20 Aug 2010
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Rok shares up after accounting problems

Shares in troubled social housing maintenance and construction firm Rok jumped ten per cent after the company appeared to draw a line under problem contracts in its plumbing, heating and electrical business.

Last week Rok suspended its finance director Ashley Martin and shed 80 staff after auditor BDO Stoy Hayward uncovered “serious mismanagement” in its PHE arm. Since then the firm has announced that the mismanagement has cost it £6.4m in exceptional charges.

Although Rok's share price fell by 45% to 13p after the initial announcement and profit warning, they recovered by 10 per cent following the announcement of its half-year results.

Following the results, Rok's chief executive Garvis Snook went on a media offensive. He told Construction News that the group's problems were isolated to the PHE arm, formed from the 2007 aquisition of a company called Avonside. “Problem contracts in the PHE business were entirely focused on this area. The problems were identified and measures taken to address them. We are confident these issues will never reoccur. There has been no evidence of fraud,” he said.

Asked how he felt when he found out about the losses, Snook told Building he was “furious” and admitted he was “tired”. “It’s been the hardest period in my whole career in the industry,” he said.

He said the problems occurred because the PHE unit was operating on a different accounting system. “There’s a very simple explanation. The whole of the rest of the group operates on the COINS accounting system, which is an industry standard. This small unit was operating on its own system until October last year and it was during the transition onto the group’s system that we realised that something wasn’t quite as it should be, so we delved further,” he explained.

“A lot of employees were shocked by what we had to announce last week, but now the dust has settled there is a determination to demonstrate that the majority of the group is in good shape,” he added.

Snook also revealed to Construction News that he had had enquiries from clients about taking on work from social housing company Connaught, which has also recently experienced problems with contracts.

But he stressed: “We are definitely not looking at parts of Connaught’s business and enquiries from mutual clients are just cautionary at this stage.”