TIDMRNWH
RNS Number : 0395V
Renew Holdings PLC
09 December 2021
9 December 2021
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Record year underpinned by strong organic growth; uniquely
positioned to capitalise on compelling growth opportunities in our
end markets
Renew (AIM: RNWH), the leading Engineering Services Group
supporting UK infrastructure, announces its preliminary results for
the year ended 30 September 2021 ("the period").
Financial Highlights
Year ended 30 September 2021 FY2021 FY2020 Change
GBPm GBPm
Group revenue(1) GBP791.0m GBP620.4m +27.5%
---------- ---------- -------
Adjusted operating profit(1) GBP51.2m GBP39.6m +29.3%
---------- ---------- -------
Operating profit GBP41.1m GBP32.9m +25.2%
---------- ---------- -------
Adjusted operating margin(1) 6.5% 6.4% +10bps
---------- ---------- -------
Profit before tax GBP40.8m GBP32.1m +26.9%
---------- ---------- -------
Adjusted earnings per share(1) 50.5p 41.2p +22.5%
---------- ---------- -------
Final dividend per share 11.17p 8.33p +34.1%
---------- ---------- -------
-- Group order book of GBP749m (2020: GBP692m)
-- Strong organic revenue growth of 19 per cent, underpinned by
continued positive momentum in Rail business, along with framework
wins and operational progress across diverse Engineering Services
business
-- Full year dividend of 16.0p per share reflects Group's strong
cash generation and positive outlook
-- De-risking of balance sheet with completion of Lovell Pension Scheme buy-in
Operational Highlights
-- Acquisition of Browne for GBP29.5m in March 2021, adding
material scale to the Group's water business in line with strategic
objectives
-- Added Thames Water, Affinity Water and Southern Water as new clients during the period
-- Acquisition of REL in May 2021 adding a unique skillset to
the Group with a view to supporting the Government's rail
decarbonisation programme
-- Engineering Services adjusted operating profit(1) of GBP51.5m (2020: GBP40.8m)
-- Good progress made against our quantitative sustainability
targets outlined in our interim results in May
-- Proud holder of London Stock Exchange's Green Economy Mark
Current Trading & Outlook
-- Positive trading momentum carried into new financial year
-- Strong forward order book underpins confidence in achieving further progress in 2022
-- Confident in our future prospects and well positioned to
capitalise on our strengths to target new opportunities in
attractive markets
Paul Scott, CEO of Renew, commented:
"2021 was another record year for the Group and I am pleased
with the progress that has been made across all divisions. The
essential nature of our work combined with the resilience of our
low-risk, high-quality operating model has been a key driver for
growth, as we continued to operate through the numerous lockdown
and tiering scenarios experienced during the year. The two
acquisitions that we completed have strengthened our offering in
water and rail and both are delivering to plan.
"I am pleased to report that we have carried forward this
positive trading momentum into the new financial year and have a
strong forward order book which underpins our confidence in
achieving further progress in 2022. As we look further ahead, we
are committed to building on our strengths to target new
opportunities in attractive markets where we have the skillset to
deliver mission-critical engineering infrastructure solutions for a
sustainable future."
(1) Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 11.
Analyst & Investor Webinar
A virtual meeting for sell-side analysts and investors will be
held at 11:15am today, 9 December 2021, the details of which can be
obtained from FTI Consulting using the contact details below.
For further information, please contact:
Renew Holdings plc via FTI Consulting
Paul Scott, Chief Executive Officer 020 3727 1000
Sean Wyndham-Quin, Chief Financial Officer
Numis Securities Limited (Nominated Adviser
& Broker)
Stuart Skinner / Kevin Cruickshank 020 7260 1000
Peel Hunt LLP (Joint Broker)
Mike Burke / Harry Nicholas / Charles
Batten 020 7418 8900
FTI Consulting (Financial PR) 020 3727 1000
Alex Beagley / Sam Macpherson / Rafaella Renew@fticonsulting.com
de Freitas
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) prior to its release as part of this
announcement.
About Renew Holdings plc
Renew Holdings Group plc is a leading UK Engineering Services
business, performing a critical role in keeping the nation's
infrastructure functioning efficiently and safely. The Group
operates through independently branded subsidiaries across its
chosen markets, delivering non-discretionary maintenance and
renewal tasks through its highly skilled, directly employed
workforce.
Renew's activities are focused into two business streams.
Engineering Services, which accounts for over 95 per cent of the
Group's adjusted operating profit, focuses on the key markets of
Rail, Infrastructure, Energy (including Nuclear) and Environmental
which are largely governed by regulation and benefit from
non-discretionary spend with long-term visibility of committed
funding.
Specialist Building focuses on the High Quality Residential and
Science markets in London and the Home Counties.
For more information please visit the Renew Holdings plc
website: www.renewholdings.com
Chairman's Statement
Introduction
The Group is pleased to announce a record financial performance,
with continued growth in revenue and profit and strong operating
cash generation, which reflects the core strengths of the Group and
our well-established positions in attractive and sustainable growth
markets as well as the resilience of Renew's business model.
In addition to good organic growth, the Group continued to make
strategic progress during the year, expanding our presence in the
water market with the acquisition of Browne, a respected provider
of specialist engineering services across the water infrastructure
network. We also acquired REL, a specialist provider of rail
overhead line electrification, in order to support the Government's
rail decarbonisation programme.
Differentiated business model
Our differentiated business model and the services we provide
continue to support key infrastructure assets in regulated markets.
Our markets enjoy committed funding which p rovides visible,
reliable and resilient revenues via long-term programmes. We
deliver non-discretionary maintenance and renewals tasks and have
little exposure to the financial and contractual risks of larger
enhancement schemes. Operating in complex, challenging and highly
regulated environments, our markets have high barriers to entry and
we directly employ a highly skilled workforce which enables us to
be extremely responsive to our clients' needs.
Results
Group revenue (1) increased to GBP791.0m (2020: GBP620.4m) with
adjusted operating profit (1) increasing to GBP51.2m (2020:
GBP39.6m) and an adjusted (1) operating margin of 6.5% (2020:
6.4%). Statutory operating profit was GBP41.1m (2020: GBP32.9m).
The adjusted EPS (1) was 50.51p (2020: 41.22p) and b asic earnings
per share was 38.73p (2020: 26.78p). The Group had a net debt (1)
position of GBP13.7m (2020: net cash GBP0.3m), in line with our
expectations.
Dividend
The Group's strong trading performance, cash position and
positive outlook give the Board the confidence to propose a final
dividend of 11.17p (2020: 8.33p) per share, an increase of 34 per
cent. This will be paid on 4 March 2022 to shareholders on the
register as at 28 January 2022, with an ex- dividend date of 27
January 2022. This will represent a full year dividend of 16.0p
(2020: 8.33p) per share.
People
Our employees are critical to the continued success of the Group
and the Board would like to sincerely thank all its employees for
their ongoing dedication and hard work.
Safety
Our priority remains to ensure both the safety of our workforce
and continued delivery of essential renewal and maintenance
operations. The Group's culture of robust governance, risk
management and a focus on health and safety has together provided a
strong platform from which we have been able to continue to operate
over the last twelve months whilst delivering uninterrupted
services for our customers.
ESG
Environmental
We understand the role we must play as a business in taking
action to address the emissions we produce. We are committed to
achieving net zero by no later than 2040, ahead of the 2050 target
date set by the Government.
