Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Majors seek stability in the regions

FINANCE City Site

THE UNCERTAINTY in the economy and the recent flurry of profit warnings might have been expected to suppress many companies'appetite for acquisitions.But one type of business that seems to have no trouble attracting buyers is the medium-sized contracting outfits with strong regional or local roots.

Last week Rok property solutions paid £4.9 million for two small contracting businesses - Grimsby-based Topcon (Builders and Contractors) and Wakefield-based Lemmeleg Building and Construction - which will reinforce its growing local contracting network.

Regional businesses have come to be prized by the larger quoted groups, notably Kier and Mowlem, for their reliable cash flows and the stability of their earnings.By focusing on smaller projects in local markets they can avoid much of the risk involved in larger contracts.

But, as well as reducing risk, Rok's chief executive Garvis Snook said these deals were part of the firm's strategy to be the 'nation's local builder'and the acquisitions will take its network in the north of England to eight branches.

Rok is keen on the firms' strong local client bases and reputations, to which it aims to bring economies of scale in areas such as IT and finance.

In all Rok is buying two businesses that have a turnover of £40 million on a multiple of just under four times posttax profits, which appears good value.

The group, which prefers to approach its targets directly rather than join a bidding contest, is funding the deals through a vendor and cash placing raising a total of £7 million.Further acquisitions may follow, particularly in central areas of the country.

Meanwhile, a strong regional presence is proving a bonus for Galliford Try, which last week said its profits for the year ending June would be well ahead of last year and above market expectations.

The firm is a market leader in affordable housing in the south-west and its construction arm has increased its margin and maintained its order book at £950 million.