TIDMRNWH
RNS Number : 8500H
Renew Holdings PLC
29 November 2022
929 November 2022
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Continued outperformance reflects differentiated, low-risk
nature of business model
Renew (AIM: RNWH), the leading Engineering Services Group
supporting the maintenance and renewal of critical UK
infrastructure, announces its preliminary results for the year
ended 30 September 2022 ("the Period").
Financial Highlights
Year ended 30 September 2022 FY2022 FY2021 Change
Group revenue(1) GBP849.0m GBP791.0m +7.3%
---------- ---------- -------
Adjusted operating profit(1) GBP58.8m GBP51.2m +14.8%
---------- ---------- -------
Operating profit GBP50.0m GBP41.1m +21.7%
---------- ---------- -------
Adjusted operating margin(1) 6.9% 6.5% +45bps
---------- ---------- -------
Profit before tax GBP49.5m GBP40.8m +21.4%
---------- ---------- -------
Adjusted earnings per share(1) 59.5p 50.5p +17.8%
---------- ---------- -------
Full year dividend 17.0p 16.0p +6.3%
---------- ---------- -------
Record results reflecting the core strengths of the Group
-- and the resilient nature of our differentiated, high-quality,
low-risk business model
Group order book of GBP775m (FY2021: GBP749m)
--
Net cash position (pre-IFRS16) of GBP20.2m (FY2021: Net
-- debt GBP13.7m)
Final dividend of 11.33p reflecting strong cash position
-- and positive outlook
De-risking of balance sheet with completion of Amco Pension
-- Scheme buy-in
Operational Highlights
Secured position as second largest supplier of road restraint
-- systems in the country with the successful collaboration
of AmcoGiffen and Carnell for National Highways
Significant expansion of water client list following the
-- successful integration of Browne
Framework extensions secured in Scotland and Eastern which
-- leave the Group ideally placed ahead of CP7 determinations
Meaningful improvements in the Group's safety performance
--
Current Trading & Outlook
Trading momentum has continued into the new financial year
--
Whilst Renew is not immune to the challenging macroeconomic
-- environment, structural growth drivers in our end markets
have never been more attractive
Government reiterated infrastructure as a growth priority
-- and restated its commitment to invest over GBP600bn(2)
on infrastructure by 2027
Post-period end acquisition of Enisca Group Limited, adding
-- new capabilities to Renew's water business
Paul Scott, CEO of Renew, commented:
"Given the difficulties faced by most UK businesses in 2022, I
am extremely pleased to be presenting another set of record results
for the Group. This continued success would not be possible without
the incredible hard work of our colleagues who I would like to
thank on behalf of the Board. The last three years have presented a
unique set of unprecedented circumstances and our continued
outperformance in each year illustrates the resilient nature of our
differentiated, high-quality, low-risk business model. We have made
good progress across all our divisions and post-period end we were
pleased to welcome Enisca to the Renew family who will add new
capabilities to our water business.
As we look ahead, we are committed to building on our strengths
and will continue to leverage the combined expertise of our
subsidiary businesses. Pleasingly, our positive trading momentum
has continued into the new financial year and we enter 2023 with a
strong order book and believe the structural growth drivers in our
end markets, underpinned by committed regulatory spend, continue to
provide the Group with significant opportunities."
For further information, please contact:
Renew Holdings plc www.renewholdings.com
Paul Scott, Chief Executive Officer via FTI Consulting
Sean Wyndham-Quin, Chief Financial Officer 020 3727 1000
Numis Securities Limited (Nominated Adviser
and Joint Broker) 020 7260 1000
Stuart Skinner / Kevin Cruickshank
Peel Hunt LLP (Joint Broker) 020 7418 8900
Mike Burke / Harry Nicholas / Charles
Batten
FTI Consulting (Financial PR) 020 3727 1000
Alex Beagley / Sam Macpherson / Rafaella Renew@fticonsulting.com
de Freitas
About Renew Holdings plc
Renew is a leading UK Engineering Services business, performing
a critical role in keeping the nation's infrastructure functioning
efficiently and safely. The Group operates through independently
branded subsidiaries across its chosen markets, delivering
non-discretionary maintenance and renewal tasks through its highly
skilled, directly employed workforce.
Renew's activities are focused 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,
Landmark and Science markets in London and the Home Counties.
For more information please visit the Renew Holdings plc
website: www.renewholdings.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.
Chairman's statement
Introduction
As the new Chairman I am pleased to announce that the Group
achieved a record financial performance, with continued growth in
revenue and profit and strong operating cash generation, again
reflecting the core strengths of the Group and our well-established
positions in attractive and sustainable growth markets. Supported
by the commercial terms within our frameworks, the Group continues
to successfully manage the well documented inflationary pressures
and supply chain challenges in the wider economy.
Differentiated business model
Our differentiated business model and the services we provide
continue to support key infrastructure assets in regulated markets.
Our markets enjoy committed funding which provides visible,
reliable and resilient revenues via long-term programmes.
We deliver non-discretionary maintenance and renewals tasks and
have little exposure to the financial and contractual risks of
larger enhancement schemes. Operating in complex, challenging and
highly regulated environments, our markets have high barriers to
entry, and we directly employ a highly skilled workforce which
enables us to be extremely responsive to our clients' needs.
Results
Group revenue(1) increased to GBP849.0m (2021: GBP791.0m) with
adjusted(1) operating profit increasing to GBP58.8m (2021:
GBP51.2m) and an adjusted(1) operating margin of 6.9% (2021: 6.5%).
Statutory operating profit was GBP50.0m (2021: GBP41.1m). The
adjusted(1) EPS has increased by 17.8% to 59.5p (2021: 50.5p) and
basic earnings per share was 47.8p (2021: 38.7p). The Group had a
pre IFRS16 net cash(1) position of GBP20.2m (2021: net debt
GBP13.7m), in line with our expectations.
Post period end we were delighted to announce the acquisition of
Enisca Group Limited. This acquisition represents an excellent
strategic fit, adding new capabilities to Renew's water business
and will form a key part of the Group's strategy to maximise the
opportunities presented by AMP8. We have worked closely with Enisca
for many years as JV partners and we are delighted to welcome all
the Enisca employees to the Renew Group. The acquisition was funded
out of the Group's cash and existing debt facilities.
Dividend
The Group's strong trading performance, cash position and
positive outlook give the Board the confidence to propose a final
dividend of 11.33p (2021: 11.17p) per share. This will be paid on 3
March 2023 to shareholders on the register as at 10 February 2023,
with an ex-dividend date of 9 February 2023. This will represent a
full year dividend of 17.0p (2021: 16.0p) per share, an increase of
6.3%.
