REG-Renewi plc Renewi plc: Half Year Trading update

RenewiAnnouncement

01/10/2020 07:05

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   Renewi plc (RWI)
   Renewi plc: Half Year Trading update

   01-Oct-2020 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement that contains inside
   information according to REGULATION (EU) No 596/2014 (MAR), transmitted by
   EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   This announcement contains inside information

    

    

    

    

   1 October 2020

                                        

                                   Renewi plc

                                        

   ("Renewi", the "Company" or, together with its subsidiaries, the "Group")

                                        

                            Half Year Trading update

                                        

   Renewi  plc  (LSE:  RWI),   the  leading  international   waste-to-product
   business, announces its trading update for the period from 1 April 2020 to
   30 September 2020, in advance of the Group's interim results which will be
   issued on 10 November 2020.

    

   Highlights

    

     • Overall trading in  the first half  has been materially  ahead of  the
       Board's Covid-19 adjusted expectations
     • Good recovery in  Commercial volumes  during Q2  with Netherlands  now
       operating at 96% and Belgium at 90% of prior year
     • Cost savings of €10m delivered during  the first half, on track to  be
       ahead of the €15m expectation for the full year
     • Strong cash performance,  with a  cash inflow of  €63m to  the end  of
       August and  leverage  is  expected  to remain  below  2.9x  as  at  30
       September, broadly in line with pre-Covid-19 levels and well below the
       adjusted covenant of 5.5x
     • Liquidity remains strong in excess of €300m
     • ATM recovery on  track with  new silos  being installed  to store  new
       filler product
     • Renewi 2.0 programme  progressing well with  secured savings  slightly
       ahead of plan
     • Good progress with the  innovation pipeline, especially with  bio-LNG,
       construction materials and RetourMatras
     • Long-term drivers for sustained future earnings growth remain strong

    

   Trading and  cash  materially  ahead  of  the  Board's  Covid-19  adjusted
   expectations

    

   Stronger than expected volumes and effective cost action means that Renewi
   has materially  outperformed its  Covid-19  adjusted expectations  in  the
   first half.

    

   Commercial Waste Division has seen volumes continue to recover well during
   the second quarter and Renewi  maintained full operational capacity,  with
   only a few employees in Belgium on furlough.  In the Netherlands,  volumes
   recovered from 94% of prior year in  the first quarter to an expected  96%
   in the second quarter, with  strong construction and bulky waste  activity
   continuing  to  offset  weakness  in  commercial  roller  bin  collection,
   especially in  Covid-affected sectors  such as  hospitality.  In  Belgium,
   volumes have recovered from 76% of prior  year in the first quarter to  an
   expected 90% in the  second quarter.  An adverse  product mix and  reduced
   efficiencies in route collection have been partially offset by strong cost
   action.  Recyclate prices were significantly below last year, as expected.

    

   Mineralz & Water Division has performed as expected, with inbound  volumes
   weaker as a result  of Covid-19 and the  lower oil price reducing  sludges
   and contaminated water from shutdowns in Rotterdam. Specialities  Division
   has recovered  well  in  the  second  quarter,  with  volumes  picking  up
   especially strongly in Coolrec.

    

   Cost actions across the Group have delivered savings of €10m in the  first
   half, on track to be ahead of our previously announced target for the year
   of €15m.  These have included short term reductions in Board and executive
   salaries,  reduced  overtime,  use  of  temporary  staff  and  third-party
   services, and lower discretionary spend.

    

   Cash performance  has  also been  better  than expected.   Core  net  debt
   (excluding IFRS 16  lease liabilities)  at the  end of  August was  €407m,
   representing a  reduction of  €50m since  31 March  2020 and  leverage  is
   expected to remain below  2.9x as at 30  September 2020, with  significant
   headroom against the  adjusted covenant of  5.5x.  Days sales  outstanding
   has remained unchanged  on prior  year and levels  of customer  insolvency
   have so far remained low.

    

   Exceptional charges  are  expected  to  be in  line  with  the  previously
   announced cost of the Renewi 2.0 programme, with the sole addition of  €6m
   (€3m non-cash) relating to  the closure of two  production lines at  Ghent
   and Houthalen in Belgium.

