Source - LSE Regulatory
RNS Number : 9050Y
Renew Holdings PLC
18 May 2021
 

 

18 May 2021

 

Renew Holdings plc

 

("Renew" or the "Group" or the "Company")

 

Half-year Report

 

Strong trading continued across H1; positive momentum going into H2

 

Renew (AIM: RNWH), the leading Engineering Services Group supporting the maintenance and renewal of critical UK infrastructure, announces its interim results for the six months ended 31 March 2021 ("the period").

 

Financial Highlights

 

Six months ended 31 March 2021

HY2021

£m

HY2020

£m

 

Change

 

Group revenue1

£366.4m

£313.6m

+17%

Adjusted operating profit1

£22.0m

£19.9m

+11%

Operating profit

£18.5m

£16.0m

+16%

Adjusted operating margin1

6.0%

6.4%

-40bps

Profit before tax

£18.1m

£15.2m

+19%

Adjusted earnings per share1

22.9p

20.1p

+14%

Interim dividend

4.83p

- p


 

Group order book of £750m (HY2020: £690m)

Net debt (pre-IFRS16) of £16.9m (HY2020: £16.1m)

Strong organic revenue growth of 12 per cent, underpinned by performance in rail

De-risking of balance sheet with completion of Lovell Pension Scheme buy-in

Reinstatement of interim dividend reflects Group's strong cash generation and positive outlook

 

Operational Highlights

 

Acquisition of J Browne Group Holdings Limited ("Browne") for £29.5m in March 2021, adding material scale to the Group's water business in line with strategic objectives

Engineering Services adjusted operating profit of £22.2m (HY2020: £20.5m)

Quantitative sustainability targets in place across five key areas of the business to embed ESG strategy

 

Current Trading & Outlook

 

Trading has started strongly in the second half of the year

Confident in our future prospects and well positioned to capitalise on the increased investment in maintaining and renewing infrastructure assets

 

Paul Scott, CEO of Renew, commented:
"We are delighted to be reporting another set of record results for the Group and I would like to thank my colleagues across the entire business for their hard work and contributions despite the ongoing wider challenges presented by the pandemic. We remain fully committed to the safety of our workforce and those who work with us as well as the effective delivery of essential UK infrastructure services that we all rely upon. In the period, we completed the third substantial acquisition in three years and I was delighted to welcome the Browne team to the Group, an acquisition which further strengthens our position in a key attractive infrastructure sector. After reporting strong organic growth in the first half, trading has started strongly into the second half of the year and we look to the future with confidence. We are well positioned to take advantage of the UK Government's commitment to level up the economy by investing £640bn in an infrastructure-led recovery that will bring significant opportunities for Renew and our differentiated, diversified, low-risk business model."

 

1Renew 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 30 of the 2020 Annual Report & Accounts.

 

Analyst & Investor Webinar

A virtual meeting for sell-side analysts and investors will be held at 10:15am today, 18 May 2021, the details of which can be obtained from FTI Consulting using the contact details below.

 

For further information, please contact:

 

Renew Holdings plc

www.renewholdings.com

 

Paul Scott, Chief Executive Officer

Sean Wyndham-Quin, Chief Financial Officer

 

via FTI Consulting

020 3727 1000

Numis Securities Limited (Nominated Adviser & Broker)

Stuart Skinner/ Kevin Cruickshank

 

020 7260 1000

FTI Consulting (Financial PR)

Alex Beagley / James Styles / Sam Macpherson

020 3727 1000

Renew@fticonsulting.com

 

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.

About Renew Holdings plc

Renew Holdings Group plc is a leading UK Engineering Services business, performing a critical role in keeping the nation's infrastructure functioning efficiently and safely. The Group operates through independently branded subsidiaries across its chosen markets, delivering non-discretionary maintenance and renewal tasks through its highly skilled, directly employed workforce.

Renew's activities are focused into two business streams. 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 

 

Group Chief Executive Officer's Review

 

On the front foot

 

The Group delivered a robust trading performance over the first six months of the financial year, demonstrating the virtues of our differentiated business model and the attractive, non-discretionary structural growth drivers within our end markets. Renew is a leading provider of essential maintenance and renewals-led engineering services to UK infrastructure networks, operating in regulated markets including rail, highways, mobile telecommunications, civil nuclear, water and environmental.

 

Despite the third national lockdown taking effect on 6 January 2021, the restrictions did not have any material impact on trading during the period, with the Group experiencing continuity in demand for its services across all markets. This bears testimony to the resilience of our business and the essential role we perform in keeping the nation's infrastructure functioning efficiently and safely at all times.