We are pleased to maintain our London Stock Exchange's Green
Economy Mark which recognises those companies that derive more than
50 per cent of revenue from products and services that are
contributing to environmental objectives. Renew plays an important
role in helping to achieve government aims for greater sustainable
infrastructure.
Social
As a business we strive to leave a lasting positive impact in
the work we undertake. During the year our businesses have engaged
with local schools and education providers, supported their local
communities and undertook a range of charity events.
Governance
As a Board, we are responsible for ensuring the effective
application of high levels of governance within our business,
balancing the interests of all our stakeholders. As a minimum, the
Group complies with the QCA Corporate Governance Code, more details
of which can be found in the corporate governance section of the
Group's website.
Risk management is led by the Board, which reviews the Group's
risk profile on an ongoing basis alongside the Audit and Risk
Committee. Subsidiary management teams are responsible for the
effective embedding and monitoring of the Board's agreed risk
management protocols and the Executive Directors provide regular
updates to the Board on the principal risks and controls across the
Group.
Further details of the Group's ESG progress and strategy are set
out in the 2021 Annual Report and Accounts.
Board changes
At the same time as our annual results, we announced the
appointment of Louise Hardy as a Non-executive Director. Louise
will augment the breadth of skills and experience on the Board as
the Group continues to grow. Further details of Louise's experience
are included in that announcement and in the Annual Report.
Having served on the Board for just over ten years and in
accordance with best practice, I have decided that it is time to
step down as Chairman and from the Board. I have worked with my
fellow Directors to identify the skills and experience required of
a prospective Chairman and the Board has undertaken an exercise to
find my replacement. That exercise is largely complete and the
Board remains confident that this process will conclude in the new
year and that a strong candidate will be appointed.
At the request of the Board, I have agreed to remain as Chairman
until that appointment is finalised which I expect to be no later
than Spring 2022, at which point I will step down from the
Board.
In accordance with the Group's normal rules, a resolution
approving my re-election as a Director will be put to shareholders
at the forthcoming Annual General Meeting. On the basis that this
is only for a short transitional period, I hope that the
shareholders will vote in favour of these arrangements.
I have been fortunate to serve on this Board during a time of
substantial growth in profitability and shareholder value. In most
part this has been down to an exceptional, focused and diligent
management team, past and present, who have implemented sound
strategic thinking aimed at looking after the interests of all
stakeholders including employees, shareholders, creditors and
pensioners. I am proud of what has been achieved over my time with
the Group.
Future focus
The Group is supported in the delivery of its long-term strategy
through effective relationships with our directly employed
workforce, customers, suppliers, shareholders, and wider
stakeholders and these are critical to the continued success of the
business. Building on our track record of consistently creating
shareholder value we will continue to deliver our strategic
priorities whilst focusing on our environmental, social and
governance responsibilities. Our approach to equality, diversity
and inclusion will also be a focus area as we move through 2022 and
beyond.
The Board expects to continue to deliver growth, both organic
and through strategic earnings-enhancing acquisitions. We remain
focused on markets with high barriers to entry and where
non-discretionary spending programmes exist to maintain critical
infrastructure. Our differentiated business model and the reliable
long-term nature of the UK infrastructure markets give the Board
continued confidence in the Group's future and the significant
growth opportunities ahead.
David M Forbes
Chairman
9 December 2021
(1) Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 11.
Group Chief Executive Officer's Review
Building on positive momentum
The Group's impressive outperformance over the year reflects the
underlying qualities and differentiated nature of our high-quality,
low-risk business model combined with the strong demand we have
seen in our chosen end markets as the UK's infrastructure-led
economic recovery gathers pace.
At Renew, we are committed to delivering engineering
infrastructure solutions for a sustainable future. We perform a
critical role in keeping the nation's infrastructure functioning
efficiently and safely as a leading provider of essential
maintenance and renewals-led engineering services, operating in
regulated markets including rail, highways, mobile
telecommunications, civil nuclear, water and environmental.
As part of the UK Government's pledge to level up the economy
and reach net-zero carbon emissions by 2050, it has committed to a
record GBP650bn(2) investment in transforming the UK's
infrastructure and we are already benefiting from an increased
focus on maintaining and renewing assets as part of this shift.
Renew has a vital role to play in supporting the green and
sustainable infrastructure of the future and we have made good
progress on our own sustainability targets this year.
Once again the Group demonstrated its resilience during the
year, where two national lockdowns had no material impact on
trading. This highlights Renew's ability to deliver consistently,
thanks to our differentiated business model, the critical nature of
our work and the committed, long-term, highly visible spending
cycles that underpin our end markets.
We delivered a further improvement in organic growth, which,
combined with our robust balance sheet and strong cash generation,
gives us the firepower and flexibility to invest in selective
value-accretive M&A opportunities. During the period we
acquired Browne, a water-focused engineering services business
based in London, which strengthens our exposure to the GBP51bn(3)
water sector, bringing new clients into the Group, including Thames
Water, Southern Water, Affinity Water and South East Water. Our
wholly owned subsidiary, QTS Group Limited, acquired Rail
Electrification Limited ("REL") which complements Renew's existing
rail offering and enables the Group to support the Government's
commitment to a net-zero rail network by 2050.
As we reflect on another successful performance and look to the
future with confidence, underpinned by our strong order book, I
would like to place on record my gratitude, on behalf of the Board,
to all our dedicated colleagues who made these results possible by
delivering an uninterrupted, highly responsive service for clients
at all times.
Renew's strengths
Renew has a number of core strengths which provide distinct
competitive advantages in our chosen markets and leave us well
placed to build on our strong track record of long-term value
creation:
-- The health, safety and wellbeing of our people remains our
number one priority and we have implemented safe working practices
for the Group's employees.
-- We operate a differentiated, diversified, low-risk,
low-capital operating model, providing critical asset maintenance
and renewals services that are not dependent on large, high-risk,
capital-intensive contract awards.
-- Our directly employed workforce enables us to provide a more
efficient and valuable service to our clients, reducing our
exposure to sub-contractor pricing volatility and being able to
deliver extremely responsive solutions.
-- Our businesses are well established in complex, challenging
and highly regulated markets with significant barriers to entry,
which demand a highly skilled and experienced workforce and a
proven track record of safe delivery.
-- We work in markets underpinned by resilient, long-term growth
dynamics and highly visible, reliable, committed regulatory
spending periods, providing predictable cashflows.
-- We have a proven track record of sustainable value creation,
reliable revenue growth and strong returns on capital thanks to our
highly cash generative earnings model and clearly defined
strategy.
-- We are committed to growing the business both organically and
through selective complementary acquisitions while maintaining a
disciplined approach to capital allocation and risk underpinned by
a strong balance sheet
-- Our high-quality model of compounding earnings through the
redeployment of internally generated cashflows enables us to
execute on our strategy of delivering reliable and consistent
growth for all our stakeholders.
-- We have strong relationships in place with all our
stakeholders, from our workforce to our customers, suppliers,
communities and shareholders.
Compelling market drivers
Our businesses are exposed to attractive long-term,
non-discretionary structural growth drivers. Increasing demand for
the maintenance and renewal of existing UK infrastructure is driven
by a number of factors including:
-- a commitment by the Government to level up the economy by investing GBP650bn(2) in a green infrastructure-led recovery, two-thirds of which will be in the transport and energy sectors, with fiscal stimulus measures likely to flow through to lower cost infrastructure maintenance programmes ahead of larger, more capital-intensive enhancement schemes;
-- greater focus on sustainability and climate change as part of
the UK's target of reaching net-zero carbon emissions by 2050,
together with flood risk prevention measures and investment in
nuclear projects, renewables and electrification programmes;
-- population growth increasing the pressure on housing, energy,
water and demand for natural resources;
-- technological innovation driving a shift towards digital
roads, smart cities and the transformation of transport and
telecommunications networks; and
-- increased Government regulation to improve safety, efficiency
and resilience of key infrastructure assets leading to more
demanding maintenance, renewal and upgrading requirements.
