TIDMRNWH
RNS Number : 8414H
Renew Holdings PLC
08 December 2020
8 December 2020
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Record results, well placed to benefit from increasing
investment in UK infrastructure
Renew (AIM: RNWH), the leading Engineering Services Group
supporting UK infrastructure, announces a set of record results for
the year ended 30 September 2020, reflecting the core strengths and
resilience of Renew's business model.
Financial Highlights
Year ended 30 September 2020 2020 2019 Change
GBPm GBPm
Group revenue(1) 620.4 600.6 +3.3%
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Adjusted operating profit(1) 39.6 38.3 +3.4%
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Operating profit 32.9 27.5 +19.3%
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Adjusted operating margin(1) 6.4% 6.4% 0.0%
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Profit before tax 32.1 27.0 +18.9%
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Adjusted earnings per share(1) 41.2p 40.4p +2.0%
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Full year dividend per share* 8.33p 11.50p -27.8%
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-- Group's order book at 30 September 2020 strengthened by c.20% to GBP692m (2019: GBP581m)
-- Net cash(1) position at 30 September of GBP0.3m (2019: net
debt GBP10.2m), supported by c.GBP17m VAT deferral and after
funding the acquisition of Carnell during the year for GBP38m
-- Post year end de-risking of balance sheet with completion of Lovell Pension Scheme buy-in
Operational Highlights
-- Engineering Services, accounting for over 90 per cent of the
Group's adjusted(1) operating profit, delivered revenue growth of
2.4% to GBP577.2m (2019: GBP563.8m)
-- Engineering Services adjusted(1) operating profit increased to GBP40.8m (2019: GBP39.4m)
-- Positive contribution from Carnell, acquired in January 2020,
which provides specialist engineering services to the UK's
strategic highways network
-- Group continued to win and renew long-term framework appointments across its chosen markets
Outlook
-- Group has continued to deliver uninterrupted,
mission-critical services to clients through both UK lockdown
periods
-- Majority of activities now at pre-pandemic levels across Group's markets
-- Continue to evaluate a pipeline of acquisition opportunities
-- Well positioned to capitalise on the UK Government's
committed infrastructure investment and the increased focus on
maintaining and renewing existing assets
Paul Scott, Chief Executive Officer of Renew, commented:
"During what has been a year without precedent, I have been
humbled by the way our people have risen to the challenge of
continuing to deliver the essential services that support the UK's
critical infrastructure upon which we all rely, every day. Our
priority at all times has been to ensure both the safety of our
workforce and the continuous delivery of essential renewal and
maintenance operations in our markets.
"The pandemic has demonstrated like never before the core
defensive strengths and resilience of our high quality, low risk,
value-accretive business model in providing 24/7 specialist
engineering services to our clients in complex, challenging and
regulated environments.
"Thanks to our differentiated and cash generative earnings
model, we delivered a record trading performance, with a solid
margin, strong cash flow and continued EPS growth. We continue to
focus on bolstering our performance with highly selective, value
enhancing acquisitions to strengthen our presence in key markets.
Following the acquisition of Carnell earlier in the year, which
facilitated our entry into the strategic highways network, I am
very pleased with its positive contribution to the Group's
results.
"The growth prospects within our industry are highly attractive,
driven by non-discretionary Government spending in relation to UK
infrastructure, a greater focus on sustainability and renewable
energy, population growth, technological innovation driving a shift
towards digital transport networks and smart cities, along with
increased regulation. Renew's businesses operate in markets
underpinned by sustainable, long-term structural growth dynamics
and committed regulatory spend.
"Trading in the new financial year has started well and we are
ideally positioned to play a significant role in the long-term
recovery opportunities that will emerge across UK infrastructure, a
sector that will play an important role in rebuilding the economy
over the next decade and beyond."
(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 10.
(*) No interim dividend paid to shareholders during the period.
Final dividend of 8.33p per share represents an increase of 8.6 per
cent over the prior year final dividend of 7.67p.
Analyst & Investor Webinar
A virtual meeting for sell-side analysts and investors will be
held at 10:30am today, 8 December 2020, the details of which can be
obtained from FTI Consulting.
For further information, please contact:
Renew Holdings plc www.renewholdings.com
Paul Scott, Chief Executive Officer via FTI Consulting
Sean Wyndham-Quin, Chief Financial 020 3727 1000
Officer
Numis Securities Limited (Nominated
Adviser)
Stuart Skinner/ Kevin Cruickshank 020 7260 1000
FTI Consulting (Financial PR) 020 3727 1000
Alex Beagley / James Styles Renew@fticonsulting.com
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
About Renew Holdings plc
Renew Holdings Group plc is a leading UK Engineering Services
business, performing a critical role in keeping the nation's
infrastructure functioning efficiently and safely. The Group
operates through independently branded subsidiaries across its
chosen markets, delivering non-discretionary maintenance and
renewal tasks through its highly skilled, directly employed
workforce.
Renew's activities are focused into two business streams.
Specialist Engineering, which accounts for over 95 per cent of the
Group's adjusted operating profit, focuses on the key markets of
Rail, Infrastructure, Energy (including Nuclear) and Environmental
which are largely governed by regulation and benefit from
non-discretionary spend with long-term visibility of committed
funding.
Specialist Building focuses on the High Quality Residential and
Science markets in London and the Home Counties.
For more information please visit the Renew Holdings plc
website: www.renewholdings.com
Chairman's Statement
Introduction
Despite the challenges of Covid-19, the Group is pleased to
announce a record revenue performance, sustained profit growth and
strong cash generation, all of which exceeded last year's
performance and reflect the core defensive strengths and resilience
of Renew's business model.
Following an excellent trading result in the first half of the
year, the Group continued to make strong progress in the second
half including winning and renewing long-term framework
appointments across our markets. We expanded into the Highways
market with the acquisition of Carnell, a company that delivers
specialist engineering services across the strategic road network.
We continue to focus on delivering essential asset maintenance and
critical infrastructure renewals which are underpinned by
non-discretionary regulatory requirements.
Results
Group revenue(1) increased to GBP620.4m (2019: GBP600.6m) with
adjusted operating profit(1) increasing to GBP39.6m (2019:
GBP38.3m). Statutory operating profit was GBP32.9m (2019:
GBP27.5m). The adjusted EPS(1) was 41.22p (2019: 40.43p) and basic
earnings per share was 26.78p (2019: 29.55p). The Group is also
pleased to report a return to net cash(1) of GBP0.3m (2019: net
debt GBP10.2m), in line with our expectations.
