Renew (RNWH) has not escaped the economic fallout of the Covid-19 pandemic, but its focus on essential infrastructure maintenance activities means 80 per cent of its work has continued. Rail, highways, water and telecommunications have all been designated as ‘critical’ sectors. That is good news considering more than 90 per cent of sales and adjusted operating profit are derived from engineering services.
Revenue from the largest division rose by 4 per cent to £293m, benefiting from emergency work in response to rail landslips and storms Ciara and Dennis. Adjusted operating profit increased by 7 per cent to £20.5m, with January’s acquisition of road engineering specialist Carnell bolstering the margin by 0.2 percentage points to 7 per cent. The purchase marks Renew’s entry into the highways market, which it has been eyeing for some time. Carnell is a ‘tier one’ contractor with Highways England and will enable the group to tap opportunities in the new road investment programme running to 2025.
The acquisition has pushed net debt from £10.2m at the September year-end to £16.1m (excluding lease liabilities). But there was a £15.9m working capital inflow thanks to a £2.6m VAT deferral and faster payments from customers towards the end of the period. To preserve cash in light of Covid-19, the half-year dividend has been suspended.
House broker Numis anticipates pre-tax profit of £35.1m and EPS of 36.6p for the full year, rising to £39.6m and 40.6p the following year.
| RENEW HOLDINGS (RNWH) | ||||
| ORD PRICE: | 474p | MARKET VALUE: | £362m | |
| TOUCH: | 474-475p | 12-MONTH HIGH: | 570p | LOW: 304p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 149p* | NET DEBT: | 28%** | |
| Half-year to 31 March | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 301 | 14.5 | 15.6 | 3.83 |
| 2020 | 314 | 15.2 | 15.6 | nil |
| % change | +4 | +5 | +0 | - |
| Ex-div: | na | |||
| Payment: | na | |||
*Includes intangible assets of £152m, or 198p a share **Includes lease liabilities of £19.1m | ||||
