Liberum Capital has published estimates for SigmaRoc PLC (LON:SRC) for the first time, using “prudent assumptions across the businesses”.
The City broker acted as joint bookrunner with Berenberg for the AIM-quoted buy-and-build construction materials group’s £12.4mln vendor consideration share placing, which completed today.
READ: SigmaRoc raises £12.4mln via placing to part-fund initial consideration for CCP acquisition
SigmaRoc saw 30,257,053 ordinary shares placed at a price of 41p each, with the monies raised to be used to part-fund the initial consideration for its acquisition of CCP Building Products Limited, announced in December.
Liberum said the acquisition of the Liverpool-based paving slabs maker and the accompanying capital raise have been fully integrated into its estimates.
In a note to clients, the broker’s analysts said: “We have taken a prudent line on revenues, forecasting growth of around 2% p.a. in Ronez and 3% in Allen and Poundfield - this assumes limited volume progress, consistent with the overall picture expected for construction and some price gains."
UK construction output is expected to see limited growth in 2019, with housing resilient, infrastructure growing but non-residential activity a drag, they added.
The analysts said they expect stronger growth in CCP (3.5%) to reflect the momentum it has achieved in growing market share, and stable profits in Ronez over the forecast period, with margins rising in the PPG segment.
READ: SigmaRoc forecasts revenue jump of over 50% in full-year update
It added: “The dip in margin expected in 2019E reflects the mix change, with lower margin PPG activities now a larger share of the Group.”
Liberum is forecasting that SigmaRoc’s clean pre-tax profit will rise to £5.7mln in 2018, up from £2.6mln in 2017, with its forecasts for subsequent years seeing increases to £7.7mln in 2019 and £8.7mln in 2019.
It estimates group sales rising from £27.1mln in 2017 to £41.0mln in 2018, £61.6mln in 2019, and £65.3mln in 2020, while net debt falls from £2.1mln last year to £1.7mln in 2018, £1.0mln in 2019, and to £0.4mln in 2020.
Strategy gaining momentum
Liberum’s analysts pointed out that SigmaRoc’s buy and build strategy is gaining momentum.
“It grew EBITDA at the first business acquired, Ronez, by 37% in 2017 and has added four more assets, at low multiples, all with improvement potential,” they said.
The analysts noted that the £12mln capital raise leaves the group with a flexible balance sheet, while the CCP acquisition brings critical mass to the precast concrete products platform, has a strong market position in the North West (20%) and has scope for profit improvement and revenue growth.
They concluded: “We believe there are many more targets in the UK aggregates and concrete industry to continue to buy and improve. The business is very cash generative, so we expect leverage to fall fast (to 0.4x in 20E from 1.4x pro-forma).”