Apollo scoops up troubled Fleetwood RV brands
Written on the 21 June 2018 by Nick Nichols
Listed motorhome group Apollo Tourism & Leisure (ASX:ATL) has steered west for its latest acquisition, splashing out $1 million to scoop up brands owned by Perth-based Fleetwood Corporation.
While this is the latest in a string of major deals secured since the company listed on the ASX in 2016, the company today warned that FY18 earnings will be at the lower end of expectations.
Apollo Tourism, headed by Brisbane brothers Luke and Karl Trouchet, has struck a binding agreement for the purchase of Fleetwood RV, Coromal and Windsor from Fleetwood Corporation which has been bleeding red ink from its RV business.
Fleetwood indicated in May that its losses could run as high as $7 million for the current half year.
Managing director Brad Denison says while the group has done 'a tremendous job of reinvigorating the Coromal and Windsor product range over the last three years', the sale to Apollo is the best outcome for shareholders.
"The board sees the future of the business as being better served by being part of Apollo's wider tourism and leisure platform," he says.
Luke Trouchet, Apollo's managing director, says the deal further consolidates the national caravan industry and builds on the company's strategy of expanding its retail distribution footprint.
"Acquiring segment leading caravan brands in Coromal and Windsor is the logical strategic response to current industry dynamics and will be a catalyst for improved margins," Trouchet says.
"The acquisition provides significant potential for manufacturing synergies due to economies of scale.
"We are proud to add these established and well-recognised brands to our portfolio and will continue to build on their heritage in the Australian market."
Fleetwood will continue to manufacture the acquired brands in Perth for six months after the deal has been sealed. Production will then move to Apollo's new manufacturing facility in Brisbane.
Under the planned buyout, Apollo will also buy Fleetwood's remaining raw material and finished goods stock.
The disposal of the brands at a deep discount to valuation is expected to deliver Fleetwood a hit of $12-$15 million to its bottom line.
Apollo hasn't veered off the road to expansion since its debut on the ASX, driving the group's earnings higher.
Net profit surged 349 per cent to $16 million in the first half of FY18, and since these results were release Apollo has acquired Camperco, one of the largest independent motorhome operators in the UK and Ireland.
Last year it bought Sydney RV Group in Penrith and the Queensland-based Kratzmann Caravans.
However, Apollo says a prolonged northern winter and growth in the global rental business in Canada, America and New Zealand has led to a delay in used RV sales in FY18
Apollo says the Fleetwood acquisition will help to improve ongoing demand for its products, as well as lift margins.
Business News Australia
Author: Nick Nichols