If the lingering effects of Omicron are drawn out, the labour shortage issues of today will not be going away any time soon, making labour hire businesses like MCS Services (ASX: MSG) even more attractive as they expand their labour suite to include traffic management.
With their existing labour hire services primarily positioned around crowd control services, the addition of traffic management comes via the acquisition of Perth-based business, Highways Traffic.
Having been in operation for 20 years, Highways Traffic provides traffic management solutions from their depots in Perth and Kununurra where they service Government projects as well as mining companies based in the Goldfields, Pilbara and Kimberley.
“The Highways Traffic acquisition is a major milestone in MCS’s history. We are thrilled to have this opportunity to acquire a substantial profitable local business of a manageable scale in a closely related industry,” said MCS Services CEO, Paul Simmons.
“We expect the acquisition to be earnings per share accretive and it may well open doors for further expansion.”
Making the acquisition most attractive is the similar operating structure that Highways Traffic offers to MCS’s existing services as a ‘plug and play’ solution that delivers trained manpower in niche situations.
Total upfront consideration for the acquisition is $2.06 million with $1.8m to be paid in cash and the balance in BCS shares. A further $0.89m may be payable subject to performance of Highways Traffic should it exceed $8.4m in revenue in the 12 months after settlement.
The acquisition will be funded from existing cash reserves.
While the onset of a pandemic had an initial impact on MCS Services due to the shutdown of major events where they provide crowd control services, the Company was quick to identify new opportunities for their labour management services.
This included an increase in their retail security, as well as deploying their security labour towards hotel quarantine services.
For the year ended 30 June 2021, MCS Services reported a 52% increase in revenue to $38 million which delivered a $1.55m net profit after tax, a 392% increase on the previous year.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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