basin (in Queensland) and the Hunter Valley (New South Wales), and other mining operations in the Pilbara, Goldfields and North West Shelf (Western Australia).
In the midst of the current minerals and construction boom, which has forced operators to scramble for access to equipment and skilled labour, the company is basking in the demand such an environment creates. Indeed, chief executive officer Rod Harmon believes the arrival of Boom Logistics could not have been better timed.
“We set this company up at a time when there was a clear gap in the marketplace. Brambles had been the only national provider of lifting solutions for more than 20 years but decided to exit that part of its business in 2002, which translated into an opportunity for us,” he said.
“The crane industry at the time was in need of consolidation – it was highly fragmented, privately owned and locally focused – and our business strategy was one way of reducing the number of players while ensuring our own growth as a nationally focused quality service provider. The industry is not highly complicated and the ability to bolt on businesses is not a high-risk proposition.
“Getting into the game when we did has proved to be brilliant timing for us. When we established Boom, we knew there would be an opportunity for growth in the mining industry and we took that into account from the moment we planned our first acquisition. What we did not know, of course, was how quickly that (industry) growth would occur and the strength of demand that would follow.”
That demand has so far been supported by 17 “friendly” acquisitions, which have helped boost the Boom hire fleet from an initial 263 cranes to more than 400 and grow its skilled labour pool to more than 1000 operators, riggers, engineers and mechanical staff.
The most recent acquistion was the $130 million purchase in August of Queensland-based Sherrin Hire, which specialises in the provision of large-scale travel towers and access equipment mostly to customers within the mining and industrial sectors and, according to Harmon, is considered an “undisputed market leader” with an estimated share of more than 80%.
The acquisition – which will keep Sherrin operating under its company name as a separate division of Boom – was funded by an underwritten institutional placement to raise $67 million and a purchase plan allowing shareholders the opportunity to acquire up to $5000 worth of new shares. It is expected to contribute a 12% lift in Boom’s earnings per share over the next 12 months.
Although Sherrin operates outside the crane game, Harmon explained the acquisition was part of a wider plan that would eventually have Boom expanding its offerings to include the entire scope of lifting solutions so it could target a wider range of customers.
“We are very disciplined, focused and deliberate in our approach, and Sherrin is a good example of that. It (the purchase) is not a diversification. It is complementary to what we do and where we see ourselves heading,” he said.
“All our takeovers have been friendly and well planned – we have taken over the business and kept its employees – and we are pleased to report the market has responded quite positively. Boom is now the single largest national provider of cranes and lifting equipment but we occupy a relatively small market share within the mining arena so we are not necessarily considered a threat.
“I am sure some of the companies we have acquired have welcomed their takeovers on some level. When you look at a private business which has been owned by the same people for a long period of time for example, and where their superannuation and financial future is tied up in their capital, a takeover can provide them with an exit strategy to realise that value.”
Harmon made light of the suggestion that Boom might be out to grab every crane company in Australia for itself.
“I don’t think so. There are more than 1400 crane companies in the Yellow Pages alone and probably a whole lot more that do not advertise,” he laughed.
“We certainly do not intend to be all things to all people. We are really targeting corporate Australia and that immediately limits the amount of opportunities available to us. It excludes, for example, a number of local crane companies because their focus is not aligned with ours, or the market they service is one we do not want to be exposed to.
“What we look for in a potential acquisition is a good quality provider with a strong reputation, positioned principally in growth corridors and with an industrial, resource or refinery customer base. It also comes down to whether or not the company is a considered a good buy.
“Fleet size and quality makes a difference. You very rarely see a crane company with brand new cranes these days because it is a very expensive way of running a business and a sure-fire way of going bust.
“There is an age-old saying in this industry that...click here to read on.
