FOS Capital illuminates balance sheet with $3m KLIK lighting acquisition

Commercial lighting solutions company FOS Capital (ASX: FOS) is set to expand its portfolio inking an agreement to purchase KLIK Systems, a Sydney-based linear lighting manufacturer. The acquisition will be financed using FOS’s available cash reserves and debt facilities. The transaction is on track to conclude within a span of two weeks.

The purchase price is $3 million, comprising $2 million cash on completion and $1 million a year from completion. Plus, a condition of the sale is relocating the KLIK factory. KLIK’s factory lease ends in January 2024; so, as per the acquisition, FOS is to relocate the business by December 2023.

Managing Director, Con Scrinis, said, “This transformative acquisition of KLIK is the next chapter in establishing FOS as the pre-eminent Australian lighting manufacturer.”

KLIK specialises in producing LED linear and handrail lighting solutions tailored for commercial, industrial, and architectural applications. With a workforce of 31 professionals, KLIK caters to the Australian commercial lighting sector, maintaining sales offices and distribution networks across all major capital cities. KLIK’s international footprint extends to export markets, contributing 25% of its revenue, with a notable presence in the United States.

This acquisition has multiple benefits for FOS, especially considering that KLIK brought in $8 million in sales in FY23. It is forecasted to add $1.5 million to FOS EBITDA, which was $936k in FY23. The Company’s revenue was $17.1 million, and with the KLIK acquisition, Group revenues are expected to reach over $25 million.

In FY23, FOS’s net profit stood at $580k, with its order book down 46% to $3.3 million. However, with KLIK, its post-acquisition order book will reach $10 million, and it will see benefits from KLIK’s NPAT, which was $755k in FY23.

Additionally, it will be able to undertake cost restructure and reduction as its manufacturing and production capacities will be spread across. KLIK will expand FOS’s market share in linear lighting and introduce it to new export markets. KLIK has a significant presence in the US market. It has 70 agents across the USA & Canada. The Company has identified an opportunity to export its LED luminaire manufacturer FOS Megabay range into these markets.

FOS has been actively considering acquisitions to bolster its balance sheet. For instance, in November 2022, FOS acquired Hawko Lighting Group for $1 million. Hawko helped the Company improve its manufacturing abilities. In FY24, one of the Company’s objectives is to actively pursue multiple value accretive acquisition opportunities and expand the distributor network.

The acquisition of KLIK not only enhances FOS’s presence in the linear lighting sector but also serves as a foundation for streamlining its manufacturing operations and introducing new product lines. Plus, KLIK brightens the path for FOS to establish a substantial export market beyond New Zealand, paving the way for increased international sales. For FOS, these acquisitions signal an illuminated FY24.