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Rok profits tumble but investors cheered by outlook
BUILDING and maintenance group Rok said pre-tax half-year profits halved to £3m, but insisted better times lie ahead.
The group, which has offices in Leeds and Wakefield, cut its dividend but shares lifted 6.5 per cent to 20.5p as investors took cheer at its outlook.
Earlier this month the group warned of "serious failings" in its plumbing, heating and electrical (PHE) business, and expects to take a 10m charge this year to close the business and cover written off debts.
Rok, which expanded into Yorkshire in 2005 with the acquisition of Wakefield construction firm Lemmeleg, said revenues fell 15 per cent to 308.1m in the six months to the end of June. The group said poor weather at the start of the year prevented it from accessing properties.
Rok insisted it has drawn a line under issues at its PHE division. Chief operating officer Rob Olorenshaw said: "The PHE issues we have got right to the bottom of. The rest of the business is in pretty good shape."
He said the problems stem from its acquisition of Avonside in October 2007 for 16.5m. It had four offices across the north of England and Scotland, including one in Hull, and worked primarily with housebuilders. The acquisition helped Rok expand its workforce of plumbing, heating and electrical engineers by about 450.
But Mr Olorenshaw said the Avonside acquisition was poorly timed and the business's accounting methods "were not up to scratch", which meant Rok did not have full visibility on jobs, both in terms of revenue and costs.
"The mistake was that we did not put accounting systems in place," said Mr Olorenshaw. The group has laid off about 250 staff in the division, with another 100 cuts pending. This resulted in 6.8m of restructuring costs and included roles cut in Hull.
Following a review by accountants BDO, finance director Ashley Martin was suspended and Mr Olorenshaw said the group is considering a replacement.
Rok cut its dividend by 33 per cent to 0.5p per share but Mr Olorenshaw said the payment "shows the confidence in the business". Net debt at the end of June was 47.6m, comfortably within its 81m covenants.
Rok said it has "good momentum" in its social housing arm and while it expects volumes to be flat for the rest of the year, margins are expected to improve in the second half.
"Our revised, lower fixed cost base and forecasts for the business means the board looks ahead with confidence," it said.
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Friday 25 May 2012
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