30 July 2020
(EPIC: SRC / Market: AIM / Sector: Construction Materials)
(‘SigmaRoc’, the ‘Company’ or the ‘Group’)
Group delivers strong first half, despite challenging conditions
SigmaRoc plc, a heavy construction materials Group active in the UK, Channel Islands and the Benelux, is pleased to update the market on its resilient trading and financial performance across the first half of 2020, ahead of publishing its interim results on 7 September 2020.
|Financial overview year-on-year|
|6 months to 30
|6 months to 30
|Underlying1 EBITDA Margin||20.0%||19.1%||+5%|
|Liquidity overview since 31 December 2019|
|As at 30 June
|As at 31
Cash and cash equivalents
|Total net debt outstanding||£46.3m||£49.8m||-7%|
|Adjusted leverage ratio2||1.97||2.07||-5%|
1 Underlying results are stated before acquisition related expenses, restructuring costs, certain finance costs, share option expense and amortisation of acquired assets.
2 Adjusted leverage ratio compares net debt to underlying EBITDA for the last twelve months adjusted for any pre-acquisition earnings of subsidiaries acquired during the relevant period.
- Strong H1 2020, with good momentum in Q1 and challenging conditions effectively managed in Q2;
- Pro-forma adjusted revenues in H1 2020 consistent with prior year, despite the impact of COVID-19;
- Improved underlying EBITDA margins demonstrating continued work on operational performance;
- Solid financial position with net leverage reduction across first half of the year;
- Diverse customer and product portfolio, with good exposure to future infrastructure expenditure, as well as long term, structural growth markets of RMI and housing;
- Focus returning to investment strategy, with significant value creation opportunities available;
- Decentralised business model showing ability to minimise impact of COVID-19, maintain profitability and ensure community
Since February 2020, SigmaRoc has delivered a comprehensive and effective response to COVID-19, leveraging its decentralised and agile structure to enable each platform and business to implement specific forward-looking
protocols; government health & safety and social distancing measures; and continual dialogue personally to their local communities, unions, staff, customers, suppliers and service providers. As a result, the business managed well through the crisis to deliver results ahead of 2019 on a pro-forma basis.
For the six-month period ended 30 June 2020, the Group expects to report unaudited revenues of £54.5m and underlying EBITDA of £10.9m, representing 83% and 91% increases, respectively, over the same period during the prior year. Underlying EBITDA margins also improved to 20%, a net improvement versus prior year of 5%. This performance, achieved despite the negative impacts of the COVID-19 pandemic, is explained by a return to stronger trading in May and June, cost reduction and operational efficiency projects, expansion of our product and service offerings, as well as some seasonality and foreign exchange effects.
Comparing these results on a like-for-like basis adjusting for subsequent acquisitions, revenues recorded for the period were approximately 100% of revenues for the same period in 2019.
As a result of the solid trading performance and effective cash management strategies implemented, SigmaRoc’s cash position increased by £7.4m over the six month period, to £17.3m, as at 30 June 2020. Group net debt evolved from £49.8m at 31 December 2019 to £46.5m at 30 June 2020. The primary drivers of this change are good cash generation, foreign exchange fluctuations and standard intra-year financing of Belgian social security payments (to smooth its cashflow impact). The Group now also consolidates in full the bank loans and finance leases related to Stone Holdings.
Adjusted leverage at 30 June 2020 had reduced to 1.97 times underlying EBITDA, from 2.07 times at 31 December 2019. SigmaRoc retains the ability to draw further bank funding within its existing facilities, but expects the business to remain strongly cash generative and with no significant amounts of deferred government payments remaining at 30 June 2020.
The Group is pleased its preparation for COVID-19 has allowed it to stay operational throughout the crisis, where government rules permitted. As a result, it was able to deliver strong financial performance, keep its workforce safe from the virus and also keep the majority of its personnel actively employed, to the benefit of the local economies it operates in.
With regard to the Group’s operations, restrictions have now been lifted in the Channel Islands allowing Ronez to resume more normal trading, albeit against a backdrop of somewhat reduced activity in Guernsey. The Group awaits further updates from the States of Guernsey and Jersey on infrastructure spending and while the project pipeline remains somewhat subdued in Guernsey and stronger in Jersey, it is possible some projects may be deferred to 2021.
In the UK, the Group’s PPG platform moved toward full production in May with stronger than expected performance in June as RMI and housing demand recovered. The supply of large-scale precast concrete products for infrastructure projects is helping the PPG platform deliver good results and residential refurbishment work has further supported demand for landscaping products as well as concrete blocks.
South Wales has only returned to normal trading during July as local road schemes and construction work resumed. As a result, the recovery of that section of the business remains behind that of other platforms. In general, however, the platform performed relatively well, shows good signs of recovery and should benefit from pent-up demand in the second half of the year.
In Belgium, operations returned to full capacity during May, with a strong month of June as a result. The drivers of this recovery have been a mix of a return to normal activity, catch up of temporarily suspended construction work and new demand for domestic projects as homeowners decided to refurbish their homes. Supplies to the Netherlands continued at a strong pace as the consequences of lock-down were less severe. Aggregate supplies resumed with the reopening of our partner’s operations in May and had a strong month in June as a result of the trends mentioned above.
Summary and outlook
The Group has delivered results ahead of its own expectations given the challenging trading environment. These are attributable to the Group’s early preparation and active management, ability to continue operating where permitted and above all its motivated workforce and management team. The Group remains convinced it has created a setup better capable of managing uncertainty, rapidly changing conditions and challenging working environments.
Notwithstanding the consistent recovery in activity levels since May, the Board believes that it is still too early to provide accurate guidance for the remainder of the year given continued uncertainty over the full impact of COVID-19 on the economy as well as the scale and timing of government support for spending in various construction market segments. This position will be kept under review and reassessed at the time of the release of full H1 2020 results planned for 7 September 2020.
Having maintained a strong operational and financial position through the very challenging conditions experienced in Q2, SigmaRoc is now focused on maintaining the strategic momentum that had been created through 2019 and into the early part of this year. As such, the Board will review opportunities to invest in support of its platforms where it believes there is the potential for significant value creation.
David Barrett, Chairman of SigmaRoc, commented:
“I am very pleased to be reporting these results for the Group. In my 45 years in the industry I have seen many cycles and the challenges they pose for business. Navigating these challenges in the way SigmaRoc and its management team have done demonstrates the resilience of the Group and its strategy.”
Max Vermorken, CEO of SigmaRoc, commented:
“The Group’s performance across the first six months of 2020 is extremely strong given the context and risks we faced. As a Group we have demonstrated again that a decentralised business model focussed on local markets works well in our industry and in challenging times. The Group is further supported by a solid asset base. The Group will continue to confront all challenges head-on to deliver further shareholder value.”
Information on the Company is available on the Company’s website, www.sigmaroc.com. For further information, please contact:
|Tel: +44 (0) 207 002 1080|
|Strand Hanson Limited (Nominated and Financial Adviser)
James Spinney / James Dance / Jack Botros
|Tel: +44(0) 207 409 3494|
|Liberum Capital (Co-Broker)
Neil Patel / Jamie Richards / Jonathan Wilkes-Green / William Hall
|Tel: +44 (0) 203 100 2000|
|Peel Hunt (Co-Broker)
Mike Bell/Ed Allsop
|Tel: +44 (0) 20 7418 8900|
|Rubik Communications (Financial PR adviser)
Andrea Mora / Charlotte Hollinshead
|Tel: +44 (0) 207 002 1080|
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.