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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Renew Holdings Plc | LSE:RNWH | London | Ordinary Share | GB0005359004 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.00 | -0.11% | 937.00 | 935.00 | 938.00 | 943.00 | 928.00 | 928.00 | 140,512 | 16:35:14 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gen Contractor-oth Residentl | 921.55M | 43.38M | 0.5482 | 17.06 | 739.9M |
From Apr 2019 to Apr 2024
TIDMRNWH
RNS Number : 5350I
Renew Holdings PLC
27 November 2018
Renew Holdings plc
("Renew" or the "Group" or the "Company")
Final Results
Renew (AIM: RNWH), the Engineering Services Group supporting UK infrastructure, is pleased to announce another set of strong results for the year ended 30 September 2018 delivering the complementary acquisition of QTS and further strengthening of the Company's position in the UK infrastructure market.
Financial Highlights
Hot Features
Premium
2018 2017
(restated**)
Group Revenue GBP541.5m GBP545.9m (0.8%)
---------- -------------- --------
Adjusted operating profit* GBP31.1m GBP28.4m 9.6%
---------- -------------- --------
Adjusted operating margin* 5.7% 5.2% 9.6%
---------- -------------- --------
Profit before tax GBP14.7m GBP19.8m (25.8%)
---------- -------------- --------
Adjusted earnings per share* 35.5p 37.2p (4.6%)
---------- -------------- --------
Dividend per share 10.0p 9.0p 11.1%
---------- -------------- --------
* operating profit, margin and EPS are stated prior to impairment, amortisation and exceptional item (See Note 10).
* * prior year comparatives restated following the reclassification of two discontinued subsidiary undertakings (see Note 4).
Operational Highlights
-- Group adjusted operating profit up 9.6% to GBP31.1m (2017: GBP28.4m)
-- Group adjusted operating profit margin now 5.7% (2017: 5.2%)
-- Engineering Services adjusted operating profit increased 19.3% to GBP32.5m (2017: GBP27.3m)
-- Engineering Services operating margin now 7.0% (2017: 6.3%)
-- Engineering Services order book strengthened by 16.4% to GBP510m (2017: GBP438m)
-- Reflecting Renew's focus on renewals and maintenance rather than large capital projects which demonstrates the extremely strong position the Company holds in its target markets
-- Net debt at the year-end was GBP21.4m (2017: net cash GBP3.9m) reflecting the GBP80m acquisition of QTS in the year and the Company's conservative approach to gearing
David M Forbes, Chairman said: "I am encouraged by another set of excellent results which demonstrates the continued progress in executing our long-standing strategy by growing the business in our chosen markets both organically and through selective complementary acquisitions. Our solid foundations allow the Board to look forward to 2019 with confidence."
Renew Holdings plc Tel: 0113 281 4200 Paul Scott, CEO Sean Wyndham-Quin, CFO Numis Securities Limited Tel: 020 7260 1000 Stuart Skinner/ Kevin Cruickshank (Nominated Adviser) Michael Burke (Corporate Broker) Walbrook PR Tel: 020 7933 8780 or renew@walbrookpr.com Paul McManus Mob: 07980 541 893 Lianne Cawthorne Mob: 07584 391 303
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.
About Renew Holdings plc
Engineering Services, which accounts for over 85% of Group revenue and 95% of operating profit, focuses on the key markets of Energy (including Nuclear), Environmental and Infrastructure, which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.
Specialist Building focuses on the High Quality Residential market in London and the Home Counties.
For more information please visit the Renew Holdings plc website: www.renewholdings.com
Chairman's Statement
Introduction
I am pleased to announce an excellent set of results for Renew. The Group focuses on directly delivering its engineering services to critical infrastructure networks in the UK. 2018 has been another successful year for Renew in which we have made decisive progress in delivering our strategic objectives and further strengthening our position in our chosen markets. We continue to improve our trading performance with an increase in adjusted operating profit(1) of 9.6% to GBP31.1m (2017: GBP28.4m) and an increase in adjusted operating profit margin(1) to 5.7% (2017: 5.2%). Adjusted EPS(1) of 35.48p (2017: 37.18p) is down on the restated prior year comparatives primarily due the impact of accounting for discontinued operations.
As a leading provider of Engineering Services in the regulated Energy, Environmental and Infrastructure markets, the Group's operations are underpinned by clear strategic priorities which include direct service delivery and the development of long-term relationships through responsiveness. The Group looks to deliver growth both organically and through selective complementary acquisitions. During the year the Group undertook its largest ever acquisition in QTS Group limited ("QTS"), a specialist rail contractor, which was funded through an oversubscribed GBP45million equity placing combined with new debt facilities. The acquisition materially strengthens the Group's position in the rail market and brings a range of complementary skills to those of our existing rail business. Since we acquired QTS, we have been particularly pleased with its performance to date and remain confident of its growth opportunities.
