For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211209:nRSI0395Va&default-theme=true
RNS Number : 0395V Renew Holdings PLC 09 December 2021
9 December 2021
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Record year underpinned by strong organic growth; uniquely positioned to
capitalise on compelling growth opportunities in our end markets
Renew (AIM: RNWH), the leading Engineering Services Group supporting UK
infrastructure, announces its preliminary results for the year ended 30
September 2021 ("the period").
Financial Highlights
Year ended 30 September 2021 FY2021 FY2020 Change
£m £m
Group revenue(1) £791.0m £620.4m +27.5%
Adjusted operating profit(1) £51.2m £39.6m +29.3%
Operating profit £41.1m £32.9m +25.2%
Adjusted operating margin(1) 6.5% 6.4% +10bps
Profit before tax £40.8m £32.1m +26.9%
Adjusted earnings per share(1) 50.5p 41.2p +22.5%
Final dividend per share 11.17p 8.33p +34.1%
( )
· Group order book of £749m (2020: £692m)
· Strong organic revenue growth of 19 per cent, underpinned by
continued positive momentum in Rail business, along with framework wins and
operational progress across diverse Engineering Services business
· Full year dividend of 16.0p per share reflects Group's strong
cash generation and positive outlook
· De-risking of balance sheet with completion of Lovell Pension
Scheme buy-in
Operational Highlights
· Acquisition of Browne for £29.5m in March 2021, adding material
scale to the Group's water business in line with strategic objectives
· Added Thames Water, Affinity Water and Southern Water as new
clients during the period
· Acquisition of REL in May 2021 adding a unique skillset to the
Group with a view to supporting the Government's rail decarbonisation
programme
· Engineering Services adjusted operating profit(1) of £51.5m
(2020: £40.8m)
· Good progress made against our quantitative sustainability
targets outlined in our interim results in May
· Proud holder of London Stock Exchange's Green Economy Mark
Current Trading & Outlook
· Positive trading momentum carried into new financial year
· Strong forward order book underpins confidence in achieving
further progress in 2022
· Confident in our future prospects and well positioned to
capitalise on our strengths to target new opportunities in attractive markets
Paul Scott, CEO of Renew, commented:
"2021 was another record year for the Group and I am pleased with the progress
that has been made across all divisions. The essential nature of our work
combined with the resilience of our low-risk, high-quality operating model has
been a key driver for growth, as we continued to operate through the numerous
lockdown and tiering scenarios experienced during the year. The two
acquisitions that we completed have strengthened our offering in water and
rail and both are delivering to plan.
"I am pleased to report that we have carried forward this positive trading
momentum into the new financial year and have a strong forward order book
which underpins our confidence in achieving further progress in 2022. As we
look further ahead, we are committed to building on our strengths to target
new opportunities in attractive markets where we have the skillset to deliver
mission-critical engineering infrastructure solutions for a sustainable
future."
(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 11.
Analyst & Investor Webinar
A virtual meeting for sell-side analysts and investors will be held at 11:15am
today, 9 December 2021, the details of which can be obtained from FTI
Consulting using the contact details below.
For further information, please contact:
Renew Holdings plc via FTI Consulting
Paul Scott, Chief Executive Officer 020 3727 1000
Sean Wyndham-Quin, Chief Financial Officer
Numis Securities Limited (Nominated Adviser & Broker) 020 7260 1000
Stuart Skinner / Kevin Cruickshank
Peel Hunt LLP (Joint Broker) 020 7418 8900
Mike Burke / Harry Nicholas / Charles Batten
FTI Consulting (Financial PR) 020 3727 1000
Alex Beagley / Sam Macpherson / Rafaella de Freitas Renew@fticonsulting.com (mailto:Renew@fticonsulting.com)
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
Renew Holdings Group plc is a leading UK Engineering Services business,
performing a critical role in keeping the nation's infrastructure functioning
efficiently and safely. The Group operates through independently branded
subsidiaries across its chosen markets, delivering non-discretionary
maintenance and renewal tasks through its highly skilled, directly employed
workforce.
Renew's activities are focused into two business streams. Engineering
Services, which accounts for over 95 per cent of the Group's adjusted
operating profit, focuses on the key markets of Rail, 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 and Science
markets in London and the Home Counties.
For more information please visit the Renew Holdings plc website:
www.renewholdings.com (http://www.renewholdings.com)
Chairman's Statement
Introduction
The Group is pleased to announce a record financial performance, with
continued growth in revenue and profit and strong operating cash generation,
which reflects the core strengths of the Group and our well-established
positions in attractive and sustainable growth markets as well as the
resilience of Renew's business model.
In addition to good organic growth, the Group continued to make strategic
progress during the year, expanding our presence in the water market with the
acquisition of Browne, a respected provider of specialist engineering services
across the water infrastructure network. We also acquired REL, a specialist
provider of rail overhead line electrification, in order to support the
Government's rail decarbonisation programme.
Differentiated business model
Our differentiated business model and the services we provide continue to
support key infrastructure assets in regulated markets. Our markets enjoy
committed funding which provides visible, reliable and resilient revenues via
long-term programmes. We deliver non-discretionary maintenance and renewals
tasks and have little exposure to the financial and contractual risks of
larger enhancement schemes. Operating in complex, challenging and highly
regulated environments, our markets have high barriers to entry and we
directly employ a highly skilled workforce which enables us to be extremely
responsive to our clients' needs.
Results
Group revenue(1) increased to £791.0m (2020: £620.4m) with adjusted
operating profit(1) increasing to £51.2m (2020: £39.6m) and an
adjusted(1) operating margin of 6.5% (2020: 6.4%). Statutory operating profit
was £41.1m (2020: £32.9m). The adjusted EPS(1) was 50.51p (2020: 41.22p)
and basic earnings per share was 38.73p (2020: 26.78p). The Group had a net
debt(1) position of £13.7m (2020: net cash £0.3m), in line with our
expectations.
Dividend
The Group's strong trading performance, cash position and positive outlook
give the Board the confidence to propose a final dividend of 11.17p (2020:
8.33p) per share, an increase of 34 per cent. This will be paid on 4 March
2022 to shareholders on the register as at 28 January 2022, with an
ex-dividend date of 27 January 2022. This will represent a full year dividend
of 16.0p (2020: 8.33p) per share.
People
Our employees are critical to the continued success of the Group and the Board
would like to sincerely thank all its employees for their ongoing dedication
and hard work.
Safety
Our priority remains to ensure both the safety of our workforce and continued
delivery of essential renewal and maintenance operations. The Group's culture
of robust governance, risk management and a focus on health and safety has
together provided a strong platform from which we have been able to continue
to operate over the last twelve months whilst delivering uninterrupted
services for our customers.
