Sigmaroc PLC Q&A with Chief Executive Officer Max Vermorken (LON:SRC)

Sigmaroc Plc

SigmaRoc PLC (LON:SRC) Chief Executive Officer Max Vermorken caught up with DirectorsTalk for an exclusive interview to discuss the construction materials sector, how they are positioning themselves in the sector, it’s new subsidiary and what to expect going forward


Q1: Now Max, given the low number of construction materials stocks on the London Stock Exchange, do you think it’ll be beneficial for our listeners if you give them a one minute overview of the sector and its dynamics?

A1: Certainly, so the construction materials industry, people will probably most relate to 2 products, cement and crushed stone, and then the derived downstream parts from there which is concrete, building blocks, basically everything you see when you walk around in a city. These products are usually low-value, high value products and quite abundant locally so that we can actually produce them quickly locally around the UK and Europe. That means that first of all that the markets are extremely competitive and highly localised, and an element to that is that transport costs in this industry compared to the value of the product itself is very high so you tend not to try and source things from far away. As it goes, over the last 20 years, a large number of bigger groups have started to consolidate in order to take market share and that led to disappearance of quite a few names that people in the UK would have remembered who were listed businesses here.


Q2: How is SigmaRoc positioning itself in the sector and how does its investment focus compared to other groups active in this space?

A2: So SigmaRoc’s focus is on high quality, very localised businesses, businesses that have ??? potential that isn’t exploited fully yet. It may sound trivial but in fact really isn’t, a large group run small entities, they’re not necessarily the best place to do so because how easy is it to understand the dynamics of a town in the UK from head office elsewhere. The second dynamic which is a lot of small companies, family-run or family-owned businesses, that don’t necessarily have the management skills you would have when you are part of a bigger group.

So, there’s a number of businesses that are out there, that can be bought, that can be run much more optimally than they currently are. The ideal set-up to do that is to have a very decentralised approach, whereas a group of industry experts in the middle of headquarters, I would say, like SigmaRoc, help and guide strong local management in running their localised business. The added difference that we put it in there, compared to traditional players in this industry or recent successes in this industry like for instance, Summit Materials in the UK or Breedon here, they don’t really have a strong preference for sub-sectors which are less competitive, either because of the geography, there’s just more and more places, or because of the product that is produced. We obviously bought Ronez which is a key example of that because of the two islands, Jersey and Guernsey and the operations in the construction material sector down there.


Q3: As you mentioned, earlier this week, SigmaRoc announced the creation of a new subsidiary, could you please expand on the new entity and describe why it’s key or the business?

A3: So, we bought Ronez which operates on the Channel Islands and we’re, obviously, always looking to expand into, first of all, the next niche opportunity we can find and the next acquisition we can do. An opportunity came our way to get into a nice bolt-on activity which is boats and then shipping using special pneumatic carriers but then of a smaller size. The strategic fit is very nice here because there are hardly any of these vessels around, in the North Sea I think there’s 1 or 2 other ones of the specific nature that we’ve bought and they are a key addition to the sector because not every port can handle large ships, not every load that is transported needs to be such a high volume and very often things need to be transported higher up the river and bigger ships can’t go there. So, with the vessel we’ve bought and the entity we’ve structured around it, we really have a nice addition to the sector in that way and for us at SigmaRoc it’s a real win-win, we’ve got a new acquisition, a new entity set up, we’ll add to our bottom line and since we are in business already, we are now in full control of our own shipping needs as well. So, a win-win and a nice little first acquisition on the back of what we did in January.


Q4: Lastly then, SigmaRoc PLC put out a strong operational update in February, how has the year gone so far and when do you expect to announce final results for 2016?

A4: So, we will be putting out 2016 results at the end of the quarter, this month. A key thing to note here is we bought our first asset in January 2017 so our existence in 2016 was as a shell company, primarily, so the results that we will find for 2016 will be to a certain degree irrelevant, they will only show the transaction costs we incurred to buy the first asset. So, these results will come out this month and since, our first has been very positive, we will certainly look to update the market of our performance of the first quarter because a large number of the significant efforts we’ve put in to embedding in the Ronez business and making sure that it runs well, that we generate further efficiencies, these are coming through already and obviously like to tell investors about that.

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