Getting goods to consumers from the other side of the planet depends on reliable logistics to reduce time and costs, ensuring customer satisfaction.
Logistic companies have been struggling to manoeuvre through the recent COVID-19 supply chain crisis that is still going on to this day. For the last few years the world has had to put up with extreme delays and setbacks which has seen goods and services arrive months after the original delivery date.
Somewhere amid the current supply chain crisis has presented an opportunity for logistics company Silk Contract Logistics Holdings (ASX: SLH), who today has announced the acquisition of a Perth based container and freight Company, Fremantle Freight & Storage Group (FFS) through its head company Brightflow Enterprises Pty Ltd.
Established in 2000, FFS is a family-owned business which operates across five sites in Perth, Australia, where it provides wharf cartage, warehousing, import quarantine, fumigation and a range of other port-related services.
Having established a secure foothold in Perth, the Company has earned its rank as one of the top container freight and logistics companies in WA.
This deal is a massive opportunity for Silk as the agreement will add immediate scale to the Company’s footprint nationally and have a direct and positive impact on the group’s earnings for the year ahead. The deal is set to unlock demand from Silk’s existing blue-chip customer base, where the Company can now provide potential cross-selling opportunities.
“FFS is a strategically important acquisition and establishes Silk’s Port Logistics capabilities in Perth. This will allow us to extend our elevated customer service offering nationally. FFS is an attractive opportunity, the businesses operating philosophy is highly aligned with Silk’s offering and will deliver operational efficiencies as well as further revenue growth,” said Silk CEO, Brendan Boyd.
As outlined in the report today, FFS has previously generated revenue of $29 million annually and has solid positive earnings and operating cash flow. The announcement did not include the exact figures and time frame for these results.
The acquisition will consist of two payments, one payment of $23.6 million upfront along with a further $7.8 million payable after achieving agreed financial milestones before the end of the financial year dated 31 July 2023. Additional considerations may be expected if these milestones are exceeded, which will be rewarded based on a percentage of the outperformance but will not exceed $3 million.
Now operating in every state, Silk has managed to achieve robust half-year results for the period ending 26 December 2021. Recording revenue of $128.5 million, increasing 18.5% over the previous corresponding period (pcp). Along with underlying net profit after tax coming in at $7.4 million, gaining 50.9% over the pcp.
SLH shares began listing on the ASX at a price of $2.32 in July 2021, but since then, shares have tracked lower with the overall market and currently sits on $2.16 at the time of writing.
Trading Desk Assistant at Emerald Financial
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