ESG
Environmental
We understand the role we must play as a business in taking action to address
the emissions we produce. We are committed to achieving net zero by no later
than 2040, ahead of the 2050 target date set by the Government.
We are pleased to maintain our London Stock Exchange's Green Economy Mark
which recognises those companies that derive more than 50 per cent of revenue
from products and services that are contributing to environmental objectives.
Renew plays an important role in helping to achieve government aims for
greater sustainable infrastructure.
Social
As a business we strive to leave a lasting positive impact in the work we
undertake. During the year our businesses have engaged with local schools and
education providers, supported their local communities and undertook a range
of charity events.
Governance
As a Board, we are responsible for ensuring the effective application of high
levels of governance within our business, balancing the interests of all our
stakeholders. As a minimum, the Group complies with the QCA Corporate
Governance Code, more details of which can be found in the corporate
governance section of the Group's website.
Risk management is led by the Board, which reviews the Group's risk profile on
an ongoing basis alongside the Audit and Risk Committee. Subsidiary management
teams are responsible for the effective embedding and monitoring of the
Board's agreed risk management protocols and the Executive Directors provide
regular updates to the Board on the principal risks and controls across the
Group.
Further details of the Group's ESG progress and strategy are set out in the
2021 Annual Report and Accounts.
Board changes
At the same time as our annual results, we announced the appointment of Louise
Hardy as a Non-executive Director. Louise will augment the breadth of skills
and experience on the Board as the Group continues to grow. Further details of
Louise's experience are included in that announcement and in the Annual
Report.
Having served on the Board for just over ten years and in accordance with best
practice, I have decided that it is time to step down as Chairman and from the
Board. I have worked with my fellow Directors to identify the skills and
experience required of a prospective Chairman and the Board has undertaken an
exercise to find my replacement. That exercise is largely complete and the
Board remains confident that this process will conclude in the new year and
that a strong candidate will be appointed.
At the request of the Board, I have agreed to remain as Chairman until that
appointment is finalised which I expect to be no later than Spring 2022, at
which point I will step down from the Board.
In accordance with the Group's normal rules, a resolution approving my
re-election as a Director will be put to shareholders at the forthcoming
Annual General Meeting. On the basis that this is only for a short
transitional period, I hope that the shareholders will vote in favour of these
arrangements.
I have been fortunate to serve on this Board during a time of substantial
growth in profitability and shareholder value. In most part this has been down
to an exceptional, focused and diligent management team, past and present, who
have implemented sound strategic thinking aimed at looking after the interests
of all stakeholders including employees, shareholders, creditors and
pensioners. I am proud of what has been achieved over my time with the Group.
Future focus
The Group is supported in the delivery of its long-term strategy through
effective relationships with our directly employed workforce, customers,
suppliers, shareholders, and wider stakeholders and these are critical to the
continued success of the business. Building on our track record of
consistently creating shareholder value we will continue to deliver our
strategic priorities whilst focusing on our environmental, social and
governance responsibilities. Our approach to equality, diversity and inclusion
will also be a focus area as we move through 2022 and beyond.
The Board expects to continue to deliver growth, both organic and through
strategic earnings-enhancing acquisitions. We remain focused on markets with
high barriers to entry and where non-discretionary spending programmes exist
to maintain critical infrastructure. Our differentiated business model and the
reliable long-term nature of the UK infrastructure markets give the Board
continued confidence in the Group's future and the significant growth
opportunities ahead.
David M Forbes
Chairman
9 December 2021
(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 11.
Group Chief Executive Officer's Review
Building on positive momentum
The Group's impressive outperformance over the year reflects the underlying
qualities and differentiated nature of our high-quality, low-risk business
model combined with the strong demand we have seen in our chosen end markets
as the UK's infrastructure-led economic recovery gathers pace.
At Renew, we are committed to delivering engineering infrastructure solutions
for a sustainable future. We perform a critical role in keeping the nation's
infrastructure functioning efficiently and safely as a leading provider of
essential maintenance and renewals-led engineering services, operating in
regulated markets including rail, highways, mobile telecommunications, civil
nuclear, water and environmental.
As part of the UK Government's pledge to level up the economy and reach
net-zero carbon emissions by 2050, it has committed to a record £650bn(2)
investment in transforming the UK's infrastructure and we are already
benefiting from an increased focus on maintaining and renewing assets as part
of this shift. Renew has a vital role to play in supporting the green and
sustainable infrastructure of the future and we have made good progress on our
own sustainability targets this year.
Once again the Group demonstrated its resilience during the year, where two
national lockdowns had no material impact on trading. This highlights Renew's
ability to deliver consistently, thanks to our differentiated business model,
the critical nature of our work and the committed, long-term, highly visible
spending cycles that underpin our end markets.
We delivered a further improvement in organic growth, which, combined with our
robust balance sheet and strong cash generation, gives us the firepower and
flexibility to invest in selective value-accretive M&A opportunities.
During the period we acquired Browne, a water-focused engineering services
business based in London, which strengthens our exposure to the £51bn(3)
water sector, bringing new clients into the Group, including Thames Water,
Southern Water, Affinity Water and South East Water. Our wholly owned
subsidiary, QTS Group Limited, acquired Rail Electrification Limited ("REL")
which complements Renew's existing rail offering and enables the Group to
support the Government's commitment to a net-zero rail network by 2050.
As we reflect on another successful performance and look to the future with
confidence, underpinned by our strong order book, I would like to place on
record my gratitude, on behalf of the Board, to all our dedicated colleagues
who made these results possible by delivering an uninterrupted, highly
responsive service for clients at all times.
Renew's strengths
Renew has a number of core strengths which provide distinct competitive
advantages in our chosen markets and leave us well placed to build on our
strong track record of long-term value creation:
· The health, safety and wellbeing of our people remains our number one
priority and we have implemented safe working practices for the Group's
employees.
· We operate a differentiated, diversified, low-risk, low-capital
operating model, providing critical asset maintenance and renewals services
that are not dependent on large, high-risk, capital-intensive contract awards.
· Our directly employed workforce enables us to provide a more
efficient and valuable service to our clients, reducing our exposure to
sub-contractor pricing volatility and being able to deliver extremely
responsive solutions.
· Our businesses are well established in complex, challenging and
highly regulated markets with significant barriers to entry, which demand a
highly skilled and experienced workforce and a proven track record of safe
delivery.
· We work in markets underpinned by resilient, long-term growth
dynamics and highly visible, reliable, committed regulatory spending periods,
providing predictable cashflows.
· We have a proven track record of sustainable value creation, reliable
revenue growth and strong returns on capital thanks to our highly cash
generative earnings model and clearly defined strategy.