Covid-19
Covid-19 presented challenges across our entire business
although it also served to highlight the importance of the
mission-critical services we provide in the Rail, Infrastructure,
Energy and Environmental sectors. The initial lockdown, and
subsequent ongoing Government restrictions, have necessitated many
changes to our working practices. Our priority from the start has
been to ensure both the safety of our workforce and the continuous
delivery of essential renewal and maintenance operations. Our
employees continue to tirelessly implement Covid-19 precautions,
often in extremely difficult environments. The Group's culture of
robust governance, risk management and focus on health and safety
have together provided a strong platform from which we have been
able to continue to operate whilst delivering uninterrupted
services for our customers.
People
Our employees are critical to the continued success of the Group
and the Board would like to sincerely thank all its employees for
their ongoing dedication and hard work in what have been, and
remain, extremely difficult circumstances both at work and at
home.
Differentiated business model
Our differentiated business model and the services we provide to
support key infrastructure assets are more critical than ever,
providing the Group with ongoing growth opportunities across our
chosen markets. These markets enjoy committed funding which
provides visible, reliable and resilient revenues via long-term
maintenance and renewal programmes. We deliver non-discretionary
maintenance and renewals tasks and have little exposure to the
financial and contractual risks of larger enhancement schemes.
Operating in complex, challenging and highly regulated
environments, our markets have high barriers to entry and we
directly employ a highly skilled workforce which enables us to be
extremely responsive to our clients' needs.
Dividend
The Covid-19 pandemic saw the Board take a number of decisive
actions to preserve cash and protect liquidity. One of the prudent
measures, taken in April 2020, was the suspension of the Group's
interim dividend which would ordinarily have been paid to
shareholders in July 2020. We have continued to review our dividend
policy whilst understanding the importance of the dividend to our
shareholders. The Group's strong trading performance, cash position
and positive outlook has given the Board the confidence to propose
a final dividend of 8.33p per share, an increase of 8.6 per cent
over the prior year final dividend of 7.67p. This will be paid on 5
March 2021 to shareholders on the register as at 29 January 2021,
with an ex-dividend date of 28 January 2021. As no interim dividend
was paid to shareholders, this will represent a full year dividend
of 8.33p per share (2019: 11.50p). In the absence of unforeseen
circumstances, or a material adverse impact on trading caused by a
worsening of the Covid-19 situation, we expect dividend payments to
continue in line with our pre-Covid dividend policy going
forward.
Governance
We have continued to develop our approach to corporate
governance in the year. 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
Risk management is led by the Board, which reviews the Group's
risk profile on an ongoing basis alongside the Audit and Risk
Committee. Subsidiary management teams are responsible for the
effective embedding and monitoring of the Board's agreed risk
management protocols and the Executive Directors provide regular
updates to the Board on the principal risks and controls across the
Group.
Board effectiveness
During the year, the Nomination Committee reviewed the Board's
structure and composition and undertook a detailed effectiveness
review, in order to ensure it continues to have the balance of
skills and experience to deliver the Group's strategy. Diversity in
its widest sense remains an area of focus as we move through
2021.
Board change
On 1 March 2020, we were pleased to announce the appointment of
Stephanie Hazell as a Non-executive Director. Stephanie has over 20
years' relevant experience working in high profile businesses
including PricewaterhouseCoopers LLP, Orange SA, Virgin Management
Ltd and National Grid Plc where she held the position of director,
strategy and corporate development. She is an industrial partner at
Infracapital and a non-executive director for a number of its
investments.
Future focus
The Board is committed to building on its track record of
consistently creating shareholder value through the delivery of its
strategic priorities whilst focusing on its environmental, social
and governance responsibilities. The Group is supported in the
delivery of its long-term strategy through its effective
relationships with our directly employed workforce, customers,
suppliers, shareholders, and wider stakeholders which are critical
to the continued success of our business.
Renew is a leading provider of engineering services and operates
in attractive markets underpinned by long-term growth drivers and
non-discretionary Government spending. Growth, both organic and
through strategic earnings-enhancing acquisitions, is focused on
maintenance and renewals tasks in markets where non-discretionary
spending programmes exist to maintain critical infrastructure. Our
differentiated business model and the reliable long-term nature of
the UK infrastructure markets give the Board continued confidence
in the Group's future and the significant growth opportunities
ahead.
David M Forbes
Chairman
8 December 2020
(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 10.
Chief Executive's Review
Introduction
Renew is a leading provider of essential engineering services to
critical UK infrastructure networks, operating in regulated markets
including rail, highways, telecommunications, civil nuclear, water
and environmental. In March, the UK Government committed to a
record GBP640bn(2) investment in the UK's infrastructure and we
expect to benefit from an increased focus on maintaining and
renewing assets. These markets are underpinned by regulatory
requirements and therefore benefit from committed long-term
spending cycles and a visible pipeline of opportunities. This
exposure to non-discretionary, reliable and regulated expenditure
fully supports our low risk, high quality and value accretive
earnings model.
Covid-19
The pandemic has helped to fully demonstrate the core strengths
of Renew's differentiated business model. Despite the many
challenges presented by Covid-19, we have delivered extraordinary
and record results for the Group and strengthened our position
across our markets. This highlights our defensive characteristics
and the importance of our role in keeping the nation's
infrastructure functioning efficiently and safely at all times.
I am incredibly proud of the way our entire workforce continues
to deliver uninterrupted, mission-critical infrastructure services
to our clients despite challenging working environments and the
introduction of stringent Covid-19 protection measures across all
our sites. We remain focused on the health, safety and wellbeing of
all our employees and stakeholders.
Operations across our key sectors were designated critical to
the Covid-19 response and, as such, demand for our directly
delivered maintenance and renewal services remained strong with
over 80% of our operations continuing throughout the peak of the
first lockdown period. Since then, the majority of the Group's
operations have returned to levels similar to those experienced
prior to the pandemic across all of our markets, with the exception
of our nuclear operations at Sellafield where we do not expect the
site to be fully operational until April 2021.
At the interim results in May, the Group announced the actions
it had taken to preserve cash and protect liquidity. These included
the deferral of all non-essential capital expenditure, a hiring
freeze, deferral of VAT payments, utilisation of the Government's
Coronavirus Job Retention Scheme ("CJRS") and a temporary 20%
reduction in the salaries/fees of the Board and senior management,
as well as the suspension of an interim dividend payment to
shareholders. These measures, as well as the core defensive
qualities of our operating model and our resilience, have proven to
be extremely effective in responding to the challenges of Covid-19
whilst strengthening the Group's balance sheet.
As encouraged by the UK Government, we utilised the CJRS to
protect and retain jobs when the initial lockdown restrictions came
into force resulting in a temporary interruption to our services.
Given the positive progress we have made since then, and the fact
that the majority of our activities have returned to pre-pandemic
levels, we are no longer utilising the scheme and it is our
intention not to do so unless there are even tougher restrictions
imposed which start to affect our markets.
