REG - Renew Holdings PLC - Final Results
26/11/2024 07:00
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RNS Number : 5923N Renew Holdings PLC 26 November 2024
26 November 2024
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Record financial performance
Renew (AIM: RNWH), the leading Engineering Services Group supporting the
maintenance and renewal of critical infrastructure, announces its final
results for the year ended 30 September 2024 ("the period").
Financial Highlights
Year ended 30 September 2024* 2023* Change
Group revenue(1) £1,057.0m £887.6m 19.1%
Adjusted operating profit(1) £70.9m £62.4m 13.8%
Operating profit £61.2m £57.7m 6.1%
Adjusted operating margin(1) 6.7% 7.0% (30bps)
Profit before tax £60.2m £56.8m 6.0%
Adjusted earnings per share(1) 65.9p 62.3p 5.8%
Full year dividend 19.0p 18.0p 5.6%
Pre IFRS 16 net cash(1) £25.7m £35.7m (28.0%)
( *Following the disposal of Walter Lilly post period end, the financial
statements have been amended to exclude its trading result from profit for the
year from continuing activities. Its result has been included in discontinued
activities. All FY23 comparatives have been restated accordingly, in
compliance with IFRS 5.)
· Another record financial performance with revenue, cash generation and
operating profit all ahead of initial market expectations.
· Group revenue increased 19.1% to £1,057.0m (FY2023: £887.6m), with organic
growth of 16.6%.
· Group order book remained strong at £889m (FY2023: £777m), underpinned by
long-term framework positions.
· Net cash position (pre-IFRS16) of £25.7m (FY2023: £35.7), in line with
expectations.
· Full year dividend of 19.00p (FY2023: 18.00p), an increase of 5.6%, reflecting
the strong trading performance, forward momentum and the Board's positive
outlook.
· Strong balance sheet and best-in-class returns profile leaves us well
positioned to take further advantage of the Government's ongoing commitment to
maintain and upgrade the UK's critical infrastructure.
Operational Highlights
· In Rail we have entered CP7 in our strongest framework position yet across all
regions and remain the largest provider of maintenance and renewals services
to Network Rail nationally and the third largest supplier overall.
· In Water we have resecured most of our key AMP7 positions as well as
increasing the number of frameworks and clients heading into AMP8. We now work
for 10 of the 12 combined waste and water companies, compared with 3 at the
beginning of AMP7.
· In line with our strategy of appraising selective, value-accretive M&A, we
successfully completed three acquisitions. This included the bolt-on
acquisitions of TIS and Route One as well as the acquisition of Excalon, which
has enabled our expansion into a new complementary sector with high barriers
to entry and strong growth potential.
· Exceeded ambitious prior year health & safety targets, ensuring our
workplace remains a safe and secure working environment for all.
Post-period End
· On 4 October 2024 we exited from the Specialist Building market with the
disposal of Walter Lilly, in line with our overarching strategy of focusing
activities on Specialist Engineering.
· On 7 October 2024 we acquired Full Circle, securing entry into the attractive
onshore wind services market which is forecast to grow at 7.7% CAGR from 2024
to 2030. The business represents a compelling strategic fit for the Group,
with its leading market position enabling us to capitalise on the green energy
transition.
Outlook
· Exciting new growth opportunities with entry into renewables and electricity
distribution and transmission markets.
· Good M&A pipeline supported by a strong balance sheet.
· Strong order book moving into 2025.
Paul Scott, CEO of Renew, commented:
"I am very pleased to report we have delivered another excellent performance
in FY24 with significant organic and acquisitive growth. We have further
strengthened our order book and expanded our service offering, strengthening
the foundations of our business.
"The Group successfully delivered three value-accretive acquisitions in the
period and post-period end we executed our strategic exit from Specialist
Building as well as entering into the high-growth onshore wind services market
with the acquisition of Full Circle.
"The start of new control periods in our largest sectors along with access to
new market sectors marks a particularly exciting milestone for the Group and I
am confident we are entering FY25 well placed to deliver on our ambitious long
term growth strategy. On behalf of the Board, I would like to thank all of our
colleagues for their outstanding dedication to delivering our mission-critical
services 365 days a year."
For further information, please contact:
Renew Holdings plc www.renewholdings.com
Paul Scott, Chief Executive Officer via FTI Consulting
Sean Wyndham-Quin, Chief Financial Officer 020 3727 1000
Deutsche Numis (Nominated Adviser and Joint Broker) 020 7260 1000
Stuart Skinner / Kevin Cruickshank / Will Wickham
Peel Hunt LLP (Joint Broker) 020 7418 8900
Ed Allsopp / Pete Mackie / Charlotte Sutcliffe
FTI Consulting (Financial PR) 020 3727 1000
Alex Beagley / Tom Hufton / Amy Goldup / Matthew Young Renew@fticonsulting.com
About Renew Holdings plc
Renew 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 on Engineering Services in the key markets of
Rail, Infrastructure, Energy (including Wind and Nuclear) and Environmental
which are largely governed by regulation and benefit from non-discretionary
spend with long-term visibility of committed funding.
For more information please visit the Renew Holdings plc
website: www.renewholdings.com (http://www.renewholdings.com)
Chairman's statement
Introduction
I am pleased to announce that the Group achieved another year of record
financial performance, with excellent organic revenue growth, a robust
operating profit margin, strong operating cash generation and the delivery of
a number of successful acquisitions. These exceptional results underscore the
Group's core capabilities and strong presence in long-term, sustainable growth
sectors.
Differentiated business model
Our differentiated compounding 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 with an unwavering
commitment to health and safety. Operating in complex, challenging and highly
regulated environments, our markets have high barriers to entry. We directly
employ a highly skilled workforce which enables us to be extremely responsive
to our clients' needs and we are committed to adding value through innovation
and collaboration.
Results
Group revenue(1) increased to £1,057.0m (2023: £887.6m) with adjusted(1)
operating profit increasing to £70.9m (2023: £62.4m) and an adjusted(1)
operating margin of 6.7% (2023: 7.0%). Statutory operating profit was £61.2m
(2023: £57.7m). The adjusted(1) earnings per share has increased by 5.8% to
65.9p (2023: 62.3p) and basic earnings per share was 55.6p (2023: 58.4p). The
Group had a pre-IFRS 16 net cash(1) position of £25.7m (2023: £35.7m), in
line with our expectations.
During the period we were delighted to announce three strategically compelling
acquisitions, each of which is progressing in line with our pre-acquisition
integration and performance plan:
Excalon Holdings Limited is a leading infrastructure contractor specialising
in the provision of high voltage and extra high voltage infrastructure to the
UK electricity sector. Excalon has a number of long-term frameworks with
electricity Distribution Network Operators ("DNOs") across the UK, which
broadens Renew's exposure to another critical UK infrastructure market. This
acquisition presents tremendous long-term growth opportunities by providing
the Group with access to both new and existing frameworks that we would not
previously have been able to win.
Route One Holdings (Wakefield) Ltd was acquired by Renew's subsidiary
business, Carnell Group Holdings Ltd. Route One is a multidisciplinary
specialist engineering business providing bridge deck maintenance and
protection in the UK Highways sector. Route One has a number of long-term
frameworks on the National Highways Scheme Delivery Frameworks across England
and will expand Carnell's offering by adding several new capabilities to the
Group's highways business.
T.I.S. Cumbria Ltd (TIS) is a leading nuclear manufacturing and fabrication
specialist. In line with the Group's strategy, the acquisition enhanced
Renew's nuclear services offering by immediately doubling manufacturing
capacity and strengthened Renew's position in the growing nuclear
decommissioning and new build markets.
Post period end, we were very pleased to announce the acquisition of Full
Circle Group Holding B.V., a specialist provider of repair, maintenance and
monitoring services for onshore wind turbines in the UK and Europe. The
acquisition of Full Circle represents an exciting opportunity for the Group to
enter the high-growth and fragmented onshore wind services market and
signifies the first move to accessing end markets outside of the UK through a
low-risk and disciplined approach. We are delighted to welcome the management
and staff of Full Circle to the Renew family.
Additionally, post period end, the Group disposed of Walter Lilly & Co.
