Renew's continued focus on higher-margin and less discretionary infrastructure engineering services is paying off. The group reported a solid first half, which, combined with a robust £304m order book and a decent dividend hike, leaves the shares still looking attractive.
The acquisition of Amco last year accelerated management's strategy of shifting the business towards engineering services and, with the social housing business in decline, that has proved to be a timely move. Engineering services generated 58 per cent of revenues in the first half and now accounts for 75 per cent of the forward order book.. The unit's order book actually rose 40 per cent in the period to £229m and, beyond the current financial year, stands at over £120m - which provides strong visibility of future revenue.
Renew has 75 framework agreements across its various disciplines, with 62 in engineering. Nuclear decommissioning work at Sellafield remains a particular area of strength and a number of new contracts were started in the first half. Work for Network Rail was also busy in the period after a three-year asset management framework was renewed. Specialist building revenues, however, fell in line with expectations after the company exited work in the north.
WH Ireland is forecasting full-year EPS of 11.6p (9.2p in 2011).
RENEW HOLDINGS (RNWH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 76p | MARKET VALUE: | £45.5m | |
| TOUCH: | 75-77p | 12-MONTH HIGH: | 84p | LOW: 49p |
| DIVIDEND YIELD: | 4% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 18p* | NET DEBT: | 66% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 156 | 0.58 | 0.50 | 1.00 |
| 2012 | 184 | 4.19 | 5.14 | 1.05 |
| % change | +18 | +622 | +928 | +5 |
Ex-div: 6 Jun Payment: 9 Jul *Includes intangible assets of £30.2m, or 50p a share | ||||
