The share price of Apollo Tourism & Leisure Ltd (ASX:ATL) is up 4.6% in today’s trading session to $1.58 following the release of an announcement that it is acquiring Camperco Group Ltd, one of the largest independent motorhome operators in the United Kingdom and Ireland.
- Apollo will acquire Camperco for £4.5 million (A$8.2 million) in a mix of cash and scrip.
- Purchase price consists of £2.25 million (A$4.1 million) cash and the issue of Apollo shares worth £2.25 million (A$4.1 million).
- The issued shares will be in escrow for 2 years.
- Camperco is being acquired on a net profit after tax multiple of around 7.5 on forecast CY18 earnings.
- Camperco’s founders and current management team will both be retained to run the business.
- A performance incentive of £1.0 million (A$1.8 million) is payable if future profitability targets are met.
- Management expects the acquisition to be earnings accretive in FY19, the first full year of ownership.
The Camperco Group was previously known as Bunk Campers, which is one of the largest independent motorhome rental operators in the United Kingdom and Ireland. The company earned over £3 million in revenue for the 2017 calendar year and has a fleet of over 200 RVs (recreational vehicles) planned for 2018. It also has plans to increase its European expansion for the 2019 season.
The acquisition is Apollo’s entry into the UK market and provides a base to expand across other European countries to capitalize on the growth in tourism. The company has made several acquisitions since listing in 2016 and the Camperco purchase aligns with its overall strategy to become a global RV solution.
Despite today’s announcement and share price bump, the stock is still down around 16% since the release of its half-yearly earnings report in late February that fell short of market expectations. The company’s focus in the second half will be effectively integrating its acquisitions and management has reaffirmed this morning that it is on track to achieve analyst consensus for its FY18 results.
Apollo is still a small cap stock with a market capitalization of around $284 million. It can provide investors an alternative to larger companies operating in the tourism space such as Crown Resorts Ltd (ASX:CWN) and SKYCITY Entertainment Group Limited (ASX:SKC).
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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.