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Rok falls victim to recession and cuts

Housing contractor Rok has become the biggest casualty of the recession after it filed for administration last week.

After a tough six months that saw two profit warnings, suspension of its finance director and problems in its plumbing, heating and electrical business, a dramatic fall in trading appears to have tipped the company over the edge, leading to PwC being appointed administrator.

Rok’s turnover for the year to 31 December 2009 was £715 million, down from more than £1 billion in 2008.

The company, which had 3,800 employees, flagged issues regarding the profitability of its PHE division in April. At the time, Rok said the problem had been “dealt with swiftly and decisively”.

Then ahead of interim results in August, the firm said “the PHE business continued to disappoint”. The board instigated a further review. Business services firm BDO was appointed to review and its investigation found “serious failings in the financial controls of the PHE business”.

Finance director Ashley Martin was reinstated after being exonerated of any wrongdoing, only to resign immediately, describing his position as untenable.

According to PwC administrator Mike Jervis, Rok suffered a “sharp drop off in work across all divisions during September”.
It is understood this forced discussions with the firm’s bankers, who withdrew their support.

With the housebuilding sector suffering with the onset of the credit crunch, Rok turned to social housing maintenance work, beefing up its PHE division.

After the administrations of Connaught and Rok, other firms moved quickly to distance themselves from the difficulties.

Mears chairman Bob Holt said: “It is a massive insult to be compared to Rok and Connaught. Mears has had 15 years of compound annual growth.”

Osborne chief executive David Fison said: “We’re extremely prudent and hold a lot of cash in the bank as a protection to the family and the people who employ us. We’ve got big reserves to stand by.”

However, Leadbitter chief executive Bob Rendell was less positive: “I think it will happen again as the impact of the spending review hits the construction industry.”

PwC said its target was to sell either the whole or parts of Rok in the coming days, as business can “evaporate” if the process drags on.
Several of Rok’s rivals indicated they were prepared to look at the business when information from the administrators became available, with Osborne, Leadbitter and Mears understood to be interested.

Mr Holt said: “We’re waiting to get access to information. We hope to have deals done by the end of week.”

 

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