Environmental, Social and Governance
Environmental
We are committed to achieving net zero by no later than 2040,
ahead of the 2050 target date set by the Government. During 2022,
our initiatives to achieve this included developing the Group's
wider sustainability strategy and our TCFD reporting. We have
continued to work on our net zero planning and the innovative
working practices that will support both the Group and its clients
in achieving critical sustainability objectives.
We are pleased to retain our London Stock Exchange's Green
Economy Mark, which recognises those companies that derive over 50
per cent of revenue from products and services that are
contributing to environmental objectives. Renew plays an important
role in helping to achieve Government aims for greater sustainable
infrastructure.
Social
We understand the value that businesses can provide to the wider
community. During the year we continued to engage with local
schools and education providers, supporting our local communities
and undertaking a range of charity events. We invest heavily in the
training and development of our colleagues including over 270
trainees, apprentices and graduates. We also continue to invest in
the Group's management development programme, Renew Inspiring
Successful Executives (RISE). We remain committed to making Renew
an attractive and diverse employer and to support this objective,
we have created a number of diversity forums across the Group aimed
at improving our performance in this important area.
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.
Board changes
In May, David Forbes resigned as the Group's Chairman and from
the Board after almost 11 years. The Board would like to thank
David for his outstanding contribution to the transformation of the
Group during his tenure.
Following a process run by the Nomination Committee, I was
appointed as Group Chairman and Chair of the Nomination Committee.
Additional Board changes include Shatish Dasani, Chair of the Audit
& Risk Committee, assuming the responsibility of Senior
Independent Director and Stephanie Hazell, Non-executive Director,
appointed as Chair of the Remuneration Committee. I have been a
member of the Renew Board for the last five years and, as Chairman,
remain focused on providing the right environment that ensures that
the Group continues to grow in a sustainable manner and that we
deliver on our strategic plans.
On 9 December 2021, Louise Hardy was appointed as Non-executive
Director and subsequently resigned on 10 March 2022 to take up a
non-executive position at another listed company.
On 1 November 2022, we were pleased to announce the appointment
of Liz Barber as a Non-executive Director. Liz brings a wealth of
experience gained over 12 years' in the regulated water sector, an
established market for Renew. Combined with her financial
background, Liz will complement the Board's current skillset and
will be invaluable as we continue on our growth journey.
People and safety
As a Board we recognise the critical role our employees play in
the success of the Group and we sincerely thank all our colleagues
for their ongoing dedication and hard work. We remain focused on
the mental and physical wellbeing of our colleagues.
We are committed to ensuring a safe working environment to
ensure that none of our colleagues, or those who work with us, are
injured during the conduct of our operations. During the year we
have had an increased focus on the behavioural aspects of safety to
further improve our safety record.
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 as we build 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 and on our approach to diversity and inclusion as
we move through 2023 and beyond.
The Group was pleased to see the Chancellor's recent Autumn
Statement where he confirmed the Government's commitment to
infrastructure spending which leaves Renew ideally placed as we
look ahead. The Board expects to continue to deliver growth, both
organic and through strategic earnings-enhancing acquisitions. Our
differentiated business model and the reliable long-term nature of
the UK infrastructure markets give the Board continued confidence
despite the wider uncertain economic outlook.
David Brown
Chairman
29 November 2022
(1) Renew uses a range of statutory performance measures and
alternative performance measures when reviewing the performance of
the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance
measures, are included in Note 9.
Chief Executive Officer's Review
Record year underpinned by resilience and reliability
The financial year ended 30 September 2022 has, for most UK
businesses, been defined by challenging macroeconomic and
geopolitical circumstances, resulting in an operating environment
that is very different from where we were 12 months ago. While
Renew is not immune to all of the headwinds this environment has
caused, it is pleasing to be able to report another set of record
results for the Group. During the last three years we have operated
through national lockdowns, a global pandemic, high inflation,
resourcing challenges and materials shortages, despite which, we
have delivered record results in each of those three years. This
period, perhaps more than any other, has highlighted the resilient
nature of our differentiated, high-quality, low-risk business
model. The Group's continued outperformance would not be possible
without the incredible hard work of all our directly employed
colleagues across the business and, on behalf of the Board, I would
like to thank them for their tireless work throughout what was an
extraordinary year.
We remain committed to delivering engineering infrastructure
solutions for a sustainable future. Our focus on critical asset
maintenance and renewal means we are not dependent on large,
capital-intensive contract awards, providing Renew with a
significantly lower risk profile than others in our industry. We
perform a mission-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 pledge to level up the economy and reach net-zero
carbon emissions by 2050, and as confirmed in the Autumn Statement,
the Government remains committed to a record GBP600bn(2) investment
in transforming the UK's infrastructure and we continue to benefit
from an increased focus on maintaining and renewing assets as part
of this shift. Renew has a vital role to play in supporting the
sustainable infrastructure of the future and we have also made good
progress on our own sustainability agenda this year and remain
committed to achieving net-zero emissions across the Group by
2040.
Supported by the commercial terms within our frameworks, the
Group has successfully managed industry-wide material shortages and
inflation challenges throughout the year, delivering operating
profit, margin and revenue ahead of strong prior year comparatives.
This performance reinforces Renew's ability to deliver consistently
and reliably through the economic cycle thanks to our
differentiated and resilient business model, the critical nature of
our work and the committed, long-term, highly visible spending
cycles that underpin our end markets.
There were countless achievements across the Group throughout
the year and while it is impossible to mention them all, it's worth
highlighting a few of note. We were pleased to be able to record an
improvement in the Group's safety performance. The successful
collaboration of AmcoGiffen and Carnell for National Highways saw
the Group become the second largest supplier of road restraint
systems in the country, while our water division expanded its
client list with the extremely successful integration of Browne
into the Renew family. Separately, our Rail division secured
framework extensions in Scotland and Eastern which leave the Group
ideally placed ahead of CP7 determinations in 2023.
Acquisitions form a key feature of our strategic ambition to
deliver compounding shareholder returns. We finished the year with
a robust balance sheet and this together with our strong
operational cash generation leaves us uniquely positioned to
continue to appraise selective value-accretive M&A
opportunities in the industries and sectors where we operate. As we
expand through M&A, we will continue to leverage collaboration
opportunities between our brands, providing a unique advantage when
applying for frameworks.
Post period end we were delighted to announce the acquisition of
Enisca Group Limited, a multi-disciplinary design, engineering and
construction business providing mechanical, electrical,
instrumentation, control and automation (MEICA) services to the
water industry. This acquisition represents an excellent strategic
fit, adding new capabilities to Renew's water business and will
form a key part of the Group's strategy to maximise the
opportunities presented by AMP8. We have worked closely with Enisca
for many years as JV partners and we are delighted to welcome all
the Enisca employees to the Renew Group.
