Although YJL will be in a stronger cash position once the £15m disposal of Lovell Partnerships to Morgan Sindall is complete, many analysts think the business is now too small to attract interest from institutional investors.
YJL – which changed its name after the sale – is bidding to buy a small building services, maintenance or property management firm with a turnover of £50m. It is in “active discussions” with at least two companies and wants to make a purchase during 1999.
But analysts say an acquisition of that size would not be enough to boost the company’s attractiveness to the market. One said: “The problem is, everyone wants to buy that sort of FM business at the moment. And I would be very surprised if YJL is not looking at either being bought or, more likely, launching a management buyout to take the company private.” YJL finance director Paul Sellars reacted to the speculation by saying: “The stock market regards any company capitalised at under £400m as being small, and we stand at about £12m. Any company that is capitalised at that level has the same thoughts.” Sellars said the company’s main aim now was to return to profitability after the disposal of the homes division, which was by far the most profitable part of the business.
I would be very surprised if YJL is not looking at being bought or a management buyout
YJL announced an interim pre-tax profit of £1.1m for the six months to 31 March 1999, an increase of 120% on the same period last year. Turnover rose 12% to £138.5m.
The company does not break down pre-tax profit by division, but Sellars said the three construction businesses that now make up the company – Lovell Construction, Bullock and Walter Lilly – had all been profitable during the period.
Balance sheet debt was down from £8m in the first six months of last year to £2.6m. This figure does not include the £15m payment for the uncompleted homes arm sale. Cash left over from the payment will be used for the planned acquisitions.