Over the next 5-year investment period in rail (CP6), the government has stated that Network Rail spending must have a greater emphasis on renewals and maintenance with a focus on improving the customer experience. This spending emphasis aligns with Renew's expanded range of rail service capabilities as we continue to undertake large volumes of day-to-day maintenance tasks to keep the network operational. In addition to rail, the Group targets the nuclear, wireless telecoms and water markets which also benefit from similar long-term programmes of investment to support their essential operational assets.
In February, the Group made the decision to exit from its gas infrastructure activities with the disposal of Forefront, allowing management to focus on the continuing growth opportunities elsewhere in the Group.
Governance
Our strategy is to safely and responsibly deliver essential engineering services to the country's key infrastructure assets: "Engineering Infrastructure for the Future." In order to continue to deliver for all our stakeholders, the Board of Renew are actively involved in ensuring the highest standards of governance. During the year we committed to ensure that we adhere to the QCA Corporate Governance Code 2018. More details of this can be found in the Corporate Governance section of the Annual Report and Accounts and on the Group's website.
As a holding company, we set overall standards for the Group's subsidiary businesses through a formal governance framework to promote best practice and knowledge sharing. We believe that ensuring a healthy corporate culture is an important element in helping us to deliver our strategic objectives and ultimately in delivering value for our shareholders. In achieving these objectives, the Board is assisted by its senior management team who play a vital role in disseminating the Group's shared values with all its employees and other stakeholders. The Board is responsible for ensuring thorough corporate governance is applied throughout the Group and it will continue to work towards further improving its governance framework through 2019.
Dividend
The Board remains confident of the strength of the Group's capabilities and its position within its chosen markets and as such proposes a final dividend of 6.67p per share to be paid to shareholders on the register as at 1 February 2018. This will represent a full year dividend of 10.0p per share (2017: 9.0p).
Board changes
I was proud to succeed Roy Harrison as Chairman following his retirement at the conclusion of the AGM in January. I would like to welcome Sean Wyndham-Quin who joined the Group as Chief Financial Officer in November 2017 succeeding John Samuel who left the Board on 29 November 2017. I would like to thank Roy and John for the valuable contribution they have made to the Group during their time as Directors.
People
The Group operates across a diverse range of markets and our continued success in these markets is the result of our employee's expertise, drive and dedication. The Board would like to thank all its employees and wider stakeholders for their continued effort and support.
Future focus
Our results in 2018 demonstrate that we continue to make progress in executing our long-standing strategy. The Board remains committed to continue to grow the business in our chosen markets both organically and through selective complementary acquisitions whilst maintaining a disciplined approach to risk management.
The Board believes that having a robust corporate governance framework is a key element in guaranteeing our long-term success. As part of this, we are committed to ensuring that succession planning, training and development remain key areas of focus. Our solid foundations allow the Board to look forward to 2019 with confidence.
David M Forbes
Chairman
27 November 2018
(1) Renew uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in Note 10.
Chief Executive's Review
Results
These strong results demonstrate continued progress and the delivery of our strategic objectives. During 2018, we have strengthened our position as a leading provider of engineering services across the Energy, Environmental and Infrastructure markets.
Group revenue(1) of GBP541.5m (2017: GBP545.9m) reflected growth in Engineering Services, despite an anticipated reduction in Rail revenue due to being in the final year of the control period, and the anticipated reduction in Specialist Building revenue. Adjusted operating profit(1) was up 9.6% to GBP31.1m (2017: GBP28.4m) delivering an adjusted operating margin(1) of 5.7% (2017: 5.2%). The Group saw strong growth in its order book(1) which stood at GBP558m (2017: GBP511m) as at 30 September 2018. Net debt at the year-end was GBP21.4m (2017: net cash GBP3.9m) reflecting the GBP80m acquisition of QTS in the year and our conservative approach to gearing.
Corporate activity
Acquisitions are an important element of the Group's long-term strategy and in May the Group announced the acquisition of QTS. QTS is a provider of specialist services to the rail industry which include civil engineering, geotechnical services, fencing and devegetation. QTS has a longstanding relationship with Network Rail and during 2018 it successfully broadened its framework positions, extending geographical coverage.
