Hancock & Gore’s Merger Push Raises Execution and Market Risks for Investors

A Year of Strategic Transformation

At its 121st Annual General Meeting, Hancock & Gore Limited (ASX: HNG) presented a compelling narrative of growth and strategic repositioning. Central to the update was the merger of its wholly owned Mountcastle business with UK-based Schoolblazer, creating Global Uniform Solutions (GUS), a dominant player in the school uniforms market across Australia, New Zealand, and the UK.

This merger is more than a simple combination of assets; it integrates two complementary businesses with leadership positions in their respective markets, backed by seasoned management teams. The pro-forma financials for FY24 reveal a combined revenue of approximately $109 million and EBITDA of $16.6 million, setting a robust foundation for future growth.

Financial Performance and Shareholder Returns

H&G reported an underlying net profit after tax of $5.1 million for the year ended 30 September 2024, marking a 13% increase over the previous year. Dividends per share rose significantly by 33% to 2.0 cents, reflecting the company’s commitment to delivering shareholder value. However, underlying earnings per share saw a slight decline of 10%, a nuance that investors will want to monitor as the integration progresses.

The net tangible asset (NTA) per share increased modestly by 2% to 31.4 cents, underscoring steady balance sheet strength amid ongoing portfolio realignment.

Portfolio Simplification and Investment Strategy

Beyond the uniforms business, Hancock & Gore is actively simplifying its investment portfolio. A key initiative is the proposed acquisition of all assets of the H&G High Conviction Fund (HCF) in exchange for shares, which would add approximately $20 million in strategic liquid assets to H&G’s balance sheet. This move aims to enhance balance sheet flexibility and support the growth ambitions of Global Uniform Solutions.

Disruptive Packaging, another notable asset, demonstrated impressive revenue growth, with FY24 consolidated group revenue reaching $30 million, a significant jump from $8 million in FY23. The company’s US market penetration is accelerating, supported by a recent capital raise at a premium to H&G’s entry price, signaling confidence in its expansion strategy.

Leadership and Future Outlook

Global Uniform Solutions is steered by a high-caliber leadership team, including Executive Chair Steve Doyle and newly appointed CEO Joanne Goldman, who bring extensive global experience. The integration of Schoolblazer’s team and technology, such as the in-house Seraph ERP system, is expected to drive operational efficiencies and support omnichannel retail growth.

Looking ahead, H&G plans to focus on consolidating accounts for FY26 to provide clearer visibility of GUS’s performance and continue pursuing M&A opportunities to strengthen its market position. The company’s strategy to balance a flexible, liquid balance sheet with targeted investments positions it well to navigate evolving market dynamics.