TIDMRNWH
RNS Number : 6040U
Renew Holdings PLC
26 November 2019
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Renew (AIM: RNWH), the Engineering Services Group supporting UK
infrastructure, announces results for the year ended 30 September
2019, another record set of results, achieving both growth in
revenue and operating profit during the year, in part reflecting a
full year's contribution of QTS, acquired in May 2018.
Financial Highlights
2019 2018
Group revenue(1) GBP600.6m GBP541.5m
---------- ----------
Adjusted operating profit(1) GBP38.3m GBP31.1m
---------- ----------
Adjusted operating margin(1) 6.4% 5.7%
---------- ----------
Profit before tax GBP27.0m GBP14.7m
---------- ----------
Adjusted earnings per share(1) 40.4p 35.5p
---------- ----------
Full Year dividend per share 11.5p 10.0p
---------- ----------
(1) Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 8.
Operational Highlights
-- Engineering Services revenue(1) grew 21 per cent to GBP564.5m (2018: GBP466.5m)
-- Engineering Services adjusted operating profit(1) increasing
by 21 per cent to GBP39.4m (2018: GBP32.5m)
- Performance reflects full contribution from QTS and strong
momentum at the end of rail CP5, which contributed towards organic
growth of 8 per cent
-- Increase in Engineering Services order book(1) to GBP542m (2018: GBP510m)
-- Activity levels in first year of CP6 are in-line with
management forecasts, with momentum growing as expected
-- Net debt(1) at the year-end was reduced in-line with
expectations to GBP10.2m (2018: net debt GBP21.4m)
- Reflecting reliable cash generation and conservative approach to gearing
David M Forbes, Chairman said: "The Group's focus remains on
those markets where non-discretionary spending programmes exist to
maintain critical infrastructure. These markets have excellent
long-term prospects with growth driven by regulatory requirements.
The Group has strengthened its position in markets which benefit
from visible funding. Our multidisciplinary engineering services
are closely aligned with the requirements of the sustained
investment in these markets which provides the Board with
confidence in future growth."
Renew Holdings plc www.renewholdings.com
Paul Scott, Chief Executive Contact via Walbrook PR
Officer
Sean Wyndham-Quin, Chief Financial
Officer
Numis Securities Limited Tel: 020 7260 1000
Stuart Skinner/ Kevin Cruickshank (Nominated
Adviser)
Michael Burke (Corporate
Broker)
Walbrook PR Tel: 020 7933 8780 or renew@walbrookpr.com
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391 303
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
About Renew Holdings plc
Engineering Services, which accounts for over 90 per cent of
Group revenue and over 95 per cent of operating profit, focuses on
the key markets of Infrastructure, Energy (including Nuclear) and
Environmental which are largely governed by regulation and benefit
from non-discretionary spend with long-term visibility of committed
funding.
Specialist Building focuses on the High Quality Residential
market in London and the Home Counties.
For more information please visit the Renew Holdings plc
website: www.renewholdings.com
Our differentiated business model:
* Our Infrastructure, Energy and Environmental mark * Provides visible, reliable and resilient revenues v
ets ia
enjoy committed funding long-term maintenance and renewal programmes
* We deliver non-discretionary maintenance and renewals * We have little exposure to the financial and
tasks contractual risks facing those businesses that
deliver large enhancement schemes funded by capex
spend
* In rail maintenance our average task size is less
than GBP20k
* Mainly funded from opex budgets
--------------------------------------------------------------
* Markets with high barriers to entry
* We work in complex, challenging and highly regulated
environments
--------------------------------------------------------------
* We employ a highly skilled, directly employed * Underpins safe working practices
workforce
* Creates a culture of responsiveness to client needs
* Reduces our exposure to sub-contractor pricing
volatility
--------------------------------------------------------------
* We have a proven track record of revenue growth, * Presenting an attractive, long-term investment case
profitability and cash generation
--------------------------------------------------------------
Chairman's Statement
Introduction
I am pleased to report Renew has delivered a record set of
results, achieving growth in both Group revenue(1) and adjusted
operating profit(1) during the year. We have had another successful
year winning new and renewing existing frameworks in our target
markets. Renew provides engineering services to critical UK
networks in the Infrastructure, Energy and Environmental markets.
The Group continues to develop its position within its chosen
infrastructure markets which benefit from ongoing spending on
essential asset maintenance and renewals. These markets are
underpinned by regulatory requirements and, as such, benefit from
long-term visible cycles of investment.
Group revenue(1) increased to GBP600.6m (2018: GBP541.5m) with
adjusted operating profit(1) increasing 23 per cent to GBP38.3m
(2018: GBP31.1m). Statutory operating profit was GBP27.5m (2018:
GBP15.5m). The adjusted EPS(1) was 40.43p (2018: 35.48p). The Group
is pleased to report a reduction of its net debt(1) in line with
our expectations to GBP10.2m (2018: GBP21.4m).
Governance
The Board believes a strong corporate governance framework
remains key to ensuring we continue to deliver value for all our
stakeholders. The Board is responsible for ensuring effective
corporate governance is applied throughout the Group and all of its
activities and it will continue to work towards further improving
its governance framework during 2020. The Group continues to comply
with the QCA Corporate Governance Code 2018 and more details can be
found in the Corporate Governance section of the Group's
website.