Since we acquired QTS in May, trading has been in line with our expectations. The integration of QTS has gone extremely well and as a Group we now have a more diverse range of rail capabilities which increase the opportunities available to us under Network Rail's next control period CP6 (2019-2024). The focus of expenditure in this control period will be renewal and maintenance of existing infrastructure which are the areas we specifically support.
In February, the Group announced its decision to exit the gas infrastructure market with the sale of Forefront. This disposal allows management to focus on opportunities that can deliver better value for shareholders.
Engineering Services
Adjusted Engineering Services revenue(1) was ahead of management expectations at GBP466.5m (2017: GBP435.3m). Adjusted operating profit(1) has grown 19% to GBP32.5m (2017: GBP27.3m) with an operating margin of 7.0% (2017: 6.3%).
At 30 September 2018, the Engineering Services order book(1) strengthened to GBP510m (2017: GBP438m). The profile of the order book reflects our focus on renewals and maintenance rather than large capital projects and demonstrates the extremely strong positions we hold in our target markets.
Energy
Working across the nuclear, thermal and renewable energy markets we support the operation and maintenance of key infrastructure assets. Our clients include Sellafield, Westinghouse, BAE Systems, SSE, E.ON, Magnox, Low Level Waste Repository and Scottish Power.
The Nuclear Decommissioning Authority's ("NDA") latest estimate for the UK's nuclear clean-up is approximately GBP121 billion over the next 120 years(2) . At the Sellafield nuclear site in Cumbria, which is allocated around 75% of the NDA's GBP3bn annual expenditure(2) , we operate as the largest employer of mechanical, electrical and instrumentation trades. The Group provides multidisciplinary services at the site where our work supports operational plant as well as decontamination, decommissioning, waste management and new major project programmes.
The Group operates on long-term decommissioning frameworks at Sellafield, including the 10-year Decommissioning Delivery Partnership programme where we work across all 3 lots. During the year the Group was also engaged via the SR&DP Asset Care, Magnox Swarf Storage Silo, Bulk Sludge Retrieval, Bundling Spares and the Tanks and Vessels Frameworks. Our work on these high-profile programmes positions us strongly for future long-term opportunities at the site.
For BAE Systems in Barrow-in-Furness, we provide engineering support to the Astute Class Nuclear Submarine Programme as well as supporting the major ongoing redevelopment and upgrade at this facility.
The Group continues to work for Westinghouse at Springfields as a preferred contractor and for Low Level Waste Repository where we have delivered mechanical, electrical & instrumentation packages. We were operational at 7 Magnox sites providing a range of services through decommissioning, civil and electrical maintenance framework contracts.
In addition to our nuclear operations, the Group provides long-term engineering maintenance at 7 of the UK's thermal power stations and were appointed to a 4-year electrical maintenance framework at the Drax Power Station.
In renewable energy, we provide maintenance and engineering support to windfarm facilities as well as hydroelectric assets in Scotland.
Environmental
The Group provides engineering support to a range of water infrastructure assets including clean and waste water networks, flood alleviation programmes and coastal protection schemes.
The water industry operates on 5-year network infrastructure investment cycles, known as Asset Management Programmes. The regulator, Ofwat, estimates through the current investment period AMP6, to 2020, a total expenditure of approximately GBP44bn will have been spent on delivering, maintaining and improving services(3) . The Board anticipates that the next AMP cycle will see at least the same level of investment due to population growth and the changing climate.
Working for D r Cymru Welsh Water through the Major Civils Framework, the Pressurised Pipelines Framework and the Capital Delivery Alliance Civils contracts we have seen an increase in demand for our services. In addition to engineering maintenance tasks the Group also undertook a high level of emergency reactive works following a period of severe weather in the region. We have developed an expertise in dam safety, a new market where we see growth opportunities and during the year the Group delivered major schemes at the Llanishen and Talybont reservoirs. We continue to work for Wessex Water on the AMP 6 Civils & EMI Delivery Partners Framework and during the year we were pleased to be awarded our first project for new client, Bristol Water.
The Group has grown its activities with the Environment Agency where we are helping to protect and improve the environment through small scale civil engineering and maintenance tasks. In March, we were awarded 5-year Flood and Coastal Risk Management Frameworks in the North, Central and South West Hubs as the only contractor to secure a position in all 3 regions. We also continue to operate as sole provider on the Northern Mechanical, Electrical, Instrumentation, Control, and Automation ("MEICA") Framework as well as in the South East where our framework was recently extended for 2 years.