Currently the Group's working capital facilities include a
GBP44.2m revolving credit facility provided by HSBC UK Bank plc and
National Westminster Bank plc, expiring in January 2024 and a
GBP10m unsecured overdraft facility. The Group's cash generation
continued to be very strong in the second half of the year and we
returned to a small net cash position of GBP0.3m at the year end.
Our available cash and bank facilities mean we had headroom of
approximately GBP68m as at 30 September 2020. This position was
bolstered by the deferment of c.GBP17m of VAT that will now be paid
in the 2021 financial year.
Market drivers
Renew's businesses operate in markets underpinned by
sustainable, long-term structural growth dynamics and committed
regulatory spend. Increasing demand for the maintenance and renewal
of existing UK infrastructure is driven by a number of long-term
economic factors including:
-- a commitment by the Government to invest GBP640bn(2) in the UK's infrastructure;
-- greater focus on sustainability and climate change, the net
zero target, flood risk and investment in renewables and
electrification programmes;
-- population growth increasing the pressure on housing, energy,
water and demand for natural resources;
-- technological innovation driving a shift towards digital
roads, smart cities and the transformation of transport and
telecommunications networks; and
-- increased Government regulation.
Our track record of growth and long-term value creation
Renew has a strong track record of sustainable value creation
across the economic cycle. Over the past five years, we have
delivered:
-- adjusted earnings per share(1) growth of 58 per cent;
-- an increase in our adjusted operating margin(1) growth from
3.9 per cent to 6.4 per cent; and
-- revenue(1) growth of 19 per cent.
Our track record of reliable revenue growth and cash generation
has resulted in our ability to deliver highly predictable organic
earnings growth and funding for the acquisition of complementary
businesses that meet our strategic requirements.
Results
Despite the impact of Covid-19, the Group delivered an
extraordinary and record trading performance, with strong cash flow
and continued EPS growth. This performance reflects our
industry-leading capabilities, the fundamental strengths of our
differentiated, low-risk business model and the critical support
services we provide to clients in complex, challenging and
regulated environments.
Group revenue(1) increased to GBP620.4m (2019: GBP600.6m) with
an adjusted(1) operating profit of GBP39.6m (2019: GBP38.3m) and a
maintained adjusted(1) operating margin of 6.4% (2019: 6.4%). As at
30 September 2020 the Group had a net cash(1) position of GBP0.3m
(2019: net debt GBP10.2m) reflecting the Group's continued focus on
cash generation and conservative approach to gearing. These results
include a contribution from Carnell, a leading provider of
specialist engineering services on the strategic highways network.
Acquired in January 2020, the business continues to perform in line
with expectations. The Group's order book(1) at 30 September 2020
has strengthened to GBP692m (2019: GBP581m).
During the year, we conducted a detailed review of the remaining
liabilities relating to Allenbuild Limited, a business that was
sold in 2014. As a consequence of this review we have determined
that an additional provision of GBP5.3m is required to enable us to
deal with these legacy contractual issues. This is shown as a loss
for the year from discontinued operations in the Group income
statement.
We are pleased to report that after the end of the financial
year, the Trustees of the Lovell Pension Scheme, in consultation
with the Board of Renew, entered into a "buy-in" agreement with
Rothesay Life plc. This transaction significantly de-risks the
Group's balance sheet, further reduces the Group's pension exposure
risks and improves its cashflow in the medium term.
Engineering Services
Our Engineering Services activities, which account for over 90
per cent of the Group's adjusted(1) operating profit, delivered
revenue of GBP577.2m (2019: GBP563.8m) with an adjusted(1)
operating profit of GBP40.8m (2019: GBP39.4m) resulting in an
operating margin of 7.1% (2019: 7.0%). At 30 September 2020, the
Engineering Services order book was GBP603m (2019: GBP542m).
Continued positive momentum in our rail and telecommunications
businesses helped drive this strong performance as well as a
contribution from Carnell, which has performed well and leaves the
Group ideally positioned to capitalise on the growth opportunity
across the UK's strategic highways network.
Rail
Our largest customer, Network Rail, will invest GBP53bn(3) over
Control Period 6 ("CP6"), the current five year investment cycle,
which runs to 2024, with an increased focus on operational support
and maintenance compared to the previous CP5 period. In addition,
the Government is committed to its rail decarbonisation programme,
including a significant investment in electrification programmes,
as part of the overall UK target to deliver net zero by 2050.
As a major provider of multidisciplinary maintenance and
renewals engineering services to Network Rail, we support the
day-to-day operation of the rail network nationally, directly
delivering essential asset maintenance through our long-term CP6
frameworks. The Group now holds in excess of fifty CP6 maintenance
and renewals frameworks across all disciplines, covering the entire
UK rail network.
During the year we secured new positions on the CP6 Wales and
Western five year renewals frameworks across all five lots, where
we will deliver a programme of engineering services to assets
across the rail network including bridges, embankments, tunnels,
signalling and electrification and plant. We were also awarded an
additional rail drainage framework in Scotland, complementing our
existing rail drainage framework positions. We have existing
frameworks for the delivery of multidisciplinary maintenance and
renewals, minor signalling, geotechnical and earthworks,
devegetation, slab track, station information and security systems
and telecoms. We also provide a 24/7 emergency support service
across the rail network and during the period we responded to
significant events at Stonehaven and Falkirk.
We remain committed to adding value through innovation. We have
developed bespoke and unique solutions for devegetation, tunnel
maintenance and drainage to deliver safer and more sustainable
working practices that create high barriers to new entrants.
Since the lockdown restrictions were imposed in March, we have
seen our planned work for our rail customers continue with minimal
disruption, albeit with enhanced safety requirements in place to
comply with the Government's Covid-19 guidelines.
Infrastructure
Highways
The UK Government has committed to an investment of GBP27.4bn(4)
in the strategic road network over the next five years, as part of
its second Road Investment Strategy ("RIS2"). GBP11.9bn of this
funding will be ringfenced for operations, maintenance and
renewals, a significant increase from the GBP5.1bn(5) invested in
RIS1. This represents an attractive growth opportunity for Renew
and in January 2020 we announced the acquisition of Carnell, a
leading provider of specialist engineering services on the
strategic road network. Carnell directly delivers non-discretionary
renewals and maintenance through long-term framework agreements,
employing plant-led technologies as part of its unique range of
services deployed across the highways network.
Operating nationally, Carnell has built strong relationships
with key public and private sector clients, including its largest
customer, Highways England, for which it is one of only three
suppliers working across all Asset Delivery Areas. During the
period, Carnell performed in line with expectations and saw a
number of its existing frameworks extended as well as securing a
new Asset Delivery Framework for Highways England in the East
Region.
