Tru-Test mulling three acquisitions, may seek shareholder funding as dairy exposure grows

Tuesday 22nd October 2013

Tru-Test Corp, which doubled in size after buying a dairy industry equipment business, is considering three offshore acquisitions that would extend its exposure to the dairy industry, says managing director Greg Muir.

The company made what it calls a transformational acquisition by buying Dairy Technology Services in January for some $73 million and the purchase contributed to a 12 percent uplift in sales for the 2013 year. Tru-Test raised almost $10 million from shareholders and Muir says investors have indicated they would be supportive of more acquisitions.

"If it was sub-$10 million then we could probably fund acquisitions internally," Muir told BusinessDesk. "Outside of that we would need to go back to shareholders."

He declined to identify the targets other than to say two of the three "have very strong dairy roots" and the third was a wider-ranging agricultural business with beef sector interests. The targets would offer new technologies to complement the company's existing livestock weighing, electronic identification and dairy automation, milk meters and electric fence products.

The acquisitions were unlikely to be executed this calendar year and would more likely be in the first quarter of 2014, he said.

Profit rose to $6.6 million in the 12 months ended March 31, from $2.3 million a year earlier, according to the Auckland-based company's annual report. Earnings included $5.6 million from the sale of its UK livestock weighing and tagging business Ritchey and Fearing. Sales rose 12 percent to $97.6 million.

Dairy Technology's milk storage and refrigeration business extended Tru-Test's reach in the dairy industry after it acquired dairy automation and herd management company Radian Technology for $1 million last December.

Dairy Technology "delivers a significant change in scale that has been required for some time," Loughlin said in the report. "We continue to actively look for further acquisition opportunities."

The first quarter of 2014 has met company expectations with less impact from last summer's drought than expected. The impact of drought may yet be felt, Loughlin said. Increased dairy company milk payouts bode well for the dairy sector while some of Tru-Test's international markets are operating "in very difficult economic conditions."

Tru-Test sold UK subsidiary Ritchey and Fearing after holding the company for little more than two years because its plans to increase its global business in animal tags were thwarted when it failed to make further acquisitions in the sector, the company said. The sale price amounted to a return of more than 100 percent on the investment.

Total assets jumped to $138.7 million in the latest year, from $57.4 million in 2012, including $41.8 million on intangibles related to Dairy Technology.

In the 2013 year, US sales climbed 22 percent, South American sales jumped more than 50 percent from a low year-earlier base while New Zealand "enjoyed another good year of trading", it said, without giving details. The Australian and European markets "both held their own in very difficult conditions."

The company won't pay a dividend as it focuses on repaying bank debt taken on to make acquisitions, it said.

BusinessDesk.co.nz

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