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Saturday, 24 February

Old Dutch Spawns New Masters - Imtech UK and Ireland Results Show Resolve

Imtech UK and Ireland has released its first set of figures since the Group emerged from the buyout from its failed Dutch parent company.

The figures cover the period August 2015 to 31st October 2016 in two seven month reporting periods: from August 2015 to March 2016 (reflecting the trading period of the post-buyout Imtech UK and Ireland to March 2016) and then April 2016 to October 2016 (reflecting the company's new 31st October financial year end).

Paul Kavanagh, Imtech UK and Ireland Chief Executive said: "Imtech UK and Ireland experienced a very challenging period in the months before August 2015. The Group’s independence has been secured from its failed Dutch parent; it has weathered the impact of the recession; and regained its position as one of the UK and Ireland’s dominant technical services providers."

When asked how the business had been affected  from a brand perspective by the bankruptcy of Royal Imtech N.V. along with Imtech Capital B.V., Imtech B.V. and Imtech Group B.V. (Click Here for details) Kavanagh told ThisWeekinFM: "The situation in Europe developed over a couple of years; and the UK and Ireland business was largely operating as a devolved business, so armed with those two factors, we were able to manage problem with a degree of comfort. We had been acquiring good businesses with good pedigrees and so people had faith in us. Importantly, most of our staff and supply chain came with us. Another thing that helped was the bankruptcy was major news in Europe but not so much in the UK. And of course, the speed in which we raised investment also gave customers and potential customers a great deal of confidence." (Imtech Survives on Endless Credit)

 

Not walking alone

Kavanagh continued: "We won some good contracts quickly after the buy-out; work such as the Liverpool FC development (Click Here) which again delivered confidence to the market. I have to admit we thought about changing the name but both our supply chain and our clients told us it would be more trouble than it was worth."

Kavanagh is cites the role Carillion played in keeping the faith with  Imtech UK and Ireland: "There were some really good other examples such as  Galliford Try and Lendlease to name just two."

 

How it works

Imtech UK and Ireland has a number of different companies within the group but Kavanagh defines it as four elements: 1. Ireland; 2. Contracting for mechanical and electrical installation; 3. Systems Integration; 4. Maintenance/Technical Facilities Management under the Imtech Inviron banner.

(The business in Ireland is profiled on industrial, high tech and pharmaceutical - which according to  Kavanagh, gives the whole company an international profile/opportunity.)

 

Technical Facilities Management

Technical Facilities Management and Imtech Inviron has a new face in the hot seat - Noel Clancy, formerly of Shepherd FM. The companies already work in commercial, education, government, healthcare, manufacturing, transport and industrial but Clancy wants to capitalise on ensuring there are more complimentary arrangements between the operating companies and Inviron and ensuring Inviron maximises its sector focus.

Clancy told ThisWeekinFM: "I've only been in post 50 days. I now understand what we have - we work in every sector in every part of the country. I want to start integrating with the other businesses. It's an exciting time to be working with the Group.

“We are a leading independent technical service provider and we are targeting clients who play to our strengths and demand 100% business continuity to protect their income streams. The Group’s wider technical strengths compliment what we do.

"Inviron has an £83 million forward order book which gives us a good recurring business profile and we expect to announce some more wins in the next week or two - watch this space as they say."

 

Positives

Kavanagh concluded in his interview with ThisWeekinFM: "We are pleased that we have £ 100 million more in the order book than this time last year and we have good strong management and resource around us. Thing look really positive for the future."

 

MBO results

The results and Paul Kavanagh's commentary are published below:

‘Imtech UK and Ireland has emerged as a strong, profitable and cash generative business with a record order book, working for blue chip clients. The Group’s financial performance and capacity, complementary work streams and broad position across a variety of sectors mean it is ready to deliver on an ambitious three-year growth plan to 2019.

‘The Group is looking to the future with confidence. During the period since the August 2015 MBO we have consistently and progressively improved performance. Results in the first quarter of 2016/2017 have continued the positive trends started in the first 14 months. We have visibility of a strong pipeline of opportunities as well as secured order book. Our focus on customer experience delivered by a strong management team will deliver results.’

 

A period of challenge and change

The challenges in 2014 and 2015 were caused in part by the impact of recession, which all businesses in our sector experienced. However, overwhelmingly the Group was affected by the serious, well-documented problems in its then foreign parent company, Royal Imtech NV. These problems were not of Imtech UK and Ireland’s making and outside of its influence or control.

On August 26th 2015, only two weeks after its Dutch parent ultimately failed, Imtech UK and Ireland announced its intention to financially restructure the business through an MBO led by the existing directors of the company with further investment from Endless LLP, a private equity firm. The transaction was completed shortly thereafter and has allowed the Group to take the business forward in a new, positive, independent direction.

The entire senior team participated in the MBO and all of the subsidiary business’ management teams transferred to the new business entity. The Group is proud to say that, of 2600 staff employed before the MBO, 2500 transferred to the new arrangement.

The recognition by the Group’s customers and suppliers of the continuing strength, capability and culture of our organisation and their consequent faith in the business was essential in this period. The team are humbled and extremely grateful to them.

Securing and strengthening the business

Following the MBO, Imtech UK and Ireland continued to be one of the two or three largest independent technical providers in the UK and Ireland. Priorities were simple, concentrate on the strength of relationships and on improving the consistency of its operational performance.

Clients responded positively. As early as August and September 2015, the Anfield Stadium project was secured with Carillion – a prestigious and technically complex project with strict deadlines that has been successfully completed and handed over in 2016.