Carnell works closely with its clients and suppliers to develop
innovative solutions to improve safety, sustainability and value in
the delivery of drainage, infrastructure, specialist surveys and
highways technology across the strategic road network. In the last
year it recycled 53,000m(3) of filter drain using its STONEmaster
and STABLEdrain systems. This saved 62,000 litres of fuel and
reduced HGV journeys saving over 500 tonnes of CO(2) and was
recognised with an International Green Apple Award for
environmental best practice. Carnell was also awarded the HRH
Prince Michael International Road Safety Award for its mobile road
worker protection system SAFETYcam.
During the Covid-19 restrictions, our activities in Highways
have continued at levels similar to those seen prior to the
pandemic. We remained operational across all Highways England areas
which is reflective of the resilience of this new market sector for
Renew.
Wireless Telecoms
The Wireless Telecoms market continues to grow significantly as
5G networks are rolled out. The Government is investing GBP5bn(2)
to roll out gigabit broadband across the UK, a significant
component of which is 5G. In addition, the four major UK network
operators are also making significant investments in the deployment
of 5G.
Delivering all aspects of wireless telecoms infrastructure,
including 4G and 5G deployment, maintenance and decommissioning
services, we have long-term relationships with all the main UK
network operators, equipment vendors and managed service providers.
In the period, we have seen a significant increase in work across
all our frameworks as the 5G roll-out programme accelerates. We
were awarded positions on both Telefonica's and MBNL's new three
year 5G services frameworks as well as a contract to deliver
Telefonica's microwave services for the next two years.
In March 2020, the Government announced it would also invest
GBP500m(6) in the Shared Rural Network, a programme to extend 4G
mobile coverage to 95% of the UK. Collaboration between the main
network operators will see them provide 220 new sites in rural
areas that are currently without coverage. We have already secured
a large portion of the site search activities and this places us in
a strong position to deliver a full acquire, design and construct
turnkey programme.
Following the Government's announcement to remove Huawei
equipment from the UK's 5G networks by 2027, we are currently
working with EE and BT to deliver 95 trial sites in Hull, London
and Cardiff, and we expect to see significant growth in this
programme over the next three years.
Wireless telecoms was designated critical to the Covid-19
response and, as such, we continued to support the network
operators where it remained safe for our employees to do so. Our
multi-skilled, direct delivery teams have continued to provide a
responsive service with limited interruption.
Energy
Nuclear
As a major mechanical, electrical and instrumentation
("ME&I") services contractor, our operations in the nuclear and
chemical process environment focus on decontamination and
decommissioning services, operational support and asset care.
Working for over 75 years in civil nuclear, we deliver a
multidisciplinary service through our large complement of highly
skilled employees who operate to demanding nuclear standards.
The Nuclear Decommissioning Authority ("NDA") spends c.GBP3bn(7)
per annum on its nuclear decommissioning programme across its 17
nuclear licensed sites in the UK and we continue to support sites
that command approximately 90 per cent of this expenditure. The
Government's total nuclear decommissioning provision is estimated
at GBP124bn(8) over the next 120 years, with around 75% of the
total spend allocated to Sellafield which is the largest of the
NDA's sites and where we remain a principal ME&I
contractor.
Operating on the major Decommissioning Delivery Partnership
Framework, which runs to 2026, we deliver work across some of the
most hazardous areas of Sellafield including waste retrieval from
legacy storage ponds and silos. Our activities include
decontamination, decommissioning and waste management. Our
long-term frameworks include the SR&DP Asset Care, Magnox Swarf
Storage Silo, Bundling Spares and Tanks and Vessels Frameworks.
During the period, we were appointed to both lots of the four year
Fabrication and Machining Spares Framework for the delivery of
highly engineered nuclear components and we remain strongly
positioned for future opportunities that will emerge from the major
projects programme at the site.
In line with nuclear safety protocols, the Sellafield site
suspended the majority of operations at the start of the Covid-19
lockdown in March. The mobilisation of work programmes and
decommissioning at Sellafield continues to gain momentum; however,
we do not expect to be fully operational until April 2021. At
Springfields, where we deliver operational support and
decommissioning activities, we have seen a significant increase in
activity since the lockdown and we have recently been appointed to
a major programme of works associated with the decommissioning of
the Magnox Island.
We continue to build on our relationship with Rolls Royce to
secure further opportunities since our appointment to the Diesel
Generator Programme at Hinkley Point "C".
Thermal power and networks
Our essential engineering maintenance services continue at four
of the UK's thermal power stations at near normal levels. We remain
operational on the Minor Works Framework with National Grid as well
as securing a Minor Civils Framework with Western Power
Distribution in the period.
Environmental
Water
In the current five year investment period, AMP7 (which runs
from 2020 to 2025), an estimated c.GBP50bn(9) will be spent,
representing a 16% increase from AMP6, with higher expenditure
committed to capital maintenance and asset optimisation. Additional
investment is allocated to deliver supply resilience including dam
safety and infrastructure refurbishment schemes. These long-term
renewal programmes require sustained investment through our
clients' operational expenditure budgets.
For D r Cymru Welsh Water ("DCWW"), we continue to operate
across the region on the Pressurised Pipelines Framework, the Major
Civils Framework and the Capital Delivery Alliance Civils &
Pipeline Framework. In addition to ongoing maintenance and renewals
tasks, we have provided extensive 24/7 emergency reactive works
across the water network, in particular supporting the response to
the disruption caused by severe storms early in 2020. During the
year we were awarded seven schemes as part of DCWW's dam safety
programme, enhancing our position as an approved dam safety
contractor and providing ongoing opportunities.
Works continue with Wessex Water and Bristol Water as they
develop their plans for AMP7. With our new client Yorkshire Water,
we will carry out engineering works to existing assets on
operational treatment and distribution facilities over the next
five years through the AMP7 Minor Civils Framework where we have
recently been awarded our first project. Additionally, we were
appointed to a treatment works scheme for new client Thames
Water.
The Government has committed record investment of GBP5.2bn(2)
over a six year period to improve flood defences nationally. Our
clients in this market include the Environment Agency and the Canal
and River Trust where we deliver essential maintenance and
improvement works nationally. We continue to build on our success
with other water clients working for Scottish Canals, Peel Ports
and Natural Resources Wales during the year.
Work continues for all our water clients with minimal disruption
albeit with enhanced safety precautions in place to comply with the
UK Government's strict Covid-19 safety guidelines. The essential
nature of the maintenance and renewals tasks we undertake on the
water network ensured we remained fully operational across all
frameworks.
Land Remediation and Specialist Restoration
In Land Remediation during the year, we experienced significant
disruption across our site activities due to the Covid-19 pandemic.
