Inspace’s £64.5m bid for Widacre
Letchworth property support specialist, Inspace plc, has announced its intention to make a £64.5 million acquisition of Widcare, owner of one the largest social housing providers in the UK.Letchworth property support specialist, Inspace plc, has announced its intention to make a £64.5 million acquisition of Widcare, owner of one the largest social housing providers in the UK.
Inspace believes the addition of Widacre’s skills to its established track record of maintaining and improving existing social housing stock, will provide an excellent platform to service the Government’s strategy to create integrated and sustainable communities.
It also expects to significantly increase its earnings visibility with secured orders and Framework Agreements of around £1.35bn.
Widacre owns two complementary businesses – Willmott Dixon Housing (WDH) and Widacre Homes, an affordable housing provider.
WDH is one of the largest social housing providers in the UK and specialises in new build projects ranging from large multi-phase regeneration schemes to greenfield housing.
Widacre Homes is an affordable housing provider specialising in the development of new homes for sale, alongside registered social landlords, in mixed tenure housing projects run by Willmott Dixon Housing.
The acquisition was announced at the same time as a pre-close trading update for the first half of 2006 in which Inspace announced that despite trading meeting expectations, a combination of factors would put pressure on the full year figures and that a more conservative outlook for new contract orders for future years would need to be taken.
This sparked a rapid sale of shares, dropping the Inspace’s price 19 pence to 106.5 pence a share, down 15 per cent. Notwithstanding this, after a relatively quiet tendering period over the last six months, the company has seen a higher level of activity more recently and estimates pipeline of opportunities at some £2.5 billion.
The purchase, which is subject to shareholder ap-roval and will be funded by £44.535 million in cash and £20 million in equity. Last year, the combined Widacre businesses generated post tax profits of £2.61m on turnover of £128.97m and Inspace estimates that the combined businesses should generate turnover of around £125m for the year ended 31 December 2006.
Inspace chief financial officer, Andrew Telfer, said: “The obvious synergies between Widacre and Inspace make this an excellent acquisition providing the company with ‘first mover’ advantage and positions us as a leading specialist service provider who can now offer a complete integrated service across the evolving UK social housing market.
“This acquisition is also earnings enhancing from day one and will provide a significant increase in our earnings visibility going forward. Importantly it allows us access to the major RSL maintenance, stock reinvestment and new build market.”
Inspace expects the acquisition of Widacre to position the new enlarged group as one of the UK’s leading specialist service providers to the social housing market and one of the only providers able to offer a comprehensive and integrated service across all sectors: repair and maintenance, refurbishment and improvement and new build.
Total spending on social housing is currently around £14bn per annum, of which around £10.3bn is spent on repair, maintenance and improvement. Of this, £4bn is spent on ongoing repair and maintenance, with the remaining £6bn being spent on capital projects such as major refurbishment and improvement.
WDH’s clients are predominantly Registered Social Landlords (RSLs), as well as Widacre Homes. It provides design, consultation, management and contracting services in relation to the construction of new social housing, with mixed tenure development, key worker accommodation and extra care housing also being areas of focus.
Widacre Homes is a smaller business which provides predominantly low cost homes for sale in partnership with RSLs, usually alongside social housing built by WDH as part of more extensive mixed tenure schemes.
One of the key strengths of Widacre Homes identified by Inspace is its ability to cultivate strong relationships with RSLs and by doing so, helps to facilitate the RSLs’ low risk involvement in developing homes for sale, their ability to cross subsidise funding towards social housing, and their ability to create integrated and sustainable communities in line with the Government’s clear policy guidelines.
WDH developed around 1,000 homes last year, predominantly throughout London and the South East, nearly all of which were conventional social housing. To date, Widacre Homes has completed one development but it is working on substantial new developments and opportunities.
WDH expects to build around 1,500 new units this year and currently has fourteen Framework Agreements with RSLs with a further eight at the tender stage. Widacre Homes expects to complete 67 homes this year, rising to 325 in 2008 when the final phases of its Eastside development, situated alongside the 2012 Olympic site in East London, are completed.
The aim is for there to be increasing levels of synergy between WDH and Widacre Homes, with Widacre Homes using WDH as its specialist contractor for the design, cost planning and construction of new housing, and the RSLs also using WDH for the social housing part of mixed tenure developments.
All of the senior management of the Widacre businesses have been in place for several years and are to transfer with the business to the Enlarged Group.
Chris Durkin, currently chief operating officer of Widacre, is seen as key to the future development of the Widacre businesses and will be appointed to the board of Inspace. In total, approximately 300 employees are expected to transfer as part of the acquisition.