Our chosen markets continue to see significant levels of
investment providing us with organic growth opportunities through
our focus on asset management programmes with non-discretionary
funding and high barriers to entry. We enter 2023 with a strong
forward orderbook supported by long-term contracts with repeat
clients and framework agreements that provide barriers to entry
which protect our current market share and provide a solid platform
for growth. We look to the future with optimism, confident in the
spending plans of our clients which are underpinned by strategic
national need and committed regulatory spend.
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 colleagues, and
those impacted by our work, remains our number one priority
and we have implemented industry leading safe working
practices for the Group's employees and operations.
-- 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.
-- The commercial terms within our frameworks mean we are
able to proactively and effectively manage cost inflation.
-- 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.
-- We have strong relationships in place with all our stakeholders,
from our workforce to our customers, suppliers, communities
and shareholders.
-- Our 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.
Compelling market drivers
Our businesses bring exposure 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 GBP600bn(3) in an 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 rail
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 resilient 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 68 per cent;
-- an increase in our adjusted(1) operating margin from 6.5 per cent to 6.9 per cent;
-- Group organic revenue growth of 1.9 per cent and total
revenue growth of 7.3 per cent; and
-- five strategic acquisitions supported largely by our strong free cash flow.
Our track record of reliable revenue growth, cash generation and
conservative approach to gearing has resulted in our ability to
deliver highly predictable, consistent organic earnings growth as
well as funding for the acquisition of complementary businesses
that meet our strategic requirements.
Results overview
During the period, Group revenue(1) of GBP849.0m (2021:
GBP791.0m), an increase of 7.3% partly as a result of the full year
impact of Browne, which was acquired in March 2021. The Group
achieved an adjusted(1) operating profit of GBP58.8m (2021:
GBP51.2m) with an adjusted(1) operating profit margin of 6.9%
(2021: 6.5%). As at 30 September 2022, the Group had pre-IFRS 16
net cash(1) of GBP20.2m (30 September 2021: net debt GBP13.7m).
Underpinned by long-term framework positions, the Group's order
book at 30 September 2022 has remained strong at GBP775m (2021:
GBP749m).
Refinancing
Post the year-end, the Group has refinanced its debt facilities
with its existing banking partners HSBC UK Bank plc and National
Westminster Bank plc and has introduced a new bank into the banking
syndicate, Lloyds Banking Group plc. The new facility comprises an
GBP80m secured revolving credit facility committed until November
2026.
Amco pension buy-in
As previously announced, the Trustee of the Amco Group Pension
Scheme ("Amco Scheme"), in consultation with the Board, entered
into a "buy-in" agreement with a specialist insurer on 8 April
2022. This transaction will ensure the security of the benefits of
the Amco Scheme's pensioners and deferred members and, while the
Group remains legally responsible for the scheme, the transaction
has eliminated all of the Group's exposure to investment and
funding risks in the Amco Scheme. The transaction also improves the
long-term security of members' benefits. As a result of this
buy-in, and the previous buy-in that occurred in 2013, all of the
Amco Scheme's liabilities are now matched with corresponding
annuities. The "buy-in" will be completed using Amco Scheme assets
plus an additional, one off, cash contribution which is expected to
be around GBP1.6m to purchase annuities from the specialist insurer
which match corresponding pension liabilities, where the annuity
policy remains an asset of the Amco Scheme.
Dividend
The Group's strong trading performance, cash position and
positive outlook gives the Board the confidence to propose a final
dividend of 11.33p per share, an increase of 1.4 per cent over the
prior year final dividend of 11.17p. This will be paid on 3 March
2023 to shareholders on the register as at 10 February 2023, with
an ex-dividend date of 9 February 2023. This will represent a full
year dividend of 17p (2021: 16p) per share.
Engineering Services
Our Engineering Services activities account for over 95 per cent
of the Group's adjusted(1) operating profit and delivered
revenue(1) of GBP778.9m (2021: GBP706.7m) with an adjusted(1)
operating profit of GBP59.1m (2021: GBP51.5m) resulting in an
adjusted(1) operating margin of 7.6% (2021: 7.3%). At 30 September
2022, the Engineering Services order book was GBP717m (2021:
GBP679m).
Rail
Network Rail is investing GBP53bn(4) over the current Control
Period (CP6), which runs to 2024. Network Rail is a significant
strategic customer for the Group and during the period the Group
became the third largest provider of engineering services to
Network Rail nationally. CP6 has an increased focus on operational
support, renewal and maintenance works, which plays to our
strengths, as does the Government's commitment to its rail
decarbonisation programme. This will include significant investment
in electrification programmes as part of the overall UK target to
deliver net-zero by 2050.
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, embankments, tunnels, drainage systems,
signalling and electrification.
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 and new frameworks
for Transport for Wales. We also secured work on the Transpennine
Upgrade and have seen growth in our renewals work bank. Pleasingly,
we are beginning to see the early signs of the electrification
market come to life as part of the UK Government's plan to
decarbonise the nation's railways. We have begun electrification
work on the Midland Main Line and the Aberdeen to Glasgow line and
see a greater emphasis on rail electrification as we move into
Control Period 7 (CP7).
Importantly, we secured a one-year framework extension in
Scotland which leaves the Group ideally placed to seize further
opportunities as we move into CP7. We have also made excellent
progress on preparations to resecure our framework positions for
CP7.
Innovation remains a key differentiator for the Group and during
the period we maintained our position as the leading rail plant
innovator in the country. We have received positive recognition
from our clients for the efficiency of our work which is in part a
result of our relentless pursuit to implement industry-leading
innovations. Our Rail MegaVac and Mega Chipper V2 are just two
recent examples of innovations we have brought to market and our
teams continue to evaluate other opportunities to make our work
more efficient and sustainable.
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 in the current and future Control Periods. Our team
remains focused on securing our existing frameworks which are
coming up for renewal while continuously appraising other areas for
organic growth. The early stages of increased electrification on
the railways bode well for future CP7 framework applications where
our three rail brands have formed a collaborative and unique
position for Overhead Line Electrification delivery, another key
strategic pillar for the Group.
Infrastructure
Highways
Following the Group's successful entry into the Highways market
via its acquisition of Carnell in January 2020, it has continued to
go from strength to strength. We made good progress during the
period, delivering essential asset maintenance and critical
infrastructure renewals underpinned by non-discretionary regulatory
requirements.
The UK Government has committed to an unprecedented level of
spending on England's strategic road network as part of its second
Road Investment Strategy ("RIS2"). Of the GBP24bn(5) , GBP11.9bn of
funding is ringfenced for operations, maintenance and renewals
which represents a significant opportunity for Renew. Importantly,
this trend looks set to continue with increased spend in renewals
forecast over the next 10 years with a focus on structures,
concrete pavement and road restraints.