· We are committed to growing the business both organically and through
selective complementary acquisitions while maintaining a disciplined approach
to capital allocation and risk underpinned by a strong balance sheet
· Our high-quality model of compounding earnings through the
redeployment of internally generated cashflows enables us to execute on our
strategy of delivering reliable and consistent growth for all our
stakeholders.
· We have strong relationships in place with all our stakeholders, from
our workforce to our customers, suppliers, communities and shareholders.
Compelling market drivers
Our businesses are exposed to attractive long-term, non-discretionary
structural growth drivers. Increasing demand for the maintenance and renewal
of existing UK infrastructure is driven by a number of factors including:
· a commitment by the Government to level up the economy by investing
£650bn(2) in a green infrastructure-led recovery, two-thirds of which will be
in the transport and energy sectors, with fiscal stimulus measures likely to
flow through to lower cost infrastructure maintenance programmes ahead of
larger, more capital-intensive enhancement schemes;
· greater focus on sustainability and climate change as part of the
UK's target of reaching net-zero carbon emissions by 2050, together with flood
risk prevention measures and investment in nuclear projects, renewables and
electrification programmes;
· population growth increasing the pressure on housing, energy, water
and demand for natural resources;
· technological innovation driving a shift towards digital roads, smart
cities and the transformation of transport and telecommunications networks;
and
· increased Government regulation to improve safety, efficiency and
resilience of key infrastructure assets leading to more demanding maintenance,
renewal and upgrading requirements.
Our track record of growth and long-term value creation
Renew has a strong track record of sustainable value creation through the
economic cycle thanks to the Group's high-quality, value-accretive compounding
earnings model. Over the past five years, we have delivered:
· adjusted(1) earnings per share growth of 84 per cent;
· an increase in our adjusted(1) operating margin from 4.2 per cent to
6.5 per cent;
· group revenue growth of 50 per cent; and
· five acquisitions supported by our strong free cash flow.
Our track record of reliable revenue growth and cash generation has resulted
in our ability to deliver highly predictable, consistent organic earnings
growth as well as funding for the acquisition of complementary businesses that
meet our strategic requirements.
Results overview
During the period, Group revenue increased to £791.0m (2020: £620.4m), with
organic growth of 19% and the Group achieved an adjusted operating profit of
£51.2m (2020: £39.6m). Adjusted operating profit margin was 6.5% (2020:
6.4%). As at 30 September 2021, the Group had pre-IFRS 16 net debt of £13.7m
(30 September 2020: net cash £0.3m), reflecting the acquisition of Browne and
REL along with the Group's strong operating cash generation and conservative
approach to gearing.
These results include contributions from both Browne and REL, acquired in
March 2021 and May 2021 respectively. Both businesses have performed in line
with management expectations and are integrating well. Underpinned by
long-term framework positions, the Group's order book at 30 September 2021 has
strengthened to £749m (2020: £692m).
During the year, the Trustees of the Lovell Pension Scheme, in consultation
with the Board of Renew, entered into a "buy-in" agreement with Rothesay Life
plc. This transaction has significantly de-risked the Group's balance sheet,
further reduced its pension exposure risks and improves our cashflow in the
medium term. Following the success of this transaction, the Group continues to
investigate the opportunity of fully buying-in its liabilities with the Amco
Scheme to further reduce the Group's pension exposure in line with our
strategy.
Dividend
The Group's strong trading performance, cash position and positive outlook
gives the Board the confidence to propose a final dividend of 11.17p per
share, an increase of 34 per cent over the prior year final dividend of 8.33p.
This will be paid on 4 March 2022 to shareholders on the register as at 28
January 2022, with an ex-dividend date of 27 January 2022. This will represent
a full year dividend of 16p (2020: 8.33p) per share.
Engineering Services
Our Engineering Services activities account for over 95 per cent of the
Group's adjusted operating profit(1) and delivered revenue of £706.7m (2020:
£577.2m) with an adjusted operating profit of £51.5m (2020: £40.8m)
resulting in an operating margin of 7.3% (2020: 7.1%). At 30 September 2021,
the Engineering Services order book was £679m (2020: £603m). The Group's
strong organic growth performance was driven by continued positive momentum in
our Rail business, along with framework wins and operational progress across
our diverse Engineering Services business.
Rail
Network Rail, a significant strategic customer for the Group, is investing
£53bn(4) over the current Control Period (CP6), which runs to 2024. This
increased focus on operational support, renewal and maintenance plays to our
strengths, as does the Government's commitment to its rail decarbonisation
programme. This includes a significant investment in electrification
programmes, as part of the overall UK target to deliver net-zero by 2050. With
a view to supporting the Government's rail decarbonisation programme, the
Group acquired Rail Electrification Limited ("REL") during the period, a
leading provider of high-quality services and Road Rail Vehicles associated
with the installation and commissioning of overhead line electrification. This
acquisition further strengthens and expands the Group's existing
multidisciplinary maintenance and renewals engineering services.
During the period, we continued to add new positions including the Southern
Buildings and Civils Framework and the Structures Integrity Framework in the
South, while also securing further fencing and vegetation management work
under CP6.
As the largest provider of multidisciplinary maintenance and renewals
engineering services to Network Rail, we support the day-to-day operation of
the rail network nationally, directly delivering essential asset maintenance
through our long-term CP6 frameworks. The Group assists Network Rail through
our mission-critical renewals and maintenance services supporting assets
including bridges, earthworks, embankments, tunnels, drainage systems,
signalling, electrification and rail plant. The Group now holds in excess of
50 CP6 maintenance and renewals frameworks across all disciplines, covering
the entire UK rail network.
We continue to develop industry-leading innovations in order to deliver
value-add services within our Rail business. These include bespoke solutions
built around the needs of our clients, including "one of a kind" equipment
deployed across geotechnical, earthworks and vegetation management.
Overall, we saw planned work for our rail customers continue with minimal
disruption, despite significant periods of time where we operated under
Government imposed restrictions. The compelling maintenance-focused structural
growth drivers within this sector, and Renew's high-quality engineering
expertise, leave the Group ideally positioned to deliver long-term, profitable
growth in Rail, particularly as we see opportunities present themselves under
the next Control Period 7 ("CP7").
Infrastructure
Highways
The Group successfully entered the Highways market during January 2020 through
its acquisition of Carnell, a leading provider of specialist engineering
services on the strategic road network. We made good operational and strategic
progress within the Highways segment during the period, delivering essential
asset maintenance and critical infrastructure renewals underpinned by
non-discretionary regulatory requirements.
With the UK Government committing to an investment of £24bn(5) in the
strategic road network over a five year period, as part of its second Road
Investment Strategy ("RIS2"), £11.9bn of this funding will be ringfenced for
operations, maintenance and renewals. This represents a significant market
opportunity for Renew. Carnell continues to leverage its innovative
technological solutions to support the needs of major clients such as National
Highways.