Limited on a cash free/debt free basis to Size Holdings Limited. The disposal
sees the Group exit its only remaining Specialist Building business and is
consistent with the Group's strategy of focusing activities on Specialist
Engineering where it targets end markets delivering maintenance and renewals
programmes that benefit from long-term, non-discretionary funding
programmes.
Buoyed by the recent acquisitions, Renew's progress against the Group strategy
has accelerated significantly over 2024 and the Group continues to strengthen
its market-leading position in its chosen long-term growth markets.
Dividend
The Group's strong trading performance, cash position and positive outlook
give the Board the confidence to propose a final dividend of 12.67p (2023:
12.00p) per share. If approved by shareholders, this will represent a full
year dividend of 19.00p (2023: 18.00p) per share, an increase of 5.6%.
ESG
We remain committed to achieving net zero by no later than 2040 driven by our
Climate and Nature Steering Group that comprises representatives from all the
Group's subsidiary businesses and which focuses on developing the Group's
climate opportunities and climate-related financial disclosure reporting. We
were also pleased to retain our London Stock Exchange's Green Economy Mark,
which recognises those companies that derive over 50 per cent of revenue from
products and services that are contributing to environmental objectives.
We recognise the positive impact our business can have on the broader
community, and we are committed to building stronger connections with local
schools, educational institutions and our surrounding communities. The
training and development of our colleagues remain essential to the Group's
long-term success and we now have around 330 trainees, apprentices and
graduates across the business.
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.
During the year, the reporting structure of the Group was reviewed in order to
address the growth in both size and complexity of the Group. The Board
supported the creation of an Executive Board which comprises the Group's Chief
Executive Officer, Chief Financial Officer, Group Commercial Director and the
Sector Directors. The Executive Board will report to the Chief Executive
Officer. The Executive Board will assist the Chief Executive Officer with the
day to day management of the Group's subsidiary businesses.
Board changes
On 2 April 2024, having served on the Board as Executive Director (Rail) for
more than 8 years, Andries Liebenberg informed the Board of his intention to
retire effective 31 January 2025. The Board would like to take this
opportunity to thank Andries for the significant contribution he has made to
the Group since his appointment and to wish him well in his retirement.
People and safety
The Board deeply values the essential contributions of its employees to the
Group's success, and it sincerely thanks all its colleagues for their
unwavering commitment and dedication. We remain focused on ensuring the mental
and physical wellbeing of all our colleagues and continue to provide support
through a number of schemes, including our Employee Assistance Programme.
Our goal is to foster a secure working environment that safeguards all our
colleagues and those who work with us from injury throughout our operations.
The Group's health and safety performance is discussed as a priority at each
Board meeting and during the year we continued to focus on the behavioural
science aspects of safety to further improve our strong safety record.
Future focus
The delivery of our long-term strategy is built on effective relationships
with our directly employed workforce, customers, suppliers, shareholders and
wider stakeholders, and these are critical to the ongoing success of the
business. We will continue to deliver our strategic priorities whilst focusing
on our environmental, social and governance responsibilities and on our
approach to diversity and inclusion as we move through 2025 and beyond.
The Group's unique compounding business model, best-in-class returns profile
and strong balance sheet mean we are well positioned to take further advantage
of the Government's ongoing commitment to maintain and upgrade the UK's
critical infrastructure. We are confident as a Board in achieving continued
growth both through organic expansion and strategic earnings enhancing
M&A.
David Brown
Chairman
25 November 2024
Chief Executive Officer's Review
The Group has delivered another year of outstanding performance with strong
organic revenue, cash generation and operating profit all ahead of initial
market expectations. Once again, these results are testament to the resilience
and differentiated nature of our high-quality, low-risk, compounding business
model, alongside the robust demand we continue to see in our end markets
focused on the repair and maintenance of critical infrastructure. I am very
proud of the strong operational performance this financial year and the
brilliant work our teams have delivered; the foundations of the business have
never been stronger than they are today. Importantly, during the period we
have enjoyed increasing success in securing new, and extending existing
frameworks, helping to cement our market leading position and allowing us to
capitalise on the significant number of growth opportunities across all of our
end markets. As well as a strong operational performance, our M&A
activities in the period have broadened our capabilities and moved us into new
and exciting growth markets. In line with the Group's strategy, post period
end, we disposed of the Group's only remaining Specialist Building business,
completing the transition to a pure play engineering services provider., and
further bolstered our end market exposure through the acquisition of Full
Circle.
Our focus on the maintenance and renewal of existing critical infrastructure
means we are not dependent on large, capital-intensive contract awards, which
positions the Group with a significantly lower risk profile than others
operating in our sectors. Supported by the commercial terms within our
frameworks, alongside the typically short execution periods of the work we
undertake, we have been able to minimise the impact of the macroeconomic
challenges facing the UK. Once again, our business model has delivered revenue
and net cash for the year ahead of market consensus, with operating profit
also marginally ahead. Moreover, our work continues to be underpinned by
highly visible, committed, long-term spending cycles and with public
expenditure remaining at the top of the news agenda the government has
reaffirmed its commitment to investing in the maintenance and renewal of
critical UK infrastructure as part of its plans to begin a "decade of national
renewal" as set out post-period end in the Autumn Budget(2).
This year we have delivered many notable operational successes, but, given
that I can only highlight a few of the achievements, in Rail I am pleased to
say we have started CP7 with a broader geographic reach and a wider range of
frameworks than we had in CP6. In Water we have also gone from strength to
strength, broadening the service offering for each of our clients. We have
resecured most of our key AMP7 positions as well as increasing the number of
frameworks and clients as we head into AMP8. It is a remarkable accomplishment
that we now work for 10 of the 12 combined waste and water companies, compared
to three at the beginning of AMP7. We look forward to the start of AMP8, which
commences 1 April 2025, that has an anticipated addressable budget for Renew
of £35bn committed to investment in new infrastructure.
In line with our strategy of appraising selective, value-accretive M&A
opportunities, during the period we successfully completed three acquisitions
for consideration in aggregate of up to £37m. In October 2023, we completed
the bolt-on acquisition of T.I.S., which is now fully integrated and is
delivering its planned strategic benefits including doubling our nuclear
fabrication manufacturing capacity, allowing us to take advantage of
increasing demand across the decommissioning and new nuclear build programmes.
In April 2024, we acquired Route One Infrastructure and its integration is
progressing well and in line with the preacquisition plan. The acquisition has
expanded Renew's service offering, adding new capabilities with its particular
expertise in providing end-to-end solutions for road bridge deck maintenance
and protection, which provides the Group with another route to market on the
strategic highways programme. In June 2024, we acquired Excalon, a leading
infrastructure contractor specialising in the provision of high voltage and
extra high voltage infrastructure to the UK electricity sector. This
acquisition is significant as it has allowed us to expand into a new
complementary sector with high barriers to entry and strong growth potential.
I am pleased to confirm this acquisition is largely complete and has proved to
be an excellent strategic fit, providing the Group with access to a number of
new and existing frameworks that we would not have otherwise been able to win.
The positive strategic momentum of the Group has continued into the new
financial year. On 4 October 2024 we announced the Group's exit from the
Specialist Building market with the disposal of Walter Lilly, in line with our
overarching strategy of focusing activities on Specialist Engineering.
Following this, on 7 October 2024, we were pleased to announce the acquisition
of Full Circle and our entry into the high-growth onshore wind services
market. Full Circle is a specialist provider of repair, maintenance and
monitoring services for onshore wind turbines in the UK and Europe. It
represents a compelling strategic fit for the Group, with its leading market
position enabling us to capitalise on the green energy transition as
governments in the UK and across Europe have reaffirmed their commitment to
achieving net zero carbon emissions by 2050. As a result of these commitments,
the onshore wind services market is forecast to grow at 7.7% CAGR from 2024 to
2030.
Ensuring the health, safety and wellbeing of our colleagues and those in the
communities in which we operate has always been our highest priority and I
would like to take this opportunity to thank our dedicated teams for their
unwavering commitment to health and safety throughout the last year. Our
strong track record here stands as a testament to the collective efforts of
every individual within our organisation and I take immense pride in the fact
that we have not only met but exceeded our prior year health & safety
targets, ensuring that our workplace remains a safe and secure working
environment for all.