Our track record of growth and long-term value creation
Renew has a strong track record of sustainable value creation
through the economic cycle thanks to the Group's high-quality,
value-accretive compounding earnings model. Over the past five
years, we have delivered:
-- adjusted(1) earnings per share growth of 84 per cent;
-- an increase in our adjusted(1) operating margin from 4.2 per cent to 6.5 per cent;
-- group revenue growth of 50 per cent; and
-- five acquisitions supported by our strong free cash flow.
Our track record of reliable revenue growth and cash generation
has resulted in our ability to deliver highly predictable,
consistent organic earnings growth as well as funding for the
acquisition of complementary businesses that meet our strategic
requirements.
Results overview
During the period, Group revenue increased to GBP791.0m (2020:
GBP620.4m), with organic growth of 19% and the Group achieved an
adjusted operating profit of GBP51.2m (2020: GBP39.6m). Adjusted
operating profit margin was 6.5% (2020: 6.4%). As at 30 September
2021, the Group had pre-IFRS 16 net debt of GBP13.7m (30 September
2020: net cash GBP0.3m), reflecting the acquisition of Browne and
REL along with the Group's strong operating cash generation and
conservative approach to gearing.
These results include contributions from both Browne and REL,
acquired in March 2021 and May 2021 respectively. Both businesses
have performed in line with management expectations and are
integrating well. Underpinned by long-term framework positions, the
Group's order book at 30 September 2021 has strengthened to GBP749m
(2020: GBP692m).
During the year, the Trustees of the Lovell Pension Scheme, in
consultation with the Board of Renew, entered into a "buy-in"
agreement with Rothesay Life plc. This transaction has
significantly de-risked the Group's balance sheet, further reduced
its pension exposure risks and improves our cashflow in the medium
term. Following the success of this transaction, the Group
continues to investigate the opportunity of fully buying-in its
liabilities with the Amco Scheme to further reduce the Group's
pension exposure in line with our strategy.
Dividend
The Group's strong trading performance, cash position and
positive outlook gives the Board the confidence to propose a final
dividend of 11.17p per share, an increase of 34 per cent over the
prior year final dividend of 8.33p. This will be paid on 4 March
2022 to shareholders on the register as at 28 January 2022, with an
ex-dividend date of 27 January 2022. This will represent a full
year dividend of 16p (2020: 8.33p) per share.
Engineering Services
Our Engineering Services activities account for over 95 per cent
of the Group's adjusted operating profit(1) and delivered revenue
of GBP706.7m (2020: GBP577.2m) with an adjusted operating profit of
GBP51.5m (2020: GBP40.8m) resulting in an operating margin of 7.3%
(2020: 7.1%). At 30 September 2021, the Engineering Services order
book was GBP679m (2020: GBP603m). The Group's strong organic growth
performance was driven by continued positive momentum in our Rail
business, along with framework wins and operational progress across
our diverse Engineering Services business.
Rail
Network Rail, a significant strategic customer for the Group, is
investing GBP53bn(4) over the current Control Period (CP6), which
runs to 2024. This increased focus on operational support, renewal
and maintenance plays to our strengths, as does the Government's
commitment to its rail decarbonisation programme. This includes a
significant investment in electrification programmes, as part of
the overall UK target to deliver net-zero by 2050. With a view to
supporting the Government's rail decarbonisation programme, the
Group acquired Rail Electrification Limited ("REL") during the
period, a leading provider of high-quality services and Road Rail
Vehicles associated with the installation and commissioning of
overhead line electrification. This acquisition further strengthens
and expands the Group's existing multidisciplinary maintenance and
renewals engineering services.
During the period, we continued to add new positions including
the Southern Buildings and Civils Framework and the Structures
Integrity Framework in the South, while also securing further
fencing and vegetation management work under CP6.
As the largest provider of multidisciplinary maintenance and
renewals engineering services to Network Rail, we support the
day-to-day operation of the rail network nationally, directly
delivering essential asset maintenance through our long-term CP6
frameworks. The Group assists Network Rail through our
mission-critical renewals and maintenance services supporting
assets including bridges, earthworks, embankments, tunnels,
drainage systems, signalling, electrification and rail plant. The
Group now holds in excess of 50 CP6 maintenance and renewals
frameworks across all disciplines, covering the entire UK rail
network.
We continue to develop industry-leading innovations in order to
deliver value-add services within our Rail business. These include
bespoke solutions built around the needs of our clients, including
"one of a kind" equipment deployed across geotechnical, earthworks
and vegetation management.
Overall, we saw planned work for our rail customers continue
with minimal disruption, despite significant periods of time where
we operated under Government imposed restrictions. The compelling
maintenance-focused structural growth drivers within this sector,
and Renew's high-quality engineering expertise, leave the Group
ideally positioned to deliver long-term, profitable growth in Rail,
particularly as we see opportunities present themselves under the
next Control Period 7 ("CP7").
Infrastructure
Highways
The Group successfully entered the Highways market during
January 2020 through its acquisition of Carnell, a leading provider
of specialist engineering services on the strategic road network.
We made good operational and strategic progress within the Highways
segment during the period, delivering essential asset maintenance
and critical infrastructure renewals underpinned by
non-discretionary regulatory requirements.
With the UK Government committing to an investment of GBP24bn(5)
in the strategic road network over a five year period, as part of
its second Road Investment Strategy ("RIS2"), GBP11.9bn of this
funding will be ringfenced for operations, maintenance and
renewals. This represents a significant market opportunity for
Renew. Carnell continues to leverage its innovative technological
solutions to support the needs of major clients such as National
Highways.
During the period, Carnell was awarded five lots on National
Highways SDF framework the maximum amount of lots available across
civil engineering, road restraint systems and drainage disciplines,
worth GBP147m over six years, with work set to begin in January
2022. Three of those lots will be delivered through a collaboration
between Carnell and AmcoGiffen which represents a successful
collaboration between different parts of the Group. Post period
end, Carnell were awarded two lots on the 7 year Technical Surveys
and Testing Framework.
We remain well placed to seize the attractive growth and market
share opportunities within Highways with increased spending
forecast over the next ten years and with the Group investing to
take advantage of opportunities in the electric vehicle charging
market.
Wireless telecoms
The wireless telecoms sector contains many attractive growth
drivers, not least of all an estimated GBP30bn(6) required to
upgrade the nation's broadband networks to gigabit-capable speeds
which includes the UK Government's GBP5bn(7) investment in 5G.
Additional investment includes the Shared Rural Network, the
Government's GBP500m(8) programme to extend 4G mobile coverage to
95% of the UK.
Through our Clarke Telecom subsidiary, which is a leading
infrastructure services provider in the wireless telecommunications
market, we have exposure to all of these opportunities, holding
long-term relationships with the main UK network operators,
equipment vendors and managed service providers.
During the period, we continued to build on the operational and
strategic progress made previously, consolidating our position on
VM02's 5G services frameworks, and securing new frameworks with
Cornerstone and 3UK. We also saw further growth delivered in our
work for the Government, alongside EE and BT, to remove Huawei
equipment from the UK's 5G networks by 2027.
