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Renew looking refreshed

TIP UPDATE: Renew benefits from a general recovery in the UK's infrastructure sector
November 26, 2013

Full-year results for engineering support services company Renew (RNWH) showed the benefit of a rapidly improving outlook for the UK construction, infrastructure and heavy engineering sectors. What was notable was how even sales growth was across Renew's divisions, which suggests that a general broad-based recovery is under way in the economy. Overall, when the impact of land sales and acquisitions is stripped out, underlying pre-tax profits were 7 per cent higher at £10.7m.

IC TIP: Buy at 166p

The key to the results was the performance of engineering services, which makes up about 70 per cent of group revenue and more than 80 per cent of operating profits. Divisional revenue increased by an underlying 6 per cent to £232m. Strip out some exceptional non-cash charges and the division's operating profits jumped 23 per cent to £10.6m on a slightly improved profit margin of 4.6 per cent. Renew also became an important contractor at the Sellafield nuclear power station and secured orders in the nuclear division rose by 16 per cent to £126m. The company's total order book grew by a healthy 26 per cent to £416m, most of it in engineering services.

Broker Numis forecasts pre-tax profits of £12.4m for 2014, giving EPS of 16.1p, compared with £9.6m and 13.2p in the year under review.

RENEW (RNWH)

ORD PRICE:166pMARKET VALUE:£99.4m
TOUCH:165-167p12-MONTH HIGH:167pLOW: 82p
DIVIDEND YIELD:2.2%PE RATIO:12
NET ASSET VALUE:17p*NET CASH:£2.8m

Year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20093171.170.63.00
20102903.994.63.00
20113532.552.23.00
20123378.427.93.15
201335010.7014.33.60
% change+4+27+81+14

Ex-div: 29 Jan

Payment: 3 Mar

*Includes intangible assets of £37m, or 62p a share