Enero ready to start shopping as business finds stability with cash in the bank

Seven years after it last opened the cheque book, Enero says it is ready to re-enter the acquisition market on the back of a strong 2016 result.

Melhuish says Enero now in good health, debt free and ready to acquire

Melhuish says Enero is now in good health, debt free and ready to acquire

The agency last entered the buyer’s ring in late 2009 as Photon Group when it splashed $54m on Brisbane internet marketing company Dark Blue Sea – the last of a swift series of acquisitions that proved to be the straw that broke the camel’s back.

Within weeks of the deal, CEO Matthew Bailey departed, followed by executive chairman Tim Hughes, who stepped down, and then finally, the company, abetted by the GFC, was placed in a trading halt and restructured as it realised it could no longer service its debt.

That cataclysmic year saw the beginning of a fire sale of businesses, renegotiations and a restructure that saw BMF’s CEO Matthew Melhuish step up to take control of the company’s agency group – his first step to becoming CEO and charting a long and painful course of recovery.

TAL Insurance

TAL Insurance was one of BMF’s wins this year

This week, on the back of a return to profitability after seven years, driven by strong results in the UK, Europe and US and aided by a currency fluctuation boost, Enero posted a net profit rise of 336%  to $6.6m – a world away from last year’s deficit of $2.8m. Operating earnings before interest, tax, depreciation and amortisation (EBITA) rose from $9.2m to $13.2m.

Melhuish told Mumbrella it was now time to move to the next stage of growing the business again, without the haste or disregard for debt that had marked the Tim Hughes/Photon era.

Indeed, he proudly proclaims Enero is now a company debt-free and, with cash reserves of $37.6m, is in “exceedingly good health”.

“We are going to  move into a phase where we are looking to deploy some of the  capital and consider some very targeted acquisitions here or there,” Melhuish said.

“If we acquired something we might add that to an existing brand or add an existing brand to that. So there is a whole range of options and I think the great thing about the stage where the group is at at the moment is because we have got a stable business, we have got a reliable business, we have got money in the bank, we have won the confidence of the investors, it gives us a lot more scope to look at things.

“Having said that, we won’t go crazy, we will be very considered and anything we do is definitely put through many lenses and only with a very strategic intent.”

He said that the US was a market which the company saw was underdone and offered opportunities for expansion.

“In our ideal world we would have a balance between Australia, UK/Europe and  North America. Currently North America is really sort of under-weight compared with the other two. So when the time comes for us to look at deploying some of the capital in the form of an acquisition or something like that the natural place to look in the first instance would be North America.”

He noted that given the global nature of many American businesses, some of the conversations Enero companies had had in the US had translated to business opportunities in other markets.

Melhuish said the war chest would also be used to help existing businesses grow organically where they saw opportunities.

“I think also backing a business – one of the smaller offices we have at the moment has the opportunity to grow, and has been told by clients ‘we will give you more work if you had some more people’,” he said.

The 5 Seeds Cider account was one of BMF's wins this year

The 5 Seeds Cider account was another of BMF’s wins this year

“So we said ‘we will give you a cheque for you to go and hire people ahead of the curve. We will pay for them and that will allow you to bulk up your team and punch you through the next layer’.”

Melhuish noted that the Australian division had suffered a tougher year than the international parts of the business, with Australasian net revenue down from $53.4 to $46m on the back of soft consumer sentiment.

“Australia seems like it’s still pretty good in world terms. Australia is blessed in so many ways but it doesn’t seem as confident just at the minute as it might be and so we all need to see what happens as the (new) parliament settles in,” he said.

But he said the local operations had been anchored by BMF, which celebrated a number of wins during the year including TAL, the Department of Social Services, the Attorney General’s Department, Dulux Group, Pirtek, Golden Crumpets, James Squire, 5 Seeds Cider and UN Women.

Melhuish said Enero will also use its reserves to help local businesses that are felt to be underperforming, although he declined to go into detail.

Another major step in the next phase of Enero will be shifting all of its Sydney-based businesses to a new hub in early 2017 – a move Melhuish says will not be ostentatious, but will send a signal to both the external market and internally about the health of the business.

“It’s going to be a fantastic facility and all the staff are very excited,” he said. “It’s time to have a fresh environment – it should lead to greater collaboration.”

Melhuish is ambitious about the future, but not wanting to seem arrogant. However, with Enero’s shares now sitting around $1.30 and investment vehicles – owned by the likes of James Packer – buying in, Melhuish said he feels he has good reason to spruik the Enero brand at last.


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