RSK grows despite cost challenge

(by Verity Mitchell)

RSK, a holding company which provides environmental and engineering solutions through a large portfolio of companies, has reported full-year results to 6 April 2025. There is strong revenue growth, partly driven by acquisitions but revealing cost challenges to its margins.

Revenue was £2.2bn, up 21% over the previous year. Net fee income after external project costs was £1.1bn, up 13%. Staff costs absorbed 76% of net fee income, resulting in group reported EBITDA of £122.4m, up only 2.5% with a margin of 5.46%. Amortisation from acquisitions equated to 63% of EBITDA. With depreciation, this resulted in an operating profit of £4.19m, a margin of 0.18%.

The group reported a loss after tax of £136.6m. The loss, management said, is in line with expectations given the group’s acquisition-led strategy – but the low margins also reflected the pressure on direct project costs. Management is committed to maximising the use of internal subcontractors and has incorporated a pricing programme that draws on the industry practice of pass-through project costs. These are expenses incurred by a contractor, for costs such as subcontractor services, materials, equipment, or government charges, with the client billed for the actual cost.

Water revenue grew by 25% to £972m and represented 43.3% of revenue. This compared to a contribution of 21.4% from built and natural environment, 21% from energy and 14.3% from infrastructure – which saw the fastest growth of all businesses at 36%.

By geography, the UK is the largest contributor to revenue at 78.2%. Other regions contribute as follows: Europe and Latin America 6.7%; Asia Pacific 13.5%; and the Middle East and Africa 1.5%. An example of its UK water activity is the Witches Oaks water treatment works which provides 65m l/d to the East Midlands water grid. MWH is the principal contractor and designer of two raw water balance tanks to provide control over the treatment of water from the River Trent. Three of RSK’s business lines – consulting, engineering and design consulting, and environmental solutions – were deployed in the project. A number of RSK companies are members of AMP8 framework delivery consortia including MWH Treatment, Binnies, WGM (engineering) and RSK Biocensus.

RSK reported that it had £176.8m of cash in the bank, up 34% over the previous period. It paid £5m in dividends. The company made 11 acquisitions, mostly not directly related to water.

During the year, in order to strengthen its financial firepower, it successfully raised £500m of equity from a consortium of Searchlight Capital Partners, Ares Management Funds and Penta Capital. £20m of additional equity was raised from its existing shareholder BGF. Ares also made a £300m debt facility available and it now also has a £125m revolving credit facility with a wider consortium of banks. Its challenge for the current year is to translate more of its revenue into earnings through tighter cost control.