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Lorne Stewart and Rotary chiefs reveal plans

Exclusive: Rotary will continue to trade as a stand alone company, with the Lorne Stewart subsidiary that bought it being rebranded as Rotary Building Services, CN can reveal.

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In an exclusive interview, Lorne Stewart finance director Puliyelethu Mathew also said his Harrow-based firm is still on the acquisition trail, with two companies ‘on the radar’ as the M&E and building services specialist looks to expand its facilities management services.

The chase for Rotary

Royal Bam was understood to be looking at Rotary after it was put up for sale. CN understands around 10 firms were looking at the company.

A Bam spokesman said its UK business would ‘not rule out any strategic acquisitions in the future to expand further its range of services and capabilities’. He said the firm is ‘not engaged in any transactional discussions at present.’

SPIE Matthew Hall previously told CN that Rotary was ‘on its radar’.

Mr Mathew said as a result of the Rotary takeover - first revealed by CN a fortnight ago - a freeze on payment of sub contractors and suppliers has been lifted, with nearly £7 million to £8m paid off and bills paid up to most of May.

Lorne Stewart subsidiary 4th Utility bought four Rotary divisions - including Rotary North West, Rotary Yorkshire, Rotary Southern and Midlands-based CA Sothers - saving 391 jobs after Rotary UK’s Australian parent company Hastie went into administration.

However,146 people were made redundant from the businesses that were not included in the sale. Rotary Services (Northern Ireland), Rotary Scotland and Rotary Northern were placed into administration.

Mr Mathew said these were less attractive, with insufficient revenue for their overheads and small order books.  Accounts show that £18.3m of cash was taken out of Rotary UK in the year to June 2011.

CN understands the sale was in the region of £10m to £20m however Mr Mathew would not comment on what Lorne Stewart had paid for the four Rotary divisions. 

Hastie paid £95m for Rotary when it bought it in 2008.

“This is a good takeover. We got a very good deal; reasonable turnover, a good management team and their operational team is there,” said Mr Mathew.

“We are not merging Rotary and Lorne Stewart. The name, I want to keep it.  The management team, I want to keep it.”

The sale also included £3m to £4m of property and assets.

Rotary chief executive Phil Laidlaw had already launched a business review of the group structure earlier this year, aimed at reducing overheads and finding ‘realignment opportunities’. It is likely to consolidate some of its back office services, such as IT and Insurance. 

Mr Mathew confirmed some staff ‘may’ be lost, but added that they ‘may need some people as well’.  

Mr Laidlaw told CN:  “Everyone’s very excited about it.  We see it as a great opportunity to move the Rotary business forward. 

“It’s been a tough couple of months for us and it’s back to doing what we do best, going out and winning work and moving the whole thing forward.”

Mr Mathew said Lorne Stewart’s balance sheet will support Rotary, but that it is unlikely to have direct involvement in the firm for some time.

“At the moment we are not even touching them. The only person involved is basically me,” he said.

“You can take over, restructure everything and you don’t know what their good points and the weak points are. 

“If there is an area where there is a problem, we have to jump on it. At the moment, the jobs they are doing, they don’t have big issues.”

Mr Mathew said the takeover is an important milestone in Lorne Stewart’s history, with Rotary companies bringing in £100m of turnover, enhancing plans to grow his business and providing a strategic and cultural fit. Rotary is also focusing on the nuclear and energy sectors in particular, along with fit out.

Joint turnover is expected to reach £300m by the end of next year, based on £175m from Lorne Stewart and £125m from Rotary.

Lorne Stewart is planning to re-shape so that it has a 50/50 division of M&E and FM, potentially keeping M&E at around £200-230m.  It presently has £40m of FM business.

Mr Mathew on the M&E sector

Lorne Stewart’s FD Puliyelethu Mathew has predicted two more years of challenging times for M&E, with main contractors squeezing their supply chain in an extremely competitive market.

He suggested M&E – which can make up 25-30 per cent of a job – is a likely target for contractors and clients looking to save costs.
He also said there is less competition in the acquisition market at present.

“Maybe people feel the market is going to be a problem, or that cash is a problem so they feel the risk more,” he said. “Before you ended up paying for a company at seven or eight times (its profits), but we are talking one, two or three now.”

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