Recently, Transport Focus, the independent watchdog representing
the interests of users of England's motorways, submitted its six
strategic objectives for RIS3(6) . The objectives build on the
first two strategies and while all six objectives are important,
Transport Focus notes that those of the greatest importance relate
to the top three road user priorities: improved quality of road
surfaces; safer design and upkeep of the road network; and better
management of roadworks. This continued focus on renewals and
maintenance plays well into the Group's capabilities as we move
into RIS3.
During the period, work commenced on the National Highways
Scheme Delivery Framework ("SDF") across five framework lots,
covering civil engineering, road restraint systems and drainage
disciplines, worth GBP147m over six years. The road restraint lots
will be delivered through a collaboration between two of the
Group's subsidiary businesses, AmcoGiffen and Carnell, illustrating
the integration and collaboration potential of our brands. The
joint venture between AmcoGiffen and Carnell, was the only
successful joint venture on the SDF and makes the Group the second
largest supplier of road restraint systems in the country.
Following this key strategic advancement, the Group continues to
pursue further opportunities where it can leverage the combined
expertise of its subsidiaries.
With the continued focus on renewals and maintenance on the
country's strategic road network, Renew remains uniquely placed to
seize attractive growth and market share opportunities within
Highways.
Aviation
During the period we were appointed to the 5-year Manchester
Airports Group GBP700m Civils Framework to deliver medium-sized
civil-engineering projects valued between GBP3m - GBP10m. This will
support its programme of infrastructure development across its
three airports namely, Manchester, East Midlands and Stansted.
Works are expected to gather momentum in late 2023 onwards.
Wireless telecoms
As the UK Government continues to invest in wireless technology
to improve the nation's connectivity, the sector remains an
attractive growth area for the Group. An estimated GBP30bn(7) is
required to upgrade the nation's broadband networks to
gigabit-capable speeds, which includes the Government's GBP5bn
investment in Project Gigabit to upgrade the UK's broadband
infrastructure, a significant component of which is 5G, the
expansion of the Shared Rural Network and the GBP500m programme to
extend 4G mobile coverage to 95% of the UK.
The Group is well positioned to benefit from various upcoming
projects to cater for the increasing demand for 5G services. We
operate across 3UK's programme of cell site densification and VMO2
and MBNL's three-year 5G services frameworks. We are progressing
well in our works with EE and BT to remove Huawei equipment from UK
networks by 2027 and we have secured contracts with Vodafone and
VMO2 to deliver acquisition, design and construction services.
Growing investment in fibre by Openreach, Virgin and Altnets,
underpinned by Government regulation, presents a strong opportunity
in the sector, and we continue to build on our long-term
relationships with the main UK network operators, equipment vendors
and managed service providers.
Energy
Nuclear
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 Nuclear Decommissioning Authority's sites and where we remain a
principal Mechanical, Electrical and Instrumentation services
contractor. The Nuclear Decommissioning Authority is increasing
investment in decommissioning at Sellafield, Magnox and Dounreay
with EDF stations being brought into public ownership.
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. As such, the Group
can take advantage of opportunities in the decommissioning stage
and the new nuclear build programme.
In the period, the Group has secured a number of decommissioning
and decontaminating contracts. We are excited to have won our first
project to plan decommissioning of facilities at AWE - Aldermaston,
and a separate decontamination project for the recently closed
THORP nuclear fuel reprocessing plant.
We continue to operate across a number of long-term frameworks
at Sellafield and we are collaborating with Programme and Project
Partners ("PPP") to secure further growth opportunities. PPP is a
20-year framework for the delivery of a broad range of major
projects for the site, with GBP7bn in the programme pipeline. We
have also secured memorandum of understanding ("MOU") to support
three of these projects. In a joint venture, the Group has
delivered the installation of the first waste retrieval machine
within the highest hazard building on the site. Our work at
Sellafield positions us well for opportunities in the Major
Projects Programme and we continue to build relationships outside
of Sellafield at Magnox and Dounreay and AWE, broadening
opportunities for decommissioning contracts.
This year has seen significant changes to the Government's
stance towards nuclear energy. Turbulent energy markets and high
gas prices have exposed the issues of over reliance on foreign
supplies. In April 2022, the Government launched the British Energy
Security Strategy, identifying new nuclear as an important part of
its plans to ensure greater energy independence. The strategy will
see a significant acceleration in investment in new nuclear, with
an ambition of new nuclear producing up to 24GW by 2050,
representing 25% of projected electricity demand(9) .
Whilst most existing plants will be shut down by the end of the
decade, the Government has simultaneously set a target to commence
construction of up to three new nuclear plants in the next 10
years, with the approval of a GBP100m investment in Sizewell C(10)
(estimated to be a GBP30bn project), GBP210m allocated to Small
Modular Reactors (SMR's)(11) and the establishment of Great British
Nuclear. This sizeable investment in new nuclear represents an
exciting growth area for the Group.
Our contract to support Rolls Royce at Hinkley Point "C" for
manufacturing and installation of key components is progressing
well and we have a MOU in place to support the manufacture of Rolls
Royce's Small Modular Reactor.
Electric Vehicle Charging
The UK Government's commitment to ban the sale of non-electric
new cars by 2030 provides the Group with another exciting growth
opportunity. This target has been identified as a key priority in
supporting the Government's net zero emissions targets as well as
its ambition to become the fastest nation in the G7 to decarbonise
road transport(12) .
As part of its plans, the Government committed to remove
charging infrastructure as both a perceived, and a real, barrier to
the adoption of electric vehicles and has allocated a GBP950m Rapid
Charging Fund(13) to support the rollout of at least 6,000 high
powered charge points across England's motorways and major A-roads
by 2035. An additional sum of over GBP500m of funding has been
granted to support local authorities to find innovative ways to
increase local charge point coverage, as well as the launch of the
GBP10m Local EV Infrastructure pilot project(14) .
The sector has seen over GBP3bn invested in recent years(15) .
Large vehicle fleet owners such as Amazon, XPO and Post Office are
investing in vehicle charging infrastructure to support return to
base electric fleets.
Our projects during the year included the delivery of Volvo bus
and truck electrical infrastructure and charging projects UK wide,
providing EV infrastructure for Amazon distribution facilities, the
Post Office and the installation of EV and network upgrades in nine
mainline Network Rail stations.
Thermal Power, Renewables, Networks, Transmission and
Distribution
Our essential engineering maintenance services continue in a
number of the UK's thermal power stations. We are progressing
delivery of our work on the Minor Works Framework with National
Grid and our Minor Civils Framework with Western Power Distribution
and have secured additional contracts for works on the SSE Hydro
Tunnels Framework and the Drax Electrical Framework.