 

I would again like to express my gratitude, on behalf of the Board, to our colleagues who can be proud of the way they have continued to deliver the day-to-day renewal and maintenance tasks for our clients in spite of the challenges that come with enhanced social distancing practices and personal safety requirements.

 

We have a proven track record of organic growth supplemented by acquisitions with attractive end markets, with strong margin and cash generation characteristics, to deliver excellent shareholder returns. Our organic revenue growth of 12 per cent during the period highlights the quality of the underlying businesses within the Group and the investments made over recent years, such as in the Rail and Highways sectors, to seize the growth opportunities in our chosen markets. This pleasing performance was complemented by the acquisition of Browne in March 2021, a water focused engineering services business based in London, which strengthens our exposure to the £51bn2 water sector, adds material scale and is immediately earnings enhancing.

 

Thanks to the positive trading performance during the period, the highly cash generative nature of our business and our confidence in the Group's prospects, we are pleased to be able to reinstate the interim dividend.

 

Our 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 value creation:

 

We operate a differentiated, diversified, low-risk, low-capital business model, providing critical asset maintenance and renewals services that are not dependent on large, 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 delivering extremely responsive solutions

Our businesses work in markets with high 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 committed regulatory spending periods, providing predictable cashflows

We are committed to growing the business both organically and through selective complementary acquisitions whilst maintaining a disciplined approach to capital allocation and risk

Our high quality model of compounding earnings through the redeployment of internally generated cashflows enables us to execute on our strategy of delivering reliable growth for all our stakeholders

 

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 £640bn3 in an infrastructure-led recovery, with fiscal stimulus measures likely to flow through to lower cost infrastructure maintenance programmes ahead of capital-intensive projects;

Greater focus on sustainability and climate change, the UK's net zero carbon emissions target, flood risk and investment in renewables and electrification programmes;

Population growth increasing the pressure on housing, energy, water and demand for natural resources;

Technological innovation driving a shift towards digital roads, smart cities and the transformation of transport and telecommunications networks; and

Increased Government regulation to improve safety, efficiency and resilience of key infrastructure assets leading to more demanding maintenance, renewal and upgrading requirements.

 

Sustainability strategy

 

A long-term approach to sustainability has always been at the heart of our business and we are ideally positioned to assist in the delivery of the UK Government's committed green infrastructure investment as part of its net zero carbon target by 2050.

 

As part of efforts to integrate our ESG strategy within our wider business strategy and to monitor the progress we are making, we have introduced quantitative targets which will be continuously measured in the following five key areas:

·      customer value;

·      climate action;

·      operating responsibly;

·      engaging our people; and

·      supporting our local communities.

 

Renew already holds 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". Renew also reports under the Streamlined Energy and Carbon Reporting ("SECR") regulations which ensure we continue to support the UK target to deliver net zero carbon by 2050.

 

Innovations

 

We continuously seek to develop and implement innovative working techniques to improve operational performance for our clients across all of our sectors. This includes the introduction of bespoke plant-led technology to deliver cost, time and environmental improvements for routine maintenance and renewal activities. An example of this in the period was our deployment of the MegaVac, a unique Road Rail Vehicle which significantly improves the capacity and efficiency of drain management operations on the rail network.

 

Results

 

During the period, Group revenue1 increased to £366.4m (HY2020: £313.6m), including organic growth of 12%, with an adjusted operating profit1 of £22.0m (HY2020: £19.9m). Adjusted operating profit margin1 was 6.0% (HY2020: 6.4%) and this is expected to increase during the second half of the year. As at 31 March 2021, the Group had pre-IFRS16 net debt of £16.9m (31 March 2020: £16.1m) as a consequence of the £29.5m acquisition of Browne and reflecting the Group's continued focus on cash generation, tight working capital management and conservative approach to gearing. The Group's order book at 31 March 2021 was £750m (HY2020: £690m), underpinned by long-term framework positions.  

 

As previously announced during the period, the Trustees of the Lovell Pension Scheme, in consultation with the Board of Renew, entered into a "buy-in" agreement with Rothesay Life plc. This transaction significantly de-risks the Group's balance sheet, further reduces the Group's pension exposure risks and will improve its cashflow in the medium term.

 

Dividend

 

The Group's robust trading performance, cash position and positive outlook have given the Board the confidence to declare an interim dividend of 4.83p (HY2020: nil; HY2019: 3.83p) per share. This represents a 26 per cent increase on the last interim dividend paid. This will be paid on 15 July 2021 to shareholders on the register as at 18 June 2021, with an ex-dividend date of 17 June 2021.

