O'Neill plans to turn Newcourt into major international player

Newcourt's chief aims to expand his young firm into a large global player through organic growth and further acquisitions, writes Arthur Beesley

Newcourt's tireless chief executive Ted O'Neill could be excused for taking a break after shareholders voted yesterday to endorse the outsourcing service group's €22 million takeover of Ely Property in Dublin, its seventh transaction this year. Yet O'Neill will not be slowing down. On the contrary, he says further deals are in the offing.

Just nine months have passed since Newcourt floated on the IEX exchange, the market for smaller companies that constitutes Dublin's belated answer to the Aim in London.

Newcourt's acquisitions since then bring its annual turnover into the €100 million league and its expansion has been accompanied by a big rise in its share price. The stock currently trades around €1.21, almost 50 per cent higher than the price of 82 cent at which it listed.

But if Newcourt's growth leads some to speculate that O'Neill et al are lining the group up for a sale to a bigger beast on the global scene, he says that is not so. "A lot of people have this view that we're on a roll-up to sell out to a multinational and that is absolutely not true."

Instead, his ambition to create an international player on a par with groups such as CRH, Kerry and Grafton. "I think sometimes we have maybe a little tendency here in Ireland to think that we can't do it ourselves. We think we can do it."

Newcourt started life in 2002 when O'Neill and co-founder Phil Sykes, formerly of AIB Corporate Finance, bought out Federal Security in Dublin. They bought into the Northern Ireland security market in 2003 and entered the recruitment sector in 2004 with a stake in Sigmar, a recruitment business it now fully controls. The group's other sectors now include facilities management and aviation recruitment.

While the group's early development was financed by private fundraisings, O'Neill says the initial public offering last year followed takeover approaches. "Basically we had three attempts to buy us during 2005 and we said, if there's that much interest in us we might as well float it."

He won't name the suitors but they included "UK private equity funds, very significant groups" as well as a grouping of privately-held family companies in Ireland.

To expand Newcourt, O'Neill says the group will have to rely on organic growth as well as acquisitions. The targets remain unnamed but O'Neill says Newcourt will complete "a number" of deals later this year. "It's not a mad dash or anything. This is very well planned."

Newcourt funded the Ely deal via a share placing, Newcourt's second this year. That acquisition came about soon after O'Neill made contact last May with Ely founder Philip Marley.

Newcourt plans to use the Ely's sale-and-leaseback expertise to leverage investment in student accommodation in Britain, a sector that is set for a big expansion. The focus at home will be on the management of tax-driven investment projects in childcare facilities and daycare hospitals.

The other acquisitions to date this year were: risk management firm Nifast (July); business process company Encom Interaction Services (May); BSFM Facilities Management and Security Technology Ireland (both April); and recruiters People Group (March) and Kenny Whelan Associates (February).

Including Ely, the total spend to date has been €36 million. Making little of the acquisition rate, O'Neill says the next acquisitions will be more modest in scale than Ely and adds that the group will not need to raise new money.

"I think none of the deals in their own right are major transactions and all of the deals fit into the pattern of what we're trying to create. Sometimes, the time is right to do the deals," he says.

"We've been in existence since late 2002. We did a lot of deals in 2003 and 2004; we didn't do any deals in 2005."

While the entrée into the property sphere via Ely provides a footing for the group in Britain, he points out that Sigmar is already developing a presence in Warsaw, Prague, Frankfurt and will "very soon" be in Bratislava.

With half-year results due in September, O'Neill has little to say about the group's financial performance but concedes that he is comfortable with projections of full-year earnings before interest, tax, depreciation and amortisation (Ebitda) of some €8 million. "The brokers would be guiding Ebitda numbers for the full-year 2006 of just over €8 million, so who are we to debate with the brokers?"

O'Neill owns 6 per cent of Newcourt. Sykes owns another 6 per cent while other managers own an additional 8 per cent of the group. The rest is on the IEX. "When we floated, the UK fund managers really liked the Irish story and they love support services. Irish fund managers I think are beginning to understand support services better," he says.

O'Neill says higher interest rates and the oil price spike could be beneficial to Newcourt because it is the job of the outsourcer to help clients in the drive for efficiency and synergies.

As the founder in 1988 of the Imari port services and transport group, O'Neill has seen much worse business conditions. He made €5 million in 2000 when he sold Imari to Mersey Docks in Britain for €30 million. "If you invested in Imari in January 1988, you'd have made 35 per cent per annum compound returns every year for 12 years. It wasn't always plain sailing either," he says.

O'Neill turned 55 this month. He was born in Tralee, raised in Cork and trained as a chartered accountant. He has nothing against accountants but preferred not to practice. He describes himself as an "entrepreneurial manager" when asked whether he is more oriented to management or entrepreneurship. The priority for Newcourt "really is all about management and the proper structures of management".