11/06/2009 - 00:00

Ausdrill adopts the Buckeridge plan

11/06/2009 - 00:00

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ONE year after fighting off a hostile takeover attempt, Ausdrill managing director Ron Sayers has declared the business he founded more than 20 years ago to be takeover-proof, and the likely instigator, not prey, of future acquisitions.

ONE year after fighting off a hostile takeover attempt, Ausdrill managing director Ron Sayers has declared the business he founded more than 20 years ago to be takeover-proof, and the likely instigator, not prey, of future acquisitions.

With family, friends and the founder now collectively holding about half of the company stock, Mr Sayers can stop looking over his shoulder and instead focus on the ambitious plans he has for the mining services company.

"In simple terms it's what I call the Len Buckeridge principle," Mr Sayers said. "It's vertical and horizontal integration with everything we do."

BGC Group, headed by billionaire Len Buckeridge, is known for making nearly everything it uses for building projects.

Speaking after the opening of Ausdrill's $20 million-plus Canning Vale factory last week, Mr Sayers said the division could more than double its annual revenue to $70 million in a year. Ausdrill's manufacturing division consists of Drilling Tools Australia and Remet Engineers.

To put this in context, Ausdrill recorded a 46 per cent increase in revenue to $273 million in the half-year to December 31, compared to the previous corresponding period.

Researcher AspectHuntley describes Ausdrill as an international drilling, contract mining, and logistics company with a strategy of building relationships with operators to ensure steady revenue streams.

The manufacturing arm is understood to potentially offer much higher margins than other areas of Ausdrill's operations, such as contract mining, and the construction of the large facility ensures the margins stay inhouse.

"We're an end user and we build drill rigs or hammers and bits by a drilling company for a drilling company," Mr Sayers said.

Ausdrill is one of several Western Australian-based listed mining services companies, including Macmahon Holdings, sold off heavily during the past year, with shareholders worried by mine closures, exploration cutbacks and reduced activity in the sector.

Macmahon launched a takeover bid for Ausdrill in May last year through a share offer, which had stalled by early September.

Mr Sayers acknowledged analysts had questioned Ausdrill's debt level, which increased to $170 million by the end of 2008, but said he was comfortable with the company's net debt-to-equity ratio of about 55 per cent. Mr Sayers said Ausdrill's debt was equipment related, not corporate debt, which was necessary for company expansion.

"At the end of the day if you want to make an omelette you've got to break eggs," he said. "If we want to boost our revenue, we have to buy gear."

The company expects to generate $1 of annual revenue for every $1 spent on buying or building equipment.

Ausdrill previously had a fixed and floating charge, which is a security interest taken by a lender to secure loan repayments.

"When we got out of that we vowed we'd never go back into a debt facility where someone had a fixed and floating charge over the company," Mr Sayers said.

"We just learned our lesson; we had a bank telling us what to do for three years, and it took us a long time to get out of it."

 

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