    

   Good progress with value creating strategic initiatives

    

   Renewi outlined its new strategy with its full year results in June  2020,
   with three key initiatives to deliver additional earnings of up to €60m in
   the coming three to five years.

    

   The recovery of ATM has made good progress during the first half of 2020. 
   An initial shipment of thermally cleaned soil (TGG) was completed in  May.
   Further outlets  of up  to 1MT  are  in late  stage discussions  with  the
   relevant authorities  and some  are expected  to become  available in  the
   second half.  New silos for filler  and other storage equipment to  enable
   the separation of  cleaned soil  into construction  materials, like  sand,
   gravel and filler, are being installed and will be commissioned on time in
   the fourth  quarter.  The  order book  for contaminated  soil is  building
   steadily but projects may be subject to delay as a result of Covid-19.

    

   Our Renewi 2.0 programme has also made positive progress during the  first
   half.  Secured savings are slightly  ahead of plan, despite some  elements
   of the  programme deliberately  being delayed  due to  Covid-19.   Initial
   modules of two  projects namely  the MyRenewi customer  interface and  the
   digital procure-to-pay system are expected to go live in the second half.

    

   Good progress has also been made with the innovation pipeline, focused  on
   high quality secondary  materials for  the growing  circular economy.   In
   addition to  progress  at ATM  for  secondary construction  materials,  an
   agreement with Shell and Nordsol has been signed for the installation of a
   bio-LNG production unit at a Renewi facility.  Progress on other  projects
   in the portfolio will be presented with the interim results.

    

   Outlook

    

   The Board  remains  suitably  cautious about  the  macroeconomic  outlook,
   including  any  potential  future   slowdown  in  the  later-cycle   Dutch
   construction market and potential  further measures to contain  Covid-19. 
   However, given the resilience  of the Group's trading  in the first  half,
   which included  a  period of  extensive  lockdown measures  in  the  first
   quarter, the Board now  anticipates a performance for  the year ending  31
   March 2021 which  is materially  ahead of its  previous Covid-19  adjusted
   expectations.

    

   Longer term,  whilst  the  speed  and extent  of  economic  recovery  will
   influence our performance, waste volumes have historically been  resilient
   through cycles and the transition to increased recycling will continue  to
   support our business  model. The sustainability  agenda and the  potential
   for a "green recovery"  supported by the EU  and national governments  are
   expected to present attractive opportunities  for Renewi to convert  waste
   into  a  wider  range  of  high-quality  secondary  materials.  We  remain
   confident our three strategic growth initiatives - recovery of earnings at
   ATM, the Renewi 2.0 programme and  our innovation pipeline - will  deliver
   significant additional earnings over the next three years and beyond.

    

    

   For further information:
                             
    
   FTI Consulting           Renewi plc

   +44 20 3727 1545         +44 7976 321 540

   Susanne Yule             Adam Richford, Head of IR
   +44 20 3727 1340         +44 7773 813 180

   Richard Mountain         Michelle James, Communications
                             
                             

    

    1 www.renewiplc.com

   About Renewi

    

   Renewi is a leading waste to product  company that gives new life to  used
   materials every  day.  We  have  around 7,000  employees  working  at  174
   operating sites across Europe. Our extensive operational network means  we
   are always close to our customers.

    

   For Renewi, waste is a state of  mind, and an opportunity. Our many  years
   of knowledge  and experience,  combined with  a broad  range of  services,
   allow us  to  offer sustainable,  practical  recycling solutions.  We  use
   innovation and the latest technology  to turn waste into useful  materials
   such as paper,  metal, plastic, glass,  wood, building materials,  compost
   and energy. In  other words,  we turn  today's waste  into tomorrow's  raw
   materials.  The result  of our  work is  less waste  and contamination,  a
   smarter use of scarce raw materials, and a reduction in carbon  emissions.
   This means that we are contributing  towards a cleaner, circular world  in
   which we "waste no more".

    

   Visit our website for more information:  2 www.renewiplc.com.

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   ISIN:           GB0007995243
   Category Code:  TST
   TIDM:           RWI
   LEI Code:       213800CNEIDZBL17KU22
   OAM Categories: 3.1. Additional regulated information required to be
                   disclosed under the laws of a Member State
   Sequence No.:   85195
   EQS News ID:    1138037


    
   End of Announcement EQS News Service

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