Rok looks to social housing to boost revenues

The group, which styles itself 'The Nation's Local Builder' and has offices in Wakefield and Leeds, has made a painful shift away from new build construction over the past year in response to mothballed

projects and intense competition.

That change of focus drove the group's revenue in 2009 down 29 per cent to 714.8m. However, Rok said its resilience was demonstrated by underlying pre-tax profits remaining flat at 20.4m.

"We think the big area of cutbacks in the public sector is going to be in new build capital programmes – education, health and prisons," said finance director Ashley Martin. "The one area we firmly believe will hold up relatively well is (social) housing, simply because there are so many people on waiting lists for affordable housing. We have focused our business quite hard on that."

Industry figures predict social housing waiting lists hitting two million households, affecting five million people, by the end of the year.

Last year Rok won a contract with a consortium of registered social landlords to provide new homes in Yorkshire over the next four years after being chosen by Firebird JVC. It is also on the list of approved contractors for Yorkshire and the Humber's regional building framework.

Rok has also consolidated its social housing work in the north of England in Leeds and Rochdale, after acquiring social housing specialist Richardson Projects in 2008. Among its projects underway in Yorkshire are several housing schemes in Bradford.

But while Rok forecasts resilience in social housing, the group suffered early in 2009 as social housing agencies struggled to get funding, put projects on hold. This drove new build revenues down 15 per cent in the first half of 2009, although they gradually recovered with Rok building 1,300 social housing units over the year.

In total, Rok saw new build revenues slump 45 per cent last year to 307.4m, as it scaled back its construction work. That included shrinking from 20 construction offices to six, closing a site in York. Operating profits increased from 2.2m to 4.6m after significant cost cuts.

"We are consciously shrinking new build because we feel that trying to go out there and chase volumes means that you take on much more risk," said Mr Martin. "To win work in this climate you have to tender to such marginal prices that if anything goes wrong you end up making thumping great losses." Mr Martin said Rok is seeing early signs of life from the private construction sector, with customers including Diageo and BAA committing to new building, "because costs are at their low point".

Rok has closed its commercial property new build arm, and is looking for a buyer for the business, while selling sites.

Its planned repairs and refurbishment arm saw revenues slide eight per cent to 314.2m, with operating profits down eight per cent to 15.5m. But Rok said social housing repairs remain an attractive market and it has 60 framework deals in place, including one with Yorkshire Housing Group.

Its response maintenance arm saw revenues fall 12 per cent to 104.6m as milder weather meant fewer claims.

Analyst Philip Sparks said the group's shares are on hold until after the general election. "Rok will need to demonstrate resilience in the face of public sector cuts to catalyse outperformance," he said.

From roots in the war

Rok has its roots in an Exeter-based firm, Exeter Building Contractors, set up in 1939 to repair war damage. The group floated on the London Stock Exchange in 1981.

When current chief executive Garvis Snook was appointed in June 2000 the company was in desperate need of an overhaul with a market capitalisation of just 7m.

In March 2001 Mr Snook renamed the group and launched its new strategy to provide local construction services across the country, styling it 'The Nation's Local Builder'.

Mr Snook took the firm beyond its traditional geographic boundaries,

and led it on a series of acquisitions.

Rok expanded into Yorkshire in 2005 with the acquisition of Lemmeleg, the Wakefield construction business co-founded by Yorkshire Forward chairman Terry Hodgkinson.