Ferret's Stock to Watch: ALESCO CORPORATION LIMITED08:38,...

Ferret's Stock to Watch: ALESCO CORPORATION LIMITED
08:38, Friday, July 06, 2007

Sydney - Friday - July 6: (RWE Aust Business News)
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OVERVIEW
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Today Alesco Corporation Ltd (ASX:ALS) supplies strong
industrial brands to niche markets in Australia and New Zealand.

Its customers include businesses in the building and
renovations, mining and construction and scientific and medical sectors.

The company has a clear focus of investing in and developing
industrial businesses holding leading industrial brands with high market
shares in niche markets.

Lincoln Sentry Group is one of Australia's leading suppliers,
distributors of hardware and components to the cabinet and furniture
making industry and the window, door and glazing industries.

Parbury manufactures and markets a wide range of surface
solutions for kitchen, bathroom and commercial applications.

Manufactures and distributes kitchen rangehoods, canopyhoods,
ducting systems, laundry tubs, ironing centres and food waste disposers
in Australia and New Zealand.

On Wednesday Alesco Corporation announced to the ASX that its
Lincoln Sentry business had entered into an agreement to acquire the
Joinery Products Hardware Supplies Pty Ltd business for $10.7 million.

Joinery Products has been operating for almost 20 years as a
leading supplier of hardware accessories to door and window
manufacturers.

It distributes through a five branch Australian network
generating annual revenue of approximately $17 million.

The company is the exclusive supplier of Truth Hardware, a
leading North American manufacturer of hardware for the timber and uPVC
window market.

In addition, the business markets an extensive range of products
from leading suppliers, including Lockwood and Whitco security and
commercial hardware, Savio Hardware, Winhaus and Intek Plastics, and
other associated products for the domestic window and door industry.

"Joinery Products is an attractive bolt-on acquisition for
Lincoln Sentry's rapidly growing Window, Door & Glazing division," said
Alesco's CEO Justin Ryan with some tongue in cheek.

But in a more important vein he added, "Lincoln Sentry is
already well placed to benefit from the increasing focus on
environmentally sustainable window and door products and systems,
including double glazing, and the addition of the Joinery Products
business will further enhance this position."

Joinery Products has a diverse and active customer base with
more than 1,100 trade customers across the southeastern region and will
trade as a stand alone company within the Lincoln Sentry Group with the
existing management team based in Thomastown.

The business will report to Lincoln Sentry general manager Jim
Brennan.

"The business allows Lincoln Sentry to further expand into the
Victoria, New South Wales and South Australia markets," Mr Brennan said.

The purchase price of $10.7 million (on a cash free, debt free
basis) represents a multiple of approximately six times FY08 EBIT (pre
synergies).

Settlement is subject to a number of conditions precedent, with
completion scheduled to occur on July 31.

This acquisition will be funded through existing debt
facilities.

Results for the year have still to emerge but based on the first
half to November 30, the result should be good.

Net profit rose 12.2 per cent to $26.9 million on a revenue of
$53.3 million, up 14.3 per cent on the previous half year.

The construction & mining and scientific & medical divisions
within the portfolio have experienced strong demand while the new home
market, in both Australia (in particular NSW) and New Zealand, continue
to experience difficult trading conditions.

The company reported record earnings per share pre amortisation
of intangibles of 41.5c per share (cps), up 10.1 per cent (Nov 2005:
37.7cps).

Interim dividend was 27.5cps (fully franked) up 10 per cent (Nov
2005: 25cps).

The acquisition program contributed to earnings growth,
offsetting the subdued new housing market.

Acquisition of Promedica ($21 million) and App-Tek ($3 million)
were completed during the half.

Acquisition of Lincoln Sentry Group for $84 million, Flextool NZ
for $6 million and EnviroEquip for $9.1 million all announced subsequent
to half year balance date and will contribute positively to second-half
earnings.

The improvement in all key ratios continues to reinforce
Alesco's strategy of building a strong and diverse portfolio of leading
brands in niche markets.

The strong improvement in the return on equity compared
to the prior corresponding period has been enhanced by the earnings
growth from debt funded acquisitions.

