Last week, surveying solutions company Veris (ASX: VRS) announced it had acquired Elton Consulting for $16 million. The business complemented Veris’ strategy to consolidate the Australian surveying, advisory and geospacial sectors by adding the market leader in consulting and advisory services for the property, transport and infrastructure sectors.
We first purchased Veris in June 2017 in WAM Microcap following a trip to Perth visiting a range of companies. One of the key themes that emerged from our trip was that a rebound in commodity prices was starting to benefit sectors of the Western Australian economy such as retail, infrastructure and property. Combined with surging infrastructure expenditure on the east coast of Australia meant that Veris’ surveying business was well placed to generate double-digit earnings growth over the medium term. Possible asset sales from Veris’ legacy mining services business meant that we saw the potential for a PE re-rating, with Veris trading at an FY18 PE of 9x.
At Veris’ recent half-year result, the company recorded stronger than expected organic top-line growth, generating approximately 40% revenue growth for the period. While margins were slightly lower than we expected, Veris has hired 60 surveyors in the period, contributing to a 30% increase in headcount. We believe this increase in headcount combined with the addition of the Elton Consulting business can contribute to future contract wins and drive strong earnings growth. Shares in Veris closed up 18.2% for the week.
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Chris is the Chief Investment Officer of Wilson Asset Management, having joined the company in 2006. He is also the Portfolio Manager responsible for WAM Capital (ASX:WAM), WAM Research (ASX:WAX), WAM Active (ASX:WAA) and WAM MicroCap (ASX:WMI).