RTS deal was first of many, says Entologi
THE NEW owners of Salford-based engineering firm RTS are planning a further pair of acquisitions by March which will see the firm becoming a £30m operation by the end of next year.
Neville Buckley, chairman of Congleton-based Entologi said that he expects the first of these acquisitions to complete before Christmas.
“The industrial revolution started in Manchester. It’s about time somebody started it again,” said Mr Buckley. “We are the fastest-growing engineering technology company around at the moment and we’re trying to start a renaissance in engineering.
“The City is starting to value that again – it’s getting away from ‘let’s make money out of mortgages’ .”
Entologi was formed last year following a merger of chief executive Carl Krajewski’s £6.5m-turnover industrial automation firm HMK Technical Services with Mr Buckley’s heating, ventilation and air conditioning systems firm Specific Environments.
Buckley said that the £600,000 purchase of RTS Life Sciences, which last year broke even on revenues of £11.8m, creates a £20m business with 130 employees.
Mr Krajewski said there are already synergies that can be gained from merging the firms – HMK supplies much of the automation equipment that RTS uses when installing £1m automated storage rooms for major pharma clients and Specific provides the clean air systems.
However, he also believes that RTS will benefit hugely from renewed focus and investment. He said that the company’s primary goal under its former plc structure was merely to generate cash to return to shareholders.
“Under the banner of the plc, it’s been suffocated – it’s had a pillow over it’s face,” he said.
Former chief executive Gary Walsh, who has now joined the Entologi board, agreed. He argued that in his former role as chief executive he spent half of his time on plc procedures such as looking at quarterly targets and holding shareholder presentations despite the fact that there is “absolutely no interest” from many institutional shareholders in small cap stocks.
“When you put it all together we estimate our central costs were £400,000. That eats away at all your profits. We got no value out of AIM,” he said.
Entologi is looking to develop a model which will allow clients to take on robotic lines built by RTS under service contracts rather than as a capital investment.
Mr Krajewski said: “That’s the way the IT and Telecoms model has gone for years and it’s the way they invest in Germany, but its a model that is alien to most of the industrial world.”
He said that many boards took strategic decisions at board levels not to purchase new equipment from capital expenditure if it can be obtained via service contracts.
Krajewski met Buckley after the pair were both asked to sit on an investors’ panel at a business conference. Buckley, who has previously worked on “buy and build” strategies in the telecoms and media sectors, said they then hatched a plan to “develop Carl’s business as a bedrock and put some other companies around it”.
The next of these deals will be funded from their own resources, but following this Buckley acknowledges that the firm will need equity investment to carry out future deals.
“We’ve got ten years in us before we hit the beaches. In that period of time we want to grow – using world-class engineering businesses to do it.”