Risk management
The Executive Directors provide regular updates to the Board on
the principal risks and controls across the Group, including the
roles and responsibilities of key management in mitigating those
risks. This process also facilitates the embedding and monitoring
of the Board's agreed risk management protocols within the
business, ensuring controls are implemented effectively.
The Group keeps its principal risks under continuous review and
ensures those identified risks are being effectively managed.
Corporate culture and ethics
The Board continuously monitors and promotes its corporate
culture throughout the year led by its senior management team who
are key to communicating our shared values. The Group strives to
act responsibly in all aspects of the work we undertake, an
approach which is underpinned by our embedded core values. We aim
to be considerate, inclusive and respectful in the way we employ
and develop our workforce.
Board effectiveness
The Nomination Committee reviewed the Board's structure and
composition during 2019 to ensure it continues to have an
appropriate balance of skills and experience to deliver the Group's
strategy. The current members of the Board bring an appropriate
range of expertise on issues of performance, strategy and
governance, which are vital to the success of the Group. The
Directors also recognise the broad benefits of ethnic and gender
diversity when considering Board composition. The Board has also
made a number of changes to the Group's Committees during the year
which have focused on improving efficiency and procedural
approach.
Delivering long-term value for shareholders
We have consistently delivered value to shareholders through our
established and proven strategy, aiming to provide reliable capital
growth alongside a progressive dividend policy. We regularly review
market trends, business operations and the key objectives of our
subsidiary businesses to ensure they support the Group's overall
strategic objectives. The Group targets growth both organically and
through earnings enhancing acquisitions to broaden our service
offering to our wide range of clients.
The Group is supported through its key resources and
relationships. Effective relationships with our employees,
customers, suppliers, shareholders and wider stakeholders is
critical to the continued success of our business.
Dividend and Capital Allocation Policy
For each of the last seven years, the Group has consistently
grown the dividend and we are pleased to report we will do so again
this year. The Board proposes a final dividend of 7.67p per share
(2018: 6.67p) to be paid on 6 March 2020 to shareholders on the
register as at 31 January 2020. The ex-dividend date will be 30
January 2020. This will represent a full year dividend of 11.5p per
share (2018: 10.0p) reflecting our confidence in the Group's future
prospects.
The Group has a Capital Allocation Policy which supports the
effective delivery of our strategic priorities. This includes
maintaining a conservative level of debt which ensures we have the
ability to make acquisitions in line with our strategy.
Board Changes
On the 8 February 2019, Renew was pleased to announce the
appointment of Shatish Dasani as a Non-executive Director and
Chairman of the Audit Committee succeeding John Bishop who retired
from the Board at the same time. Shatish is a Chartered Accountant
with over 20 years' experience in senior public company finance
roles across various sectors including building materials, advanced
electronics, general industrial and business services. The Board
would like to thank John for the valuable contribution he has made
to the Group since his appointment in 2006.
Our current priority is to develop further diversity on the
board. Specifically, we are actively focussed on improving gender
diversity. The Directors expect to be able to announce progress in
this area at the Group's Annual General Meeting in January.
People
The Board would like to thank all employees for their important
contribution to the continued success of the Group and wider
stakeholders for their ongoing support.
Future focus
The Board is committed to the continued achievement of
shareholder value through the delivery of its strategic priorities
alongside a strong corporate governance framework. The Group will
continue to develop its culture, where our core values underpin
delivery of sustainable economic, social and environmental
value.
Growth is driven both organically and through strategic earnings
enhancing acquisitions. The Group's focus remains on those markets
where non-discretionary spending programmes exist to maintain
critical infrastructure. These markets have excellent long-term
prospects with growth driven by regulatory requirements. The Group
has strengthened its position in markets which benefit from visible
funding. Our multidisciplinary engineering services are closely
aligned with the requirements of the sustained investment in these
markets which provides the Board with confidence in future
growth.
David M Forbes
Chairman
26 November 2019
(1) Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 8.
Chief Executive's Review
The Group has made excellent progress in delivering its
strategic priorities including the successful appointment to key
frameworks in the Infrastructure, Energy and Environmental markets.
These frameworks strengthen the Group's position with clients
responsible for maintaining and renewing critical UK infrastructure
networks.
Our success is underpinned by a differentiated business model,
with a number of defensive characteristics that deliver reliability
and a competitive advantage, which is particularly relevant in the
current economic and political climate.
As a specialist engineering services provider, we focus on
directly delivering non-discretionary maintenance and renewals
tasks, which means that our average task size is comparatively
small and that the Group is not exposed to the financial and
contractual risks facing those businesses that deliver large
enhancement schemes. This results in a fundamentally lower risk
profile, as demonstrated by our stable track record of revenue
growth, profitability and cash generation. Working in complex and
challenging environments, our highly skilled, directly employed
workforce ensures our delivery is safe and responsive, as well as
reducing our exposure to supply chain price volatility.
We operate in the Infrastructure, Energy and Environmental
markets which benefit from committed funding on nondiscretionary
long-term maintenance and renewal programmes. These sectors have
significant barriers to entry because they are highly regulated,
making them resilient and providing reliable, long-term earnings
opportunities.
