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Interim Results H1 2019 RNS

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SigmaRoc plc/ EPIC: SRC / Market: AIM / Sector: Mining

30 September 2019

SigmaRoc plc (‘SigmaRoc’, the ‘Company’ or the ‘Group’)

Interim Results

 

SigmaRoc plc, the AIM listed buy-and-build construction materials group is pleased to announce its unaudited interim results for the six months ended 30 June 2019.  

 

Highlights:

 

6 months to 30 June 2019

6 months to 30 June 2018

Change

 

 

 

 

Revenue

£29.8m

£19.9m

+49.7%

Underlying1 EBITDA

£5.7m

£4.8m

+18.8%

Underlying1 profit before tax

£3.5m

£2.8m

+25.0%

Underlying1 EPS

1.97p

1.97p

-

Net debt

£23.3m

£16.4m

+42.1%

 

1 Underlying results are stated before acquisition related expenses, restructuring costs, certain finance costs, share option expense and amortisation of acquired intangibles.

 

Acquisitions:

 

  • Substantial acquisition of CCP, expanding the Group’s Precast, Prestressed Group (‘PPG’ or ‘SigmaPPG’) platform to North-West England;
  • Significant acquisition in South Wales through GDH, creating a platform with 80m tonnes of mineral reserves; and
  • Continued focus on growing all four platforms.

 

Integration & operations:

 

  • South Wales and SigmaPPG platforms expanded through acquisitions;
  • CCP integrated into SigmaPPG with significant restructuring undertaken;
  • Management support provided to GDH translating into improved performance;
  • Jersey concrete plant successfully commissioned in February 2019 and operated through the remainder of the period;
  • Safety culture continues to improve with dedicated health & safety officer established across the Group to drive consistency and ensure best practice; and
  • The Group now has close to 500 employees across 26 production sites.

 

Post Period updates:

 

  • Proposed board appointment of renowned industrialist Jacques Emsens;
  • Conditional acquisition of Stone Holdings, for 4.4 times three-year average EBITDA, which, on completion, will offer SigmaRoc an operating hub in the Benelux region; and
  • Exciting pipeline of opportunities being assessed, which the Board believes are capable of completion during 2019.

 

 

 

David Barrett, Executive Chairman, commented:

 

“We have completed another half year with excellent progress on the acquisition and improvement front. Two businesses have joined the Group expanding our footprint to South Wales and the North West of England, giving us further scale to the benefit of our group. The team is hard at work to integrate both new entities with good progress made in the first half and more to follow in the second. We also welcome a very eminent industrialist, Jacques Emsens, who is proposed to join our board as we make our first steps into mainland Europe. Excellent progress all round.”

 

Max Vermorken, CEO, commented:

 

“We are very pleased with the progress made to date. From winning the BAA quarry of the year award, supplying major sea defence projects and continuously improving the businesses we have acquired. Our focus on safety has yielded positive results but a lot remains to be done. The second half should see us deliver more from our existing business and enter new markets with significant potential for the Group. We remain optimistic as ever about the potential of our strategy and the results we can deliver for shareholders.”

 

The full text of the interim statement is attached, together with detailed financial results, and will be available on the Company’s website at www.sigmaroc.com.

 

An analyst meeting will take place at 9.00 a.m. today at the offices of Liberum, Ropemaker Place, Level 12, 25 Ropemaker Street, London, EC2Y 9LY with conference call available. Please contact Ben Feder on 02071297828 or email ir@sigmaroc.com for dial-in details. A presentation for the conference call will be available on the Company’s website at www.sigmaroc.com.

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

 

Enquiries:

 

SigmaRoc

Tel: +44(0)207 129 7828

Max Vermorken, CEO

 

 

 

Strand Hanson (Nominated and Financial adviser)

Tel: +44(0)207 409 3494

James Spinney / James Dance / Jack Botros

 

 

 

Liberum (Broker)

Tel: +44(0)203 207 7800

Neil Patel / Jamie Richards

 

 

 

Investor Relations

Tel: +44(0)207 129 7828

Ben Feder

ir@sigmaroc.com

 

 

EXECUTIVE STATEMENT

 

During the first six months of this year we made further rapid progress with the strategy of the SigmaRoc Group. We expanded our PPG platform to include North West England in January 2019 when we acquired CCP Building Products Limited (‘CCP’). We subsequently created a South Wales platform in April 2019 when we took an initial 40% stake in GDH (Holdings) Limited (‘GDH’), which, together with its subsidiary undertakings, is a major quarrying, asphalt, concrete and contracting business.