This was particularly the case in Scotland where all of our schemes
were suspended during the first lockdown. All activity had returned
to pre-pandemic levels by July with enhanced safety protection
measures in place in line with the UK Government's Covid-19
guidelines.
In Specialist Restoration, despite a temporary cessation of
works, our operations at the Palace of Westminster have been at
normal capacity since June. During the period we have also been
appointed to a new five year conservation framework at this UNESCO
World Heritage Site.
Specialist Building
We specialise in the High Quality Residential and Science
markets in London and the Home Counties.
Revenue was in line with the Group's expectations at GBP43.2m
(2019: GBP36.1m) reflecting a continued focus on contract
selectivity and risk management. Operating profit was GBP1.0m
(2019: GBP0.9m), with an operating margin of 2.3% (2019: 2.4%). In
Specialist Building, the order book was GBP89m (2019: GBP39m).
During the initial lockdown period in March, we experienced some
disruption in the High Quality Residential sector in London
although operations returned to pre-pandemic levels by July. The
Group continues to be selective in these markets where we have a
long-established track record. During the period, work continued
uninterrupted on our critical science schemes for Defra and the MRC
London Institute of Medical Science where we continue to make good
progress.
New and emerging markets
As part of the Group's growth ambition, we entered the Highways
market with the acquisition of Carnell which delivers renewal and
maintenance services across the strategic highways network. We also
continue to explore opportunities for our existing portfolio of
subsidiaries to work together and to leverage their skills and
capabilities to enter adjacent market segments and exploit new
emerging opportunities.
Health and safety
We continue to make health and safety a priority, ensuring safe
working practices for the Group's employees and those who work with
us.
Our progress during the year was overshadowed by an accident in
April when our colleague Aden Ashurst was fatally injured in the
performance of his duties as a Controller of Site Safety. This
incident remains the subject of ongoing investigations and our
thoughts remain with the family, friends and colleagues of Aden who
lost his life in the conduct of delivering essential rail
services.
In addition to our ongoing safety programmes, the Covid-19
pandemic has necessitated significant changes to working practices
across all our operations to ensure we are able to continue to
operate safely whilst implementing the Government's Covid-19
prevention guidelines.
Sustainability
At Renew, our vision is to safely and responsibly deliver
essential engineering services to support and maintain the
country's key infrastructure assets. Our specialist engineering
services help to future-proof the critical infrastructure upon
which millions of people rely as they go about their day-to-day
business, from the rail network to roads and telecoms to the energy
we use. A long-term approach to sustainability has therefore always
been at the heart of our business.
We continue to align our business with the ESG requirements of
our stakeholders and during the year we further developed our
sustainability strategy which is now reported in five key areas:
customer value, climate action, operating responsibly, engaging our
people and supporting our local communities.
The pandemic has intensified the world's focus on climate change
and during the year we have introduced a number of initiatives
including trialling the use of electric powered plant. We have also
been rolling out the installation of electric vehicle charging
points at our offices and depots which supports our growing fleet
of electric vehicles and reduces the carbon footprint of our
operations.
This is our first year of reporting under the Streamlined Energy
and Carbon Reporting ("SECR") regulations which will provide us
with a baseline for future reporting and to ensure we continue to
support the UK target to deliver net zero carbon by 2050.
Outlook
These results demonstrate the resilient and long-term nature of
the UK infrastructure markets in which we operate and provide a
solid platform for our continued growth ambitions. The UK
Government remains committed to investing in infrastructure over
the long-term, and the Group's market leading capabilities mean we
are well positioned as a partner of choice in a number of
infrastructure sectors to take advantage of this investment.
Since the Covid-19 societal restrictions were imposed, we have
continued to demonstrate a safe and pro-active response to a
continuous demand for our essential services. This situation has
prevailed since the second lockdown was enforced on the 5 November
2020 and we have continued to operate safely, in compliance with
the latest guidance and without any reduction in the levels of
service demand. Given our positive progress, with the majority of
our activities at pre-pandemic levels, we do not intend to further
utilise the Government's Coronavirus Job Retention Scheme.
Our entry into the Highways market has broadened our offering
into a compelling new growth area and we continue to seek
opportunities in markets with similar characteristics of
non-discretionary regulated investment, ongoing renewal and
maintenance requirements and high barriers to entry. Our clients
have clear spending plans underpinned by strategic national need,
regulatory commitments and essential maintenance requirements
delivered through long-term programmes of investment, providing
visibility of spend over regulatory cycles.
Our differentiated and resilient business model, highly skilled
directly employed workforce and proven track record provide us with
a competitive advantage which is fundamental to the Group's success
in its chosen markets.
The Board remains confident that Renew is strongly positioned to
play a significant role in the long-term recovery opportunities
that will emerge across UK infrastructure, a sector that will play
an important role in rebuilding the economy over the next decade
and beyond.
