You can only delay infrastructure spending for so long, one of the underlying investment themes for Renew (RNWH). The Leeds-based group provides support for the UK’s infrastructure, in areas such as rail and water; where the imperative to commit funding for maintenance and renewal has moved from desirable, through to compelling, and in some cases critical.
The 4 per cent rise in the engineering services order book in the year to September is therefore welcome, not only because the division generates four-fifths of group revenue, but as it underlines an “established position in long-term" – and crucially – "non-discretionary programmes”. Another telling metric is the 40-basis point increase in the underlying operating margin. Renew has tried to boost the quality of earnings to ratchet up margins. To this end, the group has exited its lossmaking small diameter gas pipe replacement activities. However, disregard the resulting £5.8m impairment charge and amortisation, and underlying profit was 16.4 per cent up at £25.6m.
After a strong increase in the year to September, revenue at the specialist building business could reduce by as much as £35m this time around. Despite this, Renew is confident the division's operating profit will hold steady.
Broker Numis expects adjusted pre-tax profit of £26.7m for the September 2018 year-end, giving EPS of 34.3p, compared with £25.3m and 33.1p in FY2017.
| RENEW HOLDINGS (RNWH) | ||||
| ORD PRICE: | 425p | MARKET VALUE: | £266m | |
| TOUCH: | 425-435p | 12-MONTH HIGH: | 490p | LOW: 383p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 45p* | NET DEBT: | 4% | |
| Year to | Turnover | Pre-tax | Earnings | Dividend |
| 30 Sep | (£m) | profit (£m) | per share (p) | per share (p) |
| 2013 | 298 | 13.0 | 16.6 | 3.6 |
| 2014 | 465 | 13.1 | 16.8 | 5.0 |
| 2015 | 520 | 16.1 | 21.3 | 7.0 |
| 2016 | 526 | 19.4 | 23.5 | 8.0 |
| 2017 | 559 | 16.3 | 19.9 | 9.0 |
| % change | +6 | -16 | -15 | +13 |
| Ex-div: | 1 Feb | |||
| Payment: | 13 Mar | |||
| *Includes intangible assets of £61m, or 97p a share | ||||
