Renew Holdings (RNWH.L; market capitalisation; £146m 243p and 3.0% of JIC Portfolio); Following yesterday’s interim results I attended a meeting with Chief Executive, Brian May and Finance Director, John Samuel. I gained a much better understanding of the Group and the main drivers of the two divisions.
Engineering Services operates in highly regulated markets, (Energy, Infrastructure (rail) and Environmental), with high barriers to entry and in most cases critical to the UK economy. Renew carries essential maintenance and renewal to keep assets working and generally accesses its clients’ operating rather than capital expenditure budgets. It describes its “business differentiators” as brand strength, a directly employed highly skilled workforce, local experienced delivery teams and long term relationships established through responsiveness. That last point was amply demonstrated by it winning the contract to repair the severe weather damaged railway line at Dawlish this winter; they were able to respond immediately and finish the job ahead of schedule. The Dawlish work along with other flood related work on the rail network contributed roughly half of the 40% growth engineering services saw in the first half and was, hopefully,(I think) a one-off. Operating margins were 4.6% in the first half, short of the target of 5.0% by 2017. The second half will be strong with the order book up 17% year-on-year to £306m with energy, rail and environmental all seeing strong demand. Much of the Energy work is centred on Sellafield where it has seen record revenue and under the existing frameworks there is good visibility for the next four years. Environmental is mainly involved in maintenance of water mains and flood prevention and alleviation, working with the Environment Agency and water companies such as Northumbrian Water, Wessex and Welsh Water.
In April it added a new strand to Infrastructure with the acquisition of Clarke Telecom for £17m. Clarke has relationships with all the UK’s cellular network operators (3, Vodafone, Telefonica and EE) and major equipment manufacturers (Ericsson and Nokia). It is principally involved in base station site acquisition, design, construction, installation, site optimisation, maintenance and decommissioning. In the year ended 31st October 2013 Clarke had revenue of £32.9m and operating profit of £2.3m. Revenue is expected to grow by 5% in the current year but as investment in the rollout of 4G accelerates, growth should pick up in subsequent years. Clarke not only brings a new growth area to…
About the Author
Johnrosier
I manage my subscription website www.JohnsInvestmentChronicle.com in which I show my portfolio and all transactions. I blog within an hour of trading, with an explanation, and send an alert email to all my subscribers. I do not pretend to have all the answers but I hope my portfolio, and the trades, provides food for thought as well as helping those who are new to managing their own portfolios.I think what I do is unique. There are plenty of tipsters out there who will remind you of the good ones and quietly forget the duffers; I do not have that luxury as the portfolio is there for all to see. I have to confront my mistakes and deal with them. A tipster also does not show how a tip fits into the context of an overall portfolio. My portfolio of up to 30 holdings has different holding sizes based on my conviction behind the stock and its risk. I set up www.JohnsInvestmentChronicle.com in January 2012. Prior to that :In September 1984, I left university with a degree in Zoology and started work in the City of London. Over the next twenty five years most of my time was spent managing UK equity portfolios with Fleming Investment Management and Henderson Global Investors, for company and local authority pension schemes as well as the reserve fund for a well known charity. During 2009 I left full time employment and decided to take time out to consider the next stage of my career. In the meantime I have been putting my years of experience to good use investing the family savings. I have thoroughly enjoyed the freedom of investing from home and despite some tricky periods during 2011 it has been a rewarding experience. more »
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