Building materials group SigmaRoc PLC (LON:SRC) has picked up two more acquisitions as its buy-and-build strategy continues apace.
In January, the group acquired the Foelfach quarry in Carmarthenshire, South Wales, for what it said was “a non-material sum” and has since proved-up the resource at the site from 1.8mln tonnes of high polished stone value (PSV) materials to around 4mln tonnes, more than double the initial estimate.
READ: SigmaRoc acquires Foelfach quarry in Carmarthenshire and appoints new managing director
Sigma is aiming to ramp up production at Foelfach to around 80,000 tonnes per year, which would serve as a launch pad for an expansion into the high PSV and asphalt markets.
Given only 8% of UK quarries produce high PSV materials, the market is wide open.
Early Christmas present
Prior to this in December, Sigma gave itself an early Christmas present, snapping up concrete blocks and paving stones maker CCP Building Products for £15.21mln.
At the time, Sigma said the acquisition was the “right next step” and would be an “excellent addition” that would add value to the business.
READ: SigmaRoc to buy Liverpool-based paving slabs maker CCP for £15.2mln
In the 12 months to the end of August, CCP generated revenue of £20.9mln and delivered adjusted underlying earnings (EBITDA) of £2.6mln.
To help finance the deal, the company increased its credit facility with Santander by £14mln to £34mln while also striking a deal to refinance the convertible loan notes which the board considered “favourable”.
“CCP will be a great fit in our journey, immediately accretive and a truly excellent addition to the group,” said chief executive Max Vermorken, adding that despite weather disruptions at the start of 2018 and “more challenging market conditions” year-on-year revenue growth for the 10-month period to October 2018 was 58% and the firm remained on track for “a strong full-year performance in line with its expectations”.
Profits double
Vermorken’s comments followed a strong performance in the first half to June where revenues jumped 52% to £19.9mln, with underlying profits 139% higher at £2.8mln.
READ: SigmaRoc doubles profits as new additions show their worth
Sigma’s CEO said the improvement was achieved despite the extremely harsh winter that meant demand for farming-related products such as retaining walls picked up later than usual.
He says numbers in the market are punchy going forward, but the first half indicates the potential.
Expansion plans
Sigma embarked on its current expansion plan in December, with the first-half results seeing contributions from previous acquisitions of Allen Concrete and Poundfield.
More purchases are likely as SigmaRoc is committed to growth by acquisition.
Vermorken says 35% of quarries in the UK are family-owned/private, while in pre-cast products, the percentage is even higher.
And the pipeline of potential deals is full to overflowing, he adds.
Firms have looked how the acquisitions of Poundfield, Allen and also Ronez, a Channel Islands-based quarry owner, have panned out and are now approaching SigmaRoc, he says.
Known local businesses
“Proximity to the customer” is the cornerstone of the strategy.
For large projects, there are the major suppliers, but for smaller developments, Vermorken believes local flexibility and presence are crucial.
That is why it retains the branding and sales team of the businesses it acquires.
“Known local businesses that supply local customers,” is how Vermorken summarises it.
With shares trading at around 4p as of 10 January, SigmaRoc carries a market cap of £54.5mln.