COSOL announced it has acquired Toustone for $22.4 million in cash and script to grow its data analytics capability. It will use part of its new debt facility for the cash component. I don’t know if it is good value at 5.61 times CY26 EBITDA. However, I like the strategic fit for this business. Toustone’s proprietary software is state of the art technology in asset management and can be immediately applied across Cosol’s current and future asset management projects. This should help Cosol to deliver state of the art technology to new and existing clients in a competitive market.

Toustone Chief Executive Officer and co-founder Craig Lefoe said COSOL was the perfect springboard to pursue its growth ambitions.

“We have admired COSOL and the manner in which it has grown its customer offer and market share while maintaining the high levels of service excellence and strong operating margins,” said Mr Lefoe.

“Toustone is equally growth oriented and becoming part of the COSOL ecosystems opens up a new world of opportunity, in Australia and overseas. We are proud that Toustone’s data analytics capability – including our proprietary platforms – can be instantly offered to COSOL’s outstanding blue chip client base.

Held IRL (0.5%)

ASX Announcement

Highlights

• Acquisition of leading data analytics group Toustone

• Proprietary data platform generating ARR software subscription revenue

• Total consideration of up to $22.44m, tied to profit performance

• Total consideration based on targeted multiple of 5.61 times CY26 EBITDA

• Immediately earnings and EPS accretive

Brisbane, 4 December 2024 – COSOL Limited (COSOL, ASX: COS) is pleased to announce the acquisition of

Toustone Pty Ltd, a leading Australian data analytics group.

The acquisition delivers COSOL an unparalleled position in enterprise asset analytics and a special position in the transport sector where Toustone has market-leading reputation and standing.

Toustone delivers a significant boost to COSOL’s intellectual property and proprietary software solutions in an asset management market ever hungry for digital solutions that identify savings and deliver material efficiencies.

Toustone leverages its expertise and proprietary IP in predictive analytics and decision intelligence to give order to clients’ complex data lakes and provide insights into their operations and efficiency opportunities.

Consideration

Total acquisition consideration is up to $22.4 million, subject to Toustone meeting profit hurdles. This is based on a targeted multiple of 5.61 times CY26 normalised EBITDA

A total of $12 million is payable upfront, comprising $8 million cash and 4,531,038 COSOL shares (being $4 million worth at a deemed issue price of $0.8828 per share). The balance of the consideration comprises up to $6.5 million in earnout and up to $3.9 million in outperformance consideration, and is payable subject to the Toustone business achieving profit and margin hurdles in CY25 and CY26. The upfront multiple is 6.3 times normalised EBITDA.

The acquisition is immediately earnings per share accretive and consistent with COSOL’s long-standing strategy of growing into market segments where there’s existing customer demand and abundant growth opportunity. COSOL affirms the earnings guidance released at its 2024 AGM, which is not changed as a result of this acquisition (see ASX announcement dated 14 November 2024).

Toustone

Toustone (www.toustone.com) is a data analytics, predictive analytics and decision intelligence company dedicated to solving complex data problems and providing accurate and reliable reporting. Founded in 2014 by a team of experienced, industry-leading data scientists, Toustone has built an outstanding base of blue-chip clients, with strong penetration in transport, large-scale agriculture and food processing, and in heavy asset infrastructure.

Toustone has developed proprietary data platforms that generate revenues across ARR software subscriptions, managed services contracts and consulting. Existing Toustone clients in transport include major public transport operators in NSW and Victoria, including Australia’s largest metro train operator.

Other major enterprise customers include a number of large agricultural and food processing companies.

Toustone fits seamlessly into the COSOL ecosystem of asset management services, with immediate deployment opportunities across COSOL’s transport, infrastructure and natural resources clients.

Comments

COSOL Managing Director Scott McGowan said Toustone was an important addition to COSOL with the increased customer emphasis on using analytics to extract efficiencies.

“Large organisations have enormous data lakes from which they look for meaning and advantage,” said Mr McGowan.

“Toustone has developed pre-configured proprietary platforms that give customers a single source of truth through synthesising data sets from operations, finance and third-party providers. This delivers outstanding insights and efficiency opportunities to customers, which is precisely what COSOL provides right across the asset management spectrum.

”Mr McGowan said Toustone deepens COSOL’s data management expertise and boosts our next-gen productivity solutions.

Toustone Chief Executive Officer and co-founder Craig Lefoe said COSOL was the perfect springboard to pursue its growth ambitions.

“We have admired COSOL and the manner in which it has grown its customer offer and market share while maintaining the high levels of service excellence and strong operating margins,” said Mr Lefoe.

“Toustone is equally growth oriented and becoming part of the COSOL ecosystems opens up a new world of opportunity, in Australia and overseas. We are proud that Toustone’s data analytics capability – including our proprietary platforms – can be instantly offered to COSOL’s outstanding blue chip client base.

“We know we can bring a lot to COSOL – in economic contribution and intellectual property – and we are excited for the future,” said Mr Lefoe.”