During the period, Carnell was awarded five lots on National Highways SDF
framework the maximum amount of lots available across civil engineering, road
restraint systems and drainage disciplines, worth £147m over six years, with
work set to begin in January 2022. Three of those lots will be delivered
through a collaboration between Carnell and AmcoGiffen which represents a
successful collaboration between different parts of the Group. Post period
end, Carnell were awarded two lots on the 7 year Technical Surveys and Testing
Framework.
We remain well placed to seize the attractive growth and market share
opportunities within Highways with increased spending forecast over the next
ten years and with the Group investing to take advantage of opportunities in
the electric vehicle charging market.
Wireless telecoms
The wireless telecoms sector contains many attractive growth drivers, not
least of all an estimated £30bn(6) required to upgrade the nation's broadband
networks to gigabit-capable speeds which includes the UK Government's
£5bn(7) investment in 5G. Additional investment includes the Shared Rural
Network, the Government's £500m(8) programme to extend 4G mobile coverage to
95% of the UK.
Through our Clarke Telecom subsidiary, which is a leading infrastructure
services provider in the wireless telecommunications market, we have exposure
to all of these opportunities, holding long-term relationships with the main
UK network operators, equipment vendors and managed service providers.
During the period, we continued to build on the operational and strategic
progress made previously, consolidating our position on VM02's 5G services
frameworks, and securing new frameworks with Cornerstone and 3UK. We also saw
further growth delivered in our work for the Government, alongside EE and BT,
to remove Huawei equipment from the UK's 5G networks by 2027.
With faster internet connectivity becoming ever more critical in the digital
age and a key part of the Government's levelling up agenda, we expect to
benefit from these trends thanks to our specialist engineering expertise and
mission-critical solutions.
Energy
Nuclear
Having worked for over 75 years in civil nuclear, we provide a
multidisciplinary service through our large complement of highly skilled
employees who operate to demanding nuclear standards, including
decontamination and decommissioning services, operational support and asset
care, as well as waste retrieval in high-hazard areas such as legacy storage
ponds and silos.
The Government's total nuclear decommissioning provision is estimated at
£124bn(9) over the next 120 years, with around 75% of the total spend
allocated to Sellafield, which is the largest of the Nuclear Decommissioning
Authority's ("NDA's") sites and where we remain a principal mechanical,
electrical and instrumentation ("M,E&I") services contractor. The NDA has
an annual expenditure of £3bn(10) on its nuclear decommissioning programme
and Renew is involved in activities representing 90% of the allocated
expenditure.
On Sellafield, we operate across a number of frameworks including the
Decommissioning Delivery Partnership Framework on both Lot 1 (Remediation) and
Lot 3 Magnox Swarf Storage Silo, Aligned partner - Remediation Redundant Asset
programme, Tanks and Vessels Framework and the Fabrication and Machining
Spares Framework. Our performance at Sellafield is strong evidence of the
Group's capabilities, and we are well-positioned for opportunities in the
Major Projects Programme.
We are collaborating with the Programme and Project Partners ("PPP") to secure
further growth opportunities at Sellafield. PPP is a 20-year framework for the
delivery of a broad range of major projects for the site, with £7bn allocated
for seven projects that require multidisciplinary services including civil
M,E&I.
Outside of Sellafield, we continue to build on our relationship with Rolls
Royce to secure further opportunities since our appointment to the Diesel
Generator Programme at Hinkley Point "C". We also deliver operational support
and decommissioning activities at Springfield and continue to widen our
network, targeting key sites such as Magnox and Dounreay where we have a
position on the Decommissioning Services Framework.
New nuclear is an essential component of the UK Government's plans to deliver
a sustainable, low-carbon energy future, and we expect continued and sustained
growth in the area. We continue to see a sustainable increase in demand for
our specialist manufacturing capabilities and remain well placed to capitalise
on trends in new nuclear and legacy decommissioning.
As part of the UK Government's commitment to net-zero, decarbonisation of our
energy supply is a key challenge. The anticipated increase in energy demand is
expected to drive significant long-term investment. Changes in the UK's energy
landscape will provide opportunities for the Group's multidisciplinary
infrastructure engineering capabilities.
Environmental
Water
In Water, we continue to benefit from the UK Government's spending of
£51bn(3) over AMP7 into 2025 and have seen further investment through our
clients' strong operational expenditure budgets. Our offer of scheduled
maintenance and renewals tasks, in addition to extensive 24/7 emergency
reactive works, remains one of our key strengths, providing specialised,
mission-critical services for clients around the UK.
During the period, the Group acquired J Browne, a water-focused engineering
services business based in Enfield, North London, operating throughout the
South of England for Thames Water, Southern Water, Affinity Water and South
East Water. This acquisition further strengthens our position in a key
attractive infrastructure sector, is proceeding to plan and continues to trade
in line with management's expectations.
For Dŵr Cymru Welsh Water ("DCWW"), we continue to operate across the region
on the Pressurised Pipelines Framework, Major Civils Framework and Capital
Delivery Alliance Civils & Pipeline Framework. The Group is advancing with
mains renovation work for Bristol Water and recently secured a place on the P
Removal Programme for Wessex Water, while maintaining and renewing existing
assets on operational treatment and distribution facilities for Yorkshire
Water through the AMP7 Minor Civils Framework. We were also successful in
securing a position on Water and Wastewater Network Construction and
Engineering Framework for Northumbrian Water.
Renew is well positioned to benefit from trends in the Water market as
companies increase expenditure on capital maintenance, asset optimisation and
supply resilience including dam safety and infrastructure refurbishment
schemes.
We are pleased to have commenced services for a number of new clients
including the Capital Delivery Framework for Thames Water, Affinity Water and
Southern Water, adding to a strong client base that includes Scottish Canals
and Peel Ports.
With the Group's extensive experience and expertise in flood defence, working
with the Environment Agency and Canal & River Trust to deliver the EA
Flood and Coastal Erosion Framework, the UK Government's commitment to invest
£5.2bn(11) over six years to improve flood defence presents a strong
opportunity for the Group.
Specialist restoration
We are progressing well with works at the Palace of Westminster, now entering
the new flat roofs phase at the site, through the award of a five year
Conservation Framework.
Specialist Building
Revenue was in line with the Group's expectations at £84.4m (2020: £43.2m)
reflecting a continued focus on contract selectivity and risk management.
Operating profit was £1.6m (2020: £1.0m). In Specialist Building, the order
book was £70m (2020: £89m).
Our Specialist Building business focuses on the High Quality Residential and
Science markets in London and the Home Counties.