For the Canal and River Trust, we continue to maintain the trust's waterway assets across England and Wales through a 7-year MEICA Framework. During the year we provided routine maintenance and renewal services as well as emergency support to around 1,200 assets on the network.
In land remediation, our clients include SGN and National Grid where we have frameworks to remediate former gas works sites. New clients include Leeds City Council, Yorkshire Wildlife Park and during the year we successfully completed the Sighthill transformational regeneration scheme for Glasgow City Council.
At the Palace of Westminster, further progress has been made on the Courtyard Conservation Framework and additional work has been secured on the Cast Iron Roof Restoration programme which will continue to 2022. Our activities at this unique World Heritage site have been extended to include specialist restoration activity on the Elizabeth Tower, home to the iconic 'Big Ben'.
Infrastructure
As a leading provider of infrastructure services to Network Rail, we undertake a high volume of asset maintenance and renewals tasks across the UK. Our range of services, alongside our 24/7 emergency support, are essential to maintain the safe operation of the rail network.
We are pleased that the importance of operating maintenance in this sector has been reflected in Network Rail's GBP48bn CP6 investment plan which is expected to include a 25% increase in operations, maintenance, support, and renewals compared to the previous control period(4) to improve existing infrastructure and consequently the passenger experience. The Group has organically expanded its capabilities in rail, which together with the acquisition of QTS, positions us well for future growth during this next period of rail investment.
We continue to provide services on rail infrastructure project frameworks and in April, we secured the Civils and Buildings Asset Management Frameworks for Network Rail on 7 of the 8 geographical routes, with 6 of these on a single source basis for a term of 6 years (5+1).
The Group has electrification and plant frameworks in the Scotland and London North Eastern (LNE) routes and we have extended our offering in signalling with the award of a minor works framework in the South East region. These positions are important in terms of growth opportunities emerging from the Digital Railway Strategy.
Outside of Network Rail's portfolio, the Group was appointed as a Strategic Partner by SPL Powerlines UK Limited on the Midland Mainline Electrification Programme and more recently we were appointed to a 4-year civil engineering framework for Transport for Wales.
Working for London Underground, we deliver specialist electrical, plant and power schemes through 5 frameworks. The Group continues to develop its opportunities in this sector where our work on the depot refurbishment programme is evidence of our growing range of civils, mechanical and electrical engineering services.
In wireless telecoms, to support the growing demand on current infrastructure from increasing data usage, the networks require long-term investment in upgrade programmes. We work for the UK's major cellular network operators and original equipment manufacturers on their 3G and 4G programmes. During the year the Group were awarded new frameworks for Telefonica in the North and London on their latest network programme. We have also expanded our customer base with national programmes being delivered for BT Link and on the Emergency Services Network. We were recently awarded a 5-year national telecommunications framework by Network Rail again demonstrating the advantages of the Group's combined capabilities. In future, the UK government's ambition to be a leader in the provision of the next generation of mobile communications technologies will see opportunities arise on long-term 5G investment programmes.
Specialist Building
As previously announced, and in line with our strategy of risk management and contract selectivity, revenue in Specialist Building reduced to GBP74.2m (2017: GBP106.8m) and operating profit reduced to GBP0.6m (2017: GBP2.4m). At the year-end, the forward order book stood at GBP48m (2017: GBP73m).
The Group's Specialist Building operation remains focused on the High Quality Residential market in London and the Home Counties where we specialise in major structural engineering works.
Outlook
The nature of the UK's ongoing requirement for investment in its critical infrastructure networks provides us with long-term prospects for continued growth. The Group has successfully developed its strategy to align with the opportunities that exist across numerous programmes. Specifically, we have targeted critical infrastructure networks that require ongoing essential renewal and maintenance support delivered through non-discretionary, operational expenditure budgets.
The Group has established an enviable reputation across its markets through a track record of reliable and responsive service, evidenced through our long-standing relationships with customers. This strong platform, and our strategy to broaden our range of services both organically and through selective complementary acquisitions, will continue to provide growth opportunities.
Whilst Brexit is a source of uncertainty, our focus on non-discretionary UK infrastructure markets gives us confidence that it will not have a material impact on the financial performance of the Group. After another good year, in which we have successfully renewed our framework positions, we have good momentum going into 2019 and look forward to delivering on our strategic priorities over the next 12 months.
