Boom. Another ‘star’ of the UK support services sector implodes.
Rok, the social housing and construction group, filed this sorry little statement on Monday morning:
The board of Rok plc (the “Company”) announces that it has resolved to put the Company into administration and to make an application to the Financial Services Authority to suspend the listing and trading of the Company’s Ordinary Shares on the Stock Exchange. It is anticipated that the administration and suspension will become effective shortly.
To say this is something of a shock is an understatement. Yes, the company has issued a couple of profit warnings this year after discovering serious failings in the financial controls in its plumbing, heating and electrical businesses.
But the full extent of these problems was supposed to have been identified. Indeed, ROK, the UK’s self styled Local Builder, was confident enough to make the following statement at the end of September:
As a result of these full investigations, the Board has concluded that the problems in the ex Avonside PHE business were due to a scaling back of sub-contracting work from the private housing sector and a combination of weak operational, commercial and financial controls within that part of the business. The actions to resolve these issues have already been taken by management. The Board continues to have confidence that the Company will meet market expectations this year.
It then announced a big deal with Tesco.
Very odd.
Garvis Snook, the motorbike riding CEO of Rok, has some serious explaining to do.
And no prizes for guessing the biggest shareholders in Rok at the close of business on Friday:
Muppets.
Update: 09:57am (GMT).
Those recent director share purchases in detail:
The Company was advised on 4 October 2010 that four directors purchased ordinary 2p shares (Shares) in the Company on 4 October as follows:
Garvis Snook, Chief Executive – 200,000 Shares at a price of 19.0p per share
Sean Cummins, Finance Director – 210,000 Shares at a price of 18.75p per share
Ian Ellis, Non-Executive Director – 52,000 Shares at a price of 18.75p per share
Rob Olorenshaw, Chief Operating Officer – 53,237 Shares at a price of 18.66p per share
Update: 12:37pm (GMT)
OK, we are going to place today’s news into a bit more context.
This story was published by the FT in mid September and it triggered a furious response from Rok:
Rok is paving the way for refinancing discussions with its lenders, just over a month after the building and maintenance group issued its second profit warning of the year.
A company spokesman told the Financial Times that its existing facilities were adequate and it was not at risk of breaching its covenants, and that the move to renegotiate its debt was an indication that it was confident of meeting market expectations of profits for the year to December 31.
A company spokesman told the Financial Times that its existing facilities were adequate and it was not at risk of breaching its covenants, and that the move to renegotiate its debt was an indication that it was confident of meeting market expectations of profits for the year to December 31.
Now, here are the killer paragraphs:
However, the group’s banks are in the process of drafting in PwC independently to verify Rok’s accounts and financial forecasts ahead of the talks, people close to the situation said.
The move to bring in the accountancy firm comes in the wake of Rok’s profit warning last month that “serious mismanagement” of contracts in its plumbing, heating and electrical business would force it to make writedowns.
So, the answer to what has really gone at Rok probably lies with PwC and the lending banks.
Rok has a £90m, three-year revolving credit facility from Royal Bank of Scotland, Clydesdale Bank and HSBC, which is due to expire in March 2012. According to the FT, £51.3m had been drawn at the end of 2009.
Also of interest is the fact, that RBS transferred its loans to Rok to a internal restructuring department in June, because the company needed “additional care and attention”.
Intensive care now looks more apt.
Related links:
Serco’s mea culpa – FT Alphaville
Connaught and super-absorbent moppets – FT Alphaville