In summary, FY24 has been another excellent year for Renew as we have
delivered terrific organic and acquisitive growth, significantly strengthened
our order book, grown the list of capabilities within our business, all
translated through to beating initial market expectations. The start of the
CP7 and AMP8 control periods in Rail and Water in particular mark an exciting
time for the Group and I am confident we are entering FY25 with significant
momentum to further deliver on our ambitious growth strategy. The business is
in excellent shape, and on behalf of the Board, I would like to thank all of
our colleagues, without whom this year's performance would simply not have
been possible. Our hardworking teams continue to go above and beyond to
deliver outstanding work executing on our commitment to providing our clients
with our mission-critical, highly responsive, services 365 days a year.
Our track record of resilient compounding 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:
· Group organic revenue growth of 51 per cent and total revenue growth of 76 per
cent;
· adjusted earnings per share growth of 63 per cent;
· an increase in dividends of 65 per cent from 11.5p to 19p per share;
· an increase in our adjusted operating margin from 6.4 per cent to 6.7 per
cent; and
· seven strategic acquisitions supported largely by our strong free cash flow,
deploying £124m.
Our track record of reliable revenue growth, cash generation and conservative
approach to gearing 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 £1,057.0m (FY2023: £887.6m),
with organic growth of 16.6% and the Group achieved an adjusted operating
profit of £70.9m (FY2023: £62.4m). Statutory operating profit was £61.2m
(FY2023: £57.7m). Adjusted operating profit margin was 6.7%. As at 30
September 2024, the Group had pre-IFRS16 net cash of £25.7m (30 September
2023: net cash £35.7m). The Group's order book at 30 September 2024 remained
strong at £889m (FY2023: £777m) underpinned by long-term framework
positions.
Dividend
The Group's robust trading performance, cash position and strong forward order
book have given the Board the confidence to declare a final dividend of 12.67p
(FY2023: 12.00p) per share. This represents a full year dividend of 19.00p
which is a 5.6 per cent increase over the prior year. This will be paid on 14
March 2025 to shareholders on the register as at 7 February 2025, with an
ex-dividend date of 6 February 2025.
Rail
We have entered the new control period in our strongest position yet across
all regions, with a number of new and existing frameworks creating notable
opportunities for the Group. Network Rail's Control Period 7 (CP7) runs from
2024 to 2029 and expenditure is expected to be focused on operations,
maintenance and renewal of the national rail network, playing into our core
strengths. The broader UK rail sector is underpinned by predictable cash flows
due to committed regulatory spending and we welcome the commitment made by the
Labour government to enact its plan to reform the performance of rail services
laying the groundwork for the transition to Great British Railways. This
single industry body will be tasked with improving services, and the
operation, maintenance and improvement of all UK rail infrastructure. We fully
support railway reform and are confident that at the heart of these plans is
an imperative to improve the efficiency, reliability and safe operation of the
entire network. Crucially, in order to execute this stated strategy, the
Government, and its chosen delivery body, will need to accelerate its
commitment to the renewal and maintenance of the rail infrastructure across
the UK. Renew has already established its leading market position in these
areas as we continue to deliver long-term national frameworks and we remain
deeply embedded in delivering renewal and maintenance programmes in all of the
national rail regions.
Network Rail, already a significant strategic customer for the Group, has
committed £45.4bn(3) of investment over the period and within this
allocation, the maintenance and renewal budget has increased 9% from CP6 to
£31.9bn.
Renew remains the largest provider of maintenance and renewals services to
Network Rail nationally and the third largest supplier overall. This strong
relationship, alongside our framework success rate and geographic coverage
across the UK, positions us well to benefit from ongoing government investment
as we look to expand our current involvement by targeting new additional CP7
frameworks.
We have continued to selectively expand our Rail client base outside of
Network Rail and overall, we commenced CP7 in a significantly stronger
framework position than at the start of CP6. Whilst we note that the start of
CP7 has been slower than expected, we remain confident that this will
normalise through the control period as we have seen historically.
Looking ahead, other significant UK rail market growth opportunities that we
are targeting include Project Reach(4), which will deliver a comprehensive
upgrade of Network Rail's trackside fibre cable and wireless infrastructure to
create a safer, more modern and digitally-connected railway and the wider rail
electrification programme which is required to achieve Network Rail's Net Zero
targets. Alongside aging assets, there is increasing pressure on the network
in terms of improving climate resilience given the increasing rate of extreme
weather events as well as the need to make rail travel more accessible, more
reliable and more environmentally friendly, all of which will provide the
Group with significant growth opportunities moving forward.
We remain committed to the training and development of our rail colleagues and
are pleased to report that our Rail Skills Academy has continued to go from
strength to strength. It is already widely recognised as a leader in the
industry and we look forward to developing this further. During the period, we
were also awarded a Training Excellence Award for the innovative Controller Of
Site Safety ("COSS") Academy Programme which has revolutionised delivery and
lineside safety both internally and throughout our supply chain.
Infrastructure
Highways
During the period, we have made further progress within Highways, continuing
to execute on work banks that are a part of the current National Highways
Scheme Delivery Framework (SDF), running to 2027, which includes five
framework lots covering civil engineering, road restraint systems and drainage
disciplines, worth more than £147m over the six-year period. We are expecting
to unlock further growth in this sector as eight Design-Build-Finance-Operate
( DBFO) highways schemes are due to be handed back to National Highways in
2026 increasing the overall strategic roads network maintained by National
Highways by 10%, an additional 1,842 lane miles. These roads will also require
significant investment before they can be handed back, providing additional
opportunities for growth. The inclusion of the legacy concrete pavement
programme in the SDF from April 2025 will enable us to take greater market
share.
Elsewhere, the AGC collaboration (AmcoGiffen & Carnell) continues to be an
incredibly successful partnership, driving increased revenue growth, as we
remain the second largest provider of road restraint systems in the network.
As the UK Governments second Road Investment Strategy (RIS2) comes towards a
close, preparatory consultations for RIS3, which is scheduled to commence in
April 2025, have indicated it will focus on carbon reduction, with a notable
shift away from new roads to maintenance work that will involve prioritising
funding on road structures, pavements and road restraints. The announcement of
RIS3 has now been delayed until January 2025 due to the UK General Election,
however, the focus on renewals and capital maintenance is expected to mean
that the budget for highway maintenance will be double that of RIS2 (£4.3bn)
and clearly plays to our core strengths as a business, uniquely positioning us
to deliver further growth.
The maintenance of the UK's strategic highways network has never been more
important. By 2025, 70% of National Highways network of roads and bridges will
be more than 45 years old(5) and, as such, the prioritisation of renewing the
network's structures & rigid pavements is essential.
Our acquisition of Route One, a multi-disciplinary specialist engineering
business operating in the UK Highways, in April 2024, for an enterprise value
of £5.0m, has significantly expanded our capabilities in this market with its
particular expertise in bridge and structures maintenance and repairs. Route
One has a number of long-term frameworks on the SDF and as such the
acquisition represents an excellent strategic fit for the Group, allowing us
to unlock more growth across the strategic highways network.
Aviation
Our strategy to increase market share in Aviation through both medium and long
term frameworks has paid dividends with our recent success in bidding for the
latest Manchester Airport Group (MAG) Airfields Framework, and we are
pleased to confirm we were the only supplier to secure places at all three
airports: Stansted, Manchester and East Midlands, building on our existing
capital and airside maintenance framework positions with MAG and Leeds
Bradford Airport (LBA). During the period our teams also mobilised the
Manchester Capital Delivery Framework Pier 2, Phase 2, and Taxiways.
Further to this, the growth opportunities available to the Group in airport
asset renewals and maintenance are increasing with six of the eight largest UK
airports undertaking major investment programmes. As such, aviation continues
to be an area of focus for the Group and we are proud to have organically
moved into this sector, which has significant barriers to entry. We look
forward to continuing to seize new opportunities as we develop our credentials
in this area.
