Hercules has acquired 60% of Future Build Recruitment, a specialist white-collar recruitment company operating in the UK construction sector. This is the Group’s first acquisition and looks highly complementary to the Group’s core blue-chip construction recruitment offering, as well as confirming the Board’s growth ambitions.
Total consideration is £1.25m (£1m cash, £0.25m shares). The acquisition metrics look very sensible (effectively 5x P/E) and the deal is strongly earnings enhancing (EPS +11.5% in FY24 and +10.3% in FY25). Today’s acquisition brings further, double digit EPS upgrades and we expect targeted M&A to be a recurring element of Group strategy over the medium term.
We upgraded our forecasts in October on the back of a positive year-end trading update, which highlighted good organic progress in all three divisions. Hercules continues to benefit from the strength of UK infrastructure activity, despite the more challenging economic backdrop, and we expect this to continue.
In our view Hercules is undervalued given the Group’s impressive track record of growth, and we retain our 60p / share Fair Value estimate.