 

Engineering Services

 

Our Engineering Services activities account for over 95 per cent of the Group's adjusted operating profit and delivered revenue of £327.5m (HY2020: £293.1m) with an adjusted operating profit of £22.2m (HY2020: £20.5m) resulting in an operating margin of 6.8% (HY2020: 7.0%). At 31 March 2021, the Engineering Services order book was £665m (31 March 2020: £591m). 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, has committed an extra £10bn of funding specifically for maintenance and renewals as part of the current control period (CP6), which runs to 2024, during which time it will invest a total of £53bn4. This increased focus on operational support, renewal and maintenance plays to our strengths as does the Government's commitment to its rail decarbonisation programme, including a significant investment in electrification programmes, as part of the overall UK target to deliver net zero by 2050.

 

During the period, we secured new positions on the five-year Southern Buildings and Civils Framework and the five-year Structures Integrity Framework in the South which continues to grow our position with Network Rail.

 

As a major provider of multidisciplinary maintenance and renewals engineering services to Network Rail, we support the day-to-day operation of the rail network nationally, directly delivering essential asset maintenance through our long-term CP6 frameworks as well as providing 24/7 emergency response across the network. The Group now holds in excess of fifty 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, tunnels, de-vegetation and drainage.

 

The compelling maintenance-focused structural growth drivers within this sector, combined with Renew's high quality engineering expertise, leaves the Group ideally positioned to deliver long-term, profitable growth in Rail.

 

Infrastructure

Highways

 

The Group continued to make good operational and strategic progress within the Highways segment in the first half, delivering essential asset maintenance and critical infrastructure renewals underpinned by non-discretionary regulatory requirements.

 

With the UK Government committing to an investment of £27.4bn5 in the strategic road network over a five-year period, as part of its second Road Investment Strategy ("RIS2"), £11.9bn of this funding will be ringfenced for operations, maintenance and renewals. This represents a significant market opportunity for Renew. Having acquired Carnell, a leading provider of specialist engineering services on the strategic road network, in January 2020, the business continues to leverage its innovative technological solutions to support the needs of major clients such as Highways England, for which it is one of only three suppliers working across all asset delivery areas. 

 

During the period, Carnell continued to perform in line with our expectations and remains well placed to seize the attractive growth and market share opportunities within Highways.

 

Wireless Telecoms

 

The wireless telecoms sector contains many attractive growth drivers, from the UK Government's £5bn3 investment in gigabit broadband and the accelerated roll-out of 5G connectivity through to the expansion of the Shared Rural Network, the Government's £500m6 programme to extend 4G mobile coverage to 95 per cent of the UK. Our long-term relationships with the main UK network operators, managed service providers and equipment vendors offers exposure to all of these opportunities.

 

During the period, we built on the operational and strategic progress made previously, consolidating our position on Telefonica's and MBNL's 5G services frameworks. We also saw further progress in our work for the Government, alongside EE and BT, to remove Huawei equipment from the UK's 5G networks by 2027. We were also appointed to a new framework supporting the 5G rollout programme for Cornerstone on behalf of Telefonica and Vodafone.

 

With faster mobile 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

 

The Government's total nuclear decommissioning provision is estimated at £124bn7 over the next 120 years, with around 75 per cent 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 ("ME&I") services contractor.

 

Encouragingly, the mobilisation of work programmes and decommissioning at Sellafield continued to gain momentum during the period after the majority of operations at the site were suspended at the start of the Covid-19 lockdown in March 2020. We expect the site to be fully operational again in the second half of the financial year. 

 

Having worked for over 75 years in civil nuclear, we deliver a multidisciplinary service through our large complement of highly skilled employees who operate to demanding nuclear standards. Outside of Sellafield, we are fully operational at Springfields and continue to develop our relationship with Hinkley Point "C".

 

Thermal Power, Renewables and Networks

 

Our essential engineering maintenance services continued at a number of the UK's thermal power stations at near normal levels. During the period we secured an extension to the SSE Hydro Tunnels Framework. We remain operational on the Minor Works Framework with National Grid as well as on the Minor Civils Framework with Western Power Distribution.

 

Environmental

Water

 

The acquisition of Browne broadens our exposure to the UK water sector, an attractive market with £51bn2 committed by Ofwat to deliver service improvements as part of the current five-year investment period (AMP7) which runs to 2025. By adding material scale to Renew's water business and bringing new water clients into the Group, including Thames Water, Southern Water, Affinity Water and South East Water, the acquisition means we are now even more strongly positioned to capitalise on the long-term growth opportunities in this market, underpinned by committed regulatory spend.

 

As part of AMP7, additional investment is allocated to deliver supply resilience including dam safety and infrastructure refurbishment schemes. These long-term renewal programmes require sustained investment through our clients' operational expenditure budgets, benefiting Renew. In the period other water customers included Dŵr Cymru Welsh Water, Wessex Water, Yorkshire Water and Bristol Water.

