Spotless’ light-bulb moment to reap millions with Utility Services Group acquisition

Spotless chief executive Bruce Dixon is predicting more growth to come. Photo: Luis AscuiHow many ASX-listed companies does it take to change a light bulb? Just one will do, says outgoing Spotless Group chief executive Bruce Dixon who has stumbled upon a lucrative revenue stream.
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The cleaning, catering and facility management company posted $2.8 billion in revenue for the 12 months to June 30, a 12.3 per cent gain on the previous year. This excluded costs associated with its return to the ASX in May, 2014.

Mr Dixon is predicting more growth to come in the next 12 months, saying its acquisition of smart reader and installation company, Utility Services Group [USG], in June has delivered unexpected revenue opportunities.

Among these are municipal contracts to change street light bulbs, which Mr Dixon said were worth millions of dollars a year.

“It’s opened up a whole new area for us,” said Mr Dixon about the USG acquisition.

“We were probably lacking in our foresight to see it but that whole energy sector is just huge and it fits our portfolio beautifully.

“There are large players, large contracts and the services are down our line, whether that be meter reading, maintenance of the poles or vegetation management. Going forward that will throw up a lot of acquisition possibilities and also organic growth.”

Spotless’ shares closed 6 per cent higher at $1.85 on Tuesday.

Mr Dixon, who retire at the end of year to help his son manage his pubs, expected further earnings gains in the next 12 months.

He said the company had been able to secure $70 million worth of new contracts since June 1. New customers include Melbourne Airport, Western Australia Department of Housing and the New Zealand Defence Force.

“Last year, we had $350 million of new contract wins and we renewed $950 million. We had a lot of large contracts, and we held every one.

“Revenue is up 12 per cent and we expect to do even better than that because a lot of the new contracts were [signed] in the back half the year, so FY16 is looking very positive.”

He also said the company, which is the third biggest manager of mining towns, was well positioned to combat dwindling investment in the resource sector.

Mr Dixon the Spotless was able to be more competitive when tendering for new resource contracts because it was able to submit an enterprise bargaining agreement that was 50 per cent less than the incumbent provider.

“The incumbents can’t match the price because the unions don’t want to swap to a greenfield EBA,” he said.

“Traditionally these contracts weren’t tendered. The town was built and the contract was awarded but now mining companies are looking to save costs.

“We think that will be a big growth area in the next 12 months.”

Mr Dixon also has cost savings from the four acquisitions it made in the past year contribute to the bottom line.

“Margins remain in line with our global peers and we see further upside as we improve processes and look for efficiencies in the new businesses currently being integrated into Spotless,” Mr Dixon said.

The company will pay a final dividend of 5.5¢ a share on September 25.