Paul Scott
Chief Executive Officer
27 November 2018
(1) Renew uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in Note 10
(2) Nuclear Decommissioning Authority, Nuclear Provision: the cost of cleaning up Britain's historic nuclear sites (12 July 2018)
(3) Ofwat PR14 Setting price controls for 2015-20 Overview (December 2014)
(4) Network Rail - Strategic Business Plan Summary (9 February 2018)
Group income statement
For the year ended 30 September 2018
Before Exceptional
exceptional items
items and and
amortisation
amortisation of
intangible
of assets
intangible
assets (see Note Total Total
3)
2018 2018 2018 2017
(*Restated)
Note GBP000 GBP000 GBP000 GBP000
Revenue: Group including share of joint
venture 2 541,469 - 541,469 545,932
Less share of joint venture's
revenue 2 (853) - (853) (2,239)
------------- ------------- ----------------- -------------------
Group revenue from continuing
activities 2 540,616 - 540,616 543,693
Cost of sales (469,008) - (469,008) (481,065)
------------- ------------- ----------------- -------------------
Gross profit 71,608 - 71,608 62,628
Administrative
expenses (40,504) (15,626) (56,130) (42,699)
Share of post-tax result of joint
venture - - - 166
------------- ------------- ----------------- -------------------
Operating profit 2 31,104 (15,626) 15,478 20,095
Finance income 4 - 4 30
Finance costs (1,080) - (1,080) (528)
Other finance income - defined benefit
pension schemes 306 - 306 197
------------- ------------- ----------------- -------------------
Profit before income
tax 30,334 (15,626) 14,708 19,794
Income tax expense 5 (6,364) 841 (5,523) (4,450)
------------- ------------- ----------------- -------------------
Profit for the year from continuing activities 23,970 (14,785) 9,185 15,344
------------- -------------
Loss for the year from discontinued operations
4 (2,412) (2,917)
----------------- -------------------
Profit for the year attributable to equity
holders of the parent company 6,773 12,427
----------------- -------------------
Basic earnings per share from
continuing
activities 7 13.6p 24.5p
Diluted earnings per share from
continuing operations 7 13.5p 24.4p
----------------- -------------------
Basic earnings per share 7 10.0p 19.9p
Diluted earnings per share 7 10.0p 19.8p
----------------- -------------------
Prior year operating profit of GBP20.1m is stated after charging GBP6.0m
of exceptional items and GBP2.3m of amortisation (See Note 3).
*The prior year comparatives for the financial year ended 30 September
2017 have been restated following the reclassification of two discontinued
subsidiary undertakings (see Note 4).
Group statement of comprehensive
income
For the year ended 30 September 2018 2017
2018
GBP000 GBP000
Profit for the year attributable to equity
holders of the parent company 6,773 12,427
--------- ---------
Items that will not be reclassified to profit
or loss:
Movement in actuarial valuation of the defined
benefit pension schemes 5,477 (2,089)
Movement on deferred tax relating to the
defined benefit pension schemes (1,917) 806
--------- ---------
Total items that will not be reclassified
to profit or loss 3,560 (1,283)
--------- ---------
Items that are or may be reclassified subsequently
to profit or loss:
Exchange movements in reserves 6 (42)
--------- ---------
Total items that are or may be reclassified
subsequently to profit or loss 6 (42)
--------- ---------
Total comprehensive income for the year attributable
to equity holders of the parent company 10,339 11,102
--------- ---------
Group statement of changes in equity
Share Share Capital Cumulative Share Retained Total
based
capital premium redemption translation payments earnings equity
account reserve adjustment reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2016 6,232 8,481 3,896 1,347 571 366 20,893
Transfer from income
statement for the
year 12,427 12,427
Dividends paid (5,226) (5,226)
New shares issued 27 1,154 1,181
Recognition of share
based payments 109 109
Exchange differences (42) (42)
Actuarial movement
recognised in pension
schemes (2,089) (2,089)
Movement on deferred
tax relating to the
pension schemes 806 806
-------- -------- ----------- ------------ --------- ---------- ----------
At 30 September 2017 6,259 9,635 3,896 1,305 680 6,284 28,059
Transfer from income
statement for the
year 6,773 6,773
Dividends paid (6,262) (6,262)
New shares issued 1.268 42,049 43,317
Recognition of share
based payments 18 18
Exchange differences 6 6
Actuarial movement
recognised in pension
schemes 5,477 5,477
Movement on deferred
tax relating to the
pension schemes (1,917) (1,917)
-------- -------- ----------- ------------ --------- ---------- ----------