 

We see an attractive opportunity to drive margin-accretive revenue growth in this sector with our enhanced capabilities following the acquisition of Browne.

 

Land Remediation and Specialist Restoration

 

In Land Remediation, we have seen continuous demand for our specialist environmental services during the period. Similarly, works at the Palace of Westminster continue to be carried out at normal capacity and we have also commenced new works as part of a five-year conservation framework at this UNESCO World Heritage Site.

 

Specialist Building

 

Our Specialist Building business focuses on the High Quality Residential and Science markets in London and the Home Counties.

 

Revenue was £38.9m (HY2020: £20.5m) with operating profit of £0.8m (HY2020: £0.4m) delivering a margin of 2.1% (HY2020: 2.0%). The Specialist Building order book was £85.0m (HY2020: £99.0m). Work continues uninterrupted across all of our schemes including those for Defra and the MRC London Institute of Medical Science.

 

Health and safety

 

We continue to make health and safety a priority, ensuring safe working practices for the Group's employees and those who work with us.

 

Track record of value creation

 

Renew has a strong track record of sustainable value creation across the economic cycle thanks to our high-quality, value-accretive compound earnings model. Over the past five years, we have delivered:

 

· adjusted earnings per share growth of 72 per cent;

 

· an increase in our adjusted operating margin from 4.0 per cent to 6.0 per cent; and

 

· revenue growth of 38 per cent.

 

Our track record of reliable revenue growth and cash generation has resulted in our ability to deliver highly predictable organic earnings growth and funding for the acquisition of complementary businesses that meet our strategic requirements.

 

Outlook - The growth opportunity ahead

 

In the context of a challenging macro-economic backdrop, we have delivered a robust set of results that demonstrate Renew's core resilience, our differentiated, low-risk, capital-light business model and the attractive growth opportunities which exist in our chosen markets, driven by long-term programmes of investment, providing visibility of spend over regulatory cycles.

 

We remain focused on leveraging the Group's strengths to build on our track record of good organic growth and selected M&A activity in related end markets with strong prospects, twinned with high cash generation and shareholder returns.

 

The acquisition of Browne further increases our exposure to a water market with an attractive long-term growth profile and highly visible cashflows. We will continue to seek opportunities in markets with similar characteristics of non-discretionary regulated investment, ongoing renewal and maintenance requirements and high barriers to entry, adopting a disciplined approach to capital allocation that is additive to our focus on delivering profitable organic growth.

 

Trading has started strongly in the second half of the year underpinned by a record order book and we are well positioned to take advantage of the compelling infrastructure-led growth opportunities that will play a key role in the UK's economic recovery.

 

Paul Scott

Chief Executive Officer

18 May 2021

 

References

 


1

Renew uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in Note 30 of the 2020 Annual Report and Accounts.

2

Ofwat PR19 final determinations December 2019

3

HM Treasury Budget 2020 12 March 2020

4

Network Rail Delivery Plan Control Period 6 High Level Summary 26 March 2020

5

Department for Transport Road Investment Strategy 2: 2020-2025 March 2020

6

UK Government press release "£1bn deal to end poor rural mobile coverage agreed" 9 March 2020

7

UK Government Nuclear Provision: the cost of cleaning up Britain's historic nuclear sites 4 July 2019

 

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months ended 31 March 2021

 















Before exceptional items and amortisation of intangible assets

Exceptional items and amortisation of intangible assets

(see Note 3)

 

Six months ended

31 March

Before exceptional items and amortisation of intangible assets

 

 

Exceptional items and amortisation of intangible assets

(see Note 3)

Year ended

30 September












2021

2021

2021

2020* 

2020

 

2020

 

2020

 


Note

 

Unaudited

 

£000

 

Unaudited

 

£000

 

Unaudited

 

£000

 

     Unaudited

 

£000

Audited

£000

Audited

£000

Audited

£000










Revenue: Group including share of joint venture

2

 

366,411

-

366,411

313,566

620,375

-

620,375

Less share of joint venture's revenue


-

-

-

-

-

-

-

Group revenue from continuing activities

2

366,411

-

366,411

313,566

620,375

-

620,375

Cost of sales


(316,127)

-

(316,127)

(268,924)

(527,274)

-

(527,274)

Gross profit


50,284

-

50,284

44,642

93,101

-

93,101

Administrative expenses


(28,284)

(3,479)

(31,763)

(28,609)

(53,453)

(6,741)

(60,194)

Share of post-tax result of joint venture


-

-

-

-

(39)

-

(39)

Operating profit

2

22,000

(3,479)

18,521

16,033

39,609

(6,741)

32,868

Finance income


13

-

13

1

44

-

44

Finance costs


(478)