In the second half of 2015 the Group secured, amongst others, a Euro 22M windfarm contract at Slievecallan in the Republic of Ireland, a £21M contract at BBC Television Centre, a £10M contract at Birmingham Conservatoire, secured preferred contractor status on a 4 year framework agreement for Cambridgeshire and Northamptonshire County Councils worth in the region of £8M, secured a multi-year framework with National Grid worth more than £15M and was recognised as the Major Contractor of the Year in the 2015 Electrical Industry Awards.

Over that time, all legacy issues have been substantially dealt with, the order book has consistently increased on the basis of satisfactory delivery and the organisation has been strengthened in anticipation of future growth.

This early momentum has been maintained throughout the reporting period and beyond into our new financial year.

 

Progress reflected in improving financial results

Highlights

In the period from August 2015 – October 2016, Imtech UK and Ireland delivered £372M of work and secured a total of £448M of quality new orders.

The closing order book at the end October 2016 was £385M broadly based across the business. This represented order book growth of £76M across the Group with Engineering Services, Suir and Capula all experiencing strong order growth during the period. This order book is the strongest in the Group’s history with a positive pipeline of future opportunities.

Revenue grew consistently through the period as the impact of the growth in new orders came on line (from £180.2M in the 7 months to 31 March 2016 increasing to £191.8M in the 7 months to 31 October 2016).

Gross profit of 11.6% has remained consistent in the second 7 month period (11.9% in the 7 months to 31 March 2016).

Operational EBITDA rose from a loss of £0.4M to a profit of £2.6M in the 7 month period to October 2016. The losses in the initial period are a reflection of legacy issues connected with the collapse of the group’s former parent, Imtech NV, and underperformance on projects secured during the recession.

Having substantively resolved those legacy issues, the Group has seen an improving operational EBITDA performance as the impact of consistent delivery and improved bidding margins took effect in the second period.

Operating costs before exceptional items were significantly improved in the second period compared to the first, reducing to 10.3% from 12.1%. This positive movement reflects both the business efficiencies achieved and the increased volume of activity in the second 7 month period.

Cash and working capital performance also improved across the period, again reflecting the consistent growth in the business and improvement in operational performance. This included the repayment of £2M to Endless.

 

Work stream performance

Engineering Services

In the period, Engineering Services orders won exceeded expectations both in volume and quality. The business won a broad base of work at consistently acceptable entry margins.

Legacy issues were resolved and operational structure strengthened resulting in a lifting of operating profit levels on a consistent basis across the business. During the second 7 month reporting period the rate of work winning increased and by October 2016 the work stream had a strong forward order book as well as a significant pipeline of opportunities, much of which is at preferred bidder stage.

 

Suir Engineering

The Group’s Irish business continued to perform strongly. It consistently won and executed work of a high quality throughout the year playing to its strengths in the energy infrastructure, pharmaceutical, and high tech industries within Ireland. In common with Engineering Services it has secured a strong order book of future opportunities and closes the period with a significantly increased order book, in a strong position for the future.

 

Capula

The Group’s systems integration business also delivered a strong performance throughout both reporting periods. Orders were ahead of expectation and there were some extremely significant wins such as the project to deliver updated control and protection systems for National Grid’s HV substations nationwide.

Mark Hardy, Capula’s new managing director and his leadership team have focussed on developing added value elements of its service offering such as Operational Intelligence and the Service business, as well as driving operational efficiency.

 

Inviron

The Group has a presence in a number of valuable technical maintenance sectors where there are growth opportunities and the opportunity to enhance the total group offering through collaboration with our other work streams, Engineering Services in particular. This continues to be the bedrock of a sustainable long term business.

Although the results in the period were disappointing due to a number of external factors such as Royal Imtech NV’s demise and internal issues - the business was too slow to address the cost base reductions as the business was restructured - steps were taken in the period to address these challenges.

Noel Clancy has been introduced as Imtech Inviron’s new Managing Director, and we have invested in the operating structure. Noel is an experienced and respected figure in the hard maintenance industry. In addition, we have refocused the strategy on delivering value from a more focussed range of activities.

These improvements, delivered by an enhanced management team with a renewed customer focus mean that Imtech Inviron is already seeing the benefit of these actions and we expect to see a significant improvement in performance in the next financial year.

 

Health and Safet

Imtech UK and Ireland has continued to improve its H&S performance over the period. The RIDDOR AFR, including sub-contractors, has fallen by over 15% and the All Injury AFR has fallen by over 25%. This has been achieved with the help of the Group’s leadership, behavioural and ‘Don’t Walk By’ programmes.

At the start of 2016 a Safety Leadership Team was set up, made up of the most senior operational managers in the Group, to ensure the correct focus on this important area is available and the pace of improvement maintained.

 

Outlook

During 2016 the Group set out its long term aim for the business in a simple phrase: “To succeed by delivering a better experience”: a better experience for customers, suppliers and our people.

A clear plan was established during 2016 to grow the business to £500m revenue over the next three years by focussing on delivering that better experience for customers across a broad sector base.

Imtech UK and Ireland aims to be in the top quartile for cash backed profitability across our market sectors.

Good progress is being made and the Group is looking to the future with confidence. The positive trends that were in evidence across the two accounting periods from August 2015 to October 2016 have continued into the start of the Group’s new financial year.

The results for April 2016 to October 2016 reflect 1.3% EBITDA on revenue of £192M and a Gross Margin of 11.6%. This masks the fact that volumes and margin improvements have continued through the period. Between October and December 2016 this trend has continued and accelerated. Volumes are significantly up on the April to October period and improvement to the bottom-line performance continues.

The Group is benefitting from a strong order book and robust pipeline which it anticipates will continue to drive a strong performance.

Picture: Imtech UK and Ireland has technical abilities across a range of building types and sectors 

Article written by Brian Shillibeer

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