Allied Group has offloaded its cabling infrastructure division to cabling integrator, KLM Group, for $2.25 million to focus solely on systems integration.
In an ASX statement, Allied chairman and managing director, Michael Addison, said the sale was the next step in its broader plan to reposition Allied as an ICT solutions and services provider to the defence, intelligence and security sectors. The sale would also simplify its merger agreement with Longreach, he said.
As well as its cash payment for Allied Technologies Australia (ATA), KLM will pick up liabilities of $100,000. The business will continue to run as a separate unit, with all staff from the company moving across to KLM. Allied Group has retained the facilities management division of ATA.
While cabling was an integral part of its overall business, Addison said it hadn't been a significant part of its asset portfolio.
"The sale is part of our strategy to move into systems integration: we are trying to move up the profit margin chain," he said. "Cabling is very much a high volume, lower margin business. We were faced with the choice of building critical mass in that area or exiting it. We lacked the critical mass."
Addison said it was now focused on growing through acquisition. The extra cash from the cabling sale would be added to the $8 million stored up in its war chest for future purchases.
KLM joint managing director, Peter Jinks, said the deal would give it access to new business sectors, such as Federal Government and defence. The company forecast the acquisition would contribute to annualised revenue of $100 million in the 2007 financial year, up from $61 million in 2005.
The deal with KLM is scheduled to be completed by July 3.