Our essential work continued uninterrupted on critical science schemes for
Defra and the Medical Research Council. The Group has also recently been
awarded a landmark scheme for one of the London Palaces.
The road to net zero
Our purpose is to provide essential engineering services to maintain and renew
critical infrastructure networks. It is well recognised that investment into
low-carbon infrastructure will be fundamental in delivering the Government's
Green Industrial Revolution and getting to net-zero emissions in the UK by
2050. It is the Board's ambition that the Group will achieve net zero by no
later than 2040.
From the rail network and digitally assisted roads to high-speed telecoms and
clean energy, Renew has a key enabling role to play on the frontline of
efforts to decarbonise the economy. Our long-term approach to sustainability,
which has always been at the heart of our business, is more relevant now than
ever before.
In recognition of this, at the Group's interim results in May 2021, we
introduced quantitative targets to embed our own ESG strategy within our wider
business operations and to continuously monitor the progress we are making
across five key areas:
· customer value;
· climate action;
· operating responsibly;
· engaging our people; and
· supporting our local communities.
These objectives are designed to complement and enhance the Group's overall
strategy of driving long-term sustainable growth and shareholder value
creation.
We continue to make good progress against each of these areas in the year,
including diverting 88% of our eligible waste away from landfill and improving
on our targeted number of mental health first aiders across our business to 1
for every 20 employees (2021 target 1:50). More details of the initiatives and
ESG targets will be included in the Group's 2021 Annual Report and Accounts.
2020 was the first year in which the Group reported under the Streamlined
Energy and Carbon Reporting ("SECR") regulations which provided us with a
baseline for ongoing reporting. Renew also continues to hold the London Stock
Exchange's Green Economy Mark, which recognises companies that derive 50 per
cent or more of their total annual revenue from products and services that
contribute to the global "Green Economy".
Opportunities for growth
Our high-quality compounding earnings model enables the Group to redeploy
internally generated cashflow in a disciplined manner, creating value through
highly selective and strategically complementary M&A opportunities that
supplement our profitable organic growth. Our track record of successfully
identifying, acquiring and integrating value-enhancing acquisitions in growing
markets with ongoing renewal and maintenance requirements and high barriers to
entry, has been a key driver of Renew's long-term growth. The M&A
landscape remains dynamic and we continue to look at opportunities in existing
and new markets that are aligned with our acquisition criteria.
Delivering value through innovation and technology
Adding value and delivering a superior service for our customers through
technology and innovation remains one of our key goals. We continuously seek
to develop and implement innovative working techniques to improve operational
performance and support the evolving needs of our clients across all of our
sectors.
During the year in Rail, we launched the innovative Mega Vac, a bespoke Road
Rail Vehicle which allows track drainage to be unblocked in record time and
provides time and cost efficiencies for tasks including specialist jetting
operations. We also developed and introduced the first rail mounted vegetation
compactor on the UK rail infrastructure. A number of our businesses are also
trialling sustainable hydrotreated vegetable oil ("HVO") fuel and battery
power to significantly reduce the carbon emissions produced by site
operations. We continue to make progress with the introduction of electric
powered plant innovations and with the roll out of more electric vehicle
charging points across our site and office locations.
Outlook - moving forward with confidence
On the back of another strong year for the Group, we are well positioned
moving forward to capitalise on the compelling growth opportunities that exist
across our end markets by leveraging Renew's unique low-risk, capital-light,
high-quality operating model.
As the UK Government makes progress on its plans to level up the economy and
reach net-zero by 2050 through long-term, record levels of committed
investment in low-carbon infrastructure, the structural growth drivers in our
end markets have never been more attractive.
The spending plans of our clients are underpinned by strategic national needs
and regulatory commitments. Our strong and well-established market positions
across key infrastructure sectors with visible, long-term, non-discretionary
spending cycles, from rail to nuclear energy, give us confidence in the
Group's prospects.
We have carried forward this positive trading momentum into the new financial
year and have a strong forward order book which underpins our confidence in
achieving further progress in 2022. As we look further ahead, we are committed
to building on our strengths to target new opportunities in attractive markets
where we have the skillset to deliver mission-critical engineering
infrastructure solutions for a sustainable future.
Paul Scott
Chief Executive Officer
9 December 2021
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 11
2. Infrastructure and Projects Authority, Analysis of the National
Infrastructure and Construction Pipeline 2021, August 2021
3. Ofwat PR19 final determinations, December 2019
4. Network Rail Delivery Plan, Control Period 6, High Level Summary, 26
March 2020
5. HM Treasury, Autumn budget and spending review 2021, October 2021
6. Department for Digital, Culture, Media & Sport, Delivering a
gigabit-capable UK: Gigabit Infrastructure Subsidy, 1 June 2021
7. Department for Digital, Culture, Media & Sport, Project Gigabit,
Phase One Delivery Plan, 19 March 2021
8. Gov.uk press release, Government breakthrough on £500 million support
package to boost rural mobile coverage, 11 March 2021
9. Nuclear Decommissioning Authority, Nuclear Provision: the cost of
cleaning up Britain's historic nuclear sites, 4 July 2019
10. Nuclear Decommissioning Authority, Draft Business Plan, 1 April 2021 to
31 March 2024, 7 December 2020
11. HM Government, Flood and coastal erosion risk management, Policy
Statement, July 2020
Group income statement
for the year ended 30 September
Before Exceptional Before Exceptional
exceptional items and exceptional items and
items and amortisation items and amortisation
amortisation of intangible amortisation of intangible
of intangible assets of intangible assets
assets (see Note 3) Total assets (see Note 3) Total
2021 2021 2021 2020 2020 2020
Note £000 £000 £000 £000 £000 £000
Revenue: Group including share of joint ventures 790,995 - 790,995 620,375 - 620,375
