WH Davis now has an all-time record order book which will underpin substantial earnings for the
next 3 years
WH Davis Limited is the last remaining specialist UK manufacturer of railway freight wagons. Competitors, such as International Railway Systems, aim to produce high volumes of generic wagons from facilities in Romania and Serbia.
Chelverton were particularly attracted to the following aspects of the WH Davis proposition:
- Specialist UK rail freight wagon and container manufacturer with particular capabilities in design and development;
- Unique Low Liner under development and fully expensed at the point of acquisition(in service 2011). Proprietary intellectual property in this wagon will reduce earnings volatility in the wagon division;
- Specialist container manufacture and refurbishment, with a number of very strong customer relationships;
- Embryonic wagon maintenance division which, after restructuring, was seen as having the capability of producing good quality monthly earnings. This division, in conjunction with the container business, should significantly reduce earnings volatility;
- Established six-strong management team, with many years’ experience in all aspects of the UK rail freight industry;
- Strong balance sheet; net assets at completion were £2.8m;
- Good long-term growth prospects for the rail and container markets.
WH Davis was acquired on the basis of long-term profit before tax (‘PBT’) of £0.7m. Despite actual PBT not initially achieving the long-term average (even after allowing for parent company costs averaging £0.1m per annum), WH Davis’ forward orders are now at record levels and it is expected that the budget result for the year to 30 September 2013 should be achieved for the 2014 and 2015 year ends as well.