Paul Scott
Chief Executive
8 December 2020
References:
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 10
2 HM Treasury Budget 2020 12 March 2020
3 Network Rail Delivery Plan Control Period 6 High Level
Summary 26 March 2020
4 Department for Transport Road Investment Strategy 2: 2020-2025
March 2020
5 Department for Transport Road Investment Strategy: for
the 2015/16-2019/20 Road Period March 2015
6 UK Government press release 'GBP1bn deal to end poor rural
mobile coverage agreed' 9 March 2020
7 Nuclear Decommissioning Authority Business Plan 1 April
2020 to 31 March 2023
8 UK Government Nuclear Provision: the cost of cleaning up
Britain's historic nuclear sites 4 July 2019
9 Renew estimates from water companies' business plans
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
of of
amortisation intangible amortisation intangible
of of
intangible assets intangible assets
(see Note (see Note
assets 3) Total assets 3) Total
2020 2020 2020 2019 2019 2019
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue: Group
including share
of joint venture 620,375 - 620,375 600,631 - 600,631
Less share of
joint venture's
revenue - - - (709) - (709)
Group revenue
from continuing
activities 2 620,375 - 620,375 599,922 - 599,922
Cost of sales (527,274) - (527,274) (514,299) - (514,299)
Gross profit 93,101 - 93,101 85,623 - 85,623
Administrative
expenses (53,453) (6,741) (60,194) (47,390) (10,788) (58,178)
Share of post-tax
result of joint
venture (39) - (39) 96 - 96
Operating profit 2 39,609 (6,741) 32,868 38,329 (10,788) 27,541
Finance income 44 - 44 50 - 50
Finance costs (1,343) - (1,343) (1,244) - (1,244)
Other finance
income - defined
benefit pension
schemes 532 - 532 615 - 615
Profit before
income tax 2 38,842 (6,741) 32,101 37,750 (10,788) 26,962
Income tax expense 5 (6,905) 1,146 (5,759) (7,306) 2,601 (4,705)
Profit for the
year from continuing
activities 31,937 (5,595) 26,342 30,444 (8,187) 22,257
Loss for the
year from discontinued
operations 4 (5,590) -
Profit for the
year attributable
to equity holders
of the parent
company 20,752 22,257
Basic earnings
per share from
continuing activities 7 34.00p 29.55p
Diluted earnings
per share from
continuing activities 7 33.72p 29.34p
Basic earnings
per share 7 26.78p 29.55p
Diluted earnings
per share 7 26.57p 29.34p
Group statement of comprehensive income
for the year ended 30 September
2020 2019
GBP000 GBP000
Profit for the year attributable to equity holders
of the parent company 20,752 22,257
Items that will not be reclassified to profit or
loss:
Movement in actuarial valuation of the defined benefit
pension schemes (2,775) 3,543
Movement on deferred tax relating to the pension
schemes 971 (1,240)
Total items that will not be reclassified to profit
or loss (1,804) 2,303
Items that are or may be reclassified subsequently
to profit or loss:
Exchange movement in reserves (23) 28
Total items that are or may be reclassified subsequently
to profit or loss (23) 28
Total comprehensive income for the year attributable
to
equity holders of the parent company 18,925 24,588
Group statement of changes
in equity
for the year ended
30 September
Share
Share Capital Cumulative based
Share premium redemption translation payments Retained Total
capital account reserve adjustment reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2018 7,527 51,684 3,896 1,311 698 10,355 75,471
Transfer from income
statement for the year 22,257 22,257
Dividends paid (7,905) (7,905)
New shares issued 6 220 226
Recognition of share
based
payments (122) (122)
Exchange differences 28 28
Actuarial movement recognised
in pension schemes 3,543 3,543
Movement on deferred
tax relating to the
pension schemes (1,240) (1,240)
At 30 September 2019 7,533 51,904 3,896 1,339 576 27,010 92,258
Transfer from income
statement for the year 20,752 20,752
Dividends paid (5,778) (5,778)
New shares issued 323 14,474 14,797
Recognition of share
based
payments 245 245
Exchange differences (23) (23)
Actuarial movement recognised
in pension schemes (2,775) (2,775)
Movement on deferred
tax relating to the
pension schemes 971 971
At 30 September 2020 7,856 66,378 3,896 1,316 821 40,180 120,447
Group balance sheet
At 30 September
2020 2019
GBP000 GBP000
Non-current assets
Intangible assets - goodwill 124,691 105,282
- other 23,062 9,463
Property, plant and equipment 14,806 20,932
Right of use assets 17,481 -
Investment in joint venture - 139
Retirement benefit asset 28,059 25,554
Deferred tax assets 2,164 1,416
210,263 162,786
----------- ------------------
Current assets
Inventories 1,619 2,632
Assets held for resale 1,500 1,500
Trade and other receivables 129,838 118,623
Current tax assets 2,174 -
Cash and cash equivalents 13,396 11,667
------------------
148,527 134,422
----------- ------------------
Total assets 358,790 297,208
----------- ------------------
Non-current liabilities
Borrowings (4,373) (13,123)
Lease liabilities (9,347) -
Obligations under finance leases - (3,214)
Deferred tax liabilities (14,252) (10,598)
Provisions (441) (452)
------------------
(28,413) (27,387)
----------- ------------------
Current liabilities
Borrowings (8,752) (8,752)
Trade and other payables (192,370) (164,450)
Lease liabilities (6,047) -
Obligations under finance leases - (2,546)
Current tax liabilities - (1,804)
Provisions (2,761) (11)
----------- ------------------
(209,930) (177,563)
----------- ------------------
Total liabilities (238,343) (204,950)
----------- ------------------
Net assets 120,447 92,258
----------- ------------------
Share capital 7,856 7,533
Share premium account 66,378 51,904
Capital redemption reserve 3,896 3,896
Cumulative translation adjustment 1,316 1,339
Share based payments reserve 821 576
Retained earnings 40,180 27,010
Total equity 120,447 92,258
----------- ------------------
Group cashflow statement
for the year ended 30 September
2020 2019
GBP000 GBP000
Profit for the year from continuing operating activities 26,342 22,257
Share of post-tax trading result of joint venture 39 (96)
Impairment and amortisation of intangible assets 5,529 6,528
Defined benefit pension scheme guaranteed minimum
pension equalisation - 4,260
Depreciation of property, plant and equipment and
right of use assets 9,672 5,561
Profit on sale of property, plant and equipment (483) (621)
Decrease/(increase) in inventories 301 (210)
Decrease in receivables 1,465 7,769
Increase/(decrease) in payables and provisions 17,010 (15,239)
Current and past service cost in respect of defined
benefit pension scheme 69 46
Cash contribution to defined benefit pension schemes (4,747) (5,279)
Charge/(credit in) respect of share options 245 (122)
Finance income (44) (50)
Finance expense 811 629
Interest paid (1,343) (1,244)
Income taxes paid (8,179) (5,524)
Income tax expense 5,759 4,705
-------- --------
Net cash inflow from continuing operating activities 52,446 23,370
Net cash (outflow)/inflow from discontinued operating
activities (592) 71
Net cash inflow from operating activities 51,854 23,441
-------- --------
Investing activities
Interest received 44 50
Dividend received from joint venture 100 80
Proceeds on disposal of property, plant and equipment 725 939
Purchases of property, plant and equipment (3,756) (2,619)
Acquisition of subsidiaries net of cash acquired (40,512) -
-------- --------
Net cash outflow from investing activities (43,399) (1,550)
-------- --------
Financing activities
Dividends paid (5,778) (7,905)
Issue of share equity 14,797 226
Loan repayments (8,750) (8,750)
Repayments of obligations under lease liabilities (6,972) (3,076)
-------- --------
Net cash outflow from financing activities (6,703) (19,505)
-------- --------
Net increase in continuing cash and cash equivalents 2,344 2,315
Net (decrease)/increase in discontinued cash and
cash equivalents (592) 71
-------- --------
Net increase in cash and cash equivalents 1,752 2,386
Cash and cash equivalents at beginning of year 11,667 9,179
Effect of foreign exchange rate changes on cash and
cash equivalents (23) 102
Cash and cash equivalents at end of year 13,396 11,667
-------- --------
Bank balances and cash 13,396 11,667
-------- --------
Notes
1 International Financial Reporting Standards
The consolidated financial statements for the year ended 30
September 2020 have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). These preliminary results
are extracted from those financial statements.