At 30 September 2018 7,527 51,684 3,896 1,311 698 10,355 75,471
-------- -------- ----------- ------------ --------- ---------- ----------
Group balance sheet
At 30 September 2018
2018 2017
GBP000 GBP000
Non-current assets
Intangible assets - goodwill 105,282 57,982
- other 15,991 2,679
Property, plant and equipment 19,710 13,497
Investment in joint venture 123 237
Retirement benefit assets 20,424 9,692
Deferred tax assets 1,592 2,057
163,122 86,144
---------- ----------
Current assets
Inventories 1,691 3,900
Assets held for resale 1,500 1,500
Trade and other receivables 129,376 115,598
Current tax assets - 220
Cash and cash equivalents 9,179 6,967
---------- ----------
141,746 128,185
---------- ----------
Total assets 304,868 214,329
---------- ----------
Non-current liabilities
Borrowings (21,873) -
Obligations under finance leases (2,253) (2,376)
Retirement benefit obligations - (760)
Deferred tax liabilities (9,912) (3,892)
Provisions (298) (314)
---------- ----------
(34,336) (7,342)
---------- ----------
Current liabilities
Borrowings (8,752) (3,100)
Trade and other payables (179,913) (173,245)
Obligations under finance leases (2,100) (2,547)
Current tax liabilities (2,245) -
Provisions (2,051) (36)
---------- ----------
(195,061) (178,928)
---------- ----------
Total liabilities (229,397) (186,270)
---------- ----------
Net assets 75,471 28,059
---------- ----------
Share capital 7,527 6,259
Share premium account 51,684 9,635
Capital redemption reserve 3,896 3,896
Cumulative translation reserve 1,311 1,305
Share based payments reserve 698 680
Retained earnings 10,355 6,284
---------- ----------
Total equity 75,471 28,059
---------- ----------
Group cash flow statement
For the year ended 30 September
2018 2017
(*Restated)
GBP000 GBP000
Profit for the year from continuing
operating activities 9,185 15,344
Share of post-tax trading result of
joint venture - (166)
Impairment and amortisation of intangible
assets 4,157 8,080
Loss on disposal of discontinued business 9,930 -
Depreciation 4,356 3,675
Profit on sale of property, plant and equipment (469) (501)
Expense in respect of share
option exercise - 1,181
(Increase)/decrease in inventories (1,190) 2,895
Increase in receivables (4,974) (24,418)
(Decrease)/increase in
payables (3,054) 13,685
Current and past service cost in respect of defined
benefit pension scheme 64 60
Cash contribution to defined benefit pension
schemes (5,772) (5,291)
Expense in respect of share options 18 109
Finance income (4) (30)
Finance expense 774 331
Interest paid (1,080) (528)
Income taxes paid (1,717) (2,145)
Income tax expense 5,523 4,450
--------- --------------------
Net cash inflow from continuing operating activities 15,747 16,731
Net cash inflow/(outflow) from discontinued
operating activities 825 (1,693)
--------- --------------------
Net cash inflow from operating activities 16,572 15,038
--------- --------------------
Investing activities
Interest received 4 30
Dividend from joint 114 -
venture
Proceeds on disposal of property, plant and
equipment 788 973
Purchases of property, plant and equipment (1,329) (2,150)
Acquisition of subsidiaries net of cash acquired (75,874) (7,024)
--------- --------------------
Net cash outflow from investing activities (76,297) (8,171)
--------- --------------------
Financing activities
Dividends paid (6,262) (5,226)
Issue of share equity 43,317 -
New loan 35,000 -
Loan repayments (7,475) (6,200)
Repayments of obligations under finance leases (2,699) (2,542)
--------- --------------------
Net cash inflow/(outflow) from financing activities 61,881 (13,968)
--------- --------------------
Net increase/(decrease) in continuing cash
and cash equivalents 1,331 (5,408)
Net increase/(decrease) in discontinued cash
and cash equivalents 825 (1,693)
--------- --------------------
Net increase/(decrease) in cash and cash equivalents 2,156 (7,101)
Cash and cash equivalents at beginning of year 6,967 14,084
Effect of foreign exchange rate changes on cash and
cash equivalents 56 (16)
--------- --------------------
Cash and cash equivalents at end of year 9,179 6,967
--------------------
Bank balances and cash 9,179 6,967
--------- --------------------
*The prior year comparatives for the financial year ended 30 September 2017 have been restated following the reclassification of two discontinued subsidiary undertakings.
Notes
1 International Financial Reporting Standards
The consolidated financial statements for the year ended 30 September 2018 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These preliminary results are extracted from those financial statements.