Less share of joint ventures' revenue (15,356) - (15,356) - - -
Group revenue from continuing activities 2 775,639 - 775,639 620,375 - 620,375
Cost of sales (666,454) - (666,454) (527,274) - (527,274)
Gross profit 109,185 - 109,185 93,101 - 93,101
Administrative expenses (57,985) (10,070) (68,055) (53,453) (6,741) (60,194)
Share of post-tax result of joint ventures 11 - 11 (39) - (39)
Operating profit 2 51,211 (10,070) 41,141 39,609 (6,741) 32,868
Finance income 19 - 19 44 - 44
Finance costs (836) - (836) (1,343) - (1,343)
Other finance income - defined benefit pension schemes 428 - 428 532 - 532
Profit before income tax 2 50,822 (10,070) 40,752 38,842 (6,741) 32,101
Income tax expense 5 (11,096) 2,427 (8,669) (6,905) 1,146 (5,759)
Profit for the year from continuing activities 39,726 (7,643) 32,083 31,937 (5,595) 26,342
Loss for the year from discontinued operations 4 (1,620) (5,590)
Profit for the year attributable to equity holders of the parent company 30,463 20,752
Basic earnings per share from continuing activities 7 40.79p 34.00p
Diluted earnings per share from continuing activities 7 40.46p 33.72p
Basic earnings per share 7 38.73p 26.78p
Diluted earnings per share 7 38.41p 26.57p
Group statement of comprehensive income
for the year ended 30 September
2021 2020
£000 £000
Profit for the year attributable to equity holders of the parent company 30,463 20,752
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined benefit pension schemes (25,672) (2,775)
Movement on deferred tax relating to the pension schemes 9,026 971
Total items that will not be reclassified to profit or loss (16,646) (1,804)
Items that are or may be reclassified subsequently to profit or loss:
Exchange movement in reserves (8) (23)
Total items that are or may be reclassified subsequently to profit or loss (8) (23)
Total comprehensive income for the year attributable to
equity holders of the parent company 13,809 18,925
Group statement of changes in equity
for the year ended 30 September
Share Capital Cumulative Share based
Share premium redemption translation payments Retained Total
capital account reserve adjustment reserve earnings equity
£000 £000 £000 £000 £000 £000 £000
At 1 October 2019 7,533 51,904 3,896 1,339 576 27,010 92,258
Transfer from income statement for the year 20,752 20,752
Dividends paid (5,778) (5,778)
New shares issued 323 14,474 14,797
Recognition of share based payments 245 245
Exchange differences (23) (23)
Actuarial movement recognised in pension schemes (2,775) (2,775)
Movement on deferred tax relating to the pension schemes 971 971
At 30 September 2020 7,856 66,378 3,896 1,316 821 40,180 120,447
Transfer from income statement for the year 30,463 30,463
Dividends paid (10,354) (10,354)
New shares issued 12 647 659
Recognition of share based payments 258 258
Exchange differences (8) (8)
Actuarial movement recognised in pension schemes (25,672) (25,672)
Movement on deferred tax relating to the pension schemes 9,026 9,026
At 30 September 2021 7,868 66,378 3,896 1,308 1,079 44,290 124,819
Group balance sheet
At 30 September
2021 2020
£000 £000
Non-current assets
Intangible assets - goodwill 139,698 124,691
- other 29,241 23,062
Property, plant and equipment 16,254 14,806
Right of use assets 17,247 17,481
Investment in joint ventures 5,708 -
Retirement benefit asset 661 28,059
Deferred tax assets 2,301 2,164
211,110 210,263
Current assets
Inventories 2,078 1,619
Assets held for resale 1,250 1,500
Trade and other receivables 157,416 129,838
Current tax assets 1,382 2,174
Cash and cash equivalents 881 13,396
163,007 148,527
Total assets 374,117 358,790
Non-current liabilities
Borrowings - (4,373)
Lease liabilities (9,421) (9,347)
Retirement benefit obligation (152) -
Deferred tax liabilities (8,067) (14,252)
Provisions (441) (441)
(18,081) (28,413)
Current liabilities
Borrowings (14,609) (8,752)
Trade and other payables (207,667) (192,370)
Lease liabilities (6,180) (6,047)
Provisions (2,761) (2,761)
(231,217) (209,930)
Total liabilities (249,298) (238,343)
Net assets 124,819 120,447
Share capital 7,868 7,856
Share premium account 66,378 66,378
Capital redemption reserve 3,896 3,896
Cumulative translation adjustment 1,308 1,316
Share based payments reserve 1,079 821
Retained earnings 44,290 40,180
Total equity 124,819 120,447
Group cashflow statement
for the year ended 30 September
2021 2020
£000 £000
Profit for the year from continuing operating activities 32,083 26,342
Share of post-tax trading result of joint ventures (11) 39
Impairment and amortisation of intangible assets 6,463 5,529
Defined benefit pension scheme G.M.P. equalisation/past service deficit 2,805 -
Depreciation of property, plant and equipment and right of use assets 10,504 9,672
Profit on sale of property, plant and equipment (649) (483)
(Increase)/decrease in inventories (405) 301
(Increase)/decrease in receivables (15,289) 1,465
Increase in payables and provisions 3,996 17,080
Current and past service cost in respect of defined benefit pension scheme 61 69
Cash contribution to defined benefit pension schemes (560) (4,817)
Charge in respect of share options 258 245
Finance income (19) (44)
Finance expense 408 811
Interest paid (836) (1,343)
Income taxes paid (7,335) (8,179)
Income tax expense 8,669 5,759
Net cash inflow from continuing operating activities 40,143 52,446
Net cash outflow from discontinued operating activities (976) (592)
Net cash inflow from operating activities 39,167 51,854
Investing activities
Interest received 19 44
Dividend received from joint venture 60 100
Proceeds on disposal of property, plant and equipment 1,263 725
Purchases of property, plant and equipment (4,042) (3,756)
Acquisition of subsidiaries net of cash acquired (33,343) (40,512)
Net cash outflow from investing activities (36,043) (43,399)
Financing activities
Dividends paid (10,354) (5,778)
Issue of share equity 659 14,797
New loan 10,000 -
Loan repayments (18,752) (8,750)
Repayments of obligations under lease liabilities (7,410) (6,972)
Net cash outflow from financing activities (25,857) (6,703)
Net (decrease)/increase in continuing cash and cash equivalents (21,757) 2,344
Net decrease in discontinued cash and cash equivalents (976) (592)
Net (decrease)/increase in cash and cash equivalents (22,733) 1,752
Cash and cash equivalents at beginning of year 13,396 11,667
Effect of foreign exchange rate changes on cash and cash equivalents (18) (23)
Cash and cash equivalents at end of year (9,355) 13,396
Bank balances and cash 881 13,396
Bank overdraft (10,236) -
Cash and cash equivalents at end of year (9,355) 13,396
Notes
1 International Financial Reporting Standards
The consolidated financial statements for the year ended 30 September 2021
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;
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 leasing and sub-leasing of some UK
properties and the provision of central services to the operating
subsidiaries.