Communication Networks
As the market has evolved, we have broadened our capabilities in order to
access wider opportunities and consequently we have renamed this segment
Communication Networks.
During the period we have seen sustained momentum, achieving yet another
record revenue performance in FY24. The country's connectivity remains a
critical focus in the digital age and, as a result, we benefitted from strong
demand across the sector as we continue to establish ourselves as a valued
partner to the nation's largest network providers. We have observed
considerable commitment to changes in the market, with significant capital
allocated to addressing the UK's historic underinvestment in key assets within
this sector. This creates substantial growth opportunities for us moving
forward. We're also pleased with the progress of our strategy to expand our
market access, and our plan to diversify the business has progressed well with
frameworks in place with all four mobile networks: 3UK, Vodafone, Virgin Media
O2 and EE.
Our sustained development of small cell work banks has progressed well during
the year. We are also committed to growing our capabilities in servicing the
private 5G market and through this, we have secured opportunities on three
government-funded private 5G developments, positioning us well to grow this
service with other private companies going forward as this network continues
to develop. This represents a clear example of our business being well
equipped to consistently evolve to meet the needs of our niche target end
markets where we see considerable opportunities.
Through our ongoing work with the Shared Rural Network programme, we are also
pleased to provide mobile phone and 4G connectivity for previously unserved
rural communities in remote locations. We are in the process of completing
phase one of the government-backed Shared Rural Network (SRN) rollout, Partial
Not Spots, and are now developing the Total Not Spot Programme to enable
connectivity in hard to reach locations including in the Scottish Highlands,
Islands and a number of remote Welsh sites.
Energy
Nuclear
The UK Government continues to commit c.£4bn annually to its decommissioning
programme of which c.75% is allocated at Sellafield. Throughout FY24, we have
continued to see strong demand for our civil nuclear business and its
multidisciplinary service offering. At Sellafield we continue to operate on a
number of decommissioning frameworks and we remain one of the largest M&E
contractors on the site.
Aside from Sellafield, we continue to secure opportunities to increase our
presence in the civil nuclear market including in Springfield and AWE, and we
are pleased to report that we have secured our first contract at Capenhurst.
We also remain excited about the new growth opportunities that will be
generated as part of the long-term frameworks for Nuclear Restoration Services
and at Hinkley Point C. The UK Government's continued focus on decarbonising
the country's energy supply to achieve its net zero targets by 2050 will
require a significant commitment to shifting further towards cleaner energy
systems, of which new nuclear is a vital component.
This commitment underpinned the creation of Great British Nuclear and the
Government's target to commence construction of up to three new nuclear plants
in the next 10 years(6). This commitment ensures long-term and sustainable
demand for our specialist manufacturing capabilities in high-grade nuclear
components.
In October 2023 we acquired T.I.S., a nuclear manufacturing specialist, for a
total cash consideration of £4.7m. The addition of T.I.S. to the business
will double our manufacturing capacity and allow us to support existing
clients and take advantage of increasing demand across the decommissioning and
new nuclear build programmes and I am pleased to report that the integration
has been a notable success.
Transmission and Distribution
In June 2024, we successfully completed the acquisition of Excalon Limited, a
leading infrastructure contractor specialising in the provision of high
voltage and extra high voltage infrastructure to the UK electricity sector,
for a total consideration of up to £26m. This acquisition is consistent with
our strategic objective of expanding into new complementary sectors that have
high barriers to entry coupled with resilient attributes and I am pleased to
report that the integration process is largely complete and in line with our
expectations.
Excalon represents a significant opportunity for the Group, providing access
to a number of new and existing frameworks that we would not have otherwise
been able to win. The UK electricity DNO market is regulated by Ofgem and
operates in 5-year control period funding cycles. The RIIO ED2 cycle commenced
in April 2023 with the latest determination of funding set at £22.2bn.
Entering this market allows Renew to access both the opportunities in ED2 as
well as the upgrade of the grid that is required to support the UK's zero
carbon generation and renewables sector. This acquisition represents our
commitment to growth and innovation within critical infrastructure markets and
strengthens our position for continued growth in this area moving forward.
Electric Vehicle Charging
As the UK Government continues working towards its ambition of achieving net
zero emissions by 2050, we remain well positioned to play a significant role
in helping drive the creation of the UK's EV charging infrastructure
landscape. Through our strong relationships with leading charge point
operators, we will continue to develop this division further and scale
alongside the wider market.
Renewable Energy
Post the period end, in October 2024, we were pleased to announce the
acquisition of Full Circle, a specialist provider of repair, maintenance and
monitoring services for onshore wind turbines in the UK and Europe for a total
cash consideration of £50.5m.
This acquisition represents a compelling strategic fit for Renew, entering the
high-growth renewable energy services market with a leading position, in line
with our stated strategy of capitalising on the green energy transition. With
governments in the UK and across Europe reaffirming their commitment to
achieving net zero carbon emissions by 2050, the opportunity within this
sector is significant and growing at pace. Through the addition of Full
Circle's best-in-class, direct delivery service model, we will be able to
fully capitalise on this transition, while benefitting from the long-term,
non-discretionary maintenance programmes that will continue to underpin it.
Renewable energy is forecast to become the largest component of Europe's total
energy mix by 2050. The onshore wind market is well-established and forecast
to grow at 7.7% CAGR over the next six years. The market for maintenance and
renewal of these turbines is highly fragmented and represents a significant
opportunity for Full Circle to grow organically and through acquisitions. As
part of the Group, Full Circle will benefit from our proven track record of
successful M&A and from its best practise experience in the wider
engineering services market.
Environmental
Water
The Group continues to go from strength to strength in Water, through
increasing collaboration between our four water brands and broadening our
overall service offering. AMP7 has been incredibly successful for us and, as
this control period comes to an end, we are particularly proud to highlight
that we now work for 10 out of the 12 combined waste and water companies,
increasing from three at the beginning of the current cycle. Importantly the
overall scope of services we provide each utility has also grown considerably
in this same control period, further strengthening our leading position in the
market.
As we look confidently ahead to the start of AMP8, which commences 1 April
2025 and runs through to 2030, we are pleased to note that Ofwat's Draft
Determination anticipates a total spend of £88bn. This marks an increase of
over £37bn from AMP7, and of which, £35bn has been committed to investment
in new infrastructure, representing a considerable increase on the £11bn
investment in new infrastructure through AMP7. We look forward to receiving
the Final Determinations that are due in January 2025, and are encouraged that
proposed plans indicate significant room for future growth as we remain well
placed to leverage the combined expertise across our water brands to service
the following target areas that have been identified for AMP8:
· £10bn committed to Storm Overflows with significant early investment
to be delivered in AMP8;
· Target to triple the replacement rate of mains pipework and reduce
leakage by 13%;
· £6bn committed to reduce nutrient pollution;
· £4bn committed to boost the UK's water supply; and
· £2bn committed to increase biodiversity and reduce greenhouse gas
emissions by 11%
The acquisition of Enisca in November 2022 brought considerable momentum to
the Group and has been a key driver behind our focus on broadening our service
offering, which has proved hugely impactful as we have worked tirelessly to
capitalise on the long-term opportunity in Water, achieving significant
success in securing long-term frameworks for AMP8.
News of Thames Water's current financial position continues to be widely
reported in the media and whilst this brings understandable concern for many
in the sector, we are pleased to note that all Thames Water operations remain
unaffected by internal issues and our maintenance and renewal frameworks will
remain intact regardless of any refinancing or ownership changes. This serves
to highlight the mission critical nature of our work, the funding underpin
that it generally sees and the sustained necessity for the maintenance to
critical UK infrastructure that we provide.
Flood and Coastal
The increasingly extreme weather conditions experienced each year persistently
highlight the need for robust investment in the UK's flood defences and we
continue to see an increased focus on climate and weather resilience across
the UK's critical infrastructure providers. Our vital work for the Environment
Agency is testament to the consistent demand for our services in this
sector, through its Asset Operations, Maintenance and Response Framework we
continue to deliver on projects designed to tackle coastal erosion and sea
flooding. Importantly, post-period end in the Autumn Budget the UK
Government also committed to investing £2.4 billion over two years in flood
resilience to support the building of new flood defences alongside the
maintenance of existing assets to protect communities, highlighting further
scope for continued growth across the sector.