Transaction Details

A summary of the transaction details is set out in the Annexure to this announcement. COSOL completed finance, tax, legal, people and technical due diligence on Toustone prior to executing the acquisition agreement.

The cash component of the consideration will come from the Company’s updated, expanded debt facility with Westpac (see ASX announcement dated 2 December 2024). The issue of COSOL shares for upfront, and potential earn-out and outperformance consideration will consume a portion of COSOL’s existing placement capacity under ASX Listing Rule 7.1. The earnout and outperformance consideration is payable in instalments subject to the Toustone business achieving audited/reviewed normalised EBITDA hurdles in calendar years 2025 and 2026.

Completion of the acquisition is scheduled for early December.

To add to @SudMav’s results straw a few days ago, Cosol also provided a business update and 1H25 guidance (see announcement below). I thought the guidance looked quite positive. Management are expecting revenue growth of 17% to 20%, and EBITDA growth of 17% to 25% underlying EBITDA margin for the first half to be in the range of 14.1% to 14.7%. Seasonally the first half EBITDA margin is lower than the overall year. The shares are trading at just over 15 times FY25 forecast earnings, which doesn’t look expensive given earnings have been growing at over 20% per year, and this is likely to continue. ROE is likely to be c. 17% going forward.

Someone out there either doubts the guidance or was expecting a lot more from Cosol, because the share price fell over 8% today to a 12 month low of 83 cps. I’ve had COS on my watchlist for over a year now and I took the opportunity today to take a starting position IRL at 85 cps. I will most likely add if the share price weakens further.

Held IRL (0.4%)

ASX Announcement

Brisbane, 14 November 2024 – COSOL Limited (COSOL, ASX: COS) is pleased to announce it will see strong revenue and profit growth in the first half of FY25 as momentum from the end of FY24 carries through to the current financial year.

Major contract wins and extensions from Q4 FY24 have underpinned strong revenue growth in H1 FY25, locking in a buoyant H1 performance and providing a springboard for continued growth across all key metrics for the full financial year.

COSOL is on track to deliver revenue growth of 17.0% - 20.0% over H1 FY24 and to be in the range of $57.5 to $58.4 million.

First half underlying EBITDA growth is expected to be in the range of 17% to 25%, with underlying EBITDA margin for the first half to be in the range of 14.1% to 14.7%. Seasonally our first half EBITDA margin is lower than the overall year.

COSOL Chairman Geoff Lewis said the Board was pleased that momentum at the end of FY24 had carried through strongly in the 2025 financial year.

“This is testament to COSOL’s investment in deep capability and the manner in which COSOL has been able to demonstrate real benefits for clients in the form of efficiencies and material cost savings,” he said.

“COSOL has consistently delivered 30%+ growth in revenue and EBITDA since listing in 20202. In FY24, we delivered 35% growth in revenue, 33% in underlying EBITDA, and an underlying EBITDA margin of 15.4%.

“This consistent growth means there is a positive predictability to COSOL’s operating performance – and we’ll do it again for the full year FY25.”

First half growth has been driven by key client wins across the Group in Q4 FY24 and early FY25 with organisations such as Horizon Power, Department of Transport in Victoria, QBuild and CleanCo, and extended work with the Department of Defence.

These long-term contracts create further momentum into FY25 and beyond.

In addition, COSOL continued to expand its capabilities in providing end-to-end Asset Management software and solutions with the successful acquisition and integration of AssetOn Group and Core Asset Co.

These strategic acquisitions position COSOL well to deliver a sector-leading Asset Management as a Service offering to our expansive blue chip client base and a platform to win new customers in the asset intensive market.

Another new contract. I think Cosol is a solid business and it’s on my watchlist. I’d like to pick it up a bit cheaper, but I will probably miss out. Good metrics in a good sector: Forecast ROE 21%, 50% reinvested income, PE 20, PB 3.1, PEG 0.9, EPS growth 22%, net debt on equity 22%. Have it returning c.11% returns at the current price and performance.

ASX Announcement

COSOL signs $17m contract to deliver asset management services to global leader in Copper and Gold mining

Brisbane, 11th July 2023 - COSOL Limited (ASX:COS) is pleased to announce it has signed a major contract to deliver Asset Management Services to OK Tedi Mining Limited, owner of one of the world’s biggest copper-and gold mines, based in Papua New Guinea.

The contract has a value of $17 million and will run for three years.

This contract extends and deepens the existing relationship, which has spanned almost two decades, delivering operational efficiencies and cost savings.

Under the contract, COSOL will deliver comprehensive, end-to-end Asset Management Services, leveraging the combination of COSOL’s proprietary software and services.

COSOL will generate major operational efficiencies, material cost savings, and assist the company in its drive to achieve zero waste in its operations and supply chains.

CEO Scott McGowan said “COSOL is delighted to solidify the long-term relationship and it is pleasing that we have again been entrusted by a leading asset intensive business to continue providing crucial asset management software and services to a global scale mining operation.”

Disc: Not held