Strong underlying growth from its core engineering support services enabled Renew (RNWH) to trump its 2017 revenue target ahead of schedule, while a marked increase in operating margins drove full-year earnings up by more than a quarter. Engineering services account for the vast majority of revenues and performance here is demonstrated by an annualised organic growth rate of 12.7 per cent over the past nine years. Cash generation remains healthy and Renew now expects to move into a net cash position by the end of the 2016 financial year.
The strength of these results underlines a key feature of the investment case for the group; namely the visibility of future revenue streams. This is borne out by Renew's long-dated nuclear contracts. Renew is the leading maintenance contractor at the Sellafield nuclear site and is currently active on 15 nuclear licensed sites across the Nuclear Decommissioning Authority's estate. It would be astonishing if Renew didn't further embed itself within the industry following the rollout of the UK's next generation of nuclear reactors, although that is still some way down the track.
It has not been all plain sailing. Delays to framework agreements on gas mains replacement programmes hit group performance, although management is confident these issues are being satisfactorily resolved.
WH Ireland has increased its adjusted EPS estimate for the year to September 2016 by 2.6p to 27.5p, against 25.7p in 2015.
| RENEW (RNWH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 361p | MARKET VALUE: | £222m | |
| TOUCH: | 358-362p | 12-MONTH HIGH: | 363p | LOW: 241p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 41p* | NET DEBT: | 19% | |
| Year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 353 | 2.6 | 2.2 | 3.0 |
| 2012 | 337 | 8.4 | 7.9 | 3.2 |
| 2013 | 298 | 13.0 | 16.6 | 3.6 |
| 2014 | 465 | 13.1 | 16.8 | 5.0 |
| 2015 | 520 | 16.1 | 21.3 | 7.0 |
| % change | +12 | +23 | +27 | +40 |
Ex-div: 28 Jan Payment: 1 Mar *Includes intangible assets of £60.3m, or 98p a share | ||||
