Trevor Koch of Surrey-based m&e contractor RTT Group is in no doubt that he has made the right decision to sell the firm he set up with his brother Robert and brother-in-law Terry Head back in 1974.
The deal, which sees RTT become part of Electra (Israel), is a marriage of like-minded souls, thinks Koch. "Electra are of the same ilk as RTT. They are engineers, they think the same way as us."
Koch is looking forward to the future, where RTT's expertise will provide a springboard for the Israeli company's UK expansion plans. "Electra will want us to grow organically, but we will also be looking to grow by acquisition," explains Koch.
Electra may be little known over here, but the company has a worldwide turnover in excess of US$400 million. In addition to m&e contracting, Electra manufactures air conditioning equipment and bms controls. Cash for expansion shouldn't be a problem: Electra has London property interests valued at £60 million and is part of the US$1·1 billion turnover Elco Holdings group.
"We were approached by Electra, who wanted a foothold in the UK," says Trevor Koch. Electra also has m&e contracting interests in Belgium and Hungary, as well as factories for its air conditioning products across Europe and the Far East.
Perhaps such a deal was beyond the wildest dreams of the three RTT founders back in the mid-1970s. But the company is now one of the top 20 electrical contractors in the UK, with a turnover of around £35 million and 300 staff.
RTT's rapid expansion owes much to the vision of the original trio, plus Bob Berry who joined in 1980 as senior contracts engineer and 21 years later is deputy to Trevor Koch. Terry Head has retired following the sale; sadly, Robert Koch died back in 1998.
Bob Berry and Trevor Koch aim to continue the growth of the past 25 years. RTT Electrical became RTT Engineering Services back in 1989, recognising that there was money to be made by adding mechanical installation to the business. "We were losing electrical jobs to multi-service companies even when we were the cheapest," recalls Koch.
We will be able to get preferential prices and delivery times on all of [Electra’s] air conditioning products and this buying power will improve our profitability
RTT Maintenance and Special Projects quickly followed. "We can offer the client a complete package from design through to post completion," says Bob Berry. "Maintenance has always got to be done, whether there is a recession or not." There's another good reason to be involved in maintenance. "There's more profit in it," says Berry.
RTT has not just resorted to organic growth. In May this year the group bought Mechelec Engineering Services, the m&e division of Dover-based construction firm R J Barwick. "They've got good staff, good clients and we are confident we can build the business," says Koch. Mechelec currently has a turnover of around £3 million.
So what does the future hold with Electra firmly behind RTT? While Israeli cash will come in handy for future expansion, it is the wealth of Electra's business operations that will have an immediate impact.
"We expect air conditioning to be a growth area in the UK," explains Berry. "We will be able to get preferential prices and delivery times on all of their air conditioning products and this buying power will improve our profitability."
While average profit margins for the m&e sector in the UK are nothing short of appalling, Electra sees a decent return on turnover in Israel. Berry thinks that some lessons could be learnt when it comes to installation techniques. "We have to take advantage of new technologies. By using more plastics pipe and twin and earth cable, for example, we can make savings while still producing safe installations."
In the longer term, RTT will seek to diversify to make the most of Electra's licences in the security and sprinkler sectors. Voice and data cabling is another area that may be targeted. "In the past, we have been put off by the high investment capital required by the cost of training and test equipment and so on, but with Electra, who knows?" says Berry.
Given Electra's track record in growing its businesses, it is unlikely to be very long before RTT are hitting the acquisition trail. "We will wait until the dust has settled on this deal, but then we will be out and about having a look around," says Koch.
An obvious avenue is to look beyond RTT's strong base in the south-east of England. "Yes, we would be looking to become a nationwide contractor and will be approaching companies for a regional presence," confirms Koch.
Source
Electrical and Mechanical Contractor