 

These acquisitions were completed in tandem with achieving strong operating results, as the Group reported revenue of £29.8 million, representing a 49.7% year-on-year increase, and an underlying EBITDA of £5.7 million, being an uplift of 18.8% year-on-year. Underlying profit before tax was £3.5 million and underlying EPS 1.97p, continuing the solid performance of the Group’s buy-and-build strategy. Revenue and underlying EBITDA have increased primarily as a result of the acquisition of CCP in January 2019, which was funded entirely through equity and has led to our EPS remaining steady year-on-year. Our 40% interest in GDH, funded through debt, has resulted in a minimal contribution to the Group’s results for the period. This is because it has been equity accounted and, therefore, not consolidated into the Group.

 

Set out below are several important elements to consider when we assess where the Group currently is in its evolution and where we would like to move to going forward.

 

Operating performance

As noted above, the Group has reported a strong financial performance across the first six months of 2019. In the Channel Islands, the recent trend continued whereby the Jersey market performed slightly above expectations and Guernsey in line with more modest expectations. With multiple key projects expected to come online in Jersey through the second half of the year our expectation is for this trend to continue in the near term. However, Guernsey’s project pipeline for 2020 could adjust this recent trend.

 

There is room for improvement at SigmaPPG, with the acquisition of CCP and subsequent integration and restructuring absorbing considerable time and resource. We are confident that this will translate into financial performance improvements throughout the second half of the year. As an illustration of the results already achieved, we were awarded the British Aggregate Association (‘BAA’) Quarry of the Year award for CCP’s Aberdo quarry, in recognition of the improvement efforts put in by the CCP team and SigmaRoc.

 

Topcrete traded as expected, delivering a good performance for the first half, in-line with the trends set last year. We believe these trends are sufficiently robust to continue for the second half, helping us deliver our targeted results for the calendar year.

 

Poundfield’s first three months of the year were quieter than expected for the special projects division, which, combined with the usual late start of farming demand, led to a slower first quarter. However, the second and third quarters have been strong as several major projects have commenced, including large sea defence work, which has resulted in full utilisation and therefore no production capacity for any further projects. Poundfield recorded its highest revenue month on record in July 2019 which was matched in August 2019, helped by good performance in retaining walls and flooring. These trends are expected to continue into the last quarter, until such point when typical seasonal cyclicality sees business slow, particularly in the farming sector.

 

GDH had a strong first half in 2019, reporting unaudited EBITDA of £1.8 million which was well ahead of its performance for the same period in 2018. As GDH is equity accounted for as an associate it is not consolidated into the Group and hence there is no resulting uplift in revenue or EBITDA. Additionally, the GDH capital structure is presently such that any material contribution to the Group’s bottom line will remain limited until the business has been acquired in full.

 

Safety

Over the first quarter the Group also made significant progress in safety. Given our current size it became paramount to appoint a dedicated individual within the business with the mandate to drive the implementation of Group wide safety standards. We remain of the opinion that safety should be an “output”, or the result of an efficient and well-structured operational business and therefore the responsibility of the line managers and not of a specific safety manager. A combination of both is therefore essential as we are progressing toward Group wide best in class safety standards.

 

The resulting records show good performance over the first half of the year. We recorded 1,000 harm free days at Ronez, which is an excellent achievement. Encouraging progress was made within the PPG platform, but there is a long journey ahead of us to reach the levels of Ronez. Overall, harm free days increased year-on-year from 96.0% to 98.3%. In addition, reporting standards were improved, giving us comfort that all incidents and near misses are captured such that each incident can be analysed in order to prevent them from happening again.

 

Integration

Since the acquisition of CCP and GDH, we have focused on integrating these new businesses into the Group, in order to deliver improvements from synergies and scale. The acquisition of CCP greatly expanded our PPG platform, extending our reach into the North West of England and North of Wales. Particular focus was placed on three areas: the quarry, the back-office and the flag production.

 

Aberdo quarry, part of the CCP group, contributed meaningfully to CCP’s results prior to acquisition. While this was indeed the aim and goal for the business, the quarry was facing certain difficulties in terms of its operational structure and therefore performance. Significant amounts of work were done to address these issues leading to a revised mining plan and operational structure. Several months of cleaning up excessive low value stock and redesigning the quarry to access good quality reserves, have led to improved results.

 

We have also placed significant emphasis on the back office and reporting at CCP. The accounting and credit control functions were revised with new members joining the team. However, further work is considered necessary to ensure back office integration between all component parts of the PPG platform which we expect will lead to better performance.

