Earlier this year, Benelux-focused waste-to-product business Shanks (SKS) completed its merger with regional rival Van Gansewinkel Groep to form Renewi (RWI). The group believes the tie-up will not only grow the top line, but will expand the margin significantly through targeted synergies. It's too early to say if they're already in train, although the unified entity has already delivered €4m (£3.47m) in savings. Looking ahead, it has a target of €12m for the year to March 2018 and hopes to reach €40m in annualised savings by the end of 2020.
The merger has obviously come at a price, which taken in conjunction with other charges, including £28.2m in onerous contracts at the UK municipal business, fed through into £87.1m in exceptional items. Take these out of the equation and Renewi's adjusted pre-tax profit was up 22 per cent to £25.7m, although it actually flatlined at constant currencies.
The municipal business accounts for around 14 per cent of pro-forma group revenues and has been plagued by one-off issues in recent years, including the insolvency of a major contractor and costs relating to an East London fire in 2014 that could not be clawed back from insurers. The group is implementing a recovery programme for the division and is looking to negotiate better offtake terms through benefits of scale. Elsewhere, the commercial waste businesses produced another solid showing, driving operating profit up by 27 per cent to €26.9m (£23.4m), with underlying margins up 130 basis points to 6.5 per cent.
The combined group is maintaining the Shanks final dividend of 2.1p per share, adjusted for the merger-linked rights issue. Management said it was aiming to increase dividend cover to three times adjusted earnings, from an existing multiple of 1.2, before introducing a progressive dividend policy.
Analysts at Investec are forecasting adjusted profit before tax of £38m, giving adjusted EPS of 3.6p for the March 2018 year-end (£25.7m and 3.7p in 2017).
| RENEWI (RWI) | ||||
| ORD PRICE: | 94p | MARKET VALUE: | £754m | |
| TOUCH: | 94-94.25p | 12-MONTH HIGH: | 107p | LOW: 62p |
| DIVIDEND YIELD: | 3.20% | PE RATIO: | NA | |
| NET ASSET VALUE: | 54p* | NET DEBT: | 117% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 ** | 615 | -10.1 | 0.4 | 3.05 |
| 2014 ** | 633 | 7.6 | -6.3 | 3.05 |
| 2015 ** | 599 | -20.5 | -4.1 | 3.05 |
| 2016 | 614 | -2.5 | -0.9 | 3.05 |
| 2017 | 779 | -61.4 | -11.3 | 3.05 |
| % change | 27 | - | - | - |
| Ex-div: 29 Jun | ||||
| Payment: 28 Jul | ||||
| *Includes intangible assets of £603m, or 75p a share | ||||
| ** EPS and DPS adjusted to take account of 3-for-8 rights issue of Oct 2016. | ||||