Results
The Group has seen record trading in the period, in part
reflecting a full year's contribution of QTS, a specialist rail
services provider acquired in May 2018, which has continued to
perform strongly. Group revenue(1) increased to GBP600.6m (2018:
GBP541.5m) with adjusted operating profit(1) up 23 per cent to
GBP38.3m (2018: GBP31.1m) delivering an adjusted operating
margin(1) of 6.4 per cent (2018: 5.7 per cent). Net debt(1) at the
year end was GBP10.2m (2018: GBP21.4m) reflecting our reliable cash
generation and conservative approach to gearing.
The Group's strong financial position is demonstrated by our low
and falling net debt position and our excellent profitability. Our
long-term track record of reliable revenue growth and cash
generation has resulted in our ability to deliver earnings growth
and to consistently meet our own and the market's expectations.
The Group continues to have a strong order book(1) ,
underpinning our future prospects, and at 30 September 2019 it grew
to GBP581m (2018: GBP558m).
Engineering Services
Engineering Services is the key driver of growth for the Group,
and accounts for over 90 per cent of Group revenue(1) and over 95
per cent of adjusted operating profit(1) . Engineering Services
revenue(1) grew 21 per cent to GBP564.5m (2018: GBP466.5m) with
adjusted operating profit(1) also increasing by 21 per cent to
GBP39.4m (2018: GBP32.5m) maintaining the operating margin(1) at
7.0 per cent (2018: 7.0 per cent). The excellent revenue
performance in Engineering Services was a reflection of the impact
of QTS as well as strong momentum at the end of the rail Control
Period 5 ("CP5") which contributed towards organic growth of 8 per
cent. In rail, we have commenced operations in the first year of
the new control period ("CP6") where we are pleased to report that
activity levels are in line with our forecasts and momentum is
growing as expected. At 30 September 2019, the Engineering Services
order book(1) grew to GBP542m (2018: GBP510m).
Infrastructure
The UK rail network will play an essential role in the country's
economic success. Over the current five-year investment cycle,
Control Period 6 ("CP6") which runs to 2024, Network Rail will
spend GBP48bn on the network including a c.25 per cent increase in
spending on operations, maintenance, support and renewals
activities(2) increasing the Group's addressable market
opportunities from Control Period 5 ("CP5").
As a major provider of infrastructure services to Network Rail
nationally, we support its day-to-day operations by providing a
high volume of essential, non-discretionary asset maintenance
activities through our long-term frameworks. During the year we
were awarded the Minor Signaling Framework's in the Scotland, South
East and Wales regions in addition to our existing CP6 frameworks
where we directly deliver civils asset management, fencing,
devegetation and drainage.
We have significantly strengthened our relationship with Network
Rail during the year, securing all the CP6 renewals frameworks that
we tendered for, including the Multidisciplinary Renewals and
Geotechnical & Earthworks five year frameworks in the Scotland
North East region. In addition, we continue to work on
Electrification and Plant, Slab Track, Station Information &
Security Systems as well as Telecoms frameworks nationally across
the network.
Since the period end, we have secured new positions on the CP6
Wales and Western Renewals Frameworks across all five lots,
delivering a programme of engineering services to assets including
bridges, embankments, tunnels and shafts as well as the delivery of
signaling, power and communications schemes.
We have a 24/7 emergency support provision which, during the
period, included clearing and securing large sections of the
embankments at Arrochar in Scotland to enable the reopening of the
West Highland Line following a major landslip and at Ecclefechan on
the West Coast Main Line.
For London Underground we deliver specialist electrical, plant
and power schemes through five framework agreements. We were also
awarded a number of depot control system and major depot
refurbishment schemes in the period. During the year we have also
been awarded a place on Merseyrail's Principal Contractor's 3-year
framework and we continue to work on the Transport for Wales STRIDE
framework.
In the wireless telecoms market an estimated GBP22bn will be
invested in the roll-out of 5G across the UK to meet increasing
demand for internet access. All four major telecoms network
providers have announced plans to launch 5G as part of a roll-out
of wireless infrastructure across the UK with further investment
programmes expected to follow targeting widespread UK coverage by
2023. We continue to see a significant increase in work on
Telefonica's frameworks in London, the South East and the North
East of England. We also secured a new framework for MBNL to
deliver EE's 5G roll-out and continued to deliver emergency
reactive works for our clients throughout the year.
Energy
The UK Government's nuclear decommissioning provision is
currently estimated at c.GBP124bn(3) . The Nuclear Decommissioning
Authority spends around GBP3bn(4) per annum on its 17 nuclear
licensed sites across the UK, the largest of which is the
Sellafield site in Cumbria which is forecast to be allocated around
75 per cent of the total decommissioning provision.
At Sellafield the focus has shifted away from reprocessing
nuclear fuel to broader decommissioning activities including high
hazard retrievals and risk reduction activities. Our range of
multidisciplinary engineering services support these activities
through established, long-term framework agreements for
decontamination, decommissioning and waste management. During the
year the largest of these frameworks, the Decommissioning Delivery
Partnership, was extended to 2026. This programme delivers work
across Sellafield and is associated with some of the most hazardous
areas at the site including waste retrieval from legacy storage
ponds and silos. We also continue to work on the SR&DP Asset
Care, Magnox Swarf Storage Silo, Bundling Spares and the Tanks and
Vessels Frameworks as well as providing support to numerous ongoing
major projects.
