Austin Engineering and ai Limited are the sort of small industrial companies that slip under the radar of many investors but recent news from both companies could warrant closer attention.
Austin Engineering and ai Limited are the sort of small industrial companies that slip under the radar of many investors but recent news from both companies could warrant closer attention.
The common link between the two companies is veteran company director Robert Martin, who has had a hand in many interesting deals over the years.
The latest financial results for ai and Austin reveal solid profits and the prospect of better results in future.
ai has been best known for boardroom battles in the past few years and Mr Martin has usually been at the centre of those battles.
His latest adversary, Adelaide investment banker Stephen Young, this month resigned from ai’s board after stepping down as chairman last December.
Mr Young had urged shareholders at last year’s annual general meeting to vote against Mr Martin’s re-election but failed dismally.
In the meantime, ai’s management has quietly been selling non-core assets, such as the half-owned aiM Maintenance, and focusing on its Adelaide-based automotive parts business.
ai Automotive, which has about 500 staff, earned revenue of $126 million and a pre-tax profit of $3.2 million last year, with a big improvement in the second half.
Managing director Tony Dale is predicting an increase in sales in 2005, despite the impact of a model changeover by major client Holden.
The company also paid its first dividend in about five years.
The sale of non-core assets has allowed ai to close its corporate head office in central Perth, with Mr Dale and executive director Peter Hutchinson now operating from the Spearwood premises of ai Construction.
Patersons Securities analyst Robert Gee said ai’s latest profit was comfortably the best profit result achieved by the company.
“Ongoing dividends are a real prospect and this should appeal to shareholders,” Mr Gee said in a research note.
He has predicted the sale of ai Construction in the next year or two, confirming the company’s focus on its automotive business.
Mr Dale said one option for ai Construction was to link up with a larger international engineering group looking for a way to enter the Australian market.
On the boardroom front, Mr Dale said ai was aiming to appoint two new directors, including a new chairman from Adelaide.
The new directors would join three current directors – Messrs Dale and Hutchinson – who hold about 13 per cent of the stock, and Mr Martin, who holds about 18 per cent.
Former chairman Mr Young this month sold his entire holding of 3.5 million shares at an average price of 15 cents, but his former associate, Adelaide investor Leo Fitch, still holds a substantial 17.5 per cent stake.
Like ai Construction, Austin Engineering is also trading very successfully, thanks to the booming resources sector.
Austin was floated earlier this year out of West Australian Metals, a mineral exploration company chaired by Mr Martin, and its managing director Michael Buckland formerly ran ai for a short period.
Austin’s original business was in Queensland but it also has a major presence in WA after the $6.9 million acquisition last month of Kewdale manufacturer John’s Engineering.
The Queensland and WA businesses both enjoyed a big jump in revenue in 2003-04 to more than $30 million.
The group is targeting total revenue of $100 million-plus in 18 months and is hoping the introduction of new welding technology will help it achieve that target.
It has made a handy start to the new financial year with John’s recently securing orders worth $5.6 million for the supply of dump truck bodies and excavator buckets.
The company has recruited CBI Constructors manager Paul Clarke as its new general manager WA.
