SigmaRoc raises GBP12mln to step up pace of acquisitions


What SigmaRoc does

SigmRoc PLC (LON:SRC) is a construction materials company with a buy-and-build strategy focusing on assets in the UK and Northern Europe.

Founded in 2016, the firm looks to create value by purchasing assets in the fragmented construction materials market and forming them into larger groups to create efficiencies.

These assets are segmented into regional ‘platforms’: Ronez, PPG, South West and Benelux.

What it owns

The company’s portfolio includes

o Ronez: A concrete and asphalt firm based in the Channel Islands consisting of the St John’s Quarry in Jersey and Les Vardes Quarry and Vale Castle in Guernsey

o Allen Concrete: A precast concrete product maker with plants in Surrey and Northamptonshire

o Poundfield Products: Suffolk-based precast and prestressed concrete manufacturer

o CCP Building Products: Supplier of concrete and aggregates (materials including sand, gravel and crushed stone). Has manufacturing facilities in North West England and North Wales

o Foelfach Quarry: Crushed aggregate and stone quarry in Carmarthenshire, Wales, containing some of the home nation’s highest quality aggregate reserves. The quarry also produces high-polished stone, a valuable material for road surfacing

o GD Harries (GDH): 40% stake in GDH, one of Wales’s largest independent suppliers of aggregates. Operates seven hardstone quarries, six concrete plants, three asphalt plants, a wharf operation and four road-contracting units.

Carrieres du Hainaut (CDH). the cornerstone of our Benelux platform, which comprises operations at CDH and Stone Holdings. CDH presently produce around 900,000 square metres of high quality Belgian blue stone per year.

How it’s doing

In December, the company raised GBP12mln and reported that for the eleven months to November 30 revenues had risen 78% year-on-year to GBP114mln, “significantly ahead of current market expectations”, while its results for the full year are also expected to be “comfortably ahead” of forecasts.

SigmaRoc said recovery trends across its business have continued through the second half of its current year and have been supplemented by what it said were its “ongoing commercial and operational enhancement initiatives”.

“Whilst the further lockdown restrictions implemented in recent weeks, associated with the second wave of COVID-19, reinforce an element of uncertainty over outlook, they have not materially impacted either the Group’s operations or short-term customer demand. As a result, the board currently expects to deliver results for the year ending 31 December 2020 ahead of current market expectations”, the company said.

SigmaRoc also said it will also repay GBP250,000 in funding assistance received from the UK government while looking ahead it is “optimistic” around normalising market conditions in 2021 as well as the government’s commitment to infrastructure investment as part of an economic recovery strategy.

What the boss says: Max Vermorken, chief executive

“The group has continued to demonstrate that a decentralised business model focussed on local markets is a robust approach in our industry, particularly in challenging times.

The group is supported by a solid asset base and will continue to confront all challenges head-on while executing on its buy-and-build strategy to deliver further shareholder value.”

What the broker says: Liberum

Sigmaroc had its price target raise to 70p from 60p by broker Liberum, which has also upped its earnings estimates for this year and next.

The acquisitive building materials group is expected to use quickly the proceeds of its recent GBP12mln fundraise having already identified a portfolio of potential bolt-on and expansion projects.

These might add 4% to EPS, said the broker, which has already raised forecasts for underlying earnings [EBITDA] for 2020 and 2021 by 6% and 1% as trading has been improving through H2 2020.

The forecasts are now back in line with pre-pandemic levels, says Liberum, and look cheap on a share price to earnings comparison with peer Breedon.

Liberum added that what the market misses about Sigmaroc is its excellent record of improving returns at acquired businesses.

The target price is based on a blend of cash flow and multiples, said the broker.


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