-

(478)

(863)

(1,343)

-

(1,343)

Other finance income - defined benefit pension schemes


 

-

-

-

-

532

-

532

Profit before income tax

2

21,535

(3,479)

18,056

15,171

38,842

(6,741)

32,101

Income tax expense

5

(3,567)

538

(3,029)

(3,251)

(6,905)

1,146

(5,759)

Profit for the period from continuing activities


 

17,968

(2,941)

15,027

11,920

31,937

(5,595)

26,342

Loss for the period from discontinued operations

4



-

-



(5,590)

Profit for the period attributable to equity holders of the parent company




15,027

11,920

20,752



















Basic earnings per share

6

22.86p 

(3.74p) 

19.12p

15.60p

41.22p 

(14.44p) 

26.78p

Diluted earnings per share

6

22.70p 

(3.72p) 

18.98p

15.48p

40.89p 

(14.32p) 

26.57p










Proposed dividend

7



4.83p

0.00p



8.33p

 

*Operating profit for the six months ended 31 March 2020 is stated after charging £2,148,000 of amortisation cost and £1,762,000 acquisition cost (see Note 3).

 

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

for the six months ended 31 March 2021 

 


Six months ended

Year ended



31 March

30 September



2021

2020

2020








Unaudited

Unaudited

Audited



£000

£000

£000






Profit for the period attributable to equity holders of the parent company


15,027

11,920

20,752






Items that will not be reclassified to profit or loss:





Movement in actuarial valuation of the defined benefit pension schemes


(27,337)

-

(2,775)

Movement on deferred tax relating to the defined benefit pension schemes


9,568

-

971

Total items that will not be reclassified to profit or loss


(17,769)

-

(1,804)

Items that are or may be reclassified subsequently to profit or loss:





Exchange movement in reserves


(30)

(5)

(23)

Total items that are or may be reclassified subsequently to profit or loss


(30)

(5)


(23)

Total comprehensive income for the period attributable to equity holders of the parent company


(2,772)

11,915


18,925

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 March 2021

 

                               



Share

Capital

Cumulative

Share based


Total


Share

premium

redemption

translation

payments

Retained

equity


capital

account

reserve

adjustment

reserve

earnings

Unaudited


£000

£000

£000

£000

£000

£000

£000









At 1 October 2019

7,533

51,904

3,896

1,339

576

27,010

92,258

Transfer from income statement for the period






11,920

11,920

Dividends paid






(5,770)

(5,770)

New shares issued

322

15,024





15,346

Recognition of share based payments





(4)


(4)

Exchange differences




(5)



(5)

At 31 March 2020

7,855

66,928

3,896

1,334

572

33,160

113,745

Transfer from income statement for the period






8,832

8,832

Share premium cost reclassification

1

(550)





(549)

Dividends paid






(8)

(8)

Recognition of share based payments





249


249

Exchange differences




(18)



(18)

Actuarial movement recognised in the 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 period






15,027

15,027

Dividends paid






(6,554)

(6,554)

New shares issued

12

647





659

Recognition of share based payments





(30)


(30)

Exchange differences




(30)



(30)

Actuarial movement recognised in the pension schemes






 

(27,337)

 

(27,337)

Movement on deferred tax relating to the pension schemes






 

9,568

 

9,568

At 31 March 2021

7,868

67,025

3,896

1,286

791

30,884

111,750

 

CONDENSED CONSOLIDATED BALANCE SHEET

at 31 March 2021

 







31 March

31 March

30 September



2021

2020

2020



Unaudited

 

Unaudited

 

Audited

 



£000

£000

£000

Non-current assets





Intangible assets - goodwill


   139,479

125,092

124,691

                    - other


34,394

26,442

23,062

Property, plant and equipment


15,324

22,242

14,806

Right of use assets


17,940

10,157

17,481

Investment in joint ventures


586

39

-

Retirement benefit assets*


974

27,936

28,059

Deferred tax assets


2,233

1,462

2,164



210,930

213,370

210,263

Current assets





Inventories


1,699

1,675

1,619

Assets held for resale


1,500

1,500

1,500

Trade and other receivables


150,640

110,700

129,838

Current tax assets


911

1,334

2,174

Cash and cash equivalents


1,836

31,430

13,396



156,586

146,639

148,527






Total assets


367,516

360,009

358,790






Non-current liabilities





Borrowings


-

(38,750)

(4,373)

Lease liabilities


(9,740)

(10,320)

(9,347)

Deferred tax liabilities


(6,925)

(14,755)

(14,252)

Provisions


(441)

(452)

(441)



(17,106)

(64,277)

(28,413)

Current liabilities





Borrowings


(18,750)

(8,750)

(8,752)

