Eco Investor October 2015

Pre-Profit Securities

Third Acquisition for HRL

HRL Holdings is undertaking its third acquisition in one year, with the target being AAC Environmental Pty Ltd, an ACT based environmental services and hazardous materials analytical laboratory business.

AAC commenced operations in 2004. Its services include asbestos auditing and building contamination assessment, NATA accredited laboratory analysis of suspected asbestos containing materials, contaminated land analysis, soil sampling, dust monitoring, and air quality monitoring.

ACC's particular focus on asbestos is relevant in the ACT which is currently an asbestos hotspot due to the well-publicized "Mr Fluffy" loose-fill asbestos insulation demolition program now underway.

The ACT Government is buying Mr Fluffy affected homes so they can be demolished and re-built. There are 1,022 homes in the buy-back scheme and 1,014 of the owners wish to participate in the program.

Every demolition must go through set stages: asbestos removal under friable conditions with air monitoring; visual and air monitoring clearance post removal; demolition of home with air monitoring; visual and air monitoring clearance post demolition; and soil testing. AAC provides all of these services and is involved in the tendering process.

HRL has identified what it says are a number of other significant opportunities in and around the ACT region.

Under the share sale agreement, HRL will acquire the issued capital of AAC for a maximum price of $1.5 million with $1 million in cash and an earn-out of up to $500,000. ACC must have earnings (EBIT) of more than $500,000 to receive the full earn out. HRL will fund the acquisition from cash and existing banking facilities. The deal is expected to settle at the end of September.

The deal means HRL will expand to have five accredited laboratories - in Brisbane, Darwin, Canberra, Christchurch and Wellington.

The acquisition strategy is working for HRL. In 2014-15 it had revenue of $4.6 million compared to only $20,858 in 2013-14, and is close to profitability having made a loss of $1.58 million but an underlying profit of $807,391 after tax.

HRL's full range of services are: asbestos and hazardous materials management, industrial hygiene, building and contaminated land assessment, soil and ground water sampling, dust monitoring, NATA/ IANZ laboratory analysis, on-site testing and monitoring, and training. (ASX: HRL)





Search Eco Investor