WorkPac sale agreed as Australia’s largest privately-owned staffing business acquired by Tasmea Limited

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Australia’s largest privately-owned recruitment and staffing business, WorkPac, has been purchased by ASX-listed Tasmea Limited.

The purchase price of up to $60.7 million, which comprises upfront cash and Tasmea shares, plus potential earn-out payments, is targeted for settlement around December 1, 2025.

The earnouts comprise two cash payments of $5.25 million each, for the twelve-month periods ending 31 October 2026 and 31 October 2027, respectively.

Tasmea owns and operates a large number of diversified specialist trade skill services businesses that provide maintenance, shutdown, breakdown, and brownfield upgrade services of critical fixed plant for blue chip essential asset owners Australia-wide.

The company, known initially as E&A Limited, was established as a private equity investment vehicle in 1999 and has subsequently acquired nearly thirty businesses, and will operate 25 subsidiaries once the WorkPac acquisition is completed.

Tasmea projects the immediate financial benefits will be a pro forma EBIT of $30 million (compared to $27.4 million for Tasmea alone) and a pro forma EBIT margin of approximately 16% (compared to 15% for Tasmea alone).

Listed among the strategic rationales for the purchase were

Skilled Labor Certainty: WorkPac’s recruitment capabilities and labor engine will enable Tasmea to meet customer skilled labor needs at speed and scale, providing a competitive edge, noting WorkPac’s 1.5 million registered candidates, 60,000 new registrations annually, and more than 15,000 workers placed each year, with approximately 6,000 daily Field Team Members (FTM).
New Workforce Solutions Segment: Creation of a new segment to support Tasmea’s specialist trade services portfolio in rapidly sourcing, mobilizing, and deploying qualified personnel for time-critical projects and large-scale shutdowns.
Operational Synergies: Integration of WorkPac is expected to lead to cross-selling opportunities, accelerated Tasmea systems upgrades (ERP, payroll, recruitment), and other cost efficiencies.

Tasmea noted that among the potential synergies from the purchase were,

National footprint: 27 offices nationwide, 20 site managers with a presence at over 50 sites, and 10 BDMs with strong client relationships.
High recurring revenue: Approximately 96% of WorkPac’s revenue comes from repeat labor hire, including over 15 material MSAs.
Experienced management team: Leadership with deep industry experience and strong relationships with blue-chip customers (not much diversity, though).
Geographic reach: Significant FTM presence in QLD (55%), WA (19%), NSW (13%), and SA (6%).
Industry focus: Core market alignment with approximately 80% blue-collar FTM roles primarily in mining/resources (54%) and industrials (38%).
Diversified customer base: Workpac’s Top 10 clients comprise approximately 70% of group revenue in FY25, offering cross-selling opportunities with Tasmea subsidiaries.

It’s a sale price that represents a disappointing financial exit for founder Phil Smart and the other WorkPac shareholders, compared to the company’s financial performance and momentum seven years ago.

In mid-2018, the AFR speculated about a “$400 million sale” on the back of the company’s recent financial performance after sales soared 84% from $492 million in FY2014 to $906 million in FY2017, with pre-tax profit rising at a corresponding rate from $4.4 million to $8.2 million in the same period.

The good times kept rolling the following year, with sales surging 46% year-on-year to reach $1.33 billion, with pre-tax profit more than doubling to $18.5 million

Sales reached an all-time high in FY 2019 of $1.41 billion and a pre-tax profit of $18.8 million.

COVID impacted the final quarter of FY2020, producing a flat year-on-year sales result; however, a 21% drop in gross profit to $100 million, together with one-off costs and write-downs, contributed to a pre-tax loss of nearly $20 million.

The bad news continued the following year with sales falling another 9%, to $1.28 billion, and gross profit plunging 17% to $83.5 million, leading to a pre-tax loss of $5.8 million for FY2021.

Revenue declined 5% in FY 2022, to $1.19 billion, and dropped again in FY2023, to $1.14 billion, although the company returned to profitability in FY2023, recording a pre-tax profit of $8.7 million.

The negative publicity and financial costs of defending and losing the Skene case in 2018 and the resulting successful Rossato class action in 2020 were lead weights in WorkPac’s saddlebag at exactly the wrong time for a near-to-medium term IPO or sale of the business.

WorkPac was founded by qualified carpenter and builder, and later successful real estate sales agent, Phil Smart.

Smart’s outstanding real estate career led to many national and international speaking bookings as an expert in real estate sales strategies and techniques.

Smart joined the recruitment industry in 1994 as an investor and adviser before establishing WorkPac in early 1997.

Just over ten years later, industry news service Shortlist noted, “Workpac has grown organically over the past 10 years to close to $200 million revenue from temp and perm recruitment in industrial, admin and professional. It has an exceptionally strong client base and expertise in the mining industry.”

In October 2008, Shortlist noted, “…. WorkPac has annual revenue of about $215 million and around 300 staff.”

In 2008, WorkPac acquired Brisbane-based In 2 Medical, which specialises in the recruitment of doctors and allied health professionals, and Melbourne-based JP Nurseforce, which supplies nursing staff, as well as launching its own nursing staff startup brand, In 2 Nursing

In FY2010, WorkPac recorded a 64% year-on-year increase in revenue to $545 million. Gross profit was $72.6 million, up 36%, with a pre-tax profit of $16.9 million, up 35%.

On the occasion of WorkPac’s 25th anniversary in 2022, a media release noted,

“Now, over 450 staff across 35 metropolitan and regional offices place more than 26,000 people annually and manage a workforce field team of over 10,000.

Over the course of 25 years, WorkPac has employed over 300,000 field team members and supported thousands of Trainees and Apprentices to commence careers in the Mining, Construction, and Healthcare sectors.”

WorkPac has been one of the biggest local success stories in the Australian recruitment industry over the past three decades.

However, like many of its peers, WorkPac has found the past half-decade challenging, so I am sure its new Australian owners are hoping their investment of resources and energy will usher in a new era of growth.

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Posted in Recruitment