Group including Group revenue Group revenue
Less
share of joint share of joint from continuing from continuing
ventures ventures activities activities
Revenue is analysed as follows: 2021 2021 2021 2020
£000 £000 £000 £000
Engineering Services 706,682 (15,356) 691,326 577,238
Specialist Building 84,425 - 84,425 43,207
Inter segment revenue (2,250) - (2,250) (2,025)
Segment revenue 788,857 (15,356) 773,501 618,420
Central activities 2,138 - 2,138 1,955
790,995 (15,356) 775,639 620,375
Before
exceptional Exceptional
items and items and
amortisation amortisation
of intangible of intangible
assets assets
2021 2021 2021 2020
£000 £000 £000 £000
Engineering 51,526 (9,070) 42,456 34,013
Services
Specialist Building 1,613 - 1,613 1,014
Segment operating profit 53,139 (9,070) 44,069 35,027
Central activities (1,928) (1,000) (2,928) (2,159)
Operating profit 51,211 (10,070) 41,141 32,868
Net financing costs (389) - (389) (767)
Profit on ordinary activities before income tax 50,822 (10,070) 40,752 32,101
Engineering Services segment operating profit for the year ended 30 September
2020 is stated after charging exceptional costs of £1,212,000 and
amortisation of £5,529,000, resulting in a total charge before taxation of
£6,741,000 (see Note 3).
3 Exceptional items and amortisation of intangible assets
2021 2020
£000 £000
Defined benefit pension scheme guaranteed minimum pension equalisation 1,107 -
Amco defined benefit scheme past service cost deficit 1,698 -
Acquisition costs 802 1,212
Total losses arising from exceptional items 3,607 1,212
Amortisation of intangible assets 6,463 5,529
Total exceptional items and amortisation charge before income tax 10,070 6,741
Taxation credit on exceptional items and amortisation (2,427) (1,146)
Total exceptional items and amortisation charge 7,643 5,595
As referred to in last year's Annual Report as a post balance sheet event, on
20 November 2020 the High Court handed down a further judgment in the Lloyds
Banking case regarding equalising guaranteed minimum pension benefits. The
judge found that pension schemes do have a liability to pay top-ups to members
who transferred out in the past. The effect of this for the schemes has been
estimated by the actuaries as an additional liability of £1,107,000.
The Amco defined benefit scheme recognised an actuarial estimate of
£1,698,000 additional liabilities from extending the Barber window to be in
line with recent legal advice received by the Trustee as part of a potential
"buy-in" transaction to remove the scheme's investment and funding risk.
This legal advice indicates that the scheme may not have equalised normal
pension age (NPA) as previously assumed in the early 1990's, and that the NPA
for members in service in May 1991 may be 60 for a higher proportion of their
service.
Acquisition costs relate to the acquisition of J Browne Group Holdings Ltd and
Rail Electrification Ltd on 26 March 2021 and 28 May 2021 respectively.
The Board has separately identified the charge of £6,463,000 (2020:
£5,529,000) for the amortisation of the fair value ascribed to certain
intangible assets, other than goodwill, arising from the acquisitions of
Giffen Holdings Ltd, QTS Group Ltd, Carnell Group Holdings Ltd. J Browne Group
Holdings Ltd and Rail Electrification Ltd.
4 Loss for the year from discontinued operations 2021 2020
£000 £000
Revenue - -
Expenses (1,620) (5,590)
Loss before income tax (1,620) (5,590)
Income tax charge - -
Loss for the year from discontinued operations (1,620) (5,590)
During the previous year the group completed the closure of Lovell America Inc
having incurred £271,000 additional costs in finalising historical taxation
issues. Once any surplus cash has been repatriated, the group will no longer
have any overseas exposure.
On 31 October 2014, the Board reached an agreement to sell Allenbuild Ltd to
Places for People Group Ltd. As a term of the disposal Renew Holdings plc
retained both the benefits and the obligations associated with a number of
Allenbuild contracts which have resulted in the requirement for an additional
£1,620,000 (2020:£5,319,000) accrual. This is as a result of the settlement
of historic claims during the financial year and a subsequent internal
reassessment of the likely costs required to settle other known contractual
disputes.
5 Income tax expense
(a) Analysis of expense in year 2021 2020
£000 £000
Current tax:
UK corporation tax on profits of the year (8,719) (5,732)
Adjustments in respect of previous period 25 216
Total current tax (8,694) (5,516)
Deferred tax - defined benefit pension schemes 601 (1,848)
Deferred tax - other timing differences (576) 1,605
Total deferred tax 25 (243)
Income tax expense in respect of continuing activities (8,669) (5,759)
(b) Factors affecting income tax expense for the year
2021 2020
£000 £000
Profit before income tax 40,752 32,101
Profit multiplied by standard rate
of corporation tax in the UK of 19% (2020: 19%) (7,743) (6,099)
Effects of:
Expenses not deductible for tax purposes (837) (297)
Timing differences not provided in deferred tax 1,476 433
Change in tax rate (1,590) (12)
Adjustments in respect of previous period 25 216
(8,669) (5,759)
Deferred tax has been provided at a rate of 25% (2020: 19%) following the
decision that the UK corporation tax rate should increase to 25% (effective
from 1 April 2023) and substantively enacted on 24 May 2021. The deferred tax
asset and liability at 30 September 2021 has been calculated based on these
rates, reflecting the expected timing of reversal of the related temporary
timing differences (2020: 19%). The Group has available further unused UK
tax losses of £25.3m (2020: £29.3m) to carry forward against future taxable
profits. A substantial element of these losses relates to activities which are
not forecast to generate the level of profits needed to utilise these losses.
A deferred tax asset has been provided to the extent considered reasonable by
the Directors, where recovery is expected to be recognisable within the
foreseeable future. The unrecognised deferred tax asset in respect of these
losses amounts to £5.2m (2020: £4.0m).
6 Dividends
2021 2020
Pence/share Pence/share
Interim (related to the year ended 30 September 2021) 4.83 -
Final (related to the year ended 30 September 2020) 8.33 7.67
Total dividend paid 13.16 7.67
£000 £000
Interim (related to the year ended 30 September 2021) 3,800 -
Final (related to the year ended 30 September 2020) 6,554 5,778
Total dividend paid 10,354 5,778
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 11.17p per Ordinary Share be paid in
respect of the year ended 30 September 2021. This will be accounted for in
the 2021/22 financial year.
7 Earnings per share
2021 2020
Earnings EPS DEPS Earnings EPS DEPS
£000 Pence Pence £000 Pence Pence
Earnings before exceptional items and amortisation 39,726 50.51 50.09 31,937 41.22 40.89
Exceptional items and amortisation (7,643) (9.72) (9.63) (5,595) (7.22) (7.17)
Basic earnings per share - continuing activities 32,083 40.79 40.46 26,342 34.00 33.72
Loss for the year from discontinued operations (1,620) (2.06) (2.05) (5,590) (7.22) (7.15)
Basic earnings per share 30,463 38.73 38.41 20,752 26.78 26.57
Weighted average number of shares 78,655 79,304 77,480 78,114
The dilutive effect of share options is to increase the number of shares by
649,000 (2020: 634,000) and reduce basic earnings per share by 0.32p (2020:
0.21p).
