SigmaRoc PLC (FRA:M2I2) (Q4 2024) Earnings Call Highlights: Robust Growth and Strategic Expansion

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Mon, Apr 21, 2025, 2:27 PM 4 min read

Revenue Growth: 72% year-on-year increase.
EBITDA Growth: 92% year-on-year increase.
EBITDA Margin: Increased by 240 basis points.
Free Cash Flow Conversion: 52.8% conversion rate.
Leverage: Ended the year at 2.08 times.
Net Debt: GBP509 million.
Earnings Per Share (EPS): 8.35p, 10% above consensus.
Return on Invested Capital (ROIC): 11.5%, aiming for 15% long-term.
Synergies Delivered: EUR9 million in 2024, targeting EUR40 million by 2027.
Cost of Debt: Approximately 7% in 2024.
Cash Flow Post-Growth CapEx Conversion: 44%, amounting to around GBP100 million.
Environmental Metrics: Emissions intensity reduced by 46% since 2021.

Warning! GuruFocus has detected 7 Warning Signs with FRA:M2I2.

Release Date: March 17, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

SigmaRoc PLC (FRA:M2I2) successfully integrated new lime and limestone businesses acquired from CRH, launching a synergies program that delivered EUR9 million in 2024.
The company increased its synergy program target from EUR30 million to EUR40 million by 2027, demonstrating strong operational efficiency.
EBITDA and EPS were ahead of consensus, with a 240 basis points increase in margins, reflecting robust financial performance.
SigmaRoc PLC achieved an 11.5% ROIC, on track to reach its long-term target of 15%, indicating strong return on investment.
The company has a clear strategy for future growth, focusing on bolt-on acquisitions and self-funding further expansion, supported by its high cash-generative nature.

Negative Points

The company faced challenges in the residential construction market, leading to a slight reduction in volumes and revenues in certain regions.
Western Europe experienced a 9% reduction in revenues due to a tough trading year and currency translation effects.
SigmaRoc PLC's net debt increased significantly to over GBP500 million due to acquisitions, although leverage remains under control.
The company is exposed to potential risks from US tariffs, which could impact its operations indirectly through the steel and automotive sectors.
Currency fluctuations pose a challenge, with 70-75% of the business in the Eurozone, requiring careful management of foreign exchange risks.

Q & A Highlights

Q: How much stock do the management and Board own? Are you planning on buying more? A: Management owns about 3% of the company, with shares purchased directly from salary or through EBT. They have consistently participated in every fundraise, investing around GBP3 million of their own money. The option program will further increase their ownership as performance targets are met. (Maximilian Vermorken, CEO)

Q: What is the longer-term vision for SigmaRoc, including potential for bolt-on deals and dividends? A: SigmaRoc aims to continue its strategy of acquisition, integration, and improvement. The company plans to use internally generated cash to fund further growth and acquisitions, enhancing EPS without relying on equity markets. Dividends and share buybacks are considered once debt levels fall below 1.5 times EBITDA. (Maximilian Vermorken, CEO)

Q: What impact do you expect from the German government's major infrastructure program? A: The program is expected to improve sentiment in Germany, leading to increased spending and construction activities. This could result in higher volumes of steel and stone used in Germany, benefiting SigmaRoc's operations. The company anticipates a return to historic volume levels in certain segments. (Maximilian Vermorken, CEO)

Q: Are currency fluctuations a concern for SigmaRoc, and should the euro be adopted for reporting? A: While 70-75% of the business is in the Eurozone, SigmaRoc is listed in pounds on the London Stock Exchange. The company has natural hedges and foreign exchange plans in place to mitigate currency risks. (Jan Van Beek, CFO)

Q: Do you expect an impact from US tariffs? A: US tariffs could affect the European economy, particularly the steel sector, which is a key market for SigmaRoc. However, the German stimulus program and defense spending may offset some of these impacts. The company is monitoring the situation closely. (Maximilian Vermorken, CEO)

Q: Can you explain the GBP45 million of finance expenses? A: The finance expenses are primarily related to interest on loans and some effects on leases. The majority is linked to the company's debt structure. As SigmaRoc reduces its debt, these costs are expected to decrease, benefiting EPS. (Jan Van Beek, CFO)

Q: Are you considering starting to pay dividends or moving from AIM to the main market? A: Dividends and share buybacks are considered once debt levels fall below 1.5 times EBITDA. While AIM has been beneficial for SigmaRoc's growth, the company is evaluating the best market for shareholder value, including a potential move to the main market. (Maximilian Vermorken, CEO)

Q: What is the target for leverage reduction for FY25? A: SigmaRoc aims to reduce leverage by approximately 0.5 points per year, targeting around 1.6 times by the end of 2025, depending on other activities. (Jan Van Beek, CFO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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