Financial Update
After Successful Stock Offering, Construction Partners Seeks More Acquisitions
Construction Partners Inc. is on the acquisition trail after raising more than $100 million in an initial public offering this spring and becoming a publicly traded company.
The Dothan, Ala.-based highway contractor, which specializes in repaving and other maintenance projects across the Southeast, recently wrapped up a $51-million deal for The Scruggs Co., a civil infrastructure contractor in southern Georgia. Its holdings included three hot mix asphalt plans, three aggregate mines and one industrial plant.
Construction Partners is particularly interested in buying out smaller, family-held firms whose owners are looking to retire.
For Construction Partners, the Scruggs deal marked the company’s 16th acquisition since it was founded in 2001, notes Charles Owens, the company’s president and chief executive officer. Five are considered platform acquisitions and the rest are bolt-ons.
Nor is Scruggs likely to be the last. Construction Partners is particularly interested in buying out smaller, family-held firms whose owners are looking to retire, Owens notes.
The company now has a payroll of 2,150, nearly double its headcount from 2010, when it stood at 1,150. Construction Partners (NASDAQ: ROAD) reported revenue of $464.3 million through nine months ending June 30th, up from $380.5 million during the comparable nine month period ending June 30th, 2017, according to SEC filings. Net income during the same period was $35.6 million in 2018 compared to $13.7 million in 2017.
“We see a lot of opportunity, a lot of family-owned businesses out there,” Owens said. “There are still a lot of families looking to exit their businesses and we have been fortunate enough to be able to help them meet their goals.”
An increase in state spending on highway maintenance has also helped keep Construction Partners busy with new projects. Some states have increased fees and taxes to pay for highway work, including South Carolina and Tennessee.
The company’s backlog of work increased to $609 million at the end of June, up from just under $564 million at the end of March.
“We have seen a significant increase in our backlog over the last 12 months,” said Alan Palmer, Construction Partners' chief financial officer, who called the company’s pipeline of projects “robust.”
“Much of it is due," he said, "to revenue increases in the states we are operating in, with tax increase and other fees that go into the highway trust fund.”
But don’t look for Construction Partners to be chasing any mega projects anytime soon.
While the company occasionally may be drawn into a bigger undertaking as a subcontractor, Construction Partners’ strategy is to focus on smaller road projects, such as repaving, with quick turnaround times.
The largest project on the company’s books right now is a $58-million job in Georgia, followed by a $56-million contract for work on I-95 in North Carolina.
“We have seen historically that these are projects that are bid in good time and in harder times,” Palmer said. The DOTs (state departments of transportation) are very focused on managing existing roads, year in and year out.”
