How tough is it then for a company trading on its ability to grow a "flexible labour force", train and most importantly retain skilled workers, and keep a lid on the major expense – the labour pool – chewing a hole in its revenue?

Well, Australia's archetypal labour hire firm, Skilled Group, is making fairly light work of the skills shortages impacting key markets such as the petroleum, mining and construction sectors.

Skilled’s aggressive acquisition-led growth strategy has also not been constrained by a balance sheet, which lists little in the way of physical assets. The company can truly say its primary asset is its people – more than 15,000 of them in its skilled and semi-skilled workforce as at the middle of last year.

But other key "assets" not recorded in its balance sheet are size, its track record and, in recent times, an even more formidable appetite for growth.

Greg Hargrave, son of business founder Frank, was appointed Skilled Group chief executive in 2003 and he wasted little time putting his mark on the company.

Sales revenue has climbed from $A654 million that year to the $968 million reported for 2005-06. Earnings before interest, tax, depreciation and amortisation topped $47 million last year, a 36% improvement on its 2005 trading performance, while 2005-06 EBIT was $38.6 million.

Skilled Group's reputation as a consolidator of Australia's fragmented labour hire industry continues to grow.

Last week it announced the $44 million acquisition of 30-year-old privately owned staffing services business Swan Contract Personnel, a company said to be providing engineering and technical professionals to about 45 petroleum and mining companies in Western Australia and Queensland.

Swan generated $130 million of revenue and EBIT of $6.83 million in 2005-06.

Hargrave said the deal increased Skilled Group's exposure to the specialised onshore and offshore oil and gas sector, and mining. A research report from Goldman Sachs JBWere said the Swan deal and other recent acquisitions would increase future Skilled Group resource-sector revenue to about 25% of total group revenue.

Swan had a similar client base to Skilled Group, the broker said, but also increased the latter's engineering firm client base where it had been under-represented.

"(Skilled) gearing post acquisition is high, but interest cover remains sound," GSJBW said.

"We expect further acquisitions from Skilled but any large acquisitions may require an equity raising."

The Swan deal came weeks after Skilled Group bought for $7 million eastern Australian coal-sector labour hire group Damstra Mining Services, which it said complemented its September 2006 acquisition, the TESA mining business.

Hargrave cited an industry report that projected Australia's coal sector alone would need more than 15,000 new skilled and semi-skilled workers by 2015.

Post the Swan acquisition, GSJBW is forecasting 2007 EBIT for Skilled Group at $56.5 million on $1.347 billion of sales. It predicts these numbers will climb to $72.7 million and $1.6 billion, respectively, the following year.

Hargrave said last month he would continue to grow the company "both organically and through acquisitions".

"With this mind we've recently locked in a new $225 million debt facility with improved terms and conditions from a syndicate led by NAB, and including Westpac and ANZ," he said.

"We are continuing to pursue opportunities that will add value to our existing portfolio of staffing services brands."

Addressing specifically the issue of sourcing and retaining staff at a time of widespread skills shortages, Hargrave said Skilled Group had developed strategies for attracting and retaining employees, providing upskilling and retraining opportunities, and offering recognition and rewards.

"Our focus on safety is also a key competitive advantage," he said.

In its 2006 annual report, Skilled Group said it had increased its apprentice numbers to 200 and it had about 600 trainees.

Hargrave said a national advertising campaign had sought to position the company as "the leading trades employer in Australia".

"The campaign was targeted at people aged 18 to 54 with specialist skill sets to complement our client needs and was extremely successful," he said.

"We are confident about our outlook, with strong investment across businesses and skills shortages in the mining and resource sector still evident, ensuring solid demand for the supply of labour."

MiningNews.net

* Richard Roberts is editor of www.highgrade.net