With faster internet connectivity becoming ever more critical in
the digital age and a key part of the Government's levelling up
agenda, we expect to benefit from these trends thanks to our
specialist engineering expertise and mission-critical
solutions.
Energy
Nuclear
Having worked for over 75 years in civil nuclear, we provide a
multidisciplinary service through our large complement of highly
skilled employees who operate to demanding nuclear standards,
including decontamination and decommissioning services, operational
support and asset care, as well as waste retrieval in high-hazard
areas such as legacy storage ponds and silos.
The Government's total nuclear decommissioning provision is
estimated at GBP124bn(9) over the next 120 years, with around 75%
of the total spend allocated to Sellafield, which is the largest of
the Nuclear Decommissioning Authority's ("NDA's") sites and where
we remain a principal mechanical, electrical and instrumentation
("M,E&I") services contractor. The NDA has an annual
expenditure of GBP3bn(10) on its nuclear decommissioning programme
and Renew is involved in activities representing 90% of the
allocated expenditure.
On Sellafield, we operate across a number of frameworks
including the Decommissioning Delivery Partnership Framework on
both Lot 1 (Remediation) and Lot 3 Magnox Swarf Storage Silo,
Aligned partner - Remediation Redundant Asset programme, Tanks and
Vessels Framework and the Fabrication and Machining Spares
Framework. Our performance at Sellafield is strong evidence of the
Group's capabilities, and we are well-positioned for opportunities
in the Major Projects Programme.
We are collaborating with the Programme and Project Partners
("PPP") to secure further growth opportunities at Sellafield. PPP
is a 20-year framework for the delivery of a broad range of major
projects for the site, with GBP7bn allocated for seven projects
that require multidisciplinary services including civil
M,E&I.
Outside of Sellafield, we continue to build on our relationship
with Rolls Royce to secure further opportunities since our
appointment to the Diesel Generator Programme at Hinkley Point "C".
We also deliver operational support and decommissioning activities
at Springfield and continue to widen our network, targeting key
sites such as Magnox and Dounreay where we have a position on the
Decommissioning Services Framework.
New nuclear is an essential component of the UK Government's
plans to deliver a sustainable, low-carbon energy future, and we
expect continued and sustained growth in the area. We continue to
see a sustainable increase in demand for our specialist
manufacturing capabilities and remain well placed to capitalise on
trends in new nuclear and legacy decommissioning.
As part of the UK Government's commitment to net-zero,
decarbonisation of our energy supply is a key challenge. The
anticipated increase in energy demand is expected to drive
significant long-term investment. Changes in the UK's energy
landscape will provide opportunities for the Group's
multidisciplinary infrastructure engineering capabilities.
Environmental
Water
In Water, we continue to benefit from the UK Government's
spending of GBP51bn(3) over AMP7 into 2025 and have seen further
investment through our clients' strong operational expenditure
budgets. Our offer of scheduled maintenance and renewals tasks, in
addition to extensive 24/7 emergency reactive works, remains one of
our key strengths, providing specialised, mission-critical services
for clients around the UK.
During the period, the Group acquired J Browne, a water-focused
engineering services business based in Enfield, North London,
operating throughout the South of England for Thames Water,
Southern Water, Affinity Water and South East Water. This
acquisition further strengthens our position in a key attractive
infrastructure sector, is proceeding to plan and continues to trade
in line with management's expectations.
For D r Cymru Welsh Water ("DCWW"), we continue to operate
across the region on the Pressurised Pipelines Framework, Major
Civils Framework and Capital Delivery Alliance Civils &
Pipeline Framework. The Group is advancing with mains renovation
work for Bristol Water and recently secured a place on the P
Removal Programme for Wessex Water, while maintaining and renewing
existing assets on operational treatment and distribution
facilities for Yorkshire Water through the AMP7 Minor Civils
Framework. We were also successful in securing a position on Water
and Wastewater Network Construction and Engineering Framework for
Northumbrian Water.
Renew is well positioned to benefit from trends in the Water
market as companies increase expenditure on capital maintenance,
asset optimisation and supply resilience including dam safety and
infrastructure refurbishment schemes.
We are pleased to have commenced services for a number of new
clients including the Capital Delivery Framework for Thames Water,
Affinity Water and Southern Water, adding to a strong client base
that includes Scottish Canals and Peel Ports.
With the Group's extensive experience and expertise in flood
defence , working with the Environment Agency and Canal & River
Trust to deliver the EA Flood and Coastal Erosion Framework, the UK
Government's commitment to invest GBP5.2bn(11) over six years to
improve flood defence presents a strong opportunity for the
Group.
Specialist restoration
We are progressing well with works at the Palace of Westminster,
now entering the new flat roofs phase at the site, through the
award of a five year Conservation Framework.
Specialist Building
Revenue was in line with the Group's expectations at GBP84.4m
(2020: GBP43.2m) reflecting a continued focus on contract
selectivity and risk management. Operating profit was GBP1.6m
(2020: GBP1.0m). In Specialist Building, the order book was GBP70m
(2020: GBP89m).
Our Specialist Building business focuses on the High Quality
Residential and Science markets in London and the Home
Counties.
Our essential work continued uninterrupted on critical science
schemes for Defra and the Medical Research Council. The Group has
also recently been awarded a landmark scheme for one of the London
Palaces.
The road to net zero
Our purpose is to provide essential engineering services to
maintain and renew critical infrastructure networks. It is well
recognised that investment into low-carbon infrastructure will be
fundamental in delivering the Government's Green Industrial
Revolution and getting to net-zero emissions in the UK by 2050. It
is the Board's ambition that the Group will achieve net zero by no
later than 2040.
From the rail network and digitally assisted roads to high-speed
telecoms and clean energy, Renew has a key enabling role to play on
the frontline of efforts to decarbonise the economy. Our long-term
approach to sustainability, which has always been at the heart of
our business, is more relevant now than ever before.
In recognition of this, at the Group's interim results in May
2021, we introduced quantitative targets to embed our own ESG
strategy within our wider business operations and to continuously
monitor the progress we are making across five key areas:
-- customer value;
-- climate action;
-- operating responsibly;
-- engaging our people; and
-- supporting our local communities.
These objectives are designed to complement and enhance the
Group's overall strategy of driving long-term sustainable growth
and shareholder value creation.
We continue to make good progress against each of these areas in
the year, including diverting 88% of our eligible waste away from
landfill and improving on our targeted number of mental health
first aiders across our business to 1 for every 20 employees (2021
target 1:50). More details of the initiatives and ESG targets will
be included in the Group's 2021 Annual Report and Accounts.
2020 was the first year in which the Group reported under the
Streamlined Energy and Carbon Reporting ("SECR") regulations which
provided us with a baseline for ongoing reporting. Renew also
continues to hold the London Stock Exchange's Green Economy Mark,
which recognises companies that derive 50 per cent or more of their
total annual revenue from products and services that contribute to
the global "Green Economy".
Opportunities for growth
Our high-quality compounding earnings model enables the Group to
redeploy internally generated cashflow in a disciplined manner,
creating value through highly selective and strategically
complementary M&A opportunities that supplement our profitable
organic growth. Our track record of successfully identifying,
acquiring and integrating value-enhancing acquisitions in growing
markets with ongoing renewal and maintenance requirements and high
barriers to entry, has been a key driver of Renew's long-term
growth. The M&A landscape remains dynamic and we continue to
look at opportunities in existing and new markets that are aligned
with our acquisition criteria.
