Join our community of smart investors

Secure a 13% free cash flow yield

This building materials group trades on a 44 per cent ratings discount to its peers
September 6, 2023
  • First-half adjusted pre-tax profit rises 13 per cent to £33mn
  • 17 per cent higher revenue of £290mn
  • EPS up 11 per cent to 4p
  • Net debt cut 15 per cent to £183mn
  • Leverage ratio reduced 25 per cent to 1.69 times
  • Forecast free cash flow yields of 13 per cent (2023) and 17 per cent (2024)

SigmaRoc (SRC:54p), a group pursuing a buy-and-build strategy in the heavy building materials sector, previewed its robust interim results at the pre-close trading update in late July (‘A building company worth backing’, 24 July 2023).

Earnings and cash flow guidance remain unchanged, implying the shares are rated on a modest price/earnings (PE) ratio of 7.2 and offer a thumping 13 per cent free cash flow yield (FCF) for the current year based on forecasts from brokerage Peel Hunt. The solid cash flow is paying down borrowings, which could be slashed by 12 per cent in the second half to close this year at £161mn. This implies a leverage ratio of below 1.5 times cash profit estimates. Moreover, Peel Hunt predicts SigmaRoc could generate FCF of £63mn in 2024, or 17 per cent of its current market capitalisation, thus offering scope to further deleverage the balance sheet as well as funding further bolt-on earnings-accretive acquisitions.

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL trial

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Have an account? Sign in