Godfreys hoovers up The Service Company for $2.7m

Australian vacuum cleaner firm Godfreys Group has bought New Zealand commercial cleaning firm The Service Company (TSC) for $2.7 million as it seeks to build up the business in a highly fragmented market.

The Victoria-based company will fund the acquisition through a bank loan and is expected to deliver immediate benefits, Godfreys said in a statement to the ASX yesterday. The Australian company has been hunting for an acquisition in the commercial cleaning sector since last year before settling on TSC, which it estimates is worth $A500 million in Australia.

Auckland-based TSC is owned by interests associated with chief executive Ian Jemmett, who will continue to work for Godfreys. If TSC hits certain earnings targets over the next four years, Mr Jemmett will also receive unspecified earn-out payments.

"This is an exciting opportunity for us to scale up our operations and bolster our product offering," Godfreys chairman Rod Walker said. "Commercial cleaning is a market that is experiencing good growth, and The Service Company brings a vast range of highly complementary, environmentally friendly products and a strong client base to our business."

The acquisition was announced when Godfreys reported its first-half earnings, posting a 17%  decline in profit to A$4.5 million on flat sales of $A90.6 million in the six months ended December 31. Its New Zealand business posted a 63% slump in profit to $A369,000 on a 0.2% increase in sales to $A12 million.

TSC has been trading since 1996 and is one of six firms holding an all-of-government contract in New Zealand to provide washroom and cleaning products.

Godfreys said TSC's focus on chemicals and consumables fills a gap for the Australian firm, which has specialised in equipment sales, and it plans to sell those products through its existing transtasman network of 223 stores.

The company's ASX-listed shares last traded at A$1.14 and have dropped 34% this year.

(BusinessDesk)