Toowoomba building materials firm in strong ASX launch It’s a concrete start
SHARES in Toowoomba- based firm Wagners have jumped 25 per cent on debut on the stockmarket, as investors bank on a future in the seesaw construction materials sector.
Wagners, started 28 years ago by the Wagner family, raised $ 196 million in the offer with shares priced at $ 2.71. The stock was tightly allocated and leapt to $ 3.31 on debut before closing at $ 3.40.
The 530- staff company makes cement and other construction materials such as reinforcing steel, with risks listed in the prospectus including any drop- off in infrastructure work or a construction downturn.
The jump saw the personal stake of Wagners chairman Denis Wagner worth $ 75 million, the same as brothers and co- founders John and Neill, while fourth sibling Joe’s was worth $ 78 million.
The Wagners retain about 55 per cent of the company, but Denis Wagner said roughly 6000 new investors came aboard.
“In the fullness of time, we think we’d like to ensure that everyone does very well,” he said.
Despite the first- day spike, he maintained the company should not have shot for a higher price before listing and thereby raised more funds.
“We made a decision as to what we considered a fair value for the business to be, and we’re happy with the outcome,” he said.
The stockmarket company listed excludes some property assets and Wagners’ recent flagship project, a private airport near Toowoomba built in 19 months.
The greater Wagner family had received $ 96 million in the float by selling down parts of their holdings, but Mr Wagner said “the intention is to invest that money widely in our ( unlisted) infrastructure and property as- sets”. Other funds are used to pay down debt and help growth.
The move will see Wagners’ accounts lifted to a routine public profile, which can be straining for some executives and shines a spotlight on governance issues such as how related- party deals are handled.
The listed company, for instance, will have dealings with the unlisted Wagners entities, such as in quarry leases, which the prospectus said were handled on a commercial “arms’ length” basis.
Mr Wagner argued the greater exposure would not hamper performance, saying: “We do … understand from a board perspective and a reporting structure ( that things) are different. What we would like to do is continue the culture, the attitude, the innovation.”
The stockmarket- listed company is forecasting profits of $ 23.2 million for fiscal 2018, up from $ 15.4 million a year earlier.
The prospectus shows that revenues can jump, going from $ 250.7 million in 2015 to $ 192.7 million in 2017, and a predicted $ 231.8 million in 2018.
Revenues were hit in recent years partly as big infrastructure projects wound up, such as the Brisbane Legacy Way toll road or Gladstone LNG work, according to the prospectus.
“In the downturn of the mining industry in late 2015, there was not a lot of work to be had,” Mr Wagner said.
“It was a very competitive market, and we walked away from a lot of work, we didn’t feel we could achieve a reasonable margin. What we’ve seen in recent times is that whole mining sector is starting to change, and come back very strongly.”
The latest prospectus includes a jump in cement revenues alone of 8.2 per cent in this financial year, but lower average selling prices. Mr Wagner said this lower price did not reflect the company now bidding at those earlier scorned prices, but rather moving into new markets with a lower price. “That’s not to say that it’s not a profitable business, but it’s a different market,” he said.
The company also develops new types of materials, such as a concrete it describes as more environmentally friendly than typical products, and is forecasting revenue rises in this area.
Analysts at IBISWorld, in a report earlier this year on cement and lime manufacturing, said the pace of industry expansion in the long- term would be constrained partly by “the increasing penetration of low- cost imports”.
“Industry revenue is projected to increase at an annualised 2.5 per cent over the five years through 2021- 22, to reach $ 2.9 billion,” IBISWorld said.
One of Wagners’ similar competitors, Boral, has had a good run on the stockmarket in the past year, with shares rising from $ 4.76 in February 2016 to close at $ 7.85. That is still off Boral’s highest of $ 9.20 in May 2006.