29/04/2008
Rok, the self-styled ‘Nation’s Local Builder’, continues to impress with astute, strategically compelling acquisitions and eye-catching financials. The latest addition to the fold is Northern-based Richardson, acquired in a deal capped at £40.5m, with initial consideration of £22.5m consideration funded predominantly through bank debt.
Providing both new build and refurbishment services to the government-backed social housing sector across the North of England, mainly under long-term framework deals, the acquisition strengthens Rok’s already impressive maintenance offering and market position in a market offering high levels of visibility and sustainable margins. Richardson also runs a private housing development division – an activity susceptible to credit crunch-related issues – which will be wound down over the next two years, with the financial risks weighted towards the vendors in the form of adjustments to the deal’s deferred element of £18m.
As for Rok, led by ambitious chief executive Garvis Snook, it continues to grow through takeovers and market share gains in a fragmented £42bn UK market in which there are roughly 50,000 small building players. Record results for 2007 from Rok revealed a 42% surge in pre-tax profits to £31.7m, from which the dividend was increased by 21% to 3.4p. Alongside the results, Rok announced a record confirmed order book alone worth £610m.
Based on earnings estimates for December 2008 and 2009 of 14.23p and 15.6p respectively, Rok trades on prospective price-to-earnings multiples of 9.6 and 8.8, a discount to lesser peers and way too low given the group's formidable track record. Strong buy.
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