Forge looks to round out with bolt-ons

With the downturn in resources spending gathering pace, mid-size operator Forge Group is moving to take advantage of the cycle by becoming a consolidator.

By InvestSMART · 30 Aug 2013

By InvestSMART ·
30 Aug 2013

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With the downturn in resources spending gathering pace, mid-size operator Forge Group is moving to take advantage of the cycle by becoming a consolidator.

Run by David Simpson, a former senior executive with UGL, Forge is bedding down one recent purchase and is on the prowl for more.

"We're looking for one or two bolt-ons, and then something bigger," Mr Simpson said. "There are good consolidation opportunities."

From its base in Western Australia, Forge plans to boost its presence on the east coast, as well as extend in the US, where it recently bought Taggart Global, which operates in the power sector.

In particular, Forge is keen to take advantage of its strong balance sheet to snare a larger player with weaker finances, so it can bulk up more quickly.

Forge also looks to organic expansion in areas adjacent to its existing operations, such as power transmission, water, coal seam gas and government-related work.

This in part is aimed at building up the maintenance side of the business, which would lift recurring revenue streams and help offset the lumpy one-off projects on the engineering side of the business.

In the year to June, Forge's pre-tax profit of $90.1 million came on revenue of $1.05 billion.

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Frequently Asked Questions about this Article…

What is Forge Group’s acquisition strategy and why is it relevant to investors?

Forge is positioning itself as a consolidator during the downturn in resources spending, actively looking for one or two bolt-on acquisitions and a larger deal to grow quickly. For investors, this strategy can drive faster scale and potential value if Forge successfully integrates complementary businesses.

Who runs Forge Group and what is his industry background?

Forge is run by David Simpson, a former senior executive with UGL. His industry experience informs Forge’s push to pursue acquisitions and expand its market footprint.

What recent acquisition did Forge make and what sector does it operate in?

Forge recently bought Taggart Global in the United States, a company that operates in the power sector. This deal is part of Forge’s strategy to extend its presence in the US market.

Where is Forge planning to expand geographically and why does that matter?

From its base in Western Australia, Forge plans to boost its presence on Australia’s east coast and extend further into the US. Geographic expansion can help diversify revenue sources and capture new market opportunities.

How does Forge plan to use its balance sheet when pursuing acquisitions?

Forge intends to use its strong balance sheet to target larger players with weaker finances so it can bulk up more quickly. That approach aims to take advantage of consolidation opportunities during tougher industry conditions.

What areas of organic expansion is Forge targeting to grow revenue?

Forge is pursuing organic growth in areas adjacent to its existing operations, including power transmission, water, coal seam gas and government-related work. These adjacent markets align with its core capabilities and offer new contract opportunities.

Why is Forge focusing on building up its maintenance business and how does that affect investors?

Forge wants to grow the maintenance side of the business to lift recurring revenue streams, which helps offset the lumpy, one-off projects typical of its engineering work. More recurring revenue can make earnings more predictable and potentially reduce investment risk.

What were Forge’s recent financial results that investors should know?

In the year to June, Forge reported a pre-tax profit of $90.1 million on revenue of $1.05 billion. These figures give investors a snapshot of the company’s recent profitability and scale.