2 Segmental analysis
The Group is organised into two operating business segments plus
central activities which form the basis of the segment information
reported below. These segments are:
Engineering Services, which comprises the Group's engineering
activities which are characterised by the use of the Group's
skilled engineering workforce, supplemented by specialist
subcontractors where appropriate, in a range of civil, mechanical
and electrical engineering applications;
Specialist Building, which comprises the Group's building
activities which are characterised by the use of a supply chain of
subcontractors to carry out building works under the control of the
Group as principal contractor; and
Central activities, which include the sale of land, the leasing
and sub-leasing of some UK properties and the provision of central
services to the operating subsidiaries.
Group revenue Group
revenue
from continuing from continuing
activities activities
Revenue is analysed 2020 2019
as follows:
GBP000 GBP000
Engineering Services 577,238 563,769
Specialist Building 43,207 36,125
Inter segment revenue (2,025) (1,461)
---------------- ----------------
Segment revenue 618,420 598,433
Central activities 1,955 1,489
----------------
620,375 599,922
---------------- ----------------
Before
exceptional Exceptional
items and items and
amortisation amortisation
of intangible of intangible
assets assets
2020 2020 2020 2019
GBP000 GBP000 GBP000 GBP000
Engineering
Services 40,754 (6,741) 34,013 32,622
Specialist Building 1,014 - 1,014 882
Segment operating profit 41,768 (6,741) 35,027 33,504
Central activities (2,159) - (2,159) (5,963)
-------------- -------------- -------- --------
Operating profit 39,609 (6,741) 32,868 27,541
Net financing
costs (767) - (767) (579)
-------------- -------- --------
Profit on ordinary activities
before income tax 38,842 (6,741) 32,101 26,962
-------------- -------------- -------- --------
Engineering Services segment operating profit for the year ended
30 September 2019 is stated after charging exceptional costs of
GBP260,000 and amortisation of GBP6,528,000, resulting in a total
charge before taxation of GBP6,788,000. Central activities incurred
GBP4,000,000 exceptional cost in the comparative year. Total
amortisation and exceptional costs before taxation in the
comparative year amounted to GBP10,788,000 (see Note 3).
3 Exceptional items and amortisation of intangible assets
2020 2019
GBP000 GBP000
Defined benefit pension scheme
guaranteed minimum pension equalisation - 4,260
Acquisition
costs 1,212 -
-------- --------
Total losses arising from
exceptional items 1,212 4,260
Amortisation of intangible
assets 5,529 6,528
-------- --------
Total exceptional items and amortisation
charge before income tax 6,741 10,788
Taxation credit on exceptional items
and amortisation (1,146) (2,601)
-------- --------
Total exceptional items and amortisation
charge 5,595 8,187
-------- --------
Acquisition costs relate to the acquisition of Carnell on 30
January 2020.
On 26 October 2018, the High Court handed down a judgment
involving the Lloyds Banking Group's defined benefit pension
schemes. The judgment concluded the schemes should be amended to
equalise pension benefits for men and women in relation to
guaranteed minimum pension benefits. The issues determined by the
judgment arise in relation to many other defined benefit pension
schemes. The impact of additional liabilities amounted to
GBP260,000 for the Amco Pension Scheme and GBP4,000,000 for the
Lovell Pension Scheme.
The Board has separately identified the charge of GBP5,529,000
(2019: GBP6,528,000) for the amortisation of the fair value
ascribed to certain intangible assets, other than goodwill, arising
from the acquisitions of Giffen Holdings Ltd, QTS Group Ltd and
Carnell Group Holdings Ltd.
4 Loss for the year from discontinued operations 2020 2019
GBP000 GBP000
Revenue - -
Expenses (5,590) -
-------- -------
Loss before income tax (5,590) -
Income tax charge - -
-------- -------
Loss for the year from discontinued
operations (5,590) -
-------- -------
During the year the group completed the closure of Lovell
America Inc having incurred GBP271,000 additional costs in
finalising historical taxation issues. Once any surplus cash has
been repatriated, the group will no longer have any overseas
exposure.
On 31 October 2014, the Board reached an agreement to sell
Allenbuild Ltd to Places for People Group Ltd. As a term of the
disposal Renew Holdings plc retained both the benefits and the
obligations associated with a number of Allenbuild contracts which
have resulted in the requirement for an additional GBP5,319,000
accrual. This is as a result of new latent defects coming to light
during the financial year and a subsequent internal reassessment of
the costs required to settle other known contractual disputes.
5 Income tax expense
(a) Analysis of expense in
year 2020 2019
GBP000 GBP000
Current tax:
UK corporation tax on profits
of the year (5,732) (5,291)
Adjustments in respect of previous
period 216 208
--------
Total current tax (5,516) (5,083)
-------- --------
Deferred tax - defined benefit pension
schemes (1,848) (556)
Deferred tax - other timing
differences 1,605 934
-------- --------
Total deferred tax (243) 378
-------- --------
Income tax expense in respect of
continuing activities (5,759) (4,705)
-------- --------
(b) Factors affecting income tax expense
for the year
2020 2019
GBP000 GBP000
Profit before income
tax 32,101 26,962
-------- --------
Profit multiplied by
standard rate
of corporation tax in the UK of 19%
(2019: 19%) (6,099) (5,123)
Effects of:
Expenses not deductible for
tax purposes (297) (114)
Timing differences not provided in
deferred tax 433 326
Change in tax rate (12) (2)
Adjustments in respect of previous
period 216 208
-------- --------
(5,759) (4,705)
-------- --------
Timing differences not provided for in deferred tax arise
principally from the utilisation of tax losses not previously
recognised.
Deferred tax has been provided at a rate of 19% (2019: 17%)
following the decision that the UK corporation tax rate should
remain at 19% (effective from 1 April 2020) and substantively
enacted on 17 March 2020. The Group has available further unused UK
tax losses of GBP29.3m (2019: GBP31m) 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 GBP4.0m (2019: GBP4.5m).
6 Dividends
2020 2019
Pence/share Pence/share
Interim (related to the year ended 30 September
2020) - 3.83
Final (related to the year ended 30 September
2019) 7.67 6.67
------------ ------------
Total dividend
paid 7.67 10.50
------------ ------------
GBP000 GBP000
Interim (related to the year ended 30 September
2020) - 2,885
Final (related to the year ended 30 September
2019) 5,778 5,020
------------ ------------
Total dividend
paid 5,778 7,905
------------ ------------
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 8.33p per
Ordinary Share be paid in respect of the year ended 30 September
2020. This will be accounted for in the 2020/21 financial year.
7 Earnings per share
2020
Earnings EPS DEPS Earnings 2019 DEPS
GBP000 Pence Pence GBP000 EPS Pence
Pence
Earnings before exceptional
items and amortisation 31,937 41.22 40.89 30,444 40.43 40.13
Exceptional items
and amortisation (5,595) (7.22) (7.17) (8,187) (10.88) (10.79)
--------- ------- ------- --------- -------- --------
Basic earnings per
share - continuing
activities 26,342 34.00 33.72 22,257 29.55 29.34
Loss for the year
from discontinued
operations (5,590) (7.22) (7.15) - - -
--------- ------- ------- ---------
Basic earnings
per share 20,752 26.78 26.57 22,257 29.55 29.34
--------- ------- ------- --------- -------- --------
Weighted average
number of shares 77,480 78,114 75,308 75,856
------- ------- -------- --------
The dilutive effect of share options is to increase the number
of shares by 634,000 (2019: 548,000) and reduce basic earnings per
share by 0.21p (2019: 0.21p).