2 Segmental analysis
The Group is organised into two operating business segments plus central activities which form the basis of the segment information reported below. These segments are:
Engineering Services, which comprises the Group's engineering activities which are characterised by the use of the Group's skilled engineering workforce, supplemented by specialist subcontractors where appropriate, in a range of civil, mechanical and electrical engineering applications and;
Specialist Building, which comprises the Group's building activities which are characterised by the use of a supply chain of subcontractors to carry out building works under the control of the Group as principal contractor and;
Central activities, which include the sale of land, the leasing and sub-leasing of some UK properties and the provision of central services to the operating subsidiaries.
2018 2017
(Restated)
Revenue is analysed as follows: GBP000 GBP000
Engineering Services 467,335 437,517
Specialist Building 74,208 106,834
Inter segment revenue (1,208) (921)
-------- -----------
Segment revenue 540,335 543,430
Central activities 1,134 2,502
-------- -----------
Group including share of joint
venture 541,469 545,932
Joint venture - Engineering
Services (853) (2,239)
-------- -----------
Group revenue from continuing
activities 540,616 543,693
-------- -----------
Before
exceptional Exceptional
items and items and
amortisation amortisation
of intangible of intangible
assets assets 2018 2017
Analysis of operating profit GBP000 GBP000 GBP000 GBP000
from continuing activities
Engineering Services 32,520 (15,626) 16,894 18,966
Specialist Building 574 - 574 2,418
Segment operating profit 33,094 (15,626) 17,468 21,384
Central activities (1,990) - (1,990) (1,289)
--------------- --------------- ------------------------ ----------
Operating profit 31,104 (15,626) 15,478 20,095
Net financing costs (770) - (770) (301)
--------------- --------------- ------------------------ ----------
Profit on ordinary activities
before income tax 30,334 (15,626) 14,708 19,794
--------------- --------------- ------------------------ ----------
Engineering Services segment operating profit for the year ended 30 September 2017 is stated after charging exceptional costs of GBP6,009,000 and amortisation of GBP2,280,000 resulting in a total charge of GBP8,289,000 (See Note 3).
3 Exceptional items and amortisation of intangible assets
2018 2017
(Restated)
GBP000 GBP000
Acquisition costs 1,539 209
Impairment of goodwill 6,893 5,800
Loss on disposal of subsidiary 3,037 -
undertaking
------- -----------
Total losses arising from exceptional
items 11,469 6,009
Amortisation of intangible assets 4,157 2,280
------- -----------
15,626 8,289
------- -----------
Costs of GBP1,539,000 were incurred during the acquisition of QTS Group Limited (2017: GBP209,000 acquisition of Giffen Group.)
The sale of Forefront Group Limited incurred a loss on disposal of net assets of GBP3,037,000 and resulted in a GBP6,893,000 write-off of goodwill attributable to that subsidiary undertaking. The total loss on disposal was GBP9,930,000.
As a consequence of the disposal, the GBP657,000 exceptional redundancy and restructuring cost incurred in the year ended 30 September 2017 has been reclassified and is now included with the comparative loss for the year from discontinued operations.
The Board has separately identified the charge of GBP4,157,000 (2017: GBP2,280,000) for the amortisation of the fair value ascribed to certain intangible assets, other than goodwill, arising from the acquisitions of Giffen Holdings Ltd and QTS Group Ltd.
4 Loss for the year from discontinued operations
2018 2017
(Restated)
GBP000 GBP000
Revenue 11,412 15,032
Expenses (13,667) (18,524)
Loss before income tax (2,255) (3,492)
Income tax credit - benefit of
tax losses - 575
Income tax charge (157) -
--------- -----------
Loss for the year from discontinued
operations (2,412) (2,917)
--------- -----------
On 31 October 2014, the Board reached an agreement to sell Allenbuild Ltd to Places for People Group Ltd for a total consideration of GBP2.75m payable in cash. PFP paid the initial 50% of the consideration on 31 October 2014 and the balance on 31 January 2016. The trading result for this business, in so far as it impacts the Group, is shown in the table above. As a term of the disposal Renew Holdings plc retains both the benefits and obligations associated with a number of Allenbuild contracts which are in the process of being finally settled with the client.
On 2 February 2018 Ferns Group Ltd acquired 100% of the ordinary share capital of Forefront Group Ltd, an Engineering Services subsidiary, for GBP1. The trading result for this cash generating unit has therefore been included within the loss for the year from discontinued operations and the comparative figures have been reclassified accordingly.
Following a strategic review of the opportunities available, the Board has decided to close Lovell America Inc, a subsidiary which carried out land development projects around Maryland in the USA. The exit from a geographical region means that the trading result from this cash generating unit is included within the loss for the year from discontinued operations and the comparative figures have been reclassified accordingly. The closure of Lovell America Inc is not expected to complete until late 2019.