Delivering value through innovation and technology
Adding value and delivering a superior service for our customers
through technology and innovation remains one of our key goals. We
continuously seek to develop and implement innovative working
techniques to improve operational performance and support the
evolving needs of our clients across all of our sectors.
During the year in Rail, we launched the innovative Mega Vac, a
bespoke Road Rail Vehicle which allows track drainage to be
unblocked in record time and provides time and cost efficiencies
for tasks including specialist jetting operations. We also
developed and introduced the first rail mounted vegetation
compactor on the UK rail infrastructure. A number of our businesses
are also trialling sustainable hydrotreated vegetable oil ("HVO")
fuel and battery power to significantly reduce the carbon emissions
produced by site operations. We continue to make progress with the
introduction of electric powered plant innovations and with the
roll out of more electric vehicle charging points across our site
and office locations.
Outlook - moving forward with confidence
On the back of another strong year for the Group, we are well
positioned moving forward to capitalise on the compelling growth
opportunities that exist across our end markets by leveraging
Renew's unique low-risk, capital-light, high-quality operating
model.
As the UK Government makes progress on its plans to level up the
economy and reach net-zero by 2050 through long-term, record levels
of committed investment in low-carbon infrastructure, the
structural growth drivers in our end markets have never been more
attractive.
The spending plans of our clients are underpinned by strategic
national needs and regulatory commitments. Our strong and
well-established market positions across key infrastructure sectors
with visible, long-term, non-discretionary spending cycles, from
rail to nuclear energy, give us confidence in the Group's
prospects.
We have carried forward this positive trading momentum into the
new financial year and have a strong forward order book which
underpins our confidence in achieving further progress in 2022. As
we look further ahead, we are committed to building on our
strengths to target new opportunities in attractive markets where
we have the skillset to deliver mission-critical engineering
infrastructure solutions for a sustainable future.
Paul Scott
Chief Executive Officer
9 December 2021
1. Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in note 11
2. Infrastructure and Projects Authority, Analysis of the
National Infrastructure and Construction Pipeline 2021, August
2021
3. Ofwat PR19 final determinations, December 2019
4. Network Rail Delivery Plan, Control Period 6, High Level Summary, 26 March 2020
5. HM Treasury, Autumn budget and spending review 2021, October 2021
6. Department for Digital, Culture, Media & Sport,
Delivering a gigabit-capable UK: Gigabit Infrastructure Subsidy, 1
June 2021
7. Department for Digital, Culture, Media & Sport, Project
Gigabit, Phase One Delivery Plan, 19 March 2021
8. Gov.uk press release, Government breakthrough on GBP500
million support package to boost rural mobile coverage, 11 March
2021
9. Nuclear Decommissioning Authority, Nuclear Provision: the
cost of cleaning up Britain's historic nuclear sites, 4 July
2019
10. Nuclear Decommissioning Authority, Draft Business Plan, 1
April 2021 to 31 March 2024, 7 December 2020
11. HM Government, Flood and coastal erosion risk management,
Policy Statement, July 2020
Group income statement
for the year ended 30 September
Before Exceptional Before Exceptional
exceptional items and exceptional items and
items and amortisation items and amortisation
amortisation of intangible amortisation of intangible
of intangible assets of intangible assets
assets (see Note 3) Total assets (see Note 3) Total
2021 2021 2021 2020 2020 2020
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue: Group
including share of
joint ventures 790,995 - 790,995 620,375 - 620,375
Less share of joint
ventures' revenue (15,356) - (15,356) - - -
-------------- -------------- ---------- -------------- -------------- ----------
Group revenue from
continuing activities 2 775,639 - 775,639 620,375 - 620,375
Cost of sales (666,454) - (666,454) (527,274) - (527,274)
-------------- -------------- ---------- -------------- -------------- ----------
Gross profit 109,185 - 109,185 93,101 - 93,101
Administrative
expenses (57,985) (10,070) (68,055) (53,453) (6,741) (60,194)
Share of post-tax
result of joint
ventures 11 - 11 (39) - (39)
-------------- ---------- -------------- -------------- ----------
Operating profit 2 51,211 (10,070) 41,141 39,609 (6,741) 32,868
Finance income 19 - 19 44 - 44
Finance costs (836) - (836) (1,343) - (1,343)
Other finance income -
defined benefit
pension schemes 428 - 428 532 - 532
-------------- -------------- ---------- -------------- -------------- ----------
Profit before income
tax 2 50,822 (10,070) 40,752 38,842 (6,741) 32,101
Income tax expense 5 (11,096) 2,427 (8,669) (6,905) 1,146 (5,759)
-------------- -------------- ---------- -------------- -------------- ----------
Profit for the year
from continuing
activities 39,726 (7,643) 32,083 31,937 (5,595) 26,342
-------------- -------------- -------------- --------------
Loss for the year from
discontinued
operations 4 (1,620) (5,590)
---------- ----------
Profit for the year
attributable to
equity holders of the
parent company 30,463 20,752
---------- ----------
Basic earnings per
share from continuing
activities 7 40.79p 34.00p
Diluted earnings per
share from continuing
activities 7 40.46p 33.72p
---------- ----------
Basic earnings per
share 7 38.73p 26.78p
Diluted earnings per
share 7 38.41p 26.57p
---------- ----------
Group
statement
of
comprehensive
income
for
the
year
ended
30
September
2021 2020
GBP000 GBP000
Profit
for
the
year
attributable
to
equity
holders
of
the
parent
company 30,463 20,752
Items
that
will
not
be
reclassified
to
profit
or
loss:
Movement
in
actuarial
valuation
of
the
defined
benefit
pension
schemes (25,672) (2,775)
Movement
on
deferred
tax
relating
to
the
pension
schemes 9,026 971
--------- --------
Total
items
that
will
not
be
reclassified
to
profit
or
loss (16,646) (1,804)
--------- --------
Items
that
are
or
may
be
reclassified
subsequently
to
profit
or
loss:
Exchange
movement
in
reserves (8) (23)
--------- --------
Total
items
that
are
or
may
be
reclassified
subsequently
to
profit
or
loss (8) (23)
--------- --------
Total
comprehensive
income
for
the
year
attributable
to
equity
holders
of
the
parent
company 13,809 18,925
--------- --------
Group statement of changes in
equity
for the year ended 30
September
Share Capital Cumulative Share based
Share premium redemption translation payments Retained Total
capital account reserve adjustment reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2019 7,533 51,904 3,896 1,339 576 27,010 92,258
Transfer from income
statement
for the year 20,752 20,752
Dividends paid (5,778) (5,778)
New shares issued 323 14,474 14,797
Recognition of share based
payments 245 245
Exchange differences (23) (23)
Actuarial movement
recognised
in pension schemes (2,775) (2,775)
Movement on deferred tax
relating
to the pension schemes 971 971
------- ------- ---------- ----------- ----------- -------- ----------
At 30 September 2020 7,856 66,378 3,896 1,316 821 40,180 120,447
Transfer from income
statement
for the year 30,463 30,463
Dividends paid (10,354) (10,354)
New shares issued 12 647 659
Recognition of share based
payments 258 258
Exchange differences (8) (8)
Actuarial movement
recognised
in pension schemes (25,672) (25,672)
Movement on deferred tax
relating
to the pension schemes 9,026 9,026
At 30 September 2021 7,868 66,378 3,896 1,308 1,079 44,290 124,819
