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ASCO Group secures Australasian foothold

ASCO Group, the Scottish oil and gas logistics specialist, has bought an Australian distribution firm for about £15m and secured £25m bank funding for further acquisitions.

EXPANSION: ASCO chief executive Derek Smith says it is looking to capitalise on booming activity in Australasia.
EXPANSION: ASCO chief executive Derek Smith says it is looking to capitalise on booming activity in Australasia.

Chief executive Derek Smith said the group's purchase of a majority stake in Bonnie Rock Transport was an important step in ASCO's international expansion plans.

The company was keen to expand in Australasia to help capitalise on booming activity in oil and gas markets in the area.

Bonnie Rock gives ASCO a foothold in the fast-growing market to provide support for firms that are developing unconventional assets on shore, like gas deposits that are tightly held in rock.

Mr Smith said Aberdeen-based ASCO is in currently talks with another potential acquisition target in Australasia.

The company is also eyeing a takeover candidate in the Americas.

The acquisition programme forms part of ASCO's internationalisation strategy.

Mr Smith said the share of group revenues generated by the core North Sea business may fall to around 40% in coming years, from around 50% currently.

But, he added: "The United Kingdom Continental Shelf will always remain as the hub for ASCO, we are an Aberdeen-based business."

He noted expertise developed in the North Sea could help ASCO win business overseas.

Asked if the company had a view on the forthcoming independence referendum in Scotland, Mr Smith said the matter was for voters to decide.

He added: "It's not on our radar as a big concern for us."

Group head of communications David Wallace said: "Fiscal stability is key."

Mr Smith said conditions in the UK market are quite tough. Oil and gas operators are driving hard bargains as they look to rein in operating costs and are demanding increasingly sophisticated services.

However, he noted ASCO had invested heavily in upgrading IT systems and the like to ensure it can respond to customer demand.

ASCO has upgraded its facilities at Peterhead dock, which suffered storm damage early in 2013.

Mr Smith said ASCO was unlikely to make any big acquisitions in the UK. However, it might make small "bolt-on" purchases to help broaden its range of services.

While experts have expressed concerns that skills shortages could crimp the oil and gas industry in Scotland, Mr Smith said ASCO has been able to get enough staff.

ASCO employs around 800 people in Scotland out of a group total of 2,200. Describing the Aberdeen labour market as tough, he noted the company had invested heavily in apprenticeships and in helping armed forces veterans move into the oil and gas industry.

ASCO employs around 30 former soldiers, including in Iraq

Mr Smith said ASCO was making good progress under the growth strategy backed by Doughty Hanson. The private equity firm led a £250m buyout of ASCO in November 2011.

Asked if the company might float on the stock market, to allow Dough-ty Hanson to realise its investment, he said: "It's an option for us and so is a trade sale."

However, Mr Smith said no timetable had been set for any such move.

The company grew revenues by 13% in 2013, to £768.6m, from £678.5m in the preceding year.

ASCO made an operating profit of £14.8m in 2013, compared with £5.7m in 2012.

It cut pre-tax losses to £5.4m from £13.6m in the preceding year.

The company incurred finance costs of around £20m in both years. It had net debt of £152m at December 31, compared with £157m at the end of the preceding year.

Directors received total emoluments of £772,000 in 2013 and £516,000 in 2012.

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