Case study: CTS

22-01-2024

Becoming a nationally leading force in materials testing services – Construction Testing Solutions (CTS) is a leading provider of on-site and laboratory testing, geo-environmental and structural assessment services to the UK Infrastructure and Construction industry. The business operates from a network of ten laboratories and six geo-technical and geo-environmental consulting offices, providing full UK coverage.

A shared belief in growth potential – At the time of our investment, the business was part of a larger group called CET, founded in Castle Donnington in 1989. CET Group comprised two distinct companies, Property Assurance (CET) and Infrastructure (CTS).

When we met the team in 2018, we were impressed with how the company had developed under Peter Eglinton’s stewardship. We saw an excellent opportunity to grow the business through a buy-and-build strategy and accelerate the investment programme through continued technological innovation.

We invested £15.8m, and Palatine Partners Tony Dickin and Richard Thomas joined the board as Non-Executive Directors.

Going for growth with added value

Revenue growth – During the investment, CTS achieved 46% organic revenue growth driven by new customer wins, additional service lines and geographic expansion.

Strategic M&A – CTS made nine acquisitions during our investment. We assisted with targeted acquisition searches, acquisition diligence and PMI support. We introduced an M&A Director to accelerate buy and build activities and to assist in coordinating post-deal integration. We also supported a refinancing process to provide the business with additional acquisition firepower.

Performance optimisation – We invested in the design and build of a proprietary IT platform, which enabled real-time resource scheduling and sharing of testing results with customers.

De-merger – The business was part of a larger group when we invested. During the investment, we supported management in formally separating the two companies, enabling us to execute two distinct strategic growth and exit plans. There were no apparent synergies or operational reasons for the businesses to remain together, so we completed a full corporate and operational separation of the company, including building separate management teams.

Following the de-merger process we strengthened the senior management team by recruiting a dedicated CEO (following the de-merger from CET), a CFO, a CTO and a Commercial Director.

ESG – CTS made an ESG hire, which allocated dedicated resource to progressing ESG performance. An ESG committee was also established, providing opportunities for passionate and talented staff to support the business in this area.

CTS introduced management, leadership, and apprenticeship programmes. A career pathways scheme was also launched to attract new (and returning) talent and increase staff retention. The business also increased health and safety controls and introduced real-time reporting of hazards, near-misses and accidents to manage and eliminate risks effectively. CTS trained over 40 mental health first aiders and appointed an in-house MHFA instructor.
We completed a carbon footprint calculation, identified emissions hotspots and made site improvements to minimise carbon emissions. Water-saving devices and grey water harvesting were also introduced at several locations.

The results – CTS developed into of the UK’s leading infrastructure and construction TIC businesses in the UK, with revenues more than doubling in just three years. We successfully exited the business in 2021 to Oakley Capital.

 

Over the last four years of partnership, Palatine has proven itself to be an outstanding and highly supportive investor. Together we have achieved remarkable growth, scaled the business significantly and enhanced our proposition to customers. All of this has paved the way for further long-term success as we become part of a larger, ambitious, international group with the backing of Oakley Capital.

Peter Eglinton

Non-Executive Director at CTS