The Group is an accredited Independent Connection Provider
(ICP), supporting electrical system upgrades required for EV and
Telecoms. Our offer is unique and provides a consultative solution
for the delivery of large-scale electrical charging
infrastructure.
Renew is focused on leveraging opportunities in the electricity
transmission and distribution market. This is expected to grow as a
consequence of the changing energy generation mix where we note
that Ofgem has announced more than GBP20bn(16) of initial funding
to strengthen the transition to low carbon technologies.
Environmental
Water
In Water, we continue to benefit from the UK Government's
commitment to spend GBP51bn(17) over AMP7 into 2025 with increased
expenditure on capital maintenance, asset optimisation and supply
resilience including dam safety and infrastructure refurbishment
schemes. The market is underpinned by committed regulatory spend
and long-term growth opportunities.
AMP7 has been characterised by a focus on cost efficiency &
leak reduction resulting in an increase in planned expenditure on
capital maintenance, asset optimisation & supply resilience. As
we enter Year 3, we expect to see an increasingly accelerated
programme of regulatory spend over the final years of the current
AMP cycle, given the lower level of expenditure in the early part
of the cycle.
Our offer of mains renewal, scheduled repairs and maintenance as
well as extensive 24/7 emergency reactive works remains one of our
key strengths, providing specialised, mission-critical services for
clients around the UK. With water companies increasing expenditure
on capital maintenance and asset optimisation, we are in a strong
position to fulfil any new works in these areas.
During the period we continued our work with D r Cymru Welsh
Water ("DCWW") and currently hold a number of contracts with
market-leading companies including for the Pressurised Pipelines
Framework and the Capital Delivery Alliance Civils & Pipeline
Framework. We are delighted that for the first time, we have
secured a place on the DCWW Major Civils 8-year Framework, a key
strategic target for the Group.
Elsewhere, we have been awarded a new framework with Severn
Trent and we continue engagements for Bristol Water on mains
renovation, Wessex Water on the Phosphate Removal Programme and we
are maintaining and renewing existing assets on operational
treatment and distribution facilities (AMP7 Minor Civils Framework)
with Yorkshire Water.
During 2021, we welcomed Browne into the Renew family and that
acquisition has continued to strengthen our offering and footprint
in the sector. Browne has seamlessly integrated into the Group,
continues to trade ahead of management's expectations and helped
the Group to expand our Water client base. During the period we
added Thames Water, Affinity Water, South East Water and Southern
Water to our growing list of clients.
We also continue to see long-term opportunities with existing
clients Scottish Canals and Peel Ports.
Flood & Coastal
Changing weather conditions have highlighted the need for
investment in flood defence, and the UK Government has committed
GBP5.2bn(18) over the next six years to improve flood defence
infrastructure. This includes plans to improve protection to
336,000 properties exposed during the floods in 2019, with similar
programmes being planned in devolved budgets for Scotland &
Wales.
The Group currently undertakes work for the Environment Agency
("EA") on the EA Flood and Coastal Erosion Framework. With growing
investment in the segment, and increased pressure on governments to
improve the UK's resilience for climate change, the Group is
well-positioned to expand its presence in the sector. We also
continue to work on national frameworks for the Canal and River
Trust, Scottish Canals and Natural Resources Wales.
Specialist Restoration
As reported in our interim results, 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. This market continues to present a number of long-term
opportunities for our specialist capabilities. In the period we
were appointed to schemes at Tollcross in Glasgow and Royal Botanic
Garden Edinburgh.
Specialist Building
Revenue was in line with the Group's expectations at GBP70.1m
(2021: GBP84.4m) reflecting a continued focus on contract
selectivity and risk management. Operating profit was GBP1.7m
(2021: GBP1.6m). In Specialist Building, the order book was GBP58m
(2021: GBP70m).
Our Specialist Building business focuses on the High Quality
Residential, Landmark and Science markets in London and the Home
Counties.
The High Quality Residential market continues to be robust and
we are active on a number of schemes across the capital. The Group
was also awarded several other landmark schemes during the period
including for the National History Museum. Our essential work for
the Medical Research Council is nearing completion and we have
recently been appointed on a scheme for Imperial College London's
Department of Infectious Diseases.
Environmental, Social and Governance (ESG)
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 ambition to reach
net-zero emissions in the UK by 2050. Indeed, 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.
Since the introduction of our quantitative targets at the
Group's interim results in May 2021, we are pleased to report good
progress on our ESG strategy across four key areas:
-- take climate action;
-- operate responsibly;
-- empower our people; and
-- build social value.
We continue to advance our strategy, and this year we have
focused on implementing TCFD disclosure and developing next steps
for 2023. Pleasingly, we have also taken the necessary steps to
retain our LSE Green Economy Mark. Further details of our
comprehensive approach to ESG will be set out in the Group's 2022
Annual Report and Accounts.
Our people
Our people are the most important part of our business and I, on
behalf of the Board, would once again like to thank them for all
their hard work throughout the year.
Our highly skilled, directly employed workforce are essential to
our high-quality, low-risk, resilient and differentiated business
model. In response to the increase in the cost of living and to
ensure we retain our talent, we have undertaken a number of
initiatives to support our employees during this difficult economic
time. Pleasingly, we remain below the industry average attrition
rate and expect this to continue as a consequence of the
initiatives we have rolled out during the period.
M&A - A key growth driver
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. We have a strong record of successfully
identifying, acquiring and integrating value-enhancing
acquisitions, more recently improving our capabilities in the Water
sector through the acquisition of Browne in 2021, whilst
successfully entering the Highways market in 2020 through the
acquisition of Carnell. Both of these brands have outperformed
expectations and now form key elements of our growth strategy going
forward. We continue to actively appraise opportunities that fit
within our strict acquisition criteria and will supplement our
existing capabilities and extend our footprint into untapped
markets in the UK. The M&A landscape remains dynamic and we
will remain disciplined in our pursuit of targets in terms of both
valuations and strategic fit.
Outlook - moving forward with confidence
The year has once again highlighted the differentiated and
resilient nature of our, high-quality, low-risk business model. In
the face of incredibly challenging political and economic
circumstances, the Group has delivered another record set of
results supported by the commercial terms within our
frameworks.
Despite recent political instability, the UK Government remains
committed to its plans to level up the economy and reach net-zero
by 2050 through long-term, record levels of committed investment
with an increased focus on maintaining and renewing assets. This
commitment was confirmed in the Chancellor's recent Autumn
Statement when he said "I am not cutting a penny from our capital
budgets in the next two years and maintaining them at that level in
cash terms for the following three years." The UK Government has
also sharpened its focus on infrastructure to improve climate
resilience and energy self-sufficiency, investing in renewable
sources and nuclear capabilities. To this end, the structural
growth drivers in our end markets have never been more attractive
and we remain uniquely positioned to seize both organic and
acquisitive growth opportunities.
