IVE Group Limited (ASX:IGL) Executive Chairman Geoff Selig talks about the recent acquisition of Active Display Group and Melbourne-based AFI Branding Solutions.
Lauren Evans: Hi. This is Lauren Evans for the Finance News Network. Joining me from IVE Group (ASX:IGL) is Executive Chairman Geoff Selig. Geoff, welcome back, and it’s nice to meet you.
Geoff Selig: It’s good to be back. Thanks for having me.
Lauren Evans: So, first up, let’s talk about your recent announcement. You’ve acquired two businesses. Could you tell us more about this?
Geoff Selig: Yes, we’ve acquired two businesses, as you said. Active Display Group, which operates in the retail display space, temporary, semi-permanent and permanent in-store point of sale, and they also have about a third of their revenue in the third-party logistics space. And then also AFI Solutions in Melbourne, which is essentially a fabric retail display, fabric producer for events and exhibitions. So, both businesses are a very good fit for the broader IVE offering and both businesses will be fully integrated into IVE’s existing operations from November of this year, concluding in June of next year, with the completion of both of the transactions due on 31 October.
Lauren Evans: Thanks Geoff. So could you give us a bit of detail around the financials of the transactions?
Geoff Selig: Yeah, it’s not a large transaction in terms of the acquisition price, $6.5 million. $1.3 of the $6.5 million is on a deferred basis aligned to the attainment of revenue targets. We’re expecting revenues of roughly $45 million and an incremental EBITDA contribution full run rate post-integration of $6.5 million, $4 million net profit after tax, or also put another way, 2.8 cents per share accretion. So, 20 per cent uplift over FY21 full year net profit after tax. So, very attractive metrics for us. And I think the other point to make is a low-risk integration and the type of integration that we’ve done a number of times before over the last 10- to 15-odd years.
Lauren Evans: So, Geoff, IVE has followed a strategy of consolidation in the industry over the last decade. Could you comment on the strategy and future areas of interest in terms of acquisitions?
Geoff Selig: We certainly, over the last 10 to 15 years, embarked on a strategy of diversifying our revenue streams, both through organic opportunities and through acquisition opportunities. As we communicated in our August results, 25 August results this year, we’ve earmarked $30 to $40 million for pursuing these types of initiatives. And one of the areas we specifically identified was in the third-party logistics space. And, certainly, the retail display space has been a growing area of ours for the last five years, and acquiring two businesses that both play heavily in the retail display space, and the third-party logistic space in the case of Active Display Group, is closely aligned to our long-term strategy of continuing to grow and diversify our revenue streams.
So, I think, from our perspective, if you look at the metrics that I just talked about as per your last question, on $6.5 million to deliver $6.5 million of EBITDA with $30 to $40 million to deploy, I think we can, through a disciplined approach, really drive some really nice earnings accretion opportunities, whether they be organic or through strategic acquisitions, like we’ve done a number of over the years.
Lauren Evans: So, looking at conditions in the economy more broadly, how are you seeing things as lockdowns are coming to an end?
Geoff Selig: Optimistically. You know, most of our customers, they’re tier one customers across all the various sectors we operate in. We do play heavily in the retail space. They’re all national companies or global brands. So, certainly, as we come out of lockdown and with a client base that has the capacity to spend on marketing, certainly to drive foot traffic or to drive sales, I think we’re very well placed and we remain quite optimistic.
Lauren Evans: And is there anything else that you’d like to add today, Geoff?
Geoff Selig: We’re looking forward to our annual general meeting on 23 November and providing an update on our investment in our digital catalogue platform Lasoo, and across a range of other areas for our investors.
Lauren Evans: Well, Geoff Selig, congratulations on the acquisitions, and we look forward to hearing from you again before the end of the year.
Geoff Selig: No, thank you, and thanks again for the time. Good to chat.