Specialist Restoration
In Specialist Restoration we have maintained our leading national position in
specialist iron restoration and we are continuing to leverage the emerging
long-term opportunities in the UK's gasholder markets.
Disposal of Walter Lilly
As announced on 4 October 2024, post-period end, Walter Lilly was acquired by
Size Holdings Limited, a leading provider of premium quality construction,
specialist crafts and maintenance services on a cash free/debt free basis. The
transaction sees Renew exit its only remaining Specialist Building business
and is consistent with our strategy of focusing activities on Specialist
Engineering where we target end markets delivering maintenance and renewals
programmes that benefit from long-term, non-discretionary funding programmes.
ESG
The UK Government's commitment to increasing investment in low carbon
infrastructure will be essential to delivering on its net zero emissions
targets by 2050 and Renew is ideally positioned to benefit from this
transition. Our strong position in this area is highlighted by the fact that,
during the period, we retained our LSE Green Economy Mark. This classification
recognises London-listed companies that derive more than 50% of their revenues
from products and services that contribute to environmental objectives such as
climate change mitigation and adaptation, waste and pollution reduction, and
the circular economy. Our post period end acquisition of Full Circle will
further bolster our position in this area and provides us with strong
foundations to scale alongside the expanding renewable energy market and fully
capitalise on the significant opportunities available to us.
As noted at our interim results, we have established quantitative
sustainability targets to embed our ESG strategy across the business and it is
the Board's ambition that the Group will achieve net zero by no later than
2040. Our purpose-led approach to ESG is centred on four key commitments;
taking climate action; operating responsibly; building social value and
empowering our people.
Outlook
Post-period end in the Autumn Budget(2), we were pleased to see the UK
Government reaffirm its commitment to investing in the maintenance and renewal
of critical UK infrastructure as part of its plans to begin a "decade of
national renewal". Our continued focus on non-discretionary spending means
that we are well positioned to take advantage of this investment, particularly
the prioritisation of maintenance and renewal. Whilst we note that the start
of the new rail control period has been slower than expected, we remain
confident that this will normalise through the cycle as we have seen
historically.
Our strategic growth levers including innovation, collaboration, talent
retention and attraction, alongside our differentiated business qualities and
resilient model enable us to take full advantage of the long-term structural
growth drivers in our targeted end markets. Further to this, our cash
generative activities and strong balance sheet provide a solid platform for
future organic and inorganic expansion.
The Group's strong order book continues to be underpinned by highly visible,
committed, long-term spending cycles and we enter FY25 buoyed by our two new
principal brands, Excalon and Full Circle, which have established us in new
and highly compelling market sectors. The combination of the aforementioned
factors gives the Board continued confidence in the Group's growth prospects
and long term outlook.
Paul Scott
Chief Executive Officer
25 November 2024
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 9.
2 https://www.gov.uk/government/publications/autumn-budget-2024/autumn-budget-2024-html#rebuilding-britain-1
(https://www.gov.uk/government/publications/autumn-budget-2024/autumn-budget-2024-html#rebuilding-britain-1)
3 https://www.networkrailmediacentre.co.uk/news/gbp-45bn-rail-improvement-plan-puts-climate-change-firmly-in-its-sights
(https://www.networkrailmediacentre.co.uk/news/gbp-45bn-rail-improvement-plan-puts-climate-change-firmly-in-its-sights)
4 www.networkrail.co.uk/wp-content/uploads/2023/05/Overview-of-CP7-efficiency-initiatives.pdf
(http://www.networkrail.co.uk/wp-content/uploads/2023/05/Overview-of-CP7-efficiency-initiatives.pdf)
5 National Highways State of The Nation plan:
https://nationalhighways.co.uk/media/3v2nqsee/cre22_0102-srn-initial-report-2025-2030_vn-updated.pdf
(https://nationalhighways.co.uk/media/3v2nqsee/cre22_0102-srn-initial-report-2025-2030_vn-updated.pdf)
6 https://www.gov.uk/government/news/shapps-sets-out-plans-to-drive-multi-billion-pound-investment-in-energy-revolution
(https://www.gov.uk/government/news/shapps-sets-out-plans-to-drive-multi-billion-pound-investment-in-energy-revolution)
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
2024 2024 2024 2023 2023 2023
(restated**) (restated**) (restated**)
Note £000 £000 £000 £000 £000 £000
Revenue: Group including share of joint ventures* 1,056,985 - 1,056,985 887,562 - 887,562
Less share of joint ventures' revenue* (48,015) - (48,015) (39,383) - (39,383)
Group revenue from continuing activities 1,008,970 - 1,008,970 848,179 - 848,179
Cost of sales (867,306) - (867,306) (719,534) - (719,534)
Gross profit 141,664 - 141,664 128,645 - 128,645
Administrative expenses (74,980) (9,479) (84,459) (70,236) (4,413) (74,649)
Other operating income 4,165 - 4,165 3,865 - 3,865
Share of post-tax result of joint ventures 25 (224) (199) 77 (231) (154)
Operating profit 70,874 (9,703) 61,171 62,351 (4,644) 57,707
Finance income 791 - 791 360 - 360
Finance costs (1,828) - (1,828) (1,285) - (1,285)
Other finance income - defined benefit pension schemes 90 - 90 66 - 66
Profit before income tax 5 69,927 (9,703) 60,224 61,492 (4,644) 56,848
Income tax expense (17,771) 1,558 (16,213) (12,296) 1,554 (10,742)
Profit for the year from continuing activities 52,156 (8,145) 44,011 49,196 (3,090) 46,106
Loss for the year from discontinued operations 4 (2,440) (2,722)
Profit for the year 41,571 43,384
Basic earnings per share from continuing activities 7 65.91p (10.30)p 55.61p 62.26p (3.91)p 58.35p
Diluted earnings per share from continuing activities 65.88p 55.59p 62.07p 58.18p
7 (10.29)p (3.89)p
Basic earnings per share 7 65.91p (13.38)p 52.53p 62.26p (7.35)p 54.91p
Diluted earnings per share 7 65.88p (13.37)p 52.51p 62.07p (7.33)p 54.74p
* Alternative performance measure, please see Note 9 for further details.
** The comparatives have been restated due to the classification of a
component of the Group as a discontinued operation in the year. Please see
Accounting policies i) Basis of accounts and preparation for further details.