In line with the Group's strategy to broaden its nuclear service
offering, our clients include EDF in association with Westinghouse
on Sizewell 'B' where we are assisting with the control and data
acquisition system upgrade to extend the life of the pressurised
water reactor. We also continue to work for BAE Systems providing
engineering support to the nuclear submarine programme as well as
for Westinghouse at Springfields and for Low Level Waste Repository
and Magnox. During the year we were also appointed to a major
decommissioning services framework for new client, Dounreay Site
Restoration Limited, for a term of up to seven years.
New nuclear will play an important role in the government's
objective of delivering sustainable and low-carbon energy. Working
at Hinkley Point 'C', during the period, we have supplied and
installed high integrity manufactured components to the site and we
continue to selectively target opportunities where our specialist
capabilities are well suited to major future demand.
We continue to deliver long-term engineering maintenance
services at a number of the UK's thermal power stations including
at Drax Power Station where we deliver electrical maintenance
services on a four year framework.
Environmental
In Water, spending on the latest five-year investment cycle
(AMP7) is estimated to increase to c.GBP50bn(5) as demand continues
to be driven by population growth, ageing infrastructure and
environmental considerations. We provide a range of engineering
services to support the renewal and maintenance of water
infrastructure assets including those on clean and wastewater
networks, flood alleviation and coastal protection systems. These
renewal programmes require sustained long-term investment through
our clients' operational expenditure budgets.
For D r Cymru Welsh Water, we operate on the Pressurised
Pipelines Framework, Major Civils Framework and the Capital
Delivery Alliance Civils contracts across the region. In addition
to ongoing maintenance and renewals tasks, we provide 24/7
emergency reactive works on the water network. As an approved dam
safety contractor we work on critical infrastructure at reservoirs
including Talybont and Llanishen, in Cardiff.
Wessex Water's planned GBP1.4bn AMP7 investment(6) is focused on
delivering improvements to clean water and sewerage systems and we
continue to work on the current AMP6 Civils & EMI Delivery
Partners Framework.
In line with a key strategic objective we continue to broaden
our customer base securing long-term frameworks with new water
clients.
For Bristol Water, we were recently appointed to the GBP75m AMP7
network partnership programme, as the exclusive provider for mains
renovation works across the region for the next five years. In
addition to this new framework, we have been appointed to deliver a
number of significant mains rehabilitation schemes.
For Yorkshire Water we secured both lots on the GBP290m AMP7
Minor Civils Framework which will see us carry out engineering
works to existing assets on operational treatment and distribution
facilities for the next five years.
The Environment Agency ("EA") will have invested approximately
GBP2.6bn in flood and coastal erosion risk management projects in
the five years to 2021 and estimates that an increase in average
annual investment to around GBP1bn will be necessary each year to
2065 to sufficiently mitigate flooding risk in the UK(7) . We
continue our long association with the EA delivering these
important maintenance and improvement works to environmental assets
nationally through the Flood and Coastal Risk Management programme
where we have framework positions in the North, Central, South West
and South East regions over the next four years. The Group also
secured a further extension to the EA's Northern Mechanical,
Electrical, Instrumentation, Control, and Automation Framework
("MEICA") as well as being on the South East MEICA Projects
Framework.
For the Canal and River Trust, we continue to maintain the
trust's waterway assets across England and Wales through a seven
year MEICA Framework.
In land remediation, we continue to see long-term demand for
brownfield regeneration and during the year we undertook a number
of complex remediation schemes for Harworth Estates as well as
delivering land regeneration services for National Grid and Scotia
Gas Networks on the sites of former gasworks through national
framework agreements.
We also continue to be involved with a number of phases of work
at the Palace of Westminster including specialist restoration
activities on the Cast Iron Roof Restoration Framework and
structural repair works to the Elizabeth Tower. We continue to see
long-term opportunities at this UNESCO World Heritage site which is
due to undergo further major renovation programmes over the next
decade.
Specialist Building
We specialise in the high quality residential market in London
and the Home Counties and during the year we have been successfully
awarded a number of new projects. In the science sector, where we
have a number of existing frameworks, the Group has been awarded a
significant contract for a repeat client post period end. The Group
continues to be selective in these markets where we have a
long-established track record.
Revenue in Specialist Building reduced to GBP36.1m (2018:
GBP74.2m), in line with our expectations and reflecting our
continued focus on contract selectivity and risk management. This
is demonstrated by an increased operating profit of GBP0.9m (2018:
GBP0.8m) at an operating margin of 2.4 per cent (2018: 1.5 per
cent). At the year end, the forward order book was GBP39m (2018:
GBP48m).
New and emerging markets
As part of the Group's growth strategy, we continue to seek
opportunities in new regulated markets that exhibit characteristics
and programmes of infrastructure maintenance and renewal spending
which align with the Group's established and proven capabilities.
Our initial focus is on highway structures and technology as well
as power infrastructure. In highways, the Government announced a
GBP25bn investment in the Road Investment Strategy 2(8) while
investment in the electricity network during RII0-1 is expected to
be c.GBP37bn and focus on improving existing power assets(9) .
Entering these markets is part of our long-term strategic plan and
we will provide updates when appropriate.