Trade and other payables


(210,728)

(167,512)

(192,370)

Lease liabilities


(6,421)

(5,714)

(6,047)

Provisions


(2,761)

(11)

(2,761)



(238,660)

(181,987)

(209,930)






Total liabilities


(255,766)

(246,264)

(238,343)






Net assets


111,750

113,745

120,447






Share capital


7,868

7,855

7,856

Share premium account


67,025

66,928

66,378

Capital redemption reserve


3,896

3,896

3,896

Cumulative translation adjustment


1,286

1,334

1,316

Share based payments reserve


791

572

821

Retained earnings


30,884

33,160

40,180

Total equity


111,750

113,745

120,447

 

*See Note 8 for details of the Lovell Pension Scheme buy-in.

 

 

CONDENSED CONSOLIDATED CASHFLOW STATEMENT

for the six months ended 31 March 2021

  

     Six months ended     

Year ended 


       31 March

30 September


2021

2020

2020


Unaudited

Unaudited

Audited


£000

£000

£000

Profit for the period from continuing operating activities

15,027 

11,920

26,342

Share of post-tax trading result of joint venture

-

39

Amortisation of intangible assets

2,810

2,148

5,529

Depreciation

4,799

4,749

9,672

Profit on sale of property, plant and equipment

(80)

(308)

(483)

(Increase)/decrease in inventories

(45)

245

301

(increase)/decrease in receivables

(8,560)

20,647

1,465

Increase/(decrease) in payables

9,565

(5,005)

17,080

Current and past service cost in respect of defined benefit pension scheme

25

25

69

Cash contribution to defined benefit pension schemes

(252)

(2,382)

(4,817)

(Credit)/charge in respect of share options

(30)

(4)

245

Finance income

(13)

(1)

(44)

Finance expense

478

863

811

Interest paid

(478)

(863)

(1,343)

Income taxes paid

(2,862)

(5,372)

(8,179)

Income tax expense

3,029 

3,251

5,759

Net cash inflow from continuing operating activities

23,413

29,913

52,446

Net cash outflow from discontinued operating activities

(1,111) 

(213)

(592)

Net cash inflow from operating activities

22,302 

29,700

51,854

Investing activities




Interest received

13

1

44

Dividend received from joint venture

-

100

100

Proceeds on disposal of property, plant and equipment

483

376

725

Purchases of property, plant and equipment

(1,327)

(1,710)

(3,756)

Acquisition of subsidiaries net of cash acquired

(29,206)

(40,512)

(40,512)

Net cash outflow from investing activities

(30,037)

(41,745)

(43,399)





Financing activities




Dividends paid

(6,554)

(5,770)

(5,778)

Issue of Ordinary Shares

659

15,346

14,797

New loan

10,000

49,000

-

Loan repayments

(4,375)

(23,375)

(8,750)

Repayment of obligations under finance leases

(3,528)

(3,394)

(6,972)

Net cash (outflow)/inflow from financing activities

(3,798)

31,807

(6,703)





Net (decrease)/increase in continuing cash and cash equivalents

  (10,422)

19,975

2,344

Net decrease in discontinued cash and cash equivalents

(1,111)

(213)

(592)

Net (decrease)/increase in cash and cash equivalents

(11,533)

19,762

1,752

Cash and cash equivalents at the beginning of the period

13,396

11,667

11,667

Effect of foreign exchange rate changes on cash and cash equivalents

(27)

1

(23)

Cash and cash equivalents at the end of the period

1,836

31,430

13,396





Bank balances and cash

1,836

31,430

13,396

 

NOTES TO THE CONDENSED CONSOLIDATED ACCOUNTS

 

1      Basis of preparation

 

(a) The condensed consolidated interim financial report for the six months ended 31 March 2021

and the equivalent period in 2020 has not been audited or reviewed by the Group's auditor.

It does not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006.  It has been prepared under the historical cost convention and on a going concern basis in accordance with applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 ("Adopted IFRSs"). The report does not comply with IAS 34 "Interim Financial Reporting" which is not currently required to be applied for AIM companies and it was approved by the Directors on 18 May 2021.

                               

(b) The accounts for the year ended 30 September 2020 were prepared under IFRS and have been delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498(2) or (3) of the Companies Act 2006. In this report, the comparative figures for the year ended 30 September 2020 have been audited. The comparative figures for the period ended 31 March 2020 are unaudited.

 

(c) The accounting policies applied in preparing the condensed consolidated interim financial information are the same as those applied in the preparation of the annual financial statements for the year ended 30 September 2020 as described in those financial statements.        

 

(d) The principal risks and uncertainties affecting the Group are unchanged from those set out in the Group's Accounts for the year ended 30 September 2020.  The Directors have reviewed financial forecasts and are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, the Group continues to adopt the going concern basis in preparing the condensed consolidated interim financial report.              

