Builder Shape shops itself around for sale or IPO
Shape, the national office fit-out company that changed its name from ISIS in 2015 after the terrorist organisation of the same name became a household word, is undergoing another transformation as it considers a trade sale or possible IPO.
The 30-year-old company is pursuing both a sale and a possible public listing as options to allow founders including director Gerard McMahon an exit and to give the business with annual revenue over $700 million sufficient capital to expand into new regions or to invest in the skills one office may have, such as health.
Fit-out work by Shape at The Star in Sydney's Pyrmont.
"The Company is well positioned to capture identified growth opportunities and support financial initiatives that would maintain an attractive dividend stream for investors," chairman Phil Arnall said.
Projects that Shape has worked on include Vicinity Centres' Melbourne corporate office at Chadstone, KPMG's office in Canberra, WeWork offices in Sydney and Melbourne, The Star casinos in Sydney and the Gold Coast and refurbishment of the State Library of NSW. It was awarded five Master Builders Association awards in 2019 for its work including the State Library project.
The privately-owned company has not disclosed earnings for the latest financial year, but in the year to June 2019 it reported pre-tax earnings of $17.4 million after revenue of $653 million. Chief executive Peter Marix-Evans said revenue for 2020 was more than $700 million and EBITDA earnings were about $25 million.
Industry sources pointed to the $400-million acquisition of design and office fit-out firm Unispace by private equity firm CPE Capital last year – which valued it at about 8-10 times EBITDA earnings – as a recent benchmark.
Shape is not the first builder to look for capital this year – Melbourne-based Vaughan Constructions went to the market in February – and the decision to shop itself around in the current environment will prompt questions about the strength of the company's pipeline. Melbourne firm FPPV Architecture last week said much of its office fit-out design work was on hold.
Mr Marix-Evans said there was always demand for office fitouts.
Shape CEO Peter Marix-Evans.
"What we’ve found, whether GFC or recession, is that typically clients are either growing or shrinking," he said. "Not too many businesses stay the same."
While work in Victoria had fallen to "a little below half" of the previous level after the imposition of stage four lockdown in early August, other states were now increasing their work levels, Mr Marix-Evans said.
Activity would ramp up once Victoria's restrictions eased as projects sought to speed up and to reduce delays and as new work started, he said.
"The tendering market in Victoria is still going very strong," Mr Marix-Evans said. "There are still jobs coming to market."
Founded by a team of six in 1989, Shape's founders, in addition to Mr McMahon, are Tim Campbell, Darryl Drayton, Stephen McDonald, Michael van Leeuwen and the late Stephen Shone.
Investment bank Moelis Australia is advising Shape.
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