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Mon June 27 2022

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RSK perseveres with acquisition strategy

9 Mar Consulting engineer RSK has announced two more acquisitions this week, making it six in the last four months.

RSK founder and chief executive Alan Ryder
RSK founder and chief executive Alan Ryder

Supported by the continued backing of US investment firm Ares Capital Europe, RSK has this week taken over Inis Environmental Consultants in the Republic of Ireland and Richard Allitt Associates in the UK.

County-Clare-based Inis Environmental Consultants was founded 22 years ago and has 26 employees. It now becomes part of RSK’s European division.

Richard Allitt Associates (RAA) provides hydraulic modelling, surface water management and flood risk consultancy for the urban drainage industry.  The company will join RSK’s Binnies division. As part of the transition, managing director Richard Allitt will step down but will continue with the business for the next year as a part-time consultant. Co-founder Kathryn Allitt retires in April. Martin Allitt takes over as managing director.

In February RSK acquired Fishtek, a Devon-based consultant specialising in marine environments and designing fish passes.

In January it took over Singleton Clamp & Partners (SCP), a transportation planning, highway and drainage consultancy founded in 1991, with 45 employees in Manchester, Leeds and London.

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RSK also made three acquisitions shortly before Christmas:  Optisol Services, a solar farm maintenance and civil works contractor; Non Entry Systems Limited (NESL), which makes automated equipment for cleaning of difficult access areas; and ATV Contract Services, a landscape management firm.

RSK refinanced in July 2021 with Ares providing £1bn of debt finance and NatWest Bank providing a £40m revolving credit facility.

The business has now made more than 70 acquisitions in the past six years. Turnover reached £350.5m for the year to 4th April 2021, up from £274.8m the previous year. However, its accounts show that it has still not made a profit since starting out on this acquisitions trail.  Last year it made a pre-tax loss of £18.9m, having made interest payments to backers of £22.8m. The previous year it lost £15.7m before tax, having made interest repayments of £18.8m.

However, the directors do not seem interest in making a profit. Growing turnover to service debt is the entire business model, as founder Alan Ryder explained in the latest accounts. He wrote: “Having taken the decision to fund our growth with debt, rather than equity, the key metrics for success as measured by our board of directors are cash flow and compliance with the covenants agreed with our lenders. The primary covenant with our lenders requires our directors to maintain leverage (the relationship between Ebitda and debt) at an acceptable level and with plenty of headroom from the point at which our convenant would have an impact. Provided that leverage is maintained below 7x, the directors are comfortable that there is plenty of headroom and our current leverage of 5.19x is a very comfortable position for us. Even at leverage levels above 7x there is plenty of headroom against covenants, but for reasons of prudence the directors plan to maintain leverage in the order of 5x to 6x.”

He continued: “The net cash generated from operating actives in the year to service debt was £52.3m, compared to a debt service requirement of 15.4m. The directors are therefore pleased with our financial accounts for the year – despite the lack of after-tax profit. The business has never been stronger – with substantial cash balances and plenty of headroom in respect of lender covenants.”

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