 

This condensed consolidated interim financial report is being sent to all shareholders and is also available upon request from the Company Secretary, Renew Holdings plc, 3175 Century Way, Thorpe Park, Leeds, LS15 8ZB, or via the website www.renewholdings.com.

 

2    Segmental analysis

 

Operating segments have been identified based on the internal reporting information provided to the Group's Chief Operating Decision Maker. From such information, Engineering Services and Specialist Building have been determined to represent operating segments.

               

                 

 

Group including share of joint venture

 

2021

Unaudited

 

 

Less share of joint venture

 

2021

Unaudited

 

Group revenue from continuing activities

Six months ended

31 March

Group including share of joint venture

 

2020

Audited

 

 

 

Less share of joint venture

 

2020

Audited

 

 

Group revenue from continuing activities

Year ended

30 September

2020

Audited

 

 

2021

Unaudited

 

2020

Unaudited

 

 


£000

 

 

£000

£000

£000

 

 

£000

 

 

£000

£000

 

Analysis of revenue









Engineering Services

327,514

-

327,514

293,093

577,238

-

577,238

 

Specialist Building

38,897

-

38,897

20,473

43,207

-

43,207

 

Inter segment revenue

(1,047)

-

(1,047)

(965)

(2,025)

-

(2,025)

 

Segment revenue

365,364

-

365,364

312,601

618,420

-

618,420

 

Central activities

   1,047

-

1,047

  965

1,955

-

1,955

 

Group revenue from continuing operations

366,411

 

-

366,411

313,566

 

620,375

 

-

620,375

 

 

 

 


Before exceptional items and  amortisation of intangible assets

2021

Unaudited

 

Exceptional items and

amortisation of intangible assets

2021

Unaudited

 

Six months ended

31 March

Before exceptional items and amortisation of intangible assets

2020

Audited

 

 Exceptional items and

amortisation of intangible assets

2020

Audited

 

Year ended

30 September

2020

Audited

 

2021

Unaudited

 

2020*

Unaudited

 


£000

£000

£000

£000

£000

£000

£000

Analysis of operating profit









Engineering Services

22,218

(3,479)

18,739

16,632

40,754

(6,741)

34,013

Specialist Building

786

-

786

415

1,014

-

1,014

Segment operating profit

23,004

 

(3,479)

17,047

 

41,768

 

(6,741)

35,027

Central activities

(1,004)

-

(1,004)

(1,014)

(2,159)

-

(2,159)

Operating profit

22,000

(3,479)

18,521

16,033

39,609

(6,741)

32,868

Net financing expense

    (465)

 

-

  (465)

  (862)

 

(767)

 

-

(767)

Profit before income tax

21,535

 

(3,479)

18,056

15,171

 

38,842

 

(6,741)

32,101

 

 *Operating profit for the six months ended 31 March 2020 is stated after charging £2,148,000 of amortisation cost and £1,762,000 acquisition cost (see Note  3).

 

 

3    Exceptional items and amortisation of intangible assets

 


Six months ended


Year ended


31 March


30 September


2021


2020


2020


Unaudited


Unaudited


Audited


£000


£000


£000

Acquisition cost

669


1,762


               1,212

Total charges arising from exceptional items

669


1,762


                     1,212

Amortisation of intangible assets

2,810


2,148


5,529

Total exceptional items and amortisation charge before income tax

3,479


3,910


6,741

Taxation credit on exceptional items and amortisation

(538)


(504)


(1,146)

Total exceptional items and amortisation charge

2,941


3,406


5,595

  

4    Loss for the period from discontinued operations

 


Six months ended


Year ended


31 March


30 September


2021


2020


2020


Unaudited


Unaudited


Audited


£000


£000


£000

Revenue

-


-


-

Expenses

-


-


(5,590)

Loss before income tax

-


-


(5,590)

Income tax charge

-


-


-

Loss for the period from discontinued operations    

-


-


(5,590)

 

5    Income tax expense

 


Six months ended

Year ended


31 March

30 September


2021

2020

2020


Unaudited

Unaudited

Audited


£000

£000

£000

Current tax:




UK corporation tax on profit for the period

(4,075)

(2,774)

(5,732)

Adjustments in respect of previous periods

531

-

216

Total current tax

(3,544)

(2,774)

(5,516)

Deferred tax

515

(477)

(243)

Income tax expense

(3,029)

(3,251)

(5,759)





 

  

6    Earnings per share                                         

 

                                                     Six months ended 31 March

Year ended 30 September




2021




 

2020




2020





Unaudited




Unaudited




Audited



Earnings

EPS

 

