Straight Maps Out Expansion Plans

Waste and recycling group Straight’s (LON:STT) £2.9 million acquisition of manufacturer  Dyro Holdings earlier this week could be followed by a number of other deals, according to founder and chief executive Jonathan Straight.

He told Proactive Investors that he plans a series of ‘initiatives’ designed to get the share price moving.

Explaining why he opted to take on £1.5 million of bank debt instead of issuing new equity, he said: ‘We see our share price as undervalued.

‘The dilution wouldn’t have been appropriate.

‘We see this (deal) as one of a number of initiatives to increase the value of our shares.

‘Once we are comfortable with the valuation we do intend to go back to the market and raise money to fund further developments and acquisitions.’

Straight has made no secret of the fact he wants to create “a £100 million company”.

Last year the Leeds based group, which makes wheelie bins and compost tubs for local authorities and retailers such as Wickes, turned over nearly £24 million.

And while Straight wasn’t prepared to discuss in detail his expansion plans, he gave some very broad hints.

‘There is further vertical integration planned that will involve additional manufacturing facilities for us,’ he said.

‘We will also look at other market areas we are interested in and we will continue to pursue those opportunities as they arise.’

The group is also attempting to broaden its retail base with councils under intense pressure to make spending cuts.  

‘It gives us an insurance policy in case we see some back-peddling on the local authority spending.

‘The signs at the moment are that this is not happening, although we haven’t had the spending review yet.

‘We are as confident as we can be that what we are doing will be below the radar.

‘We see a lot of the infrastructural development in waste management continuing because the targets require by legislation haven’t gone away.’

Dyro was a very shrewd acquisition. The Hull-based manufacturer owns Powell Plastics, which makes Straight’s products.

So in buying the business Straight is securing production capacity, while boosting the company’s profitability

Broker Astaire has raised its earnings per share forecast by 10 per cent this year on the back of deal and predicts the company will post EBITDA of £2.6 million.

‘Powell was making a lot of money as we were busy, so we decided it was not clever to be giving margin away,’ Straight said.

‘We also realised it was not clever to have a supplier overly reliant on us for its business.’

Straight's purchase of Dyro is one in a series of deals negotiated by the company’s chief executive.

In 2004, a year after listing on AIM, it bought its main competitor Blackwall for £6.75 million. It has since bought Gummy Bins and Harcostar Garden Products, while creating a manufacturing base in the US.

In March it snapped up the bulk of waste company Helesi's UK business, an acquisition which gave Straight its first branded wheelie bin.

‘Helesi is doing well,’ the CEO said.

‘We are looking to get to the sales levels to where they were before Helesi went off the boil in the second half of 2009.’

http://www.proactiveinvestors.co.uk/companies/news/20281/straight-maps-out-expansion-plans-20281.html