In recent years, Tradelink, Iplex and Viadux have experienced challenging times, brought about by continuous management and ownership changes, leading to poor operating profits, and low staff morale. This, in addition to the contraction in miningand gas exploration, has impacted heavily on these companies.
Furthermore, these internal pressures on the respective companies management, have contributed to a failure to address the changing market environment, which is demanding greater customer service, product availability, and lower costs than ever before.
To address this, and to create an incredible investment opportunity, a group of highly experienced, senior industry executives has been assembled to evaluate the situation and find a way to restructure how these companies go to market. By combining experiences from various industries, this new management group has developed a strategy to restructure the supply chain of four significant companies in the sector, which under a new single ownership, will create the critical mass to deliver sustainable profitability, and market leading excellence in customer service, lower operating costs and world class innovation.
Their vision is to create a unique, vertically integrated plumbing and civil infrastructure group that has capabilities from manufacturing, supply, distribution, right through to retail. This new company (NewCo) will operate under a single administration and central logistics system, eliminating duplication, which will significantly lower costs, and result in a unique industry position, capable of taking on main rival, the highly successful, Reece Plumbing Ltd.
- General Business Outline
-Create Newco from the merger of four significant and strategic companies
-Newco will be a Plumbing Parts and Distribution Business -210 Branches (Trade Stores, Showrooms, Retail Outlets)
-13 Factories (Plastic Pipes and Fittings, Metal Foundry’s)
-$5.2B Market currently, but $6.43B+ Market under the proposal.
The New Company (NewCo) will broadly operate in two defined markets initially, the $ 1.8B Plastic Pipe and Fittings Market, and the $ 5.2B Plumbing Supplies Market.
Management estimates that $587M of the Plastic Pipe market value is taken up in the Plumbing Supplies Statistics. (Overlap)
Therefore, the estimated total market size for the NewCo is in the order of $6.43B, initially, before growing through $10B as new product segments come on stream.
Since the late 2000s, the industry has shown resilience despite variable demand conditions. The onset of the global financial crisis dampened consumer and business confidence, which drove
down investment in housing and commercial buildings, affecting demand for plumbing installation services.
Demand from residential building construction is projected to climb moderately over the five years through 2014-15 (1.1% annualised). Demand from the nonresidential building construction is projected to decline (1.7% annualised) due to the winding back of installation of plumbing fixtures and fittings on new educational facilities and the decline in office construction.
Industry revenue is projected to increase at an annualised 0.9% over the five years through 2014-15, to total $13.0 billion. This includes growth of 1.6% during the current year, in response to stronger demand for plumbing installation services in both new housing and commercial building construction. Contractors have also continued to generate work on emergency repair and maintenance projects.
The pace of industry expansion is projected to strengthen moderately over the next five years. Industry revenue is forecast to increase at an annualised 1.7% to total $14.1 billion in 2019-20. This will be underpinned by the cyclical upswing in non-residential building construction and solid growth in the number of housing commencements and work done on existing housing. In the short term, relatively low interest rates will encourage households and businesses to acquire credit and commit to building investment and renovation.
The main competitor of NewCo is called Reece, next two pictures show the sales performance of Reece and the comparison between NewCo and Reece.
In a word, the NewCo company will play a significant role in pluming industry in the near future.
By kennyfang (214267189)
IBISworld 2015, products and services segmentation, IBISworld, retrieved 17 April 2016, <http://www.ibisworld.com.au/>
Reece 2016, About us, Reece, retrieved 16 April 2016, <http://www.reece.com.au/aboutus>
Tradelink 2016, company information, Tradelink, retrieved 18 April 2016, <http://tradelink.com.au/retail>