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Atlas Engineered Products: THE INVESTMENT CASE

Atlas Engineered Products building firm foundations as its acquisition strategy rolls on

Last week, the Toronto-listed firm said it was buying buying Satellite Truss Ltd for C$1.2mln taking it into the eastern Ontario market
Atlas Engineered Products building firm foundations as its acquisition strategy rolls on
The company specialises in trusses, which for the unitiated, keep your roof above your head

Wood product group Atlas Engineered Products Ltd (CVE:AEP) is growing fast, underscored by the fact it has already announced three acquisitions in 2018.

President of the roof truss specialist Guy Champagne told Proactive last December how the central plank, pardon the pun, of his firm's strategy was making acquisitions, slowly but surely  (not that slow perhaps), of owner-managed companies from those wishing to retire or develop their brands.

He  said that over the next three years, he is growing Atlas up to the C$50mln company which something, which has been promised to shareholders, and recent third quarter numbers showed a surge in revenue.

The figures also underlined the core strength within the business and gave a clue to where it's heading in the full year.

WATCH: Atlas Engineered Products building a strong future

Acquisitions roll on

Last week, the Toronto-listed business said it was buying buying Satellite Truss Ltd for C$1.2mln in cash, thereby making the Atlas mark in the eastern Ontario market.

Satellite had revenue last year of around C$1.5mln and it also owns real estate assets with an appraised value of C$590,000, and equipment assets of C$212,000.

And in March it said it had bought the operating assets including equipment, inventory, and trademarks of Alberta Truebeam Ltd (Truebeam), leased the land and buildings in which Truebeam operates, and hired all the Truebeam employees.

Truebeam supplies trusses and engineered wood products to residential development projects in Northern Alberta and Northwest British Columbia.

Most notably perhaps is that the Truebeam operation will contribute strong positive cash flow to Atlas and an estimated C$2.4mln in profitable revenue during the 2018 calendar year.

And the month before that - in February, the group inked a binding letter of intent to buy Highwood Trusses Ltd, in Alberta, which has annual sales of over C$3.5mln, as well as strong profitability.

As announced last year, it also bought Ontario- based Clinton Roof Truss Ltd for C$2.1mln in cash.

The purchase included 31,000 sq feet (sq ft) of plant, warehouse and office space on a five acre site, positioned to provide access to the growing Ontario communities west of Mississauga.

Decent quarterly numbers..

In April this year, Atlas said third quarter revenue growth surged by 18% from the previous quarter and was up 26% for the nine-months to February.

The group said the three month figures did the impact of the costs associated with growing the group

Thus adjusted Earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to C$83,830 from C$222,722 due to the higher costs associated with the company’s acquisitions.

Nevertheless, the company added that its 12-month revenue target of C$50mln with a 15% EBITDA margin was realisable.

Meanwhile in February, when the group reported second quarter numbers, it said it had enjoyed a record period with  underlying earnings (EBITDA)  of C$674,180 on sales of C$3,565,798.

What does the company do?

Trusses, for those not handy with a hammer, are the pre-fabricated, triangular frameworks that support a house’s roof.

The truss industry in North America is ripe for a company such as Atlas to consolidate, as many truss fabricators are local businesses run by owner-operators nearing retirement. 

Often, there is no obvious successor to pass their business to, or to whom they can sell it.

Once the number of companies under the umbrella grows large enough, Champagne has said there are other products, such as I-joists and engineered beams, that Atlas can sell.

And critical mass also brings the potential to transfer skillsets across regions.  Engineers used to creating technically complex truss designs for a high-end market such as Vancouver, for example, can lend those talents to truss plants in other markets where access to such expertise is hard to come by.

Atlas Engineered Products shares stand at C$0.43.

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July 17 2018
Last week, the Toronto-listed firm said it was buying buying Satellite Truss Ltd for C$1.2mln taking it into the eastern Ontario market

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