Interserve has announced the conclusion of the strategic review of its Equipment Services business which trades as RMD Kwikform and contributed 32% of Group total operating profit in 2015.
In February 2016 the international support services and construction group announced that following several years of substantial growth it would conduct a strategic review of RMDK to assess the full range of options to maximise value for shareholders.
Through the strategic review, the Board has concluded that Interserve remains the best owner for RMDK and that retaining RMDK as a core part of the Group, with an updated strategy, best maximises value creation for shareholders.
RMDK is a global market leader solving complex engineering problems for its customers, through the application of world-class design and logistics capabilities, backed up by an extensive fleet of specialist equipment. RMDK contributed 32% of Group total operating profit in 2015.
Interserve said the business has a track record of attractive growth (8% CAGR over the last 15 years), is highly cash generative through the cycle and produces excellent returns on capital employed (20% in 2015).
As a global business, RMDK provides an important element of diversification to the rest of the Group's predominantly UK-based earnings profile.
Interserve said that whilst some of its end markets face some near term uncertainty, the structural drivers for global infrastructure remain strong.
The Group said that this, together with its proven ability to identify and respond as market demand shifts globally, underpinned confidence in the medium-term outlook and in the business's ability to deliver sustainable margins above 20%.
The strategy for RMDK will focus around the following:
- Strengthening positions where Interserve has market leadership, through disciplined investment and operational excellence
- Driving the use of digital technology to differentiate further its engineering-led customer value proposition
- Developing a leading position in ground shoring, initially in the UK, to complement the existing strengths in falsework and formwork
- Investing in growth markets to develop a stronger position and improved financial performance, in addition to our established core markets
- Restructuring operations in a number of smaller, less attractive markets
Interserve said that non-recurring charges associated with the strategy will be approximately £17 million, of which the cash outflow in the next 12 months will be approximately £5 million.
The benefits of the restructuring include a reduction in capital expenditure requirements over the next two years of £5 million (due to fleet redeployment) and an increment to annual profitability of £1 million in the first full year following implementation.
Trading and cash performance in RMDK in the first nine months of the year continue to be in line with expectations and Interserve’s expectations for the full year remain unchanged.
An update on the Group's trading and cash performance for the year will be provided in mid-November.
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