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Acal increases fibre optics footprint with Norwegian acquisition

Last updated: 07:03 07 Jan 2015 EST, First published: 08:03 07 Jan 2015 EST

foss

Acal (LON:ACL), the international supplier of customised electronics to industry, has bought Norwegian firm Foss AS Fiberoptisk Systemsalg for £10.1mln.

The UK company is acquiring the designer and manufacturer of customised fibre optic solutions on a debt free and cash free basis for an initial consideration of NOK 117mln.

Additional amounts, up to NOK 22mln (£1.9mln) may be payable over the next three years, depending on how well the acquisition performs.

Foss, which has around 100 employees, will become part of Acal's Design & Manufacturing division, though it will continue to trade under its own brand.

Foss’s turnover in 2013 was NOK 163mln (£14.0mln), while pre-tax profits came in at £1.5mln.

Gross assets at the end of 2013 were valued at NOK 82mln (£7.1mln).

Acal said adding Foss to the business would double Acal’s revenues in the fibre optic market, while Foss would benefit from cross-selling opportunities when it becomes part of Acal.

“The acquisition continues our strategy of acquiring high quality, growing businesses that broaden and strengthen our technology expertise, thereby creating further growth opportunities,” said Nick Jefferies, group chief executive of Acal.

“Foss has a well established track record of designing and manufacturing high performance, customised fibre optic products. As part of the enlarged group, Foss will gain access to our base of over 20,000 customers while Acal will benefit from access to their customised design and manufacturing skills," he added.

Broker N+1 Singer reiterated its positive stance on the company, which is founded on Acal's transition from a general electronics distributor to a specialised niche industrial distributor and solutions provider.

“The reshaping process took a major step with the acquisition of Noratel last year and the purchase of Foss today makes sound strategic sense,” N+1 Singer argues.

“The European market opportunity is large and the space is fragmented providing further growth opportunity. Clearly there is some dependency on improving conditions on the mainland, evidenced in this update, but with a number of multi-national clients we see good prospects,” the broker added.

Cross-selling is a huge opportunity and Foss increases the potential, is the broker’s view.

Another fan of the stock is finnCap, which has Acal as one of its key picks for 2015.

The City firm has become keener still on the stock following the Foss acquisition, upping its fiscal 2016 earnings estimates by around 5%.

FinnCap notes the deal is immediately earnings enhancing and continues the process of building strong market positions in the group's chosen technical areas.

The broker's price target is 322p.

Shares in Acal were up 1.5% at 232.25p in lunchtime trading.

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