Health, safety and the environment
We continue to make health and safety a priority, ensuring safe
working practices for the Group's employees, those who work with us
and our wider stakeholders. The Group is pleased to report further
improvement in its health and safety performance during the
year.
The Group is committed to operating in a sustainable and ethical
manner and we work hard to
leave a lasting positive impact with everything we do. The Group
has recently been awarded the London Stock Exchange's Green Economy
Mark, which recognises companies that contribute to positive
environmental outcomes.
Outlook
Renew continues to directly deliver non-discretionary
engineering support services to the UK's critical infrastructure
networks through its highly skilled workforce. Technological
developments, demographic changes, historic underinvestment,
climate change and legislative changes will necessitate increased
infrastructure investment over a long period of time. These
changing dynamics continue to require our clients to commit to
clear spending plans which are delivered through long-term
programmes of investment and, as such, we are unlikely to be
affected by the UK's potential withdrawal from the European Union
and the current political uncertainty.
The Group's appointment to a number of key frameworks in the
period increases our addressable market and provides significant
opportunity for continued organic growth. The markets in which we
operate remain large and fragmented and, as such, provide the Group
with the opportunity to grow its Engineering Services business in
the UK through selective, earnings enhancing acquisitions that are
in line with our strategy. We also continue to seek opportunities
in new regulated markets which align with the Group's established
and proven capabilities.
The Group's strong financial position and our differentiated
business model gives the Board confidence the Group will continue
to deliver on its strategic objectives and provide excellent growth
opportunities.
Paul Scott
Chief Executive
26 November 2019
(1) Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 8.
(2) CP6 Network Rail Strategic Business Plan - Summary 9
February 2018
(3)
https://www.gov.uk/government/publications/nuclear-provision-explaining-the-cost-of-cleaning-up-britains-nuclear-legacy/nuclear-provision-explaining-the-cost-of-cleaning-up-britains-nuclear-legacy
(4) NDA Business Plan 1 April 2019 to 31 March 2022 (March
2019)
(5) Water UK A Manifesto for Water, Summary of the Water
Industry's Plans in England 2020-25 3 September 2018
(6) Wessex Water Business Plan 2020-2025
(7) Environment Agency Research and analysis Long-term
investment scenarios (LTIS) 2019 (Updated May 2019)
(8) HM Treasury Autumn Budget 2018 (October 2018)
(9) Ofgem RIIO-1 PCFM (November 2018)
Group income statement
For the year ended 30 September 2019
Before Exceptional
exceptional items
items and and amortisation
amortisation of intangible
of intangible assets
assets (see Note Total Total
3)
2019 2019 2019 2018
Note GBP000 GBP000 GBP000 GBP000
Revenue: Group including share of
joint
venture 2 600,631 - 600,631 541,469
Less share of joint
venture's
revenue 2 (709) - (709) (853)
-------------- ------------------ ------------------ -----------
Group revenue from
continuing
activities 2 599,922 - 599,922 540,616
Cost of sales (514,299) - (514,299) (469,008)
-------------- ------------------ ------------------ -----------
Gross profit 85,623 - 85,623 71,608
Administrative
expenses (47,390) (10,788) (58,178) (56,130)
Share of post-tax result of
joint
venture 96 - 96 -
-------------- ------------------ ------------------ -----------
Operating profit 2 38,329 (10,788) 27,541 15,478
Finance income 50 - 50 4
Finance costs (1,244) - (1,244) (1,080)
Other finance income - defined
benefit
pension schemes 615 - 615 306
-------------- ------------------ ------------------ -----------
Profit before income
tax 37,750 (10,788) 26,962 14,708
Income tax expense 4 (7,306) 2,601 (4,705) (5,523)
-------------- ------------------ ------------------ -----------
Profit for the year from continuing
activities 30,444 (8,187) 22,257 9,185
-------------- ------------------
Loss for the year from discontinued
operation - (2,412)
------------------ -----------
Profit for the year attributable to equity
holders of the parent company 22,257 6,773
------------------ -----------
Basic earnings per share from
continuing
activities 6 29.6p 13.6p
Diluted earnings per share from
continuing operations 6 29.3p 13.5p
------------------ -----------
Basic earnings per share 6 29.6p 10.0p
Diluted earnings per share 6 29.3p 10.0p
------------------ -----------
Prior year operating profit of GBP15.5m is stated after charging GBP11.5m
of exceptional items and GBP4.1m of amortisation (See Note 3).