Our business model is built on solid foundations, evidenced by
strong and well-established market positions across key
infrastructure sectors with visible, non-discretionary spending
cycles. The spending plans of our clients are underpinned by
strategic national needs and regulatory commitments. In line with
previous years, we have entered the new financial year with our
order book in a strong position and trading in the new year has
begun positively.
As we look ahead, we are committed to building on our strengths
and will continue to leverage the combined expertise of our
subsidiary businesses in 2023, following their successful
collaboration on a number of projects this year as we target new
areas for organic growth while simultaneously appraising
acquisitive opportunities in our end markets. Our chosen markets
continue to see significant levels of investment which gives us
confidence in the Group's future prospects as we move into 2023 and
into new framework cycles across our sectors of expertise.
Paul Scott
Chief Executive Officer
29 November 2022
1 Renew uses a range of statutory performance measures and alternative performance measures
when reviewing the performance of the Group against its strategy. Definitions of the alternative
performance measures, and a reconciliation to statutory performance measures, are included
in Note 9.
2 HM Treasury, Autumn budget and spending review 2022 - October 2022
3 HM Treasury, Autumn budget and spending review 2022 - October 2022
4 Network Rail Delivery Plan, Control Period 6, High Level Summary - 26 March 2020
5 UK Government Department for Transport, Planning ahead for the Strategic Road Network -
December 2021
6 Transport Focus, Putting road users at the heart of the Road Investment Strategy for 2025-2030
- October 2022
7 UK Government Department for Digital, Culture, Media & Sport, Future Telecoms Infrastructure
Review - 23 July 2018
8 Nuclear Decommissioning Authority, Nuclear Provision: the cost of cleaning up Britain's
historic nuclear sites - 4 July 2019
9 British Energy Security Strategy - April 2022
10 British Energy Security Strategy - April 2022
11 British Energy Security Strategy - April 2022
12 Taking Charge: the electric vehicle infrastructure strategy - March 2022
13 Taking Charge: the electric vehicle infrastructure strategy - March 2022
14 Taking Charge: the electric vehicle infrastructure strategy - March 2022
15 Taking Charge: the electric vehicle infrastructure strategy - March 2022
16 Ofgem RIIO-ED2 Draft Determinations - Overview Document - 29 June 2022
17 Ofwat PR19 final determinations, December 2019
18 UK Government Department for Environment, Food and Rural Affairs, Flood and coastal erosion
risk management - 29 July 2021
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
(see Note (see Note
assets 3) Total assets 3) Total
2022 2022 2022 2021 2021 2021
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue: Group including share
of joint ventures* 849,048 - 849,048 790,995 - 790,995
Less share of joint ventures'
revenue* (32,772) - (32,772) (15,356) - (15,356)
------------------------------ ---- ------------- ------------- --------- ------------- ------------- ---------
Group revenue from continuing
activities 2 816,276 - 816,276 775,639 - 775,639
Cost of sales (693,336) - (693,336) (666,454) - (666,454)
------------- ------------- --------- ------------- ------------- ---------
Gross profit 122,940 - 122,940 109,185 - 109,185
Administrative expenses (68,184) (8,527) (76,711) (57,985) (10,070) (68,055)
Other operating income 3,655 - 3,655 - - -
Share of post-tax result of
joint ventures 362 (267) 95 11 - 11
------------- --------- ------------- ------------- ---------
Operating profit 2 58,773 (8,794) 49,979 51,211 (10,070) 41,141
Finance income 16 - 16 19 - 19
Finance costs (573) - (573) (836) - (836)
Other finance income - defined
benefit pension schemes 33 - 33 428 - 428
------------- ------------- --------- ------------- ------------- ---------
Profit before income tax 2 58,249 (8,794) 49,455 50,822 (10,070) 40,752
Income tax expense 5 (11,330) 1,782 (9,548) (11,096) 2,427 (8,669)
------------- ------------- --------- ------------- ------------- ---------
Profit for the year from
continuing activities 46,919 (7,012) 39,907 39,726 (7,643) 32,083
------------- ------------- ------------- -------------
Loss for the year from
discontinued
operations 4 (2,242) (1,620)
Profit for the year
attributable
to equity holders of the
parent
company 37,665 30,463
--------- ---------
Basic earnings per share from
continuing activities 7 59.52p (8.89)p 50.63p 50.51p (9.72)p 40.79p
Diluted earnings per share
from continuing activities 7 59.13p (8.87)p 50.43p 50.09p (9.63)p 40.46p
------------- ------------- --------- ------------- ------------- ---------
Basic earnings per share 7 59.52p (11.74)p 47.78p 50.51p (11.78)p 38.73p
Diluted earnings per share 7 59.13p (11.70)p 47.60p 50.09p (11.68)p 38.41p
------------- ------------- --------- ------------- ------------- ---------
* Alternative performance measure, please see Note 9 for further
details.
