Renew Holdings (RNWH) has revealed that adjusted operating profit for the year to 30 September is expected to increase to between £39m-40m, versus the £38.3m seen a year earlier. Analyst consensus compiled by FactSet had been anticipating a decline in profits to £36.5m this year.
The resilient performance comes as activity in rail, infrastructure and environmental markets held up well during the height of the Covid-19 pandemic after being deemed critical sectors by the government. These markets contribute to Renew’s engineering services business which accounts for more than 90 per cent of overall revenue and adjusted operating profit. According to broker Liberum, engineering clients have been happy to accept pass through costs on contracts, meaning margins have improved in spite of pandemic-related expenses.
The energy division has been a weak spot. Nuclear decommissioning activities at Sellafield and Springfields were suspended in March and while they have been steadily remobilising, Renew does not expect to be fully operational at these sites until the second half of its 2021 financial year.
Thanks to robust cash generation, the group is guiding that it will swing from £16m of net debt (excluding lease liabilities) at the half-year stage to a net cash position. Liberum has upgraded its full year forecast from £4m of net debt to £1m of net cash. There’s no word yet on whether a dividend will be declared this year – the interim payout was suspended in April.