 

Given our minority interest in GDH, integration efforts there have required a much lighter touch, with our management team providing support to Ian Harries and his operations. Our focus to date has been on those areas where SigmaRoc, given its larger scale and reach, could help GDH further improve. This has thus far been successful, with both local management and staff supportive of SigmaRoc’s current and future involvement in the business. This is of key importance to SigmaRoc, as we always wish to preserve and reinforce the strengths of local businesses, which often implies facilitating improvements without taking away their local independence and strong links to the local markets. 

 

Organic development

As a group we are constantly working to achieve organic development of our existing assets alongside our buy and build acquisition strategy. A good example of this is the new ready-mix concrete plant at Jersey which was successfully commissioned in February 2019 and has been fully operational throughout the remainder of the period. The new plant offers our Jersey customers a more compelling proposition for ready-mix concrete, with a much quicker service, additional mix designs and improved capacity.

 

In February 2019, the Group also secured a partnership with Lindsay Corporation, a leading global manufacturer and distributor of irrigation and infrastructure equipment and technology, for the exclusive licencing of their EN-compliant Road Lindsay’s Road Zipper System, consisting of T-shaped moveable barriers that are connected to form a continuous wall, which is used globally and accepted by many highway agencies, including Highways England.

 

Acquisitions

This year has thus far been significant in the Group’s continued development through acquisitions and their integration into the Group. In January 2019, we completed the acquisition of CCP for £15.21 million in conjunction with a vendor placing raising gross proceeds of £12.4 million. Subsequently, in April 2019, we acquired an initial 40 per cent. interest in GDH for cash consideration of £4.89 million, which was funded through a combination of our own cash plus debt financing from Santander (UK) plc.

 

As set out in the circular sent to shareholders on 11 September 2019, the Group has conditionally agreed to acquire Belgian based, Stone Holdings S.A. and its subsidiary Philippe Cuvelier S.A. (together ‘Stone’). Stone averaged revenue of €3.8 million and adjusted EBITDA of €0.5 million for financial years 2016, 2017 and 2018. Subject to satisfactory completion of due diligence work, the Group will acquire Stone for a transaction value of up to €2.2 million, leading to an effective acquisition multiple of 4.4 times average EBITDA.

 

The Group is also planning to exercise its option to acquire the remaining 60 per cent. of GDH in Q4 2019 such that GDH will become a wholly owned subsidiary of the Group and be consolidated into its results.

 

The Company continues to develop its transaction pipeline and is completing due diligence on a number of opportunities. We are hopeful of securing further acquisition before the end of 2019.

 

Corporate

In April 2019, we welcomed Tim Hall to the board as Non-Executive Director pursuant to the relationship agreement between Pula Investments Limited, Bailiwick Investments Limited, TEMK Investments Limited, Ravenscroft Limited (together, the ‘Shareholders’), the Company and Strand Hanson Limited. Tim joined the board as a representative of the Shareholders and brings a wealth of experience and knowledge of the industry to the SigmaRoc board.

 

In September 2019, the Company announced that Jacques Emsens is proposed to join the Board following completion of the Stone acquisition and customary director due diligence. Mr Emsens has an extensive history in defining and implementing strategies of industrial businesses, as well as access to potential investors and should make a significant contribution to the Group.

 

Outlook

SigmaRoc is once again well positioned for continued growth and we are optimistic we can continue to deliver solid results from our existing businesses. Management expects to meet the Board’s expectations for the full year while continuing due diligence on a number of significant opportunities that we hope will translate into an enlarged footprint before the year ends. We look forward to updating investors with further information on the development of the Group as and when appropriate.

 

 

David Barrett

Max Vermorken

Garth Palmer

Executive Chairman

Chief Executive Officer

Chief Financial Officer

 

30 September 2019

 

 

 

Placeholder comment

 

CONSOLIDATED INCOME STATEMENT

 

 

 

 

6 months to 30 June 2019

Unaudited

6 months to 30 June 2018

Unaudited

 

 

Underlying

Non-underlying* (Note 6)

Total

Underlying

Non-underlying* (Note 6)

Total

Continued operations

Note

£

£

£

£

£

£

 

 

 

 

 

 

 

 

Revenue

 

29,777,661

-

29,777,661

19,936,914

-

19,936,914

 

 

 

 

 

 

 

 

Cost of sales

5

(21,509,659)

-

(21,509,659)

(14,496,018)

(107,438)

(14,603,456)