Group statement of comprehensive income
for the year ended 30 September
2024 2023
£000 £000
Profit for the year 41,571 43,384
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined benefit pension schemes 81 387
Movement on deferred tax relating to the pension schemes (5) (106)
Total items that will not be reclassified to profit or loss 76 281
Total comprehensive income for the year net of tax 41,647 43,665
Group statement of changes in equity
for the year ended 30 September
Share Capital Share based
Share premium redemption payments Retained Total
capital account reserve reserve earnings equity
£000 £000 £000 £000 £000 £000
At 1 October 2022 7,886 66,378 3,896 1,375 69,143 148,678
Transfer from income statement for the year 43,384 43,384
Dividends paid (13,683) (13,683)
New shares issued 27 41 68
Recognition of share based payments 669 669
Vested share option transfer (777) 777 -
Actuarial movement recognised in pension schemes 387 387
Movement on deferred tax relating to the pension schemes (106) (106)
At 30 September 2023 7,913 66,419 3,896 1,267 99,902 179,397
Transfer from income statement for the year 41,571 41,571
Dividends paid (14,506) (14,506)
New shares issued 1 1
Recognition of share based payments 707 707
Vested share option transfer (599) (257) (856)
Actuarial movement recognised in pension schemes 81 81
Movement on deferred tax relating to the pension schemes (5) (5)
At 30 September 2024 7,914 66,419 3,896 1,375 126,786 206,390
Group balance sheet
At 30 September
2024 2023
£000 £000
Non-current assets
Intangible assets - goodwill 161,172 148,805
- other 33,925 27,869
Property, plant and equipment 25,608 19,400
Right of use assets 26,294 19,174
Investment in joint ventures 3,780 3,979
Retirement benefit asset 2,954 2,456
253,733 221,683
Current assets
Inventories 6,365 4,169
Assets held for resale 19,519 -
Trade and other receivables 183,488 187,311
Current tax assets 4,389 814
Cash and cash equivalents 80,219 35,657
293,980 227,951
Total assets 547,713 449,634
Non-current liabilities
Lease liabilities (15,605) (10,733)
Retirement benefit obligation (641) (822)
Deferred tax liabilities (9,982) (7,363)
Provisions (338) (338)
(26,566) (19,256)
Current liabilities
Borrowings (52,000) -
Trade and other payables (207,244) (228,677)
Lease liabilities (8,975) (6,945)
Provisions (17,461) (15,359)
Liabilities directly associated with assets held for resale (29,077) -
(314,757) (250,981)
Total liabilities (341,323) (270,237)
Net assets 206,390 179,397
Share capital 7,914 7,913
Share premium account 66,419 66,419
Capital redemption reserve 3,896 3,896
Share based payments reserve 1,375 1,267
Retained earnings 126,786 99,902
Total equity 206,390 179,397
Group cashflow statement
for the year ended 30 September
2024 2023
(restated*)
£000 £000
Profit for the year from continuing operating activities 44,011 46,106
Share of post-tax trading result of joint ventures 199 154
Impairment and amortisation of intangible assets 5,960 6,014
Gain on remeasurement of existing equity asset - (2,164)
Research and development expenditure credit (4,894) (1,249)
Depreciation of property, plant and equipment and right of use assets 12,683 10,623
Profit on sale of property, plant and equipment (549) (822)
Increase in inventories (1,770) (1,440)
Increase in receivables (1,520) (10,670)
(Decrease)/increase in payables and provisions (4,593) 11,247
Charge in respect of share options 707 669
Settlement of share options (856) -
Finance income (791) (360)
Finance expense 1,738 1,219
Interest paid (1,828) (1,285)
Income taxes paid (16,243) (11,767)
Income tax expense 16,213 10,742
Net cash inflow from continuing operating activities 48,467 57,017
Net cash outflow from discontinued operating activities (4,032) (3,240)
Net cash inflow from operating activities 44,435 53,777
Investing activities
Interest received 791 360
Proceeds on disposal of property, plant and equipment 1,326 1,251
Purchases of property, plant and equipment (6,146) (5,414)
Acquisition of subsidiaries net of cash acquired (26,083) (13,324)
Net cash outflow from continuing investing activities (30,112) (17,127)
Net cash outflow from discontinued investing activities (545) (95)
Net cash outflow from financing activities (30,657) (17,222)
Financing activities
Dividends paid (14,506) (13,683)
Issue of share equity 1 68
New loan 72,000 23,000
Loan repayments (20,000) (23,000)
Repayments of obligations under lease liabilities (9,246) (7,501)
Net cash inflow/(outflow) from financing activities 28,249 (21,116)
Net increase in continuing cash and cash equivalents 46,604 18,774
Net decrease in discontinued cash and cash equivalents (4,577) (3,335)
Net increase in cash and cash equivalents 42,027 15,439
Cash and cash equivalents at beginning of year 35,657 20,218
Cash and cash equivalents at end of year 77,684 35,657
Bank balances and cash (Note 12) 77,684 35,657
* The comparatives have been restated due to the classification of a component
of the Group as a discontinued operation in the year. Please see Accounting
policies i) Basis of accounts and preparation for further details.
Notes
1 Basis of preparation
The consolidated financial statements for the year ended 30 September 2024
have been prepared in accordance with UK adopted International Accounting
Standards ("UK adopted IAS"). These preliminary results are extracted from
those financial statements.
Going concern
The Board has concluded that it is appropriate to adopt the going concern
basis, having undertaken a rigorous review of financial forecasts and
available resources. The Directors have robustly tested the going concern
assumption in preparing these financial statements, taking into account the
Group's liquidity position at 30 September 2025. The Directors have considered
the results of the stress testing of key assumptions and consider the
likelihood of events or circumstances that would impact the going concern
assessment as collectively remote. The Directors have reviewed the period to
31 December 2025.
Prior year
restatement
On 4 October 2024 Walter Lilly was sold to Size Group Holdings (see Note 11).
Management determined that, as a separate major line of business which met the
criteria to be classified as held for sale as at 30 September 2024, Walter
Lilly qualified as a discontinued operation. Under IFRS 5, the classification
of Walter Lilly as a discontinued operation results in the requirement to
separately present the totals of its result for the period and any gain or
loss on remeasurement on the face of the statement. IFRS 5 also requires that
these disclosures be re-presented for prior periods presented in the financial
statements. Accordingly, it was necessary to restate the comparative
information as originally reported in order to present the result of Walter
Lilly as discontinued
operations.
2 Segmental analysis
The Chief Operating Decision Maker ("CODM") is responsible for the overall
resource allocation and performance assessment of the Group. The Board
approves major capital expenditure and assesses the performance of the Group
and its progress against the strategic plan through monitoring key performance
indicators. The Board also determines key financing decisions such as raising
equity, all loan or bank borrowing arrangements and granting of security over
the Group's assets. As such the Group considers that the Board is the CODM.
As set out in the accounting policy, the Group's operating segments have been
identified at the level of the individual subsidiaries based on the
information provided to the CODM. However, these operating segments are then
combined to identify the externally reportable segments based on aggregation
criteria in IFRS 8. In previous years, having applied the aggregation
criteria, the Group identified two reportable segments - Engineering Services
and Specialist Building. Historically, the Specialist Building segment
comprised Walter Lilly and Allenbuild Limited. Walter Lilly was sold on 4
October 2024 and, as a separate major line of business, was classified as a
discontinued operation under IFRS 5 (see Note 1 Accounting policies prior year
restatement). Allenbuild Limited had previously been disposed of in October
2014.
As Walter Lilly represented the last remaining CGU in the Specialist Building
segment, and was classified as a discontinued operation at September 2024, the
Group now comprises a single operating segment - Engineering Services.
3 Exceptional items and amortisation of intangible assets 2024 2023
£000 £000
Costs associated with acquisitions 3,519 560
Total losses arising from exceptional items 3,519 560
Amortisation of intangible assets 6,184 6,245
Gain on remeasurement of existing equity interest - (2,161)
Total exceptional items and amortisation charge before income tax 9,703 4,644
Taxation credit on exceptional items and amortisation (1,558) (1,554)
Total exceptional items and amortisation charge 8,145 3,090
During the year the Group incurred £3.5m (2023: £0.6m) on acquisitions. The
costs this year included costs on Excalon £1.3m, Full Circle £1.3m and
£0.9m other.
On 25 November 2022, the Company acquired the whole of the issued share
capital of Enisca Group Limited which resulted in the Group owning 100% of
Enisca Browne Ltd. The Group previously owned 50% of this Company and
accounted for it as a joint venture using the equity method of accounting. As
a result, under IFRS 3 this is treated as a step acquisition where the
previously held equity interest is remeasured at its acquisition-date fair
value with the resulting gain recognised in the income statement.
4 Loss for the year from discontinued operations
The loss for the year from discontinued operations recognised in the Income
Statement of £2,440,000 (2023: £2,722,000) comprises:
- The profit after tax of Walter Lilly of £1,026,000 (2023: £954,000); and
- A loss of £3,466,000 (2023: £3,676,000) arising from ongoing costs
associated with the disposal of Allenbuild Ltd
Following the disposal of Walter Lilly on 4 October 2024, the trading results
have been reclassified as discontinued operations as reported in Note 14 to
the Annual Report & Accounts.
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. At the time of the disposal, the sale of this business
was accounted for as a discontinued operation.