DEPS

 


Earnings

 

EPS

 

DEPS

 


Earnings

 

EPS

 

DEPS

 


£000

Pence

Pence


£000

Pence

Pence


£000

Pence

Pence

Earnings before exceptional items and amortisation

 

 

 

17,968

22.86

22.70


 

 

 

15,326

20.06

19.90


31,937

41.22

40.89

Exceptional items and amortisation

 

 

   (2,941)

(3.74)

(3.72)


 

 

   (3,406)

(4.46)

(4.42)


(5,595)

(7.22)

(7.17)

Basic earnings per share - continuing activities

 

 

 

15,027

19.12

18.98


 

 

 

11,920

15.60

15.48


26,342

34.00

33.72

Loss for the period from discontinued activities

 

 

 

-

-

-


 

 

 

-

-

-


(5,590)

(7.22)

(7.15)

Basic earnings per share

 

15,027

19.12

18.98


 

11,920

15.60

15.48


20,752

      26.78

26.57













Weighted average number of shares


78,587

79,166



76,405

77,016



            77,480

78,114

 

 

The dilutive effect of share options is to increase the number of shares by 579,000 (March 2020: 611,000; September 2020: 634,000) and reduce the basic earnings per share by 0.14p (March 2020: 0.12p; September 2020: 0.21p). 

 

7      Dividends          

                               

The proposed interim dividend is 4.83p (2020: 0.00p) per share. This will be paid out of the Company's available distributable reserves to shareholders on the register on 18 June 2021, payable on 15 July 2021.  The ex-dividend date will be 17 June 2021.  In accordance with IAS 1 "Presentation of Financial Statements", dividends are recorded only when paid and are shown as a movement in equity rather than as a charge in the Income statement.

 

8      Lovell Pension Scheme buy-in

 

Renew Holdings plc's statutory accounts for the year ended 30 September 2020 noted that the following transaction took place as a post balance sheet event. On 26 November 2020, the Trustees of the Lovell Scheme, in consultation with the Directors, used scheme assets to purchase annuities which match certain pension liabilities in a transaction known as a "buy-in" where the annuity policy remains an asset of the scheme. Following the conclusion of this buy-in, all the scheme liabilities are now matched with the annuities which has removed the scheme's investment and funding risks. Consequently, there has been a reduction in the IAS 19 Retirement benefit assets in the Group's accounts for the 6 months ended 31 March 2021.  The effect has been to reduce the Retirement benefit asset by £27,337,000, reverse the associated Deferred tax liability of £9,568,000 resulting in a £17,769,000 reduction in the Group's Retained earnings.

 

9    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 £29.5m plus a net cash adjustment of £12.0m. The £12.0m represents J Browne's surplus cash held in an escrow account at completion which was subsequently paid to the vendor.  The net acquisition cost was funded by a combination of cash and the Group's existing revolving credit 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

 

 

£000

£000

 £000

Non-current assets

 

 

 

 

Intangible assets -goodwill

 

2,673

12,115

14,788

                               -other

 

-

14,142

14,142

Property, plant and equipment

 

629

-

629

Right of use assets

 

-

317

317

Investment in joint ventures

 

586

-

586

 

 

3,888

26,574

30,462

Current assets

 

 

 

 

Inventories

 

35

-

35

Trade and other receivables

 

12,266

-

12,266

Cash and cash equivalents

 

12,293

-

12,293

 

 

24,594

-

24,594

 

 

 

 

 

Total assets

 

28,482

26,574

55,056

 

 

 

 

 

Non-current liabilities

 

 

 

 

Obligations under finance leases

 

-

(244)

(244)

Deferred tax liabilities

 

-

(2,687)

(2,687)

 

 

                   -

(2,931)

(2,931)

Current liabilities

 

 

 

 

Trade and other payables

 

(9,899)

-

(9,899)

Obligations under finance leases

 

(72)

(73)

(145)

Current tax liability

 

(581)

-

(581)

 

 

(10,552)

(73)

(10,625)

 

 

 

 

 

Total liabilities

 

(10,552)

(3,004)

(13,556)

 

 

 

 

 

Net assets

 

17,930

23,570

41,500

 

Goodwill of £14,788,000 arises on acquisition and is attributable to the expertise and workforce of the acquired business.  Other intangible assets, provisionally valued at £14,142,000, which represent customer relationships and contractual rights, were also acquired and will be amortised over their useful economic lives in accordance with IFRS 3.  Deferred tax has been provided on this amount. Amortisation of this intangible asset will commence from April 2021.

 

Right of use assets and obligations under finance leases

J Browne's statutory accounts are prepared 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 Group reporting under IFRS 16.

 

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.

 

 

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