Supastructure Limited (ASX:SPA) Chairman Paul Watson and Rocktown Managing Director & Founder John Hughes discuss Rocktown's civil engineering and infrastructure, contracting business, range of project work for tier 1 contractors, financials and Supastructure's upcoming IPO.
Jessica Amir: Thanks for tuning in to the Finance News Network. With me today from Supastructure (ASX:SPA) is Chairman Paul Watson and the founder of Rocktown Group, John Hughes. Gentlemen, welcome to the network and thanks for coming in.
Paul Watson: Thank you.
John Hughes: Thanks, Jessica.
Jessica Amir: Firstly, Paul, just give us an introduction to Supastructure.
Paul Watson: Supastructure is a newly formed organisation, put in place to acquire existing sustainable businesses that operate in infrastructure, civil engineering, heavy civil engineering in Australia. It's designed to collect a group of organisations.
And we believe by collecting these organisations together, the synergy that we can create by giving them added advantages of balance sheet, working capital, systems and procedures will allow us to exploit, in a positive way, the coming opportunities coming before us.
The federal government has announced $100 billion worth of work coming up in the next 10 years. New South Wales has budgeted for over $87 billion dollars’ worth of work.
Rocktown is the first target organisation that we're looking at acquiring. It’s very familiar with a lot of people in the industry, particularly in relation to NorthConnex, WestConnex, the Sydney Opera House. It's very active, very active in civil engineering, structural engineering, tunnels, bridges, roads. It's also in heavy haulage. It has very high quality, very high performance of time. And for us, it's quite profitable and believe we can take it to the next opportunity.
Jessica Amir: Thanks Paul. Now, over to you, John, as the MD and founder of Rocktown, just give us a little bit more detail [about the business].
John Hughes: We started the Rocktown business in 2006. Rocktown is a civil engineering construction company. We specialise in concrete structures Rocktown have over 500 personnel, spread across Queensland, New South Wales and Victoria. And Rocktown have an $95 million worth of revenue on their books this year.
Jessica Amir: So you're a massively successful business. You've got lots of successful projects under your belt. Just tell us about some of them.
Paul Watson: Jessica, we did a very large project in Western Australia, it was called the Gorgon Project. We worked on the project for approximately four and a half years for Chevron (NYSE:CVX). And the job was that successful that we got a tender to go to the Northern territory to do another LNG plant. In Brisbane, Queensland, we completed the Clem7 Tunnel. Airport Link was very similar, it was another tunnel project.
Into New South Wales, we've worked in some of the major infrastructure projects like the Cross-City Tunnel, which is very similar to Brisbane, concrete lining and cross passages, large amounts of concrete. And that was the same in Lane Cove Tunnel and WestConnex and NorthConnex.
Down in Canberra, we took on a job which is the light rail, where we set the rail link tracks and built multiple stations on the railway project.
Jessica Amir: John, if you wouldn't mind telling me, what are you currently working on and what's in the pipeline as well?
John Hughes: Jessica, we're currently working on $95 million worth of work at the present, with over $100 million in the pipeline. We're working in Brisbane, we're working in Sydney, we're working in Melbourne and we have now branched out to overseas to Canada with Samsung Construction (KRX:005930) and a large water infrastructure project.
Jessica Amir: Thanks so much, John. Back to you, Paul. How much is the business looking to raise and what value would that put on Supastructure?
Paul Watson: We've gone to the market with an offer of 140 million shares at 50 cents a share, giving you $70 million. Our intentions is to acquire Rocktown and the residual, which will give us working capital and the possibility to look into other acquisitions.
Jessica Amir: Brilliant. And Paul, how can investors find out more?
Paul Watson: Jessica, they can go to our webpage, Supastructure.com. They can go the lead manager, XX-LEMFinancial Services. They can go to their broker.
Jessica Amir: And just lastly, gentlemen, before we let you go, why should investors consider adding Supastructure to their portfolio?
Paul Watson: The organisation is true, tried, it's existing in market. The market's been demonstratively improved by the federal government and the state government has announced what's in their budget, over $185 billion worth of infrastructure projects. This organisation, Rocktown, is very successful, it's very well placed, it's highly respected in the industry.
They’ve got a very healthy turnover this year. They've got 80 per cent of next year's turnover in the can already. We can add to that significantly by our additional resources coming into the organisation and it will take us to the growth path that we believe the investors will be quite appreciative of.
Jessica, one of the other things we might just mention in potential shareholders, particularly super funds or retirees, is the board of directors have committed to a 3.5 per cent dividend payment as a result of the acquisition of Rocktown and moving forward the organisation.
Jessica Amir: Outstanding. Paul Watson, John Hughes, thanks so much for the introduction and good luck with the IPO.
Paul Watson: Thank you.
John Hughes: Thank you, Jessica.