------- ------- ---------- ----------- ----------- -------- ----------
Group balance sheet
At 30 September
2021 2020
GBP000 GBP000
Non-current assets
Intangible assets - goodwill 139,698 124,691
- other 29,241 23,062
Property, plant and equipment 16,254 14,806
Right of use assets 17,247 17,481
Investment in joint ventures 5,708 -
Retirement benefit asset 661 28,059
Deferred tax assets 2,301 2,164
211,110 210,263
---------- ----------
Current assets
Inventories 2,078 1,619
Assets held for resale 1,250 1,500
Trade and other receivables 157,416 129,838
Current tax assets 1,382 2,174
Cash and cash equivalents 881 13,396
----------
163,007 148,527
---------- ----------
Total assets 374,117 358,790
---------- ----------
Non-current liabilities
Borrowings - (4,373)
Lease liabilities (9,421) (9,347)
Retirement benefit obligation (152) -
Deferred tax liabilities (8,067) (14,252)
Provisions (441) (441)
----------
(18,081) (28,413)
---------- ----------
Current liabilities
Borrowings (14,609) (8,752)
Trade and other payables (207,667) (192,370)
Lease liabilities (6,180) (6,047)
Provisions (2,761) (2,761)
---------- ----------
(231,217) (209,930)
---------- ----------
Total liabilities (249,298) (238,343)
---------- ----------
Net assets 124,819 120,447
---------- ----------
Share capital 7,868 7,856
Share premium account 66,378 66,378
Capital redemption reserve 3,896 3,896
Cumulative translation adjustment 1,308 1,316
Share based payments reserve 1,079 821
Retained earnings 44,290 40,180
Total equity 124,819 120,447
---------- ----------
Group cashflow statement
for the year ended 30 September
2021 2020
GBP000 GBP000
Profit for the year from continuing operating
activities 32,083 26,342
Share of post-tax trading result of joint
ventures (11) 39
Impairment and amortisation of intangible
assets 6,463 5,529
Defined benefit pension scheme G.M.P. equalisation/past
service deficit 2,805 -
Depreciation of property, plant and equipment
and right of use assets 10,504 9,672
Profit on sale of property, plant and equipment (649) (483)
(Increase)/decrease in inventories (405) 301
(Increase)/decrease in receivables (15,289) 1,465
Increase in payables and provisions 3,996 17,080
Current and past service cost in respect
of defined benefit pension scheme 61 69
Cash contribution to defined benefit pension
schemes (560) (4,817)
Charge in respect of share options 258 245
Finance income (19) (44)
Finance expense 408 811
Interest paid (836) (1,343)
Income taxes paid (7,335) (8,179)
Income tax expense 8,669 5,759
--------- ---------
Net cash inflow from continuing operating
activities 40,143 52,446
Net cash outflow from discontinued operating
activities (976) (592)
Net cash inflow from operating activities 39,167 51,854
--------- ---------
Investing activities
Interest received 19 44
Dividend received from joint venture 60 100
Proceeds on disposal of property, plant
and equipment 1,263 725
Purchases of property, plant and equipment (4,042) (3,756)
Acquisition of subsidiaries net of cash
acquired (33,343) (40,512)
--------- ---------
Net cash outflow from investing activities (36,043) (43,399)
--------- ---------
Financing activities
Dividends paid (10,354) (5,778)
Issue of share equity 659 14,797
New loan 10,000 -
Loan repayments (18,752) (8,750)
Repayments of obligations under lease liabilities (7,410) (6,972)
--------- ---------
Net cash outflow from financing activities (25,857) (6,703)
--------- ---------
Net (decrease)/increase in continuing cash
and cash equivalents (21,757) 2,344
Net decrease in discontinued cash and cash
equivalents (976) (592)
--------- ---------
Net (decrease)/increase in cash and cash
equivalents (22,733) 1,752
Cash and cash equivalents at beginning
of year 13,396 11,667
Effect of foreign exchange rate changes
on cash and cash equivalents (18) (23)
Cash and cash equivalents at end of year (9,355) 13,396
--------- ---------
Bank balances and cash 881 13,396
Bank overdraft (10,236) -
--------- ---------
Cash and cash equivalents at end of year (9,355) 13,396
--------- ---------
Notes
1 International Financial Reporting Standards
The consolidated financial statements for the year ended 30
September 2021 have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). These preliminary results
are extracted from those financial statements.
2 Segmental analysis
The Group is organised into two operating business segments plus
central activities which form the basis of the segment information
reported below. These segments are:
Engineering Services, which comprises the Group's engineering
activities which are characterised by the use of the Group's
skilled engineering workforce, supplemented by specialist
subcontractors where appropriate, in a range of civil, mechanical
and electrical engineering applications;
Specialist Building, which comprises the Group's building
activities which are characterised by the use of a supply chain of
subcontractors to carry out building works under the control of the
Group as principal contractor; and
Central activities, which include the leasing and sub-leasing of
some UK properties and the provision of central services to the
operating subsidiaries.
Group Group revenue Group
including Less revenue
share share from continuing from continuing
of joint of joint
ventures ventures activities activities
Revenue is analysed 2021 2021 2021 2020
as follows:
GBP000 GBP000 GBP000 GBP000
Engineering Services 706,682 (15,356) 691,326 577,238
Specialist Building 84,425 - 84,425 43,207
Inter segment revenue (2,250) - (2,250) (2,025)
----------- ---------- ---------------- ----------------
Segment revenue 788,857 (15,356) 773,501 618,420
Central activities 2,138 - 2,138 1,955
----------- ---------- ----------------
790,995 (15,356) 775,639 620,375
----------- ---------- ---------------- ----------------
Before
exceptional Exceptional
items and items and
amortisation amortisation
of intangible of intangible
assets assets
2021 2021 2021 2020
GBP000 GBP000 GBP000 GBP000
Engineering
Services 51,526 (9,070) 42,456 34,013
Specialist Building 1,613 - 1,613 1,014
Segment operating profit 53,139 (9,070) 44,069 35,027
Central activities (1,928) (1,000) (2,928) (2,159)
-------------- -------------- -------- --------
Operating profit 51,211 (10,070) 41,141 32,868
Net financing costs (389) - (389) (767)
-------------- -------- --------
Profit on ordinary activities
before income tax 50,822 (10,070) 40,752 32,101
-------------- -------------- -------- --------
Engineering Services segment operating profit for the year ended
30 September 2020 is stated after charging exceptional costs of
GBP1,212,000 and amortisation of GBP5,529,000, resulting in a total
charge before taxation of GBP6,741,000 (see Note 3).
3 Exceptional items and amortisation of intangible assets
2021 2020
GBP000 GBP000
Defined benefit pension scheme guaranteed
minimum pension equalisation 1,107 -
Amco defined benefit scheme past service
cost deficit 1,698 -
Acquisition
costs 802 1,212
-------- --------
Total losses arising from
exceptional items 3,607 1,212
Amortisation of intangible
assets 6,463 5,529
-------- --------
Total exceptional items and amortisation
charge before income tax 10,070 6,741
Taxation credit on exceptional items
and amortisation (2,427) (1,146)
-------- --------
Total exceptional items and amortisation
charge 7,643 5,595
-------- --------
As referred to in last year's Annual Report as a post balance
sheet event, on 20 November 2020 the High Court handed down a
further judgment in the Lloyds Banking case regarding equalising
guaranteed minimum pension benefits. The judge found that pension
schemes do have a liability to pay top-ups to members who
transferred out in the past. The effect of this for the schemes has
been estimated by the actuaries as an additional liability of
GBP1,107,000.
