SigmaRoc PLC Q&A with CEO Max Vermorken & Zeus Capital’s Nick Chalmers: 2016 Annual Results (LON:SRC)

Sigmaroc Plc

SigmaRoc PLC (LON:SRC) Chief Executive Officer Max Vermorken and Zeus Capital Director of Metals and Mining Nick Chalmers caught up with DirectorsTalk for 2 exclusive interviews to discuss SigmaRoc’s 2016 annual results


Interview with SigmaRoc


Q1: Max, you published your 2016 results today, could you run us through the highlights of the results?

A1: So, there’s a bit of a side remark to put next to these results because the results, as some of our investors will know, relate to the period where we were still a shell company, the first big deal in the acquisition we did was closed the 5th January 2017 so the results only show our performance of last year as a shell company and therefore only relate the cost of the acquisition which were obviously incurred in that year.

The more interesting part of the announcement this morning was what we have said about the first quarter of this year and the first quarter performance of the business has been quite strong, ahead in EBITDA terms 12% versus the same quarter last year, and that’s really a testimony to the different things that we’re already putting in place in terms of optimisation of the operations and really running a small business like a small business should be run.


Q2: You have, like you say, had a definite positive start to 2017 with a strong Q1, what has driven this improvement?

A2: The key drivers, there’s a multitude, a proportion is obviously driven by a solid market performance, solid trading performance in Jersey, Guernsey has been a bit more flat over the first quarter of this year so there’s a proportion of that 12% increase that certainly comes from there.

The rest, and it’s probably the majority, is a series of changes to the business we’ve put in place, from an operational trading perspective, sourcing and procurement perspective. All these things that we said we would do to make this business run more like a local business, running its local needs based on what the local management thinks and not driven by the agenda of a large cap group which is what it was before, have driven up performance. We will continue to put effort into the business for the rest of the year and we should see an even better outturn at the end of the calendar year.


Q3: What can the market expect from SigmaRoc for the rest of 2017?

A3: So, the rest of 2017, I think, looks pretty good. We’ve spent most this quarter making sure that the run of the business was embedded in and that there are no significant risks and that all of the programmes we wanted to push through are pushed through. That we can effectively, as a management team because we’re not a very large organisation, at the top we’re just a few people, that these few people can actually focus on a number of other transactions that we’re looking at and that is really what we will be focussing on for the rest of the year. What the market should expect is further acquisitions because that’s what is the agenda and the driver behind the strategy of the company in a mix of assets which are similar to the Ronez assets, yielding assets or more growth-driven strategic opportunities that we find. So, it will be really a combination of these three things; acquisitions, keeping the performance of the Ronez business going and then some strategic developments and partnerships we can set up.

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Interview with Zeus Capital


Q1: Now Nick, SigmaRoc has released its 2016 annual results this morning, how do they look?

A1: The results themselves pre-date the acquisition at the start of the virtually integrated Channel Islands aggregates business called Ronez so they only reflect SigmaRoc as a shell company which isn’t material. However, the company did disclose that Ronez is a standalone entity under its previous owner which was the major LafargeHolcim, that business generated EBITDA of just under £5 million from revenue of around £24 million for 2016. So, that equates to an EBITDA margin of about 20% which we consider to be a very solid ??? during the year in which trading conditions weren’t the strongest particularly on the island of Guernsey.


Q2: So, how has the business gone since SigmaRoc took control at the start of the 2017?

A2: Very strongly, indeed. So, EBITDA for Q1 this year is reportedly up by 12% relative to Ronez did as a standalone business in the corresponding period last year and it’s important to note that the Q1 2017 calculation is after corporate overheads at the SigmaRoc level so a very encouraging performance indeed and a good start to life under SigmaRoc’s control.


Q3: What’s driven this improvement?

A3: Well, certainly, there’s been trading, at least in Jersey, have been relatively strong in relation to last year but it’s mainly down to key operational and reporting changes made by SigmaRoc since taking control of the business. If these efficiencies continue to be bedded down, we expect those improvements to go straight to the bottom line and we think Ronez should be capable of generating operational EBITDA of upwards of £6 million for the full year and that’s notwithstanding the potential for trading conditions on islands to strengthen full year.


Q4: What’s next for the wider group on the corporate front then?

A4: Ronez was really made a cornerstone acquisition under SigmaRoc’s buy-and-build strategy in the building materials space and management have laid out a very clear strategy to grow the company through the accumulation of further niche assets, through outright acquisitions or more organic investment from projects. Its experience and wide network amongst the major players in the sector, we think positions it very strongly in this regard and it now obviously has a very solid cash flowing platform via Ronez which clearly could be leveraged to help them grow. So, much of management’s times completing the acquisition of Ronez, at the start of this year, has been devoted to integrating that business and implementing the improvements that I’ve mentioned. So, with that process successfully navigated, we’d anticipate management to sharpen its focus on delivering the next opportunities so it’s a very much a case of ‘watch this space’.

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