Group statement of comprehensive
income
for the year ended 30 September
2022 2021
GBP000 GBP000
Profit for the year attributable to equity holders
of the parent company 37,665 30,463
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined
benefit pension schemes 347 (25,672)
Movement on deferred tax relating to the pension
schemes (240) 9,026
------ --------
Total items that will not be reclassified to profit or loss 107 (16,646)
------ --------
Items that are or may be reclassified subsequently
to profit or loss:
Exchange movement in reserves - (8)
------ --------
Total items that are or may be reclassified
subsequently to profit or loss - (8)
------ --------
Total comprehensive income for the year attributable to
equity holders of the parent company 37,772 13,809
------ --------
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 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
Transfer from income statement
for the year 37,665 37,665
Dividends paid (13,281) (13,281)
New shares issued 18 18
Recognition of share based payments 658 658
Vested share option transfer (362) 362 -
Reclassification on closure
of overseas subsidiaries (1,308) (1,308)
Actuarial movement recognised
in pension schemes 347 347
Movement on deferred tax relating
to the pension schemes (240) (240)
At 30 September 2022 7,886 66,378 3,896 - 1,375 69,143 148,678
------- ------- ---------- ----------- -------- -------- ----------
Group balance sheet
At 30 September
2022 2021
(restated*)
GBP000 GBP000
Non-current assets
Intangible assets - goodwill 138,445 139,698
- other 22,385 29,241
Property, plant and equipment 17,834 16,254
Right of use assets 15,519 17,247
Investment in joint ventures 5,538 5,708
Retirement benefit asset 2,230 661
Deferred tax assets 2,899 2,301
204,850 211,110
--------- -----------
Current assets
Inventories 2,613 2,078
Assets held for resale 1,250 1,250
Trade and other receivables 164,590 157,416
Current tax assets - 1,382
Cash and cash equivalents 20,218 881
-----------
188,671 163,007
--------- -----------
Total assets 393,521 374,117
--------- -----------
Non-current liabilities
Lease liabilities (8,640) (9,421)
Retirement benefit obligation (1,049) (152)
Deferred tax liabilities (7,568) (8,067)
Provisions (338) (441)
-----------
(17,595) (18,081)
--------- -----------
Current liabilities
Borrowings - (14,609)
Trade and other payables (212,684) (207,667)
Lease liabilities (5,884) (6,180)
Current tax liabilities (595) -
Provisions (8,085) (2,761)
--------- -----------
(227,248) (231,217)
--------- -----------
Total liabilities (244,843) (249,298)
--------- -----------
Net assets 148,678 124,819
--------- -----------
Share capital 7,886 7,868
Share premium account 66,378 66,378
Capital redemption reserve 3,896 3,896
Cumulative translation adjustment - 1,308
Share based payments reserve 1,375 1,079
Retained earnings 69,143 44,290
Total equity 148,678 124,819
--------- -----------
*Reclassification from accruals to provisions (please see
accounting policy Note 1)
Group cashflow statement
for the year ended 30 September
2022 2021
GBP000 GBP000
Profit for the year from continuing operating
activities 39,907 32,083
Share of post-tax trading result of joint
ventures (95) (11)
Impairment and amortisation of intangible
assets 8,109 6,463
Research and development expenditure credit (1,353) -
Defined benefit pension scheme G.M.P. equalisation/past
service deficit - 2,805
Depreciation of property, plant and equipment
and right of use assets 10,136 10,504
Profit on sale of property, plant and equipment (830) (649)
Increase in inventories (534) (405)
Increase in receivables (7,455) (15,289)
Increase in payables and provisions 10,986 3,996
Current and past service cost in respect
of defined benefit pension scheme 23 61
Cash contribution to defined benefit pension
schemes (315) (560)
Charge in respect of share options 657 258
Finance income (16) (19)
Finance expense 540 408
Interest paid (573) (836)
Income taxes paid (7,595) (7,335)
Income tax expense 9,548 8,669
-------- --------
Net cash inflow from continuing operating
activities 61,140 40,143
Net cash outflow from discontinued operating
activities (3,977) (976)
Net cash inflow from operating activities 57,163 39,167
-------- --------
Investing activities
Interest received 16 19
Dividend received from joint venture 265 60
Proceeds on disposal of property, plant and
equipment 1,514 1,263
Purchases of property, plant and equipment (5,056) (4,042)
Acquisition of subsidiaries net of cash acquired - (33,343)
-------- --------
Net cash outflow from investing activities (3,261) (36,043)
-------- --------
Financing activities
Dividends paid (13,281) (10,354)
Issue of share equity 18 659
New loan 18,000 10,000
Loan repayments (22,373) (18,752)
Repayments of obligations under lease liabilities (6,693) (7,410)
-------- --------
Net cash outflow from financing activities (24,329) (25,857)
-------- --------
Net increase/(decrease) in continuing cash
and cash equivalents 33,550 (21,757)
Net decrease in discontinued cash and cash
equivalents (3,977) (976)
-------- --------
Net increase/(decrease) in cash and cash
equivalents 29,573 (22,733)
Cash and cash equivalents at beginning of
year (9,355) 13,396
Effect of foreign exchange rate changes on
cash and cash equivalents - (18)
Cash and cash equivalents at end of year 20,218 (9,355)
-------- --------
Bank balances and cash 20,218 881
Bank overdraft - (10,236)
-------- --------
Cash and cash equivalents at end of year 20,218 (9,355)
-------- --------
Notes
1 Basis of preparation
The consolidated financial statements for the year ended 30
September 2022 have been prepared in accordance with UK adopted
International accounting standards ("Adopted IFRS"). These
preliminary results are extracted from those financial
statements.
Going concern
The Board has concluded that it is appropriate to adopt the
going concern basis, having undertaken a rigorous review of
financial forecasts and available resources. The Directors have
robustly tested the going concern assumption in preparing these
financial statements, taking into account the Group's liquidity
position at 30 September 2022. The Directors have considered the
results of the stress testing of key assumptions and consider the
likelihood of events or circumstances that would impact the going
concern assessment as collectively remote. The Directors have
reviewed the period to 31 December 2023.
Prior year restatement
In the prior year, GBP6.0m of provisions were incorrectly
recorded as accruals. This has resulted in previously reported
trade and other payables reducing by GBP6.0m and previously
reported provisions increasing by GBP6.0m. This reclassification
impacts the balance sheet only. There is no impact to any other
primary statement or note to the financial statements. The impact
at the beginning of the prior period (1 October 2020) would be to
increase provisions and reduce accruals by GBP6.0m.
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 Group
including Less revenue revenue
share share from continuing from continuing
of joint of joint
ventures ventures activities activities
Revenue is analysed as
follows: 2022 2022 2022 2021
GBP000 GBP000 GBP000 GBP000
Engineering Services 778,917 (32,772) 746,145 691,207
Specialist Building 70,125 - 70,125 84,425
---------------- ----------------
Segment revenue 849,042 (32,772) 816,270 775,632
Central activities 6 - 6 7
----------- ---------- ----------------
849,048 (32,772) 816,276 775,639
----------- ---------- ---------------- ----------------
Before
exceptional Exceptional
items and items and
amortisation amortisation
of intangible of intangible
assets assets
2022 2022 2022 2021
GBP000 GBP000 GBP000 GBP000
Engineering
Services 59,123 (8,376) 50,747 42,456
Specialist Building 1,679 - 1,679 1,613
Segment operating profit 60,802 (8,376) 52,426 44,069
Central activities (2,029) (418) (2,447) (2,928)
-------------- -------------- -------- --------
Operating profit 58,773 (8,794) 49,979 41,141
Net financing
costs (524) - (524) (389)
-------------- -------- --------
Profit on ordinary activities
before income tax 58,249 (8,794) 49,455 40,752
-------------- -------------- -------- --------
Engineering Services segment operating profit for the year ended
30 September 2021 is stated after charging exceptional costs of
GBP3,607,000 and amortisation of GBP6,463,000, resulting in a total
charge before taxation of GBP10,070,000 (see Note 3).
3 Exceptional items and amortisation of
intangible assets 2022 2021
GBP000 GBP000
Defined benefit pension scheme guaranteed
minimum pension equalisation - 1,107
Amco defined benefit scheme past service
cost deficit - 1,698
Aborted acquisition costs/acquisition costs 418 802
-------- --------
Total losses arising from exceptional
items 418 3,607
Amortisation of intangible assets 7,123 6,463
Impairment of intangible asset 1,253 -
-------- --------
Total exceptional items and amortisation
charge before income tax 8,794 10,070
Taxation credit on exceptional items
and amortisation (1,782) (2,427)
-------- --------
Total exceptional items and amortisation
charge 7,012 7,643
-------- --------
Last year's Annual Report reported that 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.
