Willmott buys ‘undervalued‘ Inspace back for £148m

Rick Willmott, the chief executive of Willmott Dixon, has criticised the stock market for failing to properly value the contractor’s social housing business during its 32-month public listing.

Speaking after completing a £148m deal to bring Inspace back in house, Willmott said there was little correlation between its share price and its real value after it floated on the alternative investment market at 108p per share in May 2005.

He said: “The problem is that we didn’t like the stock market and the share price swings we have seen in recent days underline that. Investors and analysts didn’t see that Inspace had been aligned as a business to match government spending.”

Analysts blamed the wider picture for Inspace’s muted performance (see box). Alan Matthews at Seymour Pierce said: “Things changed pretty much on the day it floated. The government started pushing its mixed communities agenda and contractors needed to offer a wider range of services.”

He also blamed a clash of culture. “Being in the public eye does not come naturally to Willmott Dixon. They wouldn’t simply take on business to meet shareholders’ expectations and compromise on margins. In the quoted world it looks like you’re missing out if you do that.”

May 2005 Inspace parts from Willmott Dixon and floats on AIM at 108p per share July 2006 Record low of 99p May 2007 Peaks at 191p December 2007 Slow decline back to 110p January 2008 Back into the fold at a 66% premium of 183p

Matthews said government cutbacks had also made the market more competitive, forcing rivals such as Connaught and Mears to diversify.

The return of Inspace, which turned over £175.5m in 2006, will push Willmott Dixon’s turnover to £850m in 2008 with pre-tax profit of £20m.

According to Willmott, it will break through the £1bn barrier in 2010. He added: “There’ll be a progressive growth in the average size of projects.”