8 Acquisition of subsidiary undertaking - Carnell Group Holdings
Ltd (formerly Agger Ltd)
On 30 January 2020, the Company acquired the whole of the issued
share capital of Carnell Group Holdings Ltd ("Carnell") for a cash
free/debt free consideration of GBP38m, after excluding a
locked-box working capital adjustment. The acquisition was funded
by a placement of 3,157,894 new ordinary shares raising GBP15m
gross and an expanded revolving credit facility provided by HSBC UK
Bank plc and National Westminster Bank plc.
The provisional value of the assets and liabilities of Carnell
at the date of acquisition were:
Book value Adjustments Fair value
GBP000 GBP000 GBP000
Non-current assets
Intangible assets - goodwill 12,142 7,267 19,409
- other - 19,128 19,128
Property, plant and equipment 905 - 905
13,047 26,395 39,442
----------- ------------ -----------
Current assets
Inventories 20 - 20
Trade and other receivables 13,523 - 13,523
Current tax
asset 540 - 540
Cash and cash equivalents 3,203 - 3,203
17,286 - 17,286
----------- ------------ -----------
Total assets 30,333 26,395 56,728
----------- ------------ -----------
Non-current liabilities
Deferred tax liabilities - (3,634) (3,634)
- (3,634) (3,634)
----------- ------------ -----------
Current liabilities
Trade and other payables (9,379) - (9,379)
(9,379) - (9,379)
----------- ------------ -----------
Total liabilities (9,379) (3,634) (13,013)
----------- ------------ -----------
Net assets 20,954 22,761 43,715
----------- ------------ -----------
Goodwill of GBP19,409,000 arises on acquisition and will be
reviewed annually for impairment. The goodwill is attributable to
the expertise and workforce of the acquired business. Other
intangible assets provisionally valued at GBP19,128,000, which
represent customer relationships and contractual rights, were also
acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this
amount. Amortisation of this intangible asset commenced from
February 2020.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value
of assets and liabilities using information available up to 12
months after the date of acquisition. Fair value has been
calculated using Level 3 inputs as defined by IFRS 13.
Deferred tax liabilities
A deferred tax liability has been recognised in relation to the
amortisation of other intangible assets.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for
impairment as required by IFRS 3. No such impairment was
identified.
If the acquisition of Carnell had occurred on 1 October 2019,
Group revenue would have been approximately GBP638m and profit
before tax for the year ended 30 September 2020 would have been
approximately GBP32.4m.
9 Preliminary financial information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2020
or 2019. Statutory accounts for 2019 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 2020 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.
10 Alternative performance measures
Renew uses a variety of alternative performance measures ('APM')
which, although financial measures of either historical or future
performance, financial position or cash flows, are not defined or
specified by IFRSs. The Directors use a combination of APMs and
IFRS measures when reviewing the performance, position and cash of
the Group.
The Directors believe that APMs provide a better understanding
of the underlying trading performance of the business because they
remove the impact of non-trading related accounting adjustments.
Furthermore, they believe that the Group's shareholders use these
APMs when assessing the performance of the Group and it is
therefore appropriate to give them prominence in the Annual Report
and Accounts.
The APMs used by the Group are defined below:
Net Cash/(Debt) - This is the cash and cash equivalents less
bank debt. This measure is visible in Note 32 in the Annual Report
& Accounts. The Directors consider this to be a good indicator
of the financing position of the Group.
Adjusted operating profit (GBP39.609m) and adjusted profit
before tax (GBP38.842m) - Both of these measures are reconciled to
total operating profit and total profit before tax on the face of
the consolidated income statement. The Directors consider that the
removal of exceptional items and amortisation provides a better
understanding of the underlying performance of the Group. The
equivalent GAAP measures are operating profit (GBP32.868m) and
profit before tax (GBP32.101m).
Adjusted operating margin (6.4%) - This is calculated by
dividing operating profit before exceptional items and amortisation
of intangible assets (GBP39.609m) by group revenue including share
of joint venture (GBP620.375m) both of which are visible on the
face of the income statement. The Directors believe that removing
exceptional items and amortisation from the operating profit margin
calculation provides a better understanding of the underlying
performance of the Group. The equivalent GAAP measure is operating
profit margin (5.3%) which is calculated by dividing operating
profit (GBP32.868m) from
group revenue including share of joint venture
(GBP620.375m).
Adjusted earnings per share (41.22p) - This measure is
reconciled to the earnings per share calculation based on earnings
before exceptional items and amortisation in Note 7. The Directors
believe that removing exceptional items and amortisation from the
EPS calculation provides a better understanding of the underlying
performance of the Group.
Group Revenue (GBP620.375m) - This measure is visible on the
face of the income statement as Revenue: Group including share of
joint venture.
Group order book, Engineering Services order book and Specialist
Building order book - This measure is calculated by the Directors
taking a conservative view on secured orders and visible workload
through long-term frameworks.
Engineering Services revenue (GBP577.238m) - This measure is
visible in Note 2 business analysis as Engineering Services Revenue
including share of joint venture. The Directors consider this to be
a good indicator of the underlying performance of the Group's
Engineering Services business.
Adjusted Engineering Services operating profit (GBP40.754m) -
This measure is visible in Note 2 business analysis as Engineering
Services operating profit before exceptional items and amortisation
of intangible assets. The Directors consider this to be a good
indicator of the underlying performance of the Group's Engineering
Services business. The GAAP equivalent measure is engineering
services operating profit (GBP34.013m) which is also visible in
Note 2 part (a).
Adjusted Engineering Services operating profit margin (7.1%) -
This is calculated in the same way as adjusted operating profit
margin but based on the adjusted Engineering Services operating
profit (GBP40.754m) and the Engineering Services revenue
(GBP577.238m) figures as set out above. The equivalent GAAP measure
is engineering services operating profit margin (5.9%) which is
calculated by dividing engineering services operating profit
(GBP34.013m) from engineering services revenue including share of
joint venture (GBP577.238m).
11 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the
year ended 30 September 2020 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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END
FR UBUURRWUURUA
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December 08, 2020 02:00 ET (07:00 GMT)
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