Author: Saeed Shah
The $368m (pounds 228.6m) cash purchase of Pinnacle Automation will be added to FKI’s Logistex division, which provides supply chain solutions used by Internet retailers, postal services and other distributors to send out goods and letters. The acquisition takes the share of FKI turnover from Logistex to almost 30 per cent, on a pro-forma basis.
Michael Blogg, an analyst at Charterhouse Securities, said: “E-commerce businesses will need to invest in hardware and those that can provide this will do very well. FKI is moving in this direction and very quickly. The growth rates in this division [Logistex] will be way above its other businesses.”
The Pinnacle move is the third acquisition FKI has made in the materials handling sector in 1999, taking its spend on this activity this year to pounds 447m. The company’s shares rose 6.5p yesterday to 195p on the news.
However, the purchase almost doubles FKI’s gearing to 160 per cent. Analysts said that the company’s strong cash flow and sale of non-core businesses should bring this level of debt down.
Steven Jones, FKI’s director of corporate planning, said that interest cover was not a problem, at over five times. He said that news on disposals was likely in the next three to six months.
He said: “We have found an area of e-commerce that we know something about. There is long-term growth in these businesses. It’s bigger in the US right now but it will spread to Europe in the next three or four years.”
In the nine months to 30 September, Pinnacle had turnover of $282.6m, with 28 per cent of sales directly to “dot.com” businesses. Operating income for the period jumped 65 per cent, compared to the equivalent period last year, to $25.2m.
Bob Beeston, chief executive of FKI, said: “We believe Logistex will now be able to offer an unrivalled breadth of expertise and experience in the market for logistics and sortation equipment, with pro-forma sales of some of pounds 460m.”
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