Last year 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.
During the year the Company incurred GBP418,000 of costs on an
unsuccessful acquisition opportunity. Last year's acquisition costs
related 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 GBP7,123,000
(2021: GBP6,463,000) 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.
The Directors have made a full provision of GBP1,253,000 against
Britannia's goodwill carrying value following the decision to wind
down that company's operations.
4 Loss for the year from discontinued operations 2022 2021
GBP000 GBP000
Revenue - -
Expenses (2,242) (1,620)
-------- --------
Loss before income tax (2,242) (1,620)
Income tax charge - -
-------- --------
Loss for the year from discontinued
operations (2,242) (1,620)
-------- --------
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 GBP3,353,000
(2021:GBP1,620,000) 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.
This expense was offset by the recycling of the foreign currency
translation reserve of GBP1,308,000.
5 Income tax expense
(a) Analysis of expense in
year 2022 2021
GBP000 GBP000
Current tax:
UK corporation tax on profits
of the year (10,692) (8,719)
Adjustments in respect of previous
period (193) 25
--------
Total current tax (10,885) (8,694)
--------- --------
Deferred tax - defined benefit pension
schemes (87) 601
Deferred tax - other timing
differences 1,424 (576)
--------- --------
Total deferred tax 1,337 25
--------- --------
Income tax expense in respect of
continuing activities (9,548) (8,669)
--------- --------
(b) Factors affecting income tax expense
for the year
2022 2021
GBP000 GBP000
Profit before income
tax 49,455 40,752
--------- --------
Profit multiplied by
standard rate
of corporation tax in the UK of 19%
(2021: 19%) (9,396) (7,743)
Effects of:
Expenses not deductible for
tax purposes (1,705) (837)
Timing differences not provided in
deferred tax 1,721 1,476
Change in tax rate 25 (1,590)
Adjustments in respect of previous
period (193) 25
--------- --------
(9,548) (8,669)
--------- --------
Deferred tax has been provided at a rate of 25% (2021: 25%)
following the decision that the UK corporation tax rate should
increase to 25% (effective from 1 April 2023) and substantively
enacted on 24 May 2021. The deferred tax asset and liability at 30
September 2022 has been calculated based on these rates, reflecting
the expected timing of reversal of the related temporary timing
differences (2021: 25%). The Group has available further unused UK
tax losses of GBP23.7m (2021: GBP25.3m) 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 GBP5.9m (2021: GBP5.2m).
6 Dividends
2022 2021
Pence/share Pence/share
Interim (related to the year ended 30 September
2022) 5.67 4.83
Final (related to the year ended 30 September
2021) 11.17 8.33
------------ ------------
Total dividend
paid 16.84 13.16
------------ ------------
GBP000 GBP000
Interim (related to the year ended 30 September
2022) 4,472 3,800
Final (related to the year ended 30 September
2021) 8,809 6,554
------------ ------------
Total dividend
paid 13,281 10,354
------------ ------------
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 11.33p per
Ordinary Share be paid in respect of the year ended 30 September
2022. This will be accounted for in the 2022/23 financial year.
7 Earnings per share
2022 2021
Earnings EPS DEPS Earnings EPS DEPS
GBP000 Pence Pence GBP000 Pence Pence
Earnings before exceptional
items and amortisation 46,919 59.52 59.30 39,726 50.51 50.09
Exceptional items
and amortisation (7,012) (8.89) (8.87) (7,643) (9.72) (9.63)
--------- ------- ------- -------- -------- --------
Basic earnings per
share - continuing
activities 39,907 50.63 50.43 32,083 40.79 40.46
Loss for the year
from discontinued
operations (2,242) (2.85) (2.83) (1,620) (2.06) (2.05)
--------- ------- ------- --------
Basic earnings
per share 37,665 47.78 47.60 30,463 38.73 38.41
--------- ------- ------- -------- -------- --------
Weighted average number
of shares ('000) 78,825 79,125 78,655 79,304
------- ------- -------- --------
The dilutive effect of share options is to increase the number
of shares by 299,750 (2021: 649,000) and reduce basic earnings per
share by 0.18p (2021: 0.32p).
8 Preliminary financial information
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2022
or 2021. Statutory accounts for 2021 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 2022 will be finalised on the basis of
the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of
Companies in due course.
9 Alternative performance measures
Renew uses a variety of alternative performance measures ('APM')
which, although financial measures of either historical or future
performance, financial position or cash flows, are not defined or
specified by Adopted IFRSs. The Directors use a combination of APMs
and Adopted 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 (GBP58.773m) and adjusted profit
before tax (GBP58.249m) - 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 (GBP49.979m) and
profit before tax (GBP49.455m).
Adjusted operating margin (6.9%) - This is calculated by
dividing operating profit before exceptional items and amortisation
of intangible assets (GBP58.773m) by group revenue including share
of joint venture (GBP849.048m) 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 (6.1%) which is calculated by dividing operating
profit (GBP49.979m) from
group revenue from continuing operations venture
(GBP816.276m).
Adjusted earnings per share (59.52p) - 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 (GBP849.048m) - 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 (GBP778.917m) - 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 (GBP59.123m) -
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 (GBP50.747m) which is also visible in
Note 2.
Adjusted Engineering Services operating profit margin (7.6%) -
This is calculated in the same way as adjusted operating profit
margin but based on the adjusted Engineering Services operating
profit (GBP59.123m) and the Engineering Services revenue
(GBP778.917m) figures as set out above. The equivalent GAAP measure
is Engineering Services operating profit margin (6.8%) which is
calculated by dividing Engineering Services operating profit
(GBP50.747m) from Engineering Services revenue from continuing
operations (GBP746.145m).
10 Post balance sheet events
Acquisition
On 29 November 2022 the Company announced that it had agreed to
acquire the entire issued share capital of Enisca Group Limited, a
leading specialist water contractor based in Northern Ireland for a
cash consideration of GBP15.6m on a cash free, debt free basis. The
acquisition was funded by a combination of cash and the Group's
existing revolving credit facility. There is no deferred
consideration payable. Further information will be included in the
Interim Report and Accounts for the six months ended 31 March
2023.
Refinancing
Post the year-end, the Group has refinanced its debt facilities
with its existing banking partners HSBC UK Bank plc and National
Westminster Bank plc and has introduced a new bank into the banking
syndicate, Lloyds Banking Group plc. The new facility comprises an
GBP80m secured revolving credit facility committed until November
2026.
11 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the
year ended 30 September 2022 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 UWSARUNUAUUA
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November 29, 2022 02:00 ET (07:00 GMT)
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