SWS plans to raise €500m to grow firm

Bandon-based group SWS plans three acquisitions this year to expand its energy and business outsourcing units in advance of a possible stock market flotation in 2007 or 2008.

After an annual meeting yesterday, at which SWS revealed that its pretax profit rose 32 per cent to €5.6 million last year, chief executive Kieran Calnan said the group initiated a strategic review in January to see how it might raise some €500 million to expand the business in the medium term.

SWS was confident that it could raise some €425 million in debt, but would need to raise the remaining €75 million elsewhere, he said. The group was examining whether to raise the money through an initial public offering (IPO) on the stock exchange or to ask its existing shareholders to raise the money.

Management owns 20 per cent of SWS, with the remainder held by Dairygold and Bandon, Barryroe, Drinagh and Lisavaird co-operatives. "2007 and 2008 will be the critical years for us," said Mr Calnan. "If we want to continue our expansion, we'll need to raise equity and that's the position our shareholders will have to address."

Also under review is the question of providing liquidity for shareholders who may wish to take a return on their investment in the group, he said.

Mr Calnan declined to specify what the group's acquisition targets in the current year were or indicate the scale of the possible deals, but said two were in the energy sector, while one was in the business processing area. SWS might take shareholdings of 50-60 per cent in certain deals, he said.

SWS started as a cattle breeding company, but in recent years has diversified into waste, energy and outsourcing. Turnover grew by 29 per cent to €30.7 million in 2005 and shareholders' funds rose by 21 per cent to €25.1 million at the end of the year.

The group does not disclose the profit margin in its individual units, but it does provide sales figures per unit. Turnover in the natural resources unit, including windfarms and waste-to-energy operations, rose to €9.96 million from €6.51 million. In the business outsourcing division, whose clients include Independent News & Media, turnover rose to €9.87 million from €7.67 million.

In the business services unit, which provides property, accounting and financial services, sales rose to €6.92 million from €5.68 million, but there was no growth in the agricultural services unit, where turnover was static at €3.93 million.

The annual report details an exceptional charge of €540,744 in respect of professional fees during merger talks with the Irish Agricultural Wholesale Society Ltd, now One51, which continued for almost two years before they were called off last September.

In addition, the report says SWS paid a total of €3.16 million in cash for two Cork-based accountancy practices - Vincent Hurley & Co and Seán Lehane - and for an interest in a Co Kerry windfarm.