During the year an additional provision of £3,466,000 (2023: £3,676,000) has
been recognised, and because this adjustment relates to uncertainties directly
related to the operations of Allenbuild before its disposal, this has been
classified within discontinued operations. This additional provision was as a
result of the settlement of historical 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 2024 2023
(restated*)
£000 £000
Current tax:
UK corporation tax on profits of the year (16,407) (12,143)
Adjustments in respect of previous period (668) 1,164
Total current tax (17,075) (10,979)
Deferred tax - defined benefit pension schemes (36) (29)
Deferred tax - other temporary differences 898 266
Total deferred tax 862 237
Income tax expense in respect of continuing activities (16,213) (10,742)
(b) Factors affecting income tax expense for the year 2024 2023
£000 £000
Profit before income tax 60,224 56,848
Profit multiplied by standard rate
of corporation tax in the UK of 25% (2023: 22%) (15,056) (12,507)
Effects of:
Expenses not deductible for tax purposes (1,139) (516)
Non-taxable income - 696
Change in tax rate 129 640
Adjustment in respect of tax losses 521 (143)
Adjustments in respect of previous period (668) 1,088
(16,213) (10,742)
Corporation tax rate increased from 19% to 25% from April 2023 so profits for
the prior year were subject to a blended rate of 22%.
Deferred tax has been provided at a rate of 25% (2023: 25%) 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 2024 has been calculated based on these
rates, reflecting the expected timing of reversal of the related temporary
timing differences (2023: 25%).
The Group has available further unused UK tax losses of £7.5m (2023: £23.1m)
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 £1.6m
(2023: £5.8m).
6 Dividends 2024 2023
Pence/share Pence/share
Interim (related to the year ended 30 September 2024) 6.33 6.00
Final (related to the year ended 30 September 2023) 12.00 11.33
Total dividend paid 18.33 17.33
£000 £000
Interim (related to the year ended 30 September 2024) 5,009 4,748
Final (related to the year ended 30 September 2023) 9,497 8,935
Total dividend paid 14,506 13,683
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 12.67p per Ordinary Share be paid in
respect of the year ended 30 September 2024. This will be accounted for in
the 2024/25
financial year.
7 Earnings per share
2024 2023
Earnings EPS DEPS Earnings EPS DEPS
£000 Pence Pence £000 Pence Pence
Earnings before exceptional items and amortisation 52,156 65.91 65.88 49,196 62.26 62.07
Exceptional items and amortisation (8,145) (10.30) (10.29) (3,090) (3.91) (3.89)
Basic earnings per share - continuing activities 44,011 55.61 55.59 46,106 58.35 58.18
Loss for the year from discontinued operations (2,440) (3.08) (3.08) (2,722) (3.44) (3.44)
Basic earnings per share 41,571 52.53 52.51 43,384 54.91 54.74
Weighted average number of shares ('000) 79,137 79,165 79,011 79,253
The dilutive effect of share options is to increase the number of shares by
28,000 (2023: 242,000) and reduce basic earnings per share by 0.02p (2023:
0.17p).
8 Preliminary financial information
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2024 or 2023. Statutory
accounts for 2023 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 2024 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.
9 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 ongoing
trading performance of the business by removing costs
such as amortisation, and one-off exceptional items which will not directly
impact the future cashflows and will mainly relate to the unrepeated cash
outflows incurred in acquiring a specific equity
investment.
Depreciation is not removed on the basis that the tangible and right of use
assets will be replaced at the end of their useful economic lives resulting in
future cash
outflows.
Furthermore, they believe that the Group's stakeholders use these APMs, for
example when assessing the performance of the Group against discounted cash
flow models, 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 - This is the cash and cash equivalents less 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 (£70.874m) and adjusted profit before tax
(£69.927m) - 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 ongoing performance of the Group. The
equivalent GAAP measures are operating profit (£61.171m) and profit before
tax (£60.224m).
Adjusted operating margin (6.7%) - This is calculated by dividing operating
profit before exceptional items and amortisation of intangible assets
(£70.874m) by Group revenue including share of joint venture (£1,056.985m)
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 ongoing
performance of the Group. The equivalent GAAP measure is operating profit
margin (6.1%) which is calculated by dividing operating profit (£61.171m)
from group revenue from continuing activities (£1,008.970m).
Adjusted earnings per share (65.91p) - 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 ongoing performance of the Group.
Group Revenue (£1,056.985m) - This measure is visible on the face of the
income statement as Revenue: Group including share of joint ventures.
Group order book - This measure is calculated by the Directors taking a
conservative view on secured orders and visible workload through long-term
frameworks.
10 Acquisition of subsidiary undertaking - TIS (Cumbria) Limited
On 26 October 2023, West Cumberland Engineering Ltd, a wholly-owned subsidiary
of Renew Holdings Plc, acquired the whole of the issued share capital of TIS
Cumbria Ltd ("TIS") for a gross cash consideration of £4.2m less a net
working capital adjustment of £1.3m. The net £2.9m acquisition cost was
funded from the Group's cash reserves. There is no deferred or contingent
consideration payable.
Based in Cumbria, TIS is a leading nuclear manufacturing and fabrication
specialist.
This acquisition will allow the Group to continue to support its existing
clients and take advantage of increasing demand across the decommissioning and
new nuclear build programmes. The added manufacturing capacity will allow
Renew to better support its existing clients, as well as strengthening its
broader market position. TIS represents an excellent strategic fit with the
Group's existing multidisciplinary nuclear capability, which offers attractive
long term structural growth opportunities underpinned by highly visible
committed regulatory spend in a sector where the Group has extensive
experience.
The fair value of the assets and liabilities of TIS at the date of acquisition
were:
Fair value
£000
Assets
Intangible assets 827
Property, plant and equipment 3,894
Right of use assets 26
Inventories 12
Trade and other receivables 390
Current tax asset 24
Total assets 5,173
Liabilities
Borrowings (1,281)
Lease liabilities (69)
Trade and other payables (1,353)
Deferred tax liabilities (254)
Total liabilities (2,957)
Total identifiable net assets at fair value 2,216
Goodwill arising on acquisition 702
Purchase consideration transferred 2,918
Goodwill of £702,000 arose on acquisition and is attributable to the
expertise and workforce of the acquired business.
Other intangible assets valued at £827,000, which represent customer
relationships and contractual rights, were also acquired and will be amortised
over their useful economic lives in accordance with IAS 38 and as defined
within accounting policy Note 1.v Intangible assets. Amortisation of this
intangible asset commenced from November 2023. Deferred tax has been provided
on this amount.
Right of use assets and obligations under finance leases
The Group measured the acquired lease liabilities using the present value of
the remaining lease payments at the date of acquisition. The right of use
assets were measured at an amount equal to the lease liabilities.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board reviewed the fair value of assets and
liabilities using information available during the 12 months after the date of
acquisition. No impairment was identified. Fair value has been calculated
using Level 3 inputs as defined by IFRS 13.
The fair value of trade and other receivables was £0.4m. The gross amount of
trade and other receivables was £0.4m and it is expected that the full
contractual amounts will be collected.
Transaction costs of £0.2m were expensed and are included in exceptional
items (please see Note 3).
From the date of acquisition, TIS has contributed £1.5m to revenue and £0.2m
to profit before tax from continuing operations of the Group. If the
acquisition of TIS had occurred on 1 October 2023, Group revenue from
continuing operations and profit before tax for the year ended 30 September
2024 would not be materially different from the results reported.
Acquisition of subsidiary undertaking - Route One Holdings (Wakefield) Ltd
On 9 April 2024, Carnell Group Holdings Ltd, a wholly-owned subsidiary of
Renew Holdings Plc, acquired the whole of the issued share capital of Route
One Holdings (Wakefield) Ltd ("Route One") for an Enterprise Value of £5.0m,
together with a working capital adjustment of £1.3m. The cash consideration
will be funded from the Group's existing cash resources, and there is no
deferred or contingent consideration payable.
Based in West Yorkshire, Route One is a multi-disciplinary specialist
engineering business operating in the UK Highways sector providing end-to-end
solutions for bridge deck maintenance and protection. Route One has a number
of long-term frameworks on the National Highways Scheme Delivery Frameworks
across England.
The acquisition represents an excellent strategic fit for the Group. Route
One will expand Carnell's offering by adding new capabilities to the Group's
highway business, with particular expertise in bridge and structures
maintenance and repairs. The UK Government's planned investment in the next
Road Investment Strategy (RIS 3) from 2025 to 2030 will provide good growth
opportunities, where the structures renewal programme has been identified as a
key priority.