Group statement of comprehensive
income
For the year ended 30 September 2019 2018
2019
GBP000 GBP000
Profit for the year attributable to equity
holders of the parent company 22,257 6,773
-------- --------
Items that will not be reclassified to profit
or loss:
Movement in actuarial valuation of the defined
benefit pension schemes 3,543 5,477
Movement on deferred tax relating to the
defined benefit pension schemes (1,240) (1,917)
-------- --------
Total items that will not be reclassified
to profit or loss 2,303 3,560
-------- --------
Items that are or may be reclassified subsequently
to profit or loss:
Exchange movements in reserves 28 6
-------- --------
Total items that are or may be reclassified
subsequently to profit or loss 28 6
-------- --------
Total comprehensive income for the year attributable
to equity holders of the parent company 24,588 10,339
-------- --------
Group statement of changes in equity
Share Share Capital Cumulative Share Retained Total
based
capital premium redemption translation payments earnings equity
account reserve adjustment reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2017 6,259 9,635 3,896 1,305 680 6,284 28,059
Transfer from income
statement for the
year 6,773 6,773
Dividends paid (6,262) (6,262)
New shares issued 1,268 42,049 43,317
Recognition of share
based payments 18 18
Exchange differences 6 6
Actuarial movement
recognised in pension
schemes 5,477 5,477
Movement on deferred
tax relating to the
pension schemes (1,917) (1,917)
-------- -------- ----------- ------------ --------- ---------- ----------
At 30 September 2018 7,527 51,684 3,896 1,311 698 10,355 75,471
Transfer from income
statement for the
year 22,257 22,257
Dividends paid (7,905) (7,905)
New shares issued 6 220 226
Recognition of share
based payments (122) (122)
Exchange differences 28 28
Actuarial movement
recognised in pension
schemes 3,543 3,543
Movement on deferred
tax relating to the
pension schemes (1,240) (1,240)
-------- -------- ----------- ------------ --------- ---------- ----------
At 30 September 2019 7,533 51,904 3,896 1,339 576 27,010 92,258
-------- -------- ----------- ------------ --------- ---------- ----------
Group balance sheet
At 30 September
2019 2018
GBP000 GBP000
Non-current assets
Intangible assets - goodwill 105,282 105,282
- other 9,463 15,991
Property, plant and equipment 20,932 19,710
Investment in joint venture 139 123
Retirement benefit assets 25,554 20,424
Deferred tax assets 1,416 1,592
162,786 163,122
---------- ----------
Current assets
Inventories 2,632 1,691
Assets held for resale 1,500 1,500
Trade and other receivables 118,623 129,376
Cash and cash equivalents 11,667 9,179
---------- ----------
134,422 141,746
---------- ----------
Total assets 297,208 304,868
---------- ----------
Non-current liabilities
Borrowings (13,123) (21,873)
Obligations under finance leases (3,214) (2,253)
Deferred tax liabilities (10,598) (9,912)
Provisions (452) (298)
---------- ----------
(27,387) (34,336)
---------- ----------
Current liabilities
Borrowings (8,752) (8,752)
Trade and other payables (164,450) (179,913)
Obligations under finance leases (2,546) (2,100)
Current tax liabilities (1,804) (2,245)
Provisions (11) (2,051)
---------- ----------
(177,563) (195,061)
---------- ----------
Total liabilities (204,950) (229,397)
---------- ----------
Net assets 92,258 75,471
---------- ----------
Share capital 7,533 7,527
Share premium account 51,904 51,684
Capital redemption reserve 3,896 3,896
Cumulative translation reserve 1,339 1,311
Share based payments reserve 576 698
Retained earnings 27,010 10,355
---------- ----------
Total equity 92,258 75,471
---------- ----------
Group cash flow statement
For the year ended 30 September
2019 2018
GBP000 GBP000
Profit for the year from continuing
operating activities 22,257 9,185
Share of post-tax trading result of (96) -
joint venture
Impairment and amortisation of intangible
assets 6,528 4,157
Loss on disposal of discontinued business - 9,930
Defined benefit pension scheme guaranteed minimum 4,260 -
pension equalisation
Depreciation 5,561 4,356
Profit on sale of property, plant and equipment (621) (469)
Increase in inventories (210) (1,190)
Decrease/(increase) in receivables 7,769 (4,974)
Decrease in payables (15,239) (3,054)
Current and past service cost in respect of defined
benefit pension scheme 46 64
Cash contribution to defined benefit pension
schemes (5,279) (5,772)
(Credit)/charge in respect of share
options (122) 18
Finance income (50) (4)
Finance expense 629 774
Interest paid (1,244) (1,080)
Income taxes paid (5,524) (1,717)
Income tax expense 4,705 5,523
--------- ------------
Net cash inflow from continuing operating activities 23,370 15,747
Net cash inflow from discontinued operating
activities 71 825
--------- ------------
Net cash inflow from operating activities 23,441 16,572
--------- ------------
Investing activities
Interest received 50 4
Dividend from joint
venture 80 114
Proceeds on disposal of property, plant and
equipment 939 788
Purchases of property, plant and equipment (2,619) (1,329)
Acquisition of subsidiaries net of cash acquired - (75,874)
--------- ------------
Net cash outflow from investing activities (1,550) (76,297)
--------- ------------
Financing activities
Dividends paid (7,905) (6,262)
Issue of share equity 226 43,317
New loan - 35,000
Loan repayments (8,750) (7,475)
Repayments of obligations under finance leases (3,076) (2,699)
--------- ------------
Net cash (outflow)/inflow from financing activities (19,505) 61,881
--------- ------------
Net increase in continuing cash and cash equivalents 2,315 1,331
Net increase in discontinued cash and cash
equivalents 71 825
--------- ------------
Net increase in cash and cash equivalents 2,386 2,156
Cash and cash equivalents at beginning of year 9,179 6,967
Effect of foreign exchange rate changes on cash and
cash equivalents 102 56
--------- ------------
Cash and cash equivalents at end of year 11,667 9,179
------------
Bank balances and cash 11,667 9,179
--------- ------------
Notes
1 International Financial Reporting Standards
The consolidated financial statements for the year ended 30
September 2019 have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). These preliminary results
are extracted from those financial statements.