8 Acquisition of subsidiary undertaking - J Browne Group Holdings Ltd
On 26 March 2021 the Company acquired the whole of the issued share capital of
J Browne Group Holdings Ltd ("J Browne") for a cash consideration of £29.5m
plus a net cash and working capital adjustment of £12.0m. The £12.0m
represents J Browne's surplus cash held in an escrow account at completion
which was subsequently paid to the vendors. The net acquisition cost was
funded by a combination of cash and the Group's existing facility provided by
HSBC UK Bank plc and National Westminster Bank plc.
The provisional value of the assets and liabilities of J Browne at the date of
acquisition were:
Book value Adjustments Fair value
£000 £000 £000
Non-current assets
Intangible assets - goodwill 2,674 8,726 11,400
- other - 12,236 12,236
Property, plant and equipment 453 - 453
Right of use assets 176 317 493
Investments in joint ventures 259 5,632 5,891
3,562 26,911 30,473
Current assets
Inventories 35 - 35
Trade and other receivables 24,310 - 24,310
Cash and cash equivalents 293 - 293
24,638 - 24,638
Total assets 28,200 26,911 55,111
Non-current liabilities
Lease liabilities - (244) (244)
Deferred tax liabilities - (2,671) (2,671)
- (2,915) (2,915)
Current liabilities
Trade and other payables (9,976) - (9,976)
Lease liabilities (72) (73) (145)
Current tax liability (575) - (575)
(10,623) (73) (10,696)
Total liabilities (10,623) (2,988) (13,611)
Net assets 17,577 23,923 41,500
Goodwill of £11,400,000 arises on acquisition and will be reviewed annually
for impairment. The goodwill is attributable to the expertise and workforce of
the acquired business. Other intangible assets provisionally valued at
£12,236,000, which represent customer relationships and contractual rights,
were also acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this amount.
Amortisation of this intangible asset commenced from April 2021.
Investment in joint ventures
Goodwill of £3,812,000 arises on acquisition and will be reviewed annually
for impairment. The goodwill is attributable to the expertise and workforce of
the acquired business. Other intangible assets provisionally valued at
£1,820,000, which represent customer relationships and contractual rights,
were also acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this amount.
Amortisation of this intangible asset commenced from April 2021.
Right of use assets
J Browne's statutory accounts are reported under FRS 102. The group has made
an adjustment for operating leases obtained on acquisition whereby the leases
are capitalised based on discounted future lease payments together with an
equivalent leasing liability to be consistent with IFRS 16 "Leases".
Trade and other receivables include £12,000,000 held in an escrow account and
represents the part of the acquisition self-funded by J Browne.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value of assets and
liabilities using information available up to 12 months after the date of
acquisition. Fair value has been calculated using Level 3 inputs as defined by
IFRS 13.
Deferred tax liabilities
A deferred tax liability has been recognised in relation to the amortisation
of other intangible assets.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for impairment as
required by IFRS 3. No such impairment was identified.
If the acquisition of J Browne had occurred on 1 October 2020, Group revenue
would have been approximately £825.1m and profit before tax for the year
ended 30 September 2021 would have been approximately £53.4m.
9 Acquisition of subsidiary undertaking - Rail Electrification Limited
On 28 May 2021 QTS Group Limited, a wholly owned Group subsidiary, acquired
the whole of the issued share capital of Rail Electrification Limited ("REL")
for a cash consideration of £3m plus a net cash and working capital
adjustment of £0.6m. £1.32m deferred consideration has also been provided
which is performance related. The acquisition cost was funded entirely by the
subsidiary's cash reserves.
The provisional value of the assets and liabilities of REL at the date of
acquisition were:
Book value Adjustments Fair value
£000 £000 £000
Non-current assets
Intangible assets - goodwill - 3,607 3,607
- other - 272 272
Property, plant and equipment 120 - 120
Right of use assets 5 - 5
125 3,879 4,004
Current assets
Inventories 19 - 19
Trade and other receivables 800 - 800
Current tax asset 61 - 61
Cash and cash equivalents 1,080 - 1,080
1,960 - 1,960
Total assets 2,085 3,879 5,964
Non-current liabilities
Lease liabilities (1) - (1)
Deferred tax liabilities (31) (52) (83)
(32) (52) (84)
Current liabilities
Borrowings (250) - (250)
Trade and other payables (658) - (658)
Lease liabilities (6) - (6)
(914) - (914)
Total liabilities (946) (52) (998)
Net assets 1,139 3,827 4,966
Goodwill of £3,607,000 arises on acquisition and will be reviewed annually
for impairment. The goodwill is attributable to the expertise and workforce of
the acquired business. Other intangible assets provisionally valued at
£272,000, which represent customer relationships and contractual rights, were
also acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this amount.
Amortisation of this intangible asset commenced from June 2021.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value of assets and
liabilities using information available up to 12 months after the date of
acquisition. Fair value has been calculated using Level 3 inputs as defined by
IFRS 13.
Deferred tax liabilities
A deferred tax liability has been recognised in relation to the amortisation
of other intangible assets.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for impairment as
required by IFRS 3. No such impairment was identified.
If the acquisition of REL had occurred on 1 October 2020, Group revenue would
have been approximately £793.6m and profit before tax for the year ended 30
September 2021 would have been approximately £50.9m.
10 Preliminary financial information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2021 or 2020. Statutory
accounts for 2020 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 2021 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.
11 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 32 in the Annual Report & Accounts. The
Directors consider this to be a good indicator of the financing position of
the Group.
Adjusted operating profit (£51.211m) and adjusted profit before tax
(£50.822m) - 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 (£41.141m)
and profit before tax (£40.752m).
Adjusted operating margin (6.5%) - This is calculated by dividing operating
profit before exceptional items and amortisation of intangible assets
(£51.211m) by group revenue including share of joint venture (£790.995m)
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 (5.2%) which is calculated by dividing operating profit (£41.141m)
from
group revenue including share of joint venture (£790.995m).
Adjusted earnings per share (50.51p) - This measure is reconciled to the
earnings per share calculation based on earnings before exceptional items
and amortisation in Note 7. 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 (£790.995m) - 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 (£706.682m) - This measure is visible in Note 2
business analysis 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 (£51.526m) - This measure is
visible in Note 2 business analysis 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 (£42.456m) which is also visible in
Note 2.
Adjusted Engineering Services operating profit margin (7.3%) - This is
calculated in the same way as adjusted operating profit margin but based on
the adjusted Engineering Services operating profit (£51.526m) and the
Engineering Services revenue (£706.682m) figures as set out above. The
equivalent GAAP measure is engineering services operating profit margin (6.0%)
which is calculated by dividing engineering services operating profit
(£42.456m) from engineering services revenue including share of joint venture
(£706.682m).
12 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the year ended 30
September 2021 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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DKFBBOBDDOBK