The Amco defined benefit scheme recognised an actuarial estimate
of GBP1,698,000 additional liabilities from extending the Barber
window to be in line with recent legal advice received by the
Trustee as part of a potential "buy-in" transaction to remove the
scheme's investment and funding risk. This legal advice indicates
that the scheme may not have equalised normal pension age (NPA) as
previously assumed in the early 1990's, and that the NPA for
members in service in May 1991 may be 60 for a higher proportion of
their service.
Acquisition costs relate to the acquisition of J Browne Group
Holdings Ltd and Rail Electrification Ltd on 26 March 2021 and 28
May 2021 respectively.
The Board has separately identified the charge of GBP6,463,000
(2020: GBP5,529,000) for the amortisation of the fair value
ascribed to certain intangible assets, other than goodwill, arising
from the acquisitions of Giffen Holdings Ltd, QTS Group Ltd,
Carnell Group Holdings Ltd. J Browne Group Holdings Ltd and Rail
Electrification Ltd.
4 Loss for the year from discontinued operations 2021 2020
GBP000 GBP000
Revenue - -
Expenses (1,620) (5,590)
-------- --------
Loss before income tax (1,620) (5,590)
Income tax charge - -
-------- --------
Loss for the year from discontinued operations (1,620) (5,590)
-------- --------
During the previous year the group completed the closure of
Lovell America Inc having incurred 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 GBP1,620,000
(2020:GBP5,319,000) accrual. This is as a result of the settlement
of historic claims during the financial year and a subsequent
internal reassessment of the likely costs required to settle other
known contractual disputes.
5 Income tax expense
(a) Analysis of expense in
year 2021 2020
GBP000 GBP000
Current tax:
UK corporation tax on profits
of the year (8,719) (5,732)
Adjustments in respect of previous
period 25 216
--------
Total current tax (8,694) (5,516)
-------- --------
Deferred tax - defined benefit pension
schemes 601 (1,848)
Deferred tax - other timing
differences (576) 1,605
-------- --------
Total deferred tax 25 (243)
-------- --------
Income tax expense in respect of
continuing activities (8,669) (5,759)
-------- --------
(b) Factors affecting income tax expense
for the year
2021 2020
GBP000 GBP000
Profit before income
tax 40,752 32,101
-------- --------
Profit multiplied by
standard rate
of corporation tax in the UK of 19%
(2020: 19%) (7,743) (6,099)
Effects of:
Expenses not deductible for
tax purposes (837) (297)
Timing differences not provided in
deferred tax 1,476 433
Change in tax rate (1,590) (12)
Adjustments in respect of previous
period 25 216
-------- --------
(8,669) (5,759)
-------- --------
Deferred tax has been provided at a rate of 25% (2020: 19%)
following the decision that the UK corporation tax rate should
increase to 25% (effective from 1 April 2023) and substantively
enacted on 24 May 2021. The deferred tax asset and liability at 30
September 2021 has been calculated based on these rates, reflecting
the expected timing of reversal of the related temporary timing
differences (2020: 19%). The Group has available further unused UK
tax losses of GBP25.3m (2020: GBP29.3m) to carry forward against
future taxable profits. A substantial element of these losses
relates to activities which are not forecast to generate the level
of profits needed to utilise these losses. A deferred tax asset has
been provided to the extent considered reasonable by the Directors,
where recovery is expected to be recognisable within the
foreseeable future. The unrecognised deferred tax asset in respect
of these losses amounts to GBP5.2m (2020: GBP4.0m).
6 Dividends
2021 2020
Pence/share Pence/share
Interim (related to the year ended 30 September
2021) 4.83 -
Final (related to the year ended 30 September
2020) 8.33 7.67
------------ ------------
Total dividend
paid 13.16 7.67
------------ ------------
GBP000 GBP000
Interim (related to the year ended 30 September
2021) 3,800 -
Final (related to the year ended 30 September
2020) 6,554 5,778
------------ ------------
Total dividend
paid 10,354 5,778
------------ ------------
Dividends are recorded only when authorised and are shown as a
movement in equity rather than as a charge in the income statement.
The Directors are proposing that a final dividend of 11.17p per
Ordinary Share be paid in respect of the year ended 30 September
2021. This will be accounted for in the 2021/22 financial year.
7 Earnings per share
2021 2020
Earnings EPS DEPS Earnings EPS DEPS
GBP000 Pence Pence GBP000 Pence Pence
Earnings before exceptional
items and amortisation 39,726 50.51 50.09 31,937 41.22 40.89
Exceptional items and
amortisation (7,643) (9.72) (9.63) (5,595) (7.22) (7.17)
--------- ------- ------- --------- -------- --------
Basic earnings per
share - continuing
activities 32,083 40.79 40.46 26,342 34.00 33.72
Loss for the year from
discontinued operations (1,620) (2.06) (2.05) (5,590) (7.22) (7.15)
--------- ------- ------- ---------
Basic earnings per
share 30,463 38.73 38.41 20,752 26.78 26.57
--------- ------- ------- --------- -------- --------
Weighted average number
of shares 78,655 79,304 77,480 78,114
------- ------- -------- --------
The dilutive effect of share options is to increase the number
of shares by 649,000 (2020: 634,000) and reduce basic earnings per
share by 0.32p (2020: 0.21p).
8 Acquisition of subsidiary undertaking - J Browne Group
Holdings Ltd
On 26 March 2021 the Company acquired the whole of the issued
share capital of J Browne Group Holdings Ltd ("J Browne") for a
cash consideration of GBP29.5m plus a net cash and working capital
adjustment of GBP12.0m. The GBP12.0m represents J Browne's surplus
cash held in an escrow account at completion which was subsequently
paid to the vendors. The net acquisition cost was funded by a
combination of cash and the Group's existing facility provided by
HSBC UK Bank plc and National Westminster Bank plc.
The provisional value of the assets and liabilities of J Browne
at the date of acquisition were:
Book value Adjustments Fair value
GBP000 GBP000 GBP000
Non-current assets
Intangible assets - goodwill 2,674 8,726 11,400
- other - 12,236 12,236
Property, plant and equipment 453 - 453
Right of use assets 176 317 493
Investments in joint ventures 259 5,632 5,891
3,562 26,911 30,473
----------- ------------ -----------
Current assets
Inventories 35 - 35
Trade and other receivables 24,310 - 24,310
Cash and cash equivalents 293 - 293
24,638 - 24,638
----------- ------------ -----------
Total assets 28,200 26,911 55,111
----------- ------------ -----------
Non-current liabilities
Lease liabilities - (244) (244)
Deferred tax liabilities - (2,671) (2,671)
- (2,915) (2,915)
----------- ------------ -----------
Current liabilities
Trade and other payables (9,976) - (9,976)
Lease liabilities (72) (73) (145)
Current tax liability (575) - (575)
(10,623) (73) (10,696)
----------- ------------ -----------
Total liabilities (10,623) (2,988) (13,611)
----------- ------------ -----------
Net assets 17,577 23,923 41,500
----------- ------------ -----------
Goodwill of GBP11,400,000 arises on acquisition and will be
reviewed annually for impairment. The goodwill is attributable to
the expertise and workforce of the acquired business. Other
intangible assets provisionally valued at GBP12,236,000, which
represent customer relationships and contractual rights, were also
acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this
amount. Amortisation of this intangible asset commenced from April
2021.