2 Segmental analysis
The Group is organised into two operating business segments plus
central activities which form the basis of the segment information
reported below. These segments are:
Engineering Services, which comprises the Group's engineering
activities which are characterised by the use of the Group's
skilled engineering workforce, supplemented by specialist
subcontractors where appropriate, in a range of civil, mechanical
and electrical engineering applications and;
Specialist Building, which comprises the Group's building
activities which are characterised by the use of a supply chain of
subcontractors to carry out building works under the control of the
Group as principal contractor and;
Central activities, which include the sale of land, the leasing
and sub-leasing of some UK properties and the provision of central
services to the operating subsidiaries.
2019 2018
Revenue is analysed as follows: GBP000 GBP000
Engineering Services 564,478 467,335
Specialist Building 36,125 74,208
Inter segment revenue (1,461) (1,208)
-------- --------
Segment revenue 599,142 540,335
Central activities 1,489 1,134
-------- --------
Group including share of joint
venture 600,631 541,469
Joint venture - Engineering
Services (709) (853)
-------- --------
Group revenue from continuing
activities 599,922 540,616
-------- --------
Before
exceptional Exceptional
items and items and
amortisation amortisation
of intangible of intangible
assets assets 2019 2018
Analysis of operating profit GBP000 GBP000 GBP000 GBP000
from continuing activities
Engineering Services 39,410 (6,788) 32,622 16,894
Specialist Building 882 - 882 574
Segment operating profit 40,292 (6,788) 33,504 17,468
Central activities (1,963) (4,000) (5,963) (1,990)
--------------- --------------- ------------------------ ----------
Operating profit 38,329 (10,788) 27,541 15,478
Net financing costs (579) - (579) (770)
--------------- --------------- ------------------------ ----------
Profit on ordinary activities
before income tax 37,750 (10,788) 26,962 14,708
--------------- --------------- ------------------------ ----------
Engineering Services segment operating profit for the year ended
30 September 2018 is stated after charging exceptional costs of
GBP11,469,000 and amortisation of GBP4,157,000 resulting in a total
charge before taxation of GBP15,626,000 (See Note 3).
3 Exceptional items and amortisation of intangible assets
2019 2018
GBP000 GBP000
Defined benefit scheme guaranteed 4,260 -
minimum pension equalisation
Acquisition costs - 1,539
Impairment of goodwill - 6,893
Loss on disposal of subsidiary
undertaking - 3,037
--------- --------
Total losses arising from exceptional
items 4,260 11,469
Amortisation of intangible assets 6,528 4,157
--------- --------
Total exceptional items and amortisation
charge before income tax 10,788 15,626
Taxation credit on exceptional
items and amortisation (2,601) (841)
--------- --------
Total exceptional items and amortisation
charge 8,187 14,785
--------- --------
On 26 October 2018, the High Court handed down a judgement
involving the Lloyds Banking Group's defined benefit pension
schemes. The judgement concluded the schemes should be amended to
equalise pension benefits for men and women in relation to
guaranteed minimum pension benefits. The issues determined by the
judgement arise in relation to many other defined benefit pension
schemes. The impact of the additional liabilities amounted to
GBP260,000 for the Amco Pension Scheme and GBP4,000,000 for the
Lovell Pension Scheme.
The Board has separately identified the charge of GBP6,528,000
(2018: GBP4,157,000) for the amortisation of the fair value
ascribed to certain intangible assets, other than goodwill, arising
from the acquisitions of Giffen Holdings Ltd and QTS Group Ltd.
4 Income tax expense
(a) Analysis of expense in year 2019 2018
GBP000 GBP000
Current tax:
UK corporation tax on profits of the year (5,291) (3,571)
Adjustments in respect of previous period 208 (336)
--------------- -----------------
Total current tax (5,083) (3,907)
--------------- -----------------
Deferred tax - defined benefit pension schemes (556) (1,969)
Deferred tax - other timing differences 934 353
--------------- -----------------
Total deferred tax 378 (1,616)
--------------- -----------------
Income tax expense in respect of continuing
activities (4,705) (5,523)
--------------- -----------------
Factors affecting income tax expense for
the year
(b) Profit before income tax 26,962 14,708
--------------- -----------------
Profit multiplied by standard rate of corporation
tax in the UK of 19% (2018: 19%) (5,123) (2,795)
Effects of:
Expenses not deductible for tax purposes (114) (808)
Timing differences not provided in deferred
tax 326 (670)
Change in tax rate (2) (914)
Adjustments in respect of previous period 208 (336)
--------------- -----------------
(4,705) (5,523)
--------------- -----------------
5 Dividends 2019 2018
Pence/share Pence/share
Interim (related to the year ended 30
September 2019) 3.83 3.33
Final (related to the year ended 30 September
2018) 6.67 6.00
--------------- ---------------
Total dividend paid 10.50 9.33
--------------- ---------------
GBP000 GBP000
Interim (related to the year ended 30
September 2019) 2,885 2,506
Final (related to the year ended 30 September
2018) 5,020 3,756
--------------- ---------------
Total dividend paid 7,905 6,262
--------------- ---------------
Dividends are recorded only when authorised and are shown as a
movement in equity rather than as a charge in the income statement.
