Snook's solution

By DAILY MAIL REPORTER
Updated:

 

IT is harder to build things up than to knock them down. Garvis Snook has experience of both. Snook, 51, started his career in his family's demolition business. He loved it, but since he arrived at the Exeter Building Company in 2000, he has been focusing on building.

So far he has taken the group - now named Rok Property Solutions - from £2m-a-year losses to £10m profits and from £7m market value to £105m.

He sees this as just the beginning. It has 21 branches. He wants 75 to 100 and aims 'to become the nation's local builder'.

As you might guess from 'property solutions', Snook is on a marketing mission. Last month he hired Sue Moore, head of brands at British Airways, to develop Rok as a national brand.

Branding efforts so far include Snook appearing in leather gear to front the group's results and beginning an industry presentation with an image of a gorilla holding a flower. The gorilla represented a builder - striving to look friendly, but still feared.

Snook says: 'People do not look forward to having the builders in. We want to change that. The industry has treated both staff and customers badly. We want Rok to be a great place to work.'

There is no doubting Snook's idealism, though it has a hard edge. He says: 'We are in business to make money.' He is aghast that builders - after enjoying boom conditions for years - are still working on 1% margins. Rok's target is 3%.

Benevolence towards staff does not extend to keeping a salary-linked pension scheme for newcomers. Motivating them to work in small local teams means that Rok can take out layers of top management. It also means putting staff on performance-linked pay packages.

Last year, when sales soared from £221m to £380m, Rok made £9.9m pre-tax profits. Brokers expect sales to reach £500m this year with £14.5m profits and 40p earnings.

The shares have risen to 410 1/2p, 10 times likely earnings. The dividend yield is a lowly 1.6%, but the payout is 4.7 times covered by profits and has room to rise.

Building remains a risky business and Rok could trip up. Some of its early investors are taking their gains. Last year's profits included a £0.5m surplus on shares in Galliford Try, where Rok's bid was rejected.

But strong growth in Government-funded projects looks set to continue. Ten-year social housing spend in Scotland, where Rok has just found a foothold, should reach £6.5bn.

Mike Foster, at sector specialist KBC Peel Hunt, rates Rok 'an important premium growth opportunity'.

If Snook can deliver the growth he seeks, the shares should have further to go.

Marshalls paves way to big profits

OUR damp summer is wiping some of the shine off Marshalls, which has made a mint out of gardeners' passion for handsome paving and stonework. The shares have come back from 296p in May to 246 1/4p.

Rising energy prices could add to the group's £100m raw material costs, but the fall looks overdone.

Marshalls has moved a long way from its original brick business. The UK construction sector is still expanding quickly and Marshalls is growing faster still.

Local authority renewal of city centres and streets is a rich market. Tight cost control has pushed group margins over 15%.

After last month's 45p-a-share cash return, Mark Hughes at Numis Securities expects profits to rise 12% to £56.4m this year, with dividends increasing to 12p. That puts the shares at less than 10 times earnings with a 4.8% yield.

For 2005 Hughes expects close to £60m, dropping the rating to nine times and pushing the yield to more than 5%.

On Jim Slater's Price Earnings to Growth measure, Marshalls comes out at less than one - cheap for a quality business.

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