Investment in joint ventures
Goodwill of GBP3,812,000 arises on acquisition and will be
reviewed annually for impairment. The goodwill is attributable to
the expertise and workforce of the acquired business. Other
intangible assets provisionally valued at GBP1,820,000, which
represent customer relationships and contractual rights, were also
acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this
amount. Amortisation of this intangible asset commenced from April
2021.
Right of use assets
J Browne's statutory accounts are reported under FRS 102. The
group has made an adjustment for operating leases obtained on
acquisition whereby the leases are capitalised based on discounted
future lease payments together with an equivalent leasing liability
to be consistent with IFRS 16 "Leases".
Trade and other receivables include GBP12,000,000 held in an
escrow account and represents the part of the acquisition
self-funded by J Browne.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value
of assets and liabilities using information available up to 12
months after the date of acquisition. Fair value has been
calculated using Level 3 inputs as defined by IFRS 13.
Deferred tax liabilities
A deferred tax liability has been recognised in relation to the
amortisation of other intangible assets.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for
impairment as required by IFRS 3. No such impairment was
identified.
If the acquisition of J Browne had occurred on 1 October 2020,
Group revenue would have been approximately GBP825.1m and profit
before tax for the year ended 30 September 2021 would have been
approximately GBP53.4m.
9 Acquisition of subsidiary undertaking - Rail Electrification
Limited
On 28 May 2021 QTS Group Limited, a wholly owned Group
subsidiary, acquired the whole of the issued share capital of Rail
Electrification Limited ("REL") for a cash consideration of GBP3m
plus a net cash and working capital adjustment of GBP0.6m. GBP1.32m
deferred consideration has also been provided which is performance
related. The acquisition cost was funded entirely by the
subsidiary's cash reserves.
The provisional value of the assets and liabilities of REL at
the date of acquisition were:
Book value Adjustments Fair value
GBP000 GBP000 GBP000
Non-current assets
Intangible assets - goodwill - 3,607 3,607
- other - 272 272
Property, plant and equipment 120 - 120
Right of use assets 5 - 5
125 3,879 4,004
----------- ------------ -----------
Current assets
Inventories 19 - 19
Trade and other receivables 800 - 800
Current tax asset 61 - 61
Cash and cash equivalents 1,080 - 1,080
1,960 - 1,960
----------- ------------ -----------
Total assets 2,085 3,879 5,964
----------- ------------ -----------
Non-current liabilities
Lease liabilities (1) - (1)
Deferred tax liabilities (31) (52) (83)
(32) (52) (84)
----------- ------------ -----------
Current liabilities
Borrowings (250) - (250)
Trade and other payables (658) - (658)
Lease liabilities (6) - (6)
(914) - (914)
----------- ------------ -----------
Total liabilities (946) (52) (998)
----------- ------------ -----------
Net assets 1,139 3,827 4,966
----------- ------------ -----------
Goodwill of GBP3,607,000 arises on acquisition and will be
reviewed annually for impairment. The goodwill is attributable to
the expertise and workforce of the acquired business. Other
intangible assets provisionally valued at GBP272,000, which
represent customer relationships and contractual rights, were also
acquired and will be amortised over their useful economic lives in
accordance with IAS 38. Deferred tax has been provided on this
amount. Amortisation of this intangible asset commenced from June
2021.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value
of assets and liabilities using information available up to 12
months after the date of acquisition. Fair value has been
calculated using Level 3 inputs as defined by IFRS 13.
Deferred tax liabilities
A deferred tax liability has been recognised in relation to the
amortisation of other intangible assets.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for
impairment as required by IFRS 3. No such impairment was
identified.
If the acquisition of REL had occurred on 1 October 2020, Group
revenue would have been approximately GBP793.6m and profit before
tax for the year ended 30 September 2021 would have been
approximately GBP50.9m.
10 Preliminary financial information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2021
or 2020. Statutory accounts for 2020 have been delivered to the
registrar of companies. The auditor has reported on those accounts;
his reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for 2021 will be finalised on the basis of
the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of
Companies in due course.
11 Alternative performance measures
Renew uses a variety of alternative performance measures ('APM')
which, although financial measures of either historical or future
performance, financial position or cash flows, are not defined or
specified by IFRSs. The Directors use a combination of APMs and
IFRS measures when reviewing the performance, position and cash of
the Group.
The Directors believe that APMs provide a better understanding
of the underlying trading performance of the business because they
remove the impact of non-trading related accounting adjustments.
Furthermore, they believe that the Group's shareholders use these
APMs when assessing the performance of the Group and it is
therefore appropriate to give them prominence in the Annual Report
and Accounts.
The APMs used by the Group are defined below:
Net Cash/(Debt) - This is the cash and cash equivalents less
bank debt. This measure is visible in Note 32 in the Annual Report
& Accounts. The Directors consider this to be a good indicator
of the financing position of the Group.
Adjusted operating profit (GBP51.211m) and adjusted profit
before tax (GBP50.822m) - Both of these measures are reconciled to
total operating profit and total profit before tax on the face of
the consolidated income statement. The Directors consider that the
removal of exceptional items and amortisation provides a better
understanding of the underlying performance of the Group. The
equivalent GAAP measures are operating profit (GBP41.141m) and
profit before tax (GBP40.752m).
Adjusted operating margin (6.5%) - This is calculated by
dividing operating profit before exceptional items and amortisation
of intangible assets (GBP51.211m) by group revenue including share
of joint venture (GBP790.995m) both of which are visible on the
face of the income statement. The Directors believe that removing
exceptional items and amortisation from the operating profit margin
calculation provides a better understanding of the underlying
performance of the Group. The equivalent GAAP measure is operating
profit margin (5.2%) which is calculated by dividing operating
profit (GBP41.141m) from
group revenue including share of joint venture
(GBP790.995m).
Adjusted earnings per share (50.51p) - This measure is
reconciled to the earnings per share calculation based on earnings
before exceptional items and amortisation in Note 7. The Directors
believe that removing exceptional items and amortisation from the
EPS calculation provides a better understanding of the underlying
performance of the Group.
Group Revenue (GBP790.995m) - This measure is visible on the
face of the income statement as Revenue: Group including share of
joint venture.
Group order book, Engineering Services order book and Specialist
Building order book - This measure is calculated by the Directors
taking a conservative view on secured orders and visible workload
through long-term frameworks.
Engineering Services revenue (GBP706.682m) - This measure is
visible in Note 2 business analysis as Engineering Services Revenue
including share of joint venture. The Directors consider this to be
a good indicator of the underlying performance of the Group's
Engineering Services business.
Adjusted Engineering Services operating profit (GBP51.526m) -
This measure is visible in Note 2 business analysis as Engineering
Services operating profit before exceptional items and amortisation
of intangible assets. The Directors consider this to be a good
indicator of the underlying performance of the Group's Engineering
Services business. The GAAP equivalent measure is engineering
services operating profit (GBP42.456m) which is also visible in
Note 2.
Adjusted Engineering Services operating profit margin (7.3%) -
This is calculated in the same way as adjusted operating profit
margin but based on the adjusted Engineering Services operating
profit (GBP51.526m) and the Engineering Services revenue
(GBP706.682m) figures as set out above. The equivalent GAAP measure
is engineering services operating profit margin (6.0%) which is
calculated by dividing engineering services operating profit
(GBP42.456m) from engineering services revenue including share of
joint venture (GBP706.682m).
12 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the
year ended 30 September 2021 will be posted to shareholders as soon
as practicable and a copy will be made available on the Group's
website:
www.renewholdings.com
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END
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