The Directors are proposing that a final dividend of 7.67p per
Ordinary Share be paid in respect of the year ended 30 September
2019. This will be accounted for in the 2019/20 financial year.
6 Earnings per share
2019 2018
Earnings EPS DEPS Earnings EPS DEPS
(Restated)
GBP000 Pence Pence GBP000 Pence Pence
Earnings before
exceptional items
and amortisation 30,444 40.43 40.13 23,970 35.48 35.28
Exceptional items
and amortisation (8,187) (10.88) (10.79) (14,785) (21.88) (21.76)
--------- -------- -------- ----------------- -------- --------
Basic earnings
per share - continuing
activities 22,257 29.55 29.34 9,185 13.60 13.52
Loss for the
year from discontinued
operations - - - (2,412) (3.57) (3.55)
--------- -------- -------- ----------------- -------- --------
Basic earnings
per share 22,257 29.55 29.34 6,773 10.03 9.97
--------- -------- -------- ----------------- -------- --------
Weighted average
number of shares 75,308 75,856 67,558 67,938
-------- -------- -------- --------
The dilutive effect of share options is to increase the number
of shares by 548,000 (2018: 380,000) and reduce basic earnings per
share by 0.21p (2018: 0.06p).
7 Preliminary financial information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2019
or 2018. Statutory accounts for 2018 have been delivered to the
registrar of companies. The auditor has reported on those accounts;
his reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for 2019 will be finalised on the basis of
the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of
Companies in due course.
8 Alternative performance measures
Renew uses a variety of alternative performance measures ('APM')
which, although financial measures of either
historical or future performance, financial position or cash
flows, are not defined or specified by IFRSs. The Directors
use a combination of APMs and IFRS measures when reviewing the
performance, position and cash of the Group.
The Directors believe that APMs provide a better understanding
of the underlying trading performance of the business because they
remove the impact of non-trading related accounting adjustments.
Furthermore, they believe that the Group's shareholders use these
APMs when assessing the performance of the Group and it is
therefore appropriate to give them prominence in the Annual Report
and Accounts.
The APMs used by the Group are defined below:
Net Cash/(Debt) - This is the cash and cash equivalents less
bank debt. This measure is visible in Note 31 in the Annual Report
& Accounts. The Directors consider this to be a good indicator
of the financing position of the Group.
Adjusted operating profit (GBP38.329m) and adjusted profit
before tax (GBP37.750m) - Both of these measures are reconciled to
total operating profit and total profit before tax on the face of
the consolidated income statement. The Directors consider that the
removal of exceptional items and amortisation provides a better
understanding of the underlying performance of the Group. The
equivalent GAAP measures are operating profit (GBP27.541m) and
profit before tax (GBP26.962m).
Adjusted operating margin (6.4%) - This is calculated by
dividing operating profit before exceptional items and
amortisation of intangible assets (GBP38.329m) by group revenue
including share of joint venture (GBP600.631m) both of which are
visible on the face of the income statement. The Directors believe
that removing exceptional items and amortisation from the operating
profit margin calculation provides a better understanding of the
underlying performance of the Group. The equivalent GAAP measure is
operating profit margin (4.6%) which is calculated by dividing
operating profit (GBP27.541m) from group revenue including share of
joint venture (GBP600.631m).
Adjusted earnings per share (40.43p) - This measure is
reconciled to the earnings per share calculation based on earnings
before exceptional items and amortisation in Note 3. The Directors
believe that removing exceptional items and amortisation from the
EPS calculation provides a better understanding of the underlying
performance of the Group.
Group Revenue (GBP600.631m) - This measure is visible on the
face of the income statement as Revenue: Group including share of
joint venture.
Group order book, Engineering Services order book and Specialist
Building order book - This measure is calculated by the Directors
taking a conservative view on secured orders and visible workload
through long-term frameworks.
Engineering Services revenue (GBP564.478m) - This measure is
visible in Note 2 as Engineering Services Revenue including share
of joint venture. The Directors consider this to be a good
indicator of the underlying performance of the Group's Engineering
Services business.
Adjusted Engineering Services operating profit (GBP39.410m) -
This measure is visible in Note 2 as Engineering Services operating
profit before exceptional items and amortisation of intangible
assets. The Directors consider this to be a good indicator of the
underlying performance of the Group's Engineering Services
business. The GAAP equivalent measure is engineering services
operating profit (GBP32.622m) which is also visible in Note 2.
Adjusted Engineering Services operating profit margin (7.0%) -
This is calculated in the same way as adjusted operating profit
margin but based on the adjusted Engineering Services operating
profit (GBP39.410m) and the Engineering Services revenue
(GBP564.478) figures as set out above. The equivalent GAAP measure
is engineering services operating profit margin (5.8%) which is
calculated by dividing engineering services operating profit
(GBP32.622m) from engineering services revenue including share of
joint venture (GBP564.478m).
Organic growth (8.4%) - This has been calculated by taking the
Engineering Services revenue growth year on year excluding the
impact of any acquisitions.
9 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the
year ended 30 September 2019 will be posted to shareholders as soon
as practicable and a copy will be made available on the Group's
website:
www.renewholdings.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UVRWRKNAAUAA
(END) Dow Jones Newswires
November 26, 2019 02:00 ET (07:00 GMT)
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