The provisional fair value of the assets and liabilities of Route One at the
date of acquisition were:
Fair value
£000
Assets
Intangible assets 2,745
Property, plant and equipment 437
Right of use assets 234
Inventories 286
Trade and other receivables 1,691
Cash and cash equivalents 969
Total assets 6,362
Liabilities
Lease liabilities (572)
Trade and other payables (939)
Corporation tax (217)
Deferred tax liabilities (788)
Total liabilities (2,516)
Total identifiable net assets at fair value 3,846
Goodwill arising on acquisition 2,444
Purchase consideration transferred 6,290
Goodwill of £2,444,000 arose on acquisition and is attributable to the
expertise and workforce of the acquired business. Other intangible assets
valued at £2,745,000, which represent customer relationships and contractual
rights, were also acquired and will be amortised over their useful economic
lives in accordance with IAS 38 and as defined within accounting policy Note
1.v Intangible assets. Amortisation of this intangible asset commenced from
April 2024. Deferred tax has been provided on this amount.
Right of use assets and obligations under finance leases
The Group measured the acquired lease liabilities using the present value of
the remaining lease payments at the date of acquisition. The right of use
assets were measured at an amount equal to the lease liabilities.
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 during the 12 months after the date of
acquisition. Fair value has been calculated using Level 3 inputs as defined
by IFRS 13.
The fair value of trade and other receivables was £1.7m. The gross amount of
trade and other receivables was £1.7m and it is expected that the full
contractual amounts will be collected.
Transaction costs of £0.2m were expensed and are included in exceptional
items (please see Note 3).
From the date of acquisition, Route One has contributed £3.3m to revenue and
£0.1m to profit before tax from continuing operations of the Group.
If the acquisition of Route One had occurred on 1 October 2023, Group revenue
from continuing activities would have been approximately £1,016.0m and profit
before income tax for the year ended 30 September 2024 would be approximately
£60.4m.
Acquisition of subsidiary undertaking - Excalon Holdings Ltd
On 11 June 2024,Renew Holdings Plc, acquired the whole issued share capital of
Excalon Holdings Ltd ("Excalon") for a total consideration of £23.8m funded
from the Group's existing facilities. The acquisition represents an
excellent strategic fit for the Group, allowing Renew to expand into the
electricity transmission and distribution market. This is consistent with
the Group's strategy of targeting end markets where maintenance and renewals
programmes benefit from non-discretionary funding.
Excalon, based in Salford, is a leading infrastructure contractor specialising
in the provision of high voltage and extra high voltage infrastructure to the
UK electricity sector. Excalon has a number of long-term frameworks with
electricity Distribution Network Operators ("DNOs") across the UK. The UK
electricity DNO market is regulated by Ofgem and operates in 5-year control
period funding cycles. The RIIO ED2 cycle commenced in April 2023 with the
latest determination of funding set at £22.2bn. Entering this market allows
Renew to access both the opportunities in ED2 as well as the upgrade of the
grid that is required to support the UK's zero carbon. Additional
consideration of up to £2m will become payable in 2025 along with a further
£2m in 2026, conditional upon the vendors remaining with the businesses and
specific profit targets being achieved. The valuation of the business was
based on Excalon generating a sustainable EBITDA of at least £3m per annum
and the profitability of Excalon is expected to be in line with Renew's
current Engineering Services operating profit margin.
The provisional fair value of the assets and liabilities of Excalon at the
date of acquisition were:
Fair value
£000
Assets
Intangible assets 8,444
Property, plant and equipment 207
Right of use assets 2,740
Retirement benefit asset 508
Inventories 128
Trade and other receivables 8,060
Cash and cash equivalents 7,320
Total assets 27,407
Liabilities
Lease liabilities (2,238)
Trade and other payables (7,779)
Current tax liability (295)
Deferred tax liabilities (2,433)
Total liabilities (12,745)
Total identifiable net assets at fair value 14,662
Goodwill arising on acquisition 9,221
Purchase consideration transferred 23,883
Goodwill of £9,221,000 arose on acquisition and is attributable to the
expertise and workforce of the acquired business. Other intangible assets
valued at £8,444,000, which represent customer relationships and contractual
rights, were also acquired and will be amortised over their useful economic
lives in accordance with IAS 38 and as defined within accounting policy Note
1.v Intangible assets.
Amortisation of this intangible asset commenced from July 2024. Deferred tax
has been provided on this amount.
Right of use assets and obligations under finance leases
The Group measured the acquired lease liabilities using the present value of
the remaining lease payments at the date of acquisition. The right of use
assets were measured at an amount equal to the lease liabilities.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board reviewed the fair value of assets and
liabilities using information available during the 12 months after the date of
acquisition. No impairment was identified. Fair value has been calculated
using Level 3 inputs as defined by IFRS 13.
The fair value of trade and other receivables was £8.1m. The gross amount of
trade and other receivables was £10.0m and it is expected that the full
contractual amounts will be collected.
Transaction costs of £1.3m were expensed and are included in exceptional
items (please see Note 3).
From the date of acquisition, Excalon has contributed £16.9m to revenue and
£2.0m to profit before tax from continuing operations of the Group. If the
acquisition of Excalon had occurred on 1 October 2023, Group revenue from
continuing activities would have been approximately £1,056.8m and profit
before income tax for the year ended 30 September 2024 would be approximately
£63.3m.
11 Post balance sheet events
a) Disposal of Walter Lilly & Co Ltd
On 4 October 2024 the Company announced the disposal of Walter Lilly & Co.
Limited ("Walter Lilly") for a nominal net cash impact on a cash free/debt
free basis to Size Holdings Limited ("Size") (the "Disposal"), a leading
provider of premium quality construction, specialist crafts and maintenance
services. Size will assume any ongoing liabilities relating to Walter Lilly.
The disposal will enhance Group operating margins. Further details are
disclosed in Note 14 to the Annual Report &
Accounts.
b) Acquisition of Full Circle
On 7 October 2024 the Group announced that it has acquired Full Circle Group
Holding B.V. ("Full Circle" or the "Company"), a specialist provider of
repair, maintenance and monitoring services for onshore wind turbines in the
UK and Europe for a total cash consideration of €60.0m (£50.5m), funded
from the Group's existing cash resources and banking facilities (the
"Acquisition"). Full Circle was controlled and owned predominantly by
AtlasInvest Holding, the Belgian family holding specialised in the energy
sector
Acquisition Highlights
- Entry into the highly fragmented onshore wind services market which is
forecast to grow at 7.7% CAGR from 2024 to 2030 as both the UK and Europe seek
to deliver on their commitments to achieve Net Zero
2050 targets
- Technology-enabled platform providing 24/7 remote maintenance across nine
countries from a centralised control centre in Amersfoort, the Netherlands
- Attractive servicing model built on strong customer relationships, with
long-term, recurring full-scope contracts (c.7 years average remaining
contract duration with c.95% renewal rate)
- Strong financial profile: FY21-23 revenue CAGR of 25%, delivering 14%+ EBIT
margins which will be accretive to Group margins
- Excellent revenue visibility for FY25 and beyond with c.85% of Operations
and Maintenance (O&M) contracts already secured and a strong pipeline of
additional opportunities which gives overall revenue visibility for FY25 of
c.75%
- Trans-European presence with c.75% of revenue currently generated through UK
operations
- Experienced and committed management team in place to execute growth
strategy
- The acquisition is expected to be earnings enhancing to the Group in the
first full year of ownership, with ROIC in excess of the Group's cost of
capital by the third full year of ownership net working capital categories.
12 Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents
comprise the following at 30 September 2024:
2024 2023
£000 £000
Cash at bank 80,208 35,646
Cash in hand 11 11
80,219 35,657
Bank overdraft attributable to discontinued operation (2,535) -
77,684 35,657
Net cash APM (Note 9) 2024 2023
£000 £000
Cash and cash equivalents (as above) 77,684 35,657
Revolving credit facility (52,000) -
Net cash 25,684 35,657
13 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the year ended 30
September 2024 will be posted to shareholders as soon as practicable and a
copy will be made available on the Group's website:
www.renewholdings.com
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