 

 

 

 

 

 

 

 

Profit from operations

 

8,268,002

-

8,268,002

5,440,896

(107,438)

5,333,458

 

 

 

 

 

 

 

 

Administrative expenses

5

(4,468,436)

(1,311,187)

(5,779,623)

(2,230,281)

(431,832)

(2,662,113)

Net finance expense

 

(446,543)

(539,452)

(985,995)

(459,425)

-

(459,425)

Other net (losses)/gains

 

113,975

(54,527)

59,448

88,107

-

88,107

Foreign exchange

 

(11,167)

-

(11,167)

(2,906)

-

(2,906)

 

 

 

 

 

 

 

 

Profit before tax

 

3,455,831

(1,905,166)

1,550,665

2,836,391

(539,270)

2,297,121

 

 

 

 

 

 

 

 

Tax expense

 

(131,520)

-

(131,520)

(143,814)

-

(143,814)

 

 

 

 

 

 

 

 

Profit/(loss)

 

3,304,311

(1,905,166)

1,419,145

2,692,577

(539,270)

2,153,307

 

 

 

 

 

 

 

 

Profit/(loss) attributable to:

 

 

 

 

 

 

 

Owners of the parent

 

3,304,311

(1,905,166)

1,419,145

2,692,577

(539,270)

2,153,307

 

 

3,304,311

(1,905,166)

1,419,145

2,692,577

(539,270)

2,153,307

Basic earnings per share attributable to owners of the parent (expressed in pence per share)

12

1.97

(1.13)

0.84

1.97

(0.39)

1.57

Diluted earnings per share attributable to owners of the parent (expressed in pence per share)

12

1.78

(1.02)

0.76

1.79

(0.36)

1.43

 

 

 

 

 

 

 

 

                         

 

* Non-underlying items represent acquisition related expenses, restructuring costs, certain finance costs, share option expense and amortisation of acquired intangibles. See Note 6 for more information.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

6 months to 30 June 2019

Unaudited

6 months to 30 June 2018

Unaudited

 

Note

£

£

 

 

 

 

Profit

 

1,419,145

2,153,307

Other comprehensive income:

 

 

 

Items that will or may be reclassified to profit or loss:

 

 

 

Other comprehensive income

 

-

-

 

 

-

-

 

 

 

 

Total comprehensive income

 

1,419,145

2,153,307

 

 

 

 

Total comprehensive income attributable to:

 

 

 

Owners of the parent

 

1,419,145

2,153,307

Total comprehensive income for the period

 

1,419,145

2,153,307

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

30 June 2019

Unaudited

30 June 2018

Unaudited

31 December 2018

Audited

 

Note

£

£

£

Non-current assets

 

 

 

 

Property, plant and equipment

7

54,137,429

49,068,901

49,972,011

Intangible assets

8

33,299,138

18,925,623

18,974,771

Investments in associates

9

5,003,321

-

-

 

 

92,439,888

67,994,524

68,946,782

Current assets

 

 

 

 

Trade and other receivables

 

13,084,304

6,392,570

6,467,207

Inventories

 

6,190,797

4,954,805

4,844,483

Cash and cash equivalents

 

3,583,663

3,374,365

3,771,735

 

 

22,858,764

14,721,740

15,083,425

Total assets

 

115,298,652

82,716,264

84,030,207

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

15,595,921

8,248,759

8,054,274

Current tax payable

 

502,849

382,198

471,531

Borrowings

10

121,433

1,078,567

74,581

 

 

16,220,203

9,709,524

8,600,386

Non-current liabilities

 

 

 

 

Borrowings

10

26,805,363

18,687,068

19,694,405

Deferred tax liabilities

 

1,098,148

999,387

974,294

Provisions

 

718,822

632,011

632,011

 

 

28,622,333

20,318,466

21,300,710

Total Liabilities

 

44,842,536

30,027,990

29,901,096

Net assets

 

70,456,116

52,688,274

54,129,111

 

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

Share capital

11

1,738,175

1,367,056

1,367,056

Share premium

11

64,463,963

50,161,904

50,136,904

Share option reserve

 

492,248

352,877

352,877

Other reserves

 

1,361,718

1,361,718

1,361,718

Retained earnings

 

2,400,012

(555,281)

910,556

Total equity

 

70,456,116

52,688,274

54,129,111

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

Share

capital

Share premium

Share option reserve

Other reserves

Retained earnings

Total

 

Note

£

£

£

£

£

£

Balance as at 1 January 2018

 

1,367,056