Premier Technical Services Group (PTSG) is expanding its Electrical Services divisional portfolio via the acquisition of Guardian Electrical Compliance, a complementary national testing and compliance company. A £20m placing has funded this £12m deal and provides finance for additional ones that appear to be well advanced. On a full-year basis, Guardian alone enhances our FY19 and FY20 EPS by c 4%, with the prospect of more to come, subject to concluding further deals.
PTSG has announced the acquisition of Guardian Electrical Compliance, a Sheffield-based national B2B provider of electrical testing and compliance services, predominantly focused on fixed wire systems. This relatively young company (established in 2010) has grown organically to £8.3m revenue and £1.8m underlying EBIT in 2017, supported by high renewal and good new business win rates and healthy margins – characteristics it shares with PTSG. In terms of fit, Guardian broadly doubles the Electrical Services division field engineer resource, provides more fixed wire balance (PTSG has larger portable appliance testing activities) and includes ‘Traq-It’, a complementary customer interface IT platform that can enhance PTSG’s own Clarity ERP system. There is an obvious opportunity to capture post-inspection repair and maintenance revenues, which Guardian does not currently carry out and also to cross-sell services to Guardian’s client base with which there is limited overlap. PTSG is paying £12m initial cash consideration (or £11m net of cash acquired) – or c 8x 2017 PAT – and up to £4m over the next three years, depending on achieved profitability.
A successful placing of 12.7m new shares at 157.5p has raised c £19m net funds for PTSG, of which £12m is being applied to the Guardian acquisition. Separately, other target companies in the pipeline include one in Fire Solutions (expected to complete for a £4m initial consideration by the end of 2018) and potentially others in each of its divisions. These are expected to be funded from the remaining placing proceeds and an extension to existing debt facilities. Management expects planned acquisitions to be significantly earnings-enhancing when the placing proceeds are fully deployed; our FY18 EPS estimate is up c 5% (neutral underlying plus lower tax effect in FY18 only) and + c 4% in the following two full years.
Share price weakness and an earnings-enhancing deal have increased our threeyear EPS CAGR from 9% to 11% now and reduced the current year 13.2x P/E and 11.8x EV/EBITDA multiples down to 12.0x and 8.4x, respectively, by FY21.