Since the end of the prior corresponding period the company
continued to invest in new businesses with the acquisition of the
Concrete Technologies, Flextool and Promedica businesses, and this is
now delivering an improved return on equity.

SHARE PRICE MOVEMENTS
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Shares of Alesco yesterday fell 13c to $13.87. Rolling high for
the year is $15 and low $11.18. Dividend is 58.5c to yield 4.22 per
cent. Earnings per share is 65.13c and p/e ratio 21.3. The company has
71.1 million shares on issue with a market cap of $987.3 million.

In an interview with Corporatefile, chief executive Justin Ryan
said the acquisition of Lincoln Sentry Group was to increase the
company's exposure to the growth trends in the Australian kitchen,
bathroom and laundry marketplace, particularly the growing renovation
segment.

"We consider the prospects for growth are strong in both the
medium and the long term," Mr Ryan said.

"This is an area where we are already active through our Parbury
and Robinhood businesses, and this acquisition will enable us to capture
more value more quickly than we could through organic growth alone.

"Over the past four to five years there has been a trend towards
renovations as a proportion of total building spend."

Mr Ryan pointed out that currently, for every three kitchens
built, one is a new build and two are renovations, with this proportion
growing in favour of renovations as housing stock matures.

"An attraction to us is that renovations, unlike new build are
not cyclical," he said.

"In addition to these trends, the actual proportion of
renovation budget being spent on kitchens continues to increase as
kitchens become ever more central to our lifestyles.

"It is a very attractive growth segment of the market," Mr Ryan
declared.

He said there were several ways that the company sees the
acquisitions fitting into Alesco strategy.

"A key goal we have is to develop industrial businesses in niche
markets and certainly Lincoln Sentry fits that description."

The CEO added that Alesco intends to develop a dedicated and
focused hardware business to be consolidated under the Lincoln Sentry
brand.

This will also provide a dedicated and focused decorative
surfaces business under the Parbury brand.

As a result, the hardware business that is presently part of
Parbury will be transferred to Lincoln Sentry.

Integration planning will take place between now and completion
of the deal.

BACKGROUND
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The origins of Alesco can be traced back to the last decade of
the 19th century in Western Australia.

Originally known as Atkins Carlyle, the company changed its name
to Alesco Corporation Ltd in 2001.

In 1896, Charles Atkins & Co Ltd, Oil and General Merchant
Importers, opened its WA premises in Fremantle.

In 1971, Charles Atkins & Co. merged with another longstanding
West Australian-based company, Carlyle and Company, to form Atkins
Carlyle.

On June 13, 1979, the company listed on the Australian Stock
Exchange.

In the 1990s Atkins Carlyle began a program to move its
business away from the traditional base as distributors of commodity
industrial and automotive products.

In 1996, McLeod Accessories, a leading distributor of motorcycle
accessories was acquired. The group's activities in this area were
expanded with the acquisition of Conco Trading and London Trading in
2001.

1997 saw the acquisition of Fennell Tyres, a leading specialist
distributor of earthmoving tyres, followed by the purchase of Marathon
Tyres in 1998. A number of smaller earthmoving tyres acquisitions were
subsequently made and from 2000, the business has traded nationally
under the Marathon Tyres name.

In 1999 Ingram Corporation, a leading distributor of specialist
automotive electrical and air-conditioning components was acquired.

2000 saw Parbury Ltd purchased by a public takeover. Parbury is
a branded building products group and has operations in supplying
decorative panels and hardware products to the cabinet, furniture and
shopfitting markets and supplying specialist chemicals to building and
construction markets.

2001 was a pivotal year in the group's development with the
final exit from the commodity automotive parts business and the sale of
the original industrial consumables business of the company. Following
the sale of trading name Atkins Carlyle with the industrial consumables
business in July 2001, the group changed its name to Alesco Corporation
Ltd in 2001.

Lincoln Sentry is one of Australia's leading suppliers and
distributors of hardware and components to the cabinet and furniture
making industry and the window, door and glazing industries.

The business markets an extensive range of leading domestic and
global hardware and component brands, including Blum, Assa Abloy, 3M and
Dow Corning. It was acquired by Alesco on February 1.

ENDS

Copyright © 2007 RWE Australian Business News. All rights reserved.