5 Income tax expense
(a) Analysis of expense in year 2018 2017
(Restated)
GBP000 GBP000
Current tax:
UK corporation tax on profits of the year (3,571) (3,294)
Adjustments in respect of previous period (336) 825
--------------- -----------------
Total current tax (3,907) (2,469)
--------------- -----------------
Deferred tax - defined benefit pension schemes (1,969) (1,753)
Deferred tax - other timing differences 353 (228)
--------------- -----------------
Total deferred tax (1,616) (1,981)
--------------- -----------------
Income tax expense in respect of continuing
activities (5,523) (4,450)
--------------- -----------------
Factors affecting income tax expense for
the year
(b) Profit before income tax 14,708 19,794
--------------- -----------------
Profit multiplied by standard rate of corporation
tax in the UK of 19% (2017: 19.5%) (2,795) (3,860)
Effects of:
Expenses not deductible for tax purposes (808) (1,241)
Timing differences not provided in deferred
tax (670) 43
Change in tax rate (914) 48
Adjustment in respect of tax losses - (265)
Adjustments in respect of previous period (336) 825
--------------- -----------------
(5,523) (4,450)
--------------- -----------------
6 Dividends 2018 2017
Pence/share Pence/share
Interim (related to the year ended 30
September 2018) 3.33 3.00
Final (related to the year ended 30 September
2017) 6.00 5.35
--------------- ---------------
Total dividend paid 9.33 8.35
--------------- ---------------
GBP000 GBP000
Interim (related to the year ended 30
September 2018) 2,506 1,877
Final (related to the year ended 30 September
2017) 3,756 3,349
--------------- ---------------
Total dividend paid 6,262 5,226
--------------- ---------------
Dividends are recorded only when authorised and are shown as a movement in equity rather than as a charge in the income statement. The Directors are proposing that a final dividend of 6.67p per Ordinary Share be paid in respect of the year ended 30 September 2018. This will be accounted for in the 2018/19 financial year.
7 Earnings per share
2018 2017
Earnings EPS DEPS Earnings EPS DEPS
(Restated)
GBP000 Pence Pence GBP000 Pence Pence
Earnings before
exceptional items
and amortisation 23,970 35.48 35.28 23,245 37.18 36.94
Exceptional items
and amortisation (14,785) (21.88) (21.76) (7,901) (12.64) (12.55)
-------------- -------- -------- ----------------- -------- --------
Basic earnings
per share - continuing
activities 9,185 13.60 13.52 15,344 24.54 24.39
Loss for the
year from discontinued
operations (2,412) (3.57) (3.55) (2,917) (4.66) (4.64)
-------------- -------- -------- ----------------- -------- --------
Basic earnings
per share 6,773 10.03 9.97 12,427 19.88 19.75
-------------- -------- -------- ----------------- -------- --------
Weighted average
number of shares 67,558 67,938 62,514 62,917
-------- -------- -------- --------
The dilutive effect of share options is to increase the number of shares by 380,000 (2017: 403,000) and reduce basic earnings per share by 0.06p (2017: 0.13p).
8 Acquisition of subsidiary
On 10 May 2018, the Company acquired the whole of the issued share capital of QTS Group Ltd ("QTS") for a cash consideration of GBP80m. The acquisition was funded by a placement of 12,676,056 new ordinary shares raising GBP45m, and a four year term loan of GBP35m provided by HSBC Bank plc.
The value of the assets and liabilities of QTS at the date of acquisition were:
Book value Adjustments Fair value
GBP000 GBP000 GBP000
Non-current assets
Intangible assets
-goodwill - 54,193 54,193
-other - 17,469 17,469
Property, plant and
equipment 9,331 (907) 8,424
9,331 70,755 80,086
----------- ------------ -----------
Current assets
Inventories 879 - 879
Trade and other receivables 11,553 - 11,553
Cash and cash equivalents 4,126 - 4,126
16,558 - 16,558
----------- ------------ -----------
Total assets 25,889 70,755 96,644
----------- ------------ -----------
Non-current liabilities
Deferred tax liabilities 1 (2,816) (2,815)
1 (2,816) (2,815)
----------- ------------ -----------
Current liabilities
Trade and other payables (13,571) - (13,571)
Obligations under
finance leases (140) - (140)
Current tax liabilities (118) - (118)
(13,829) - (13,829)
----------- ------------ -----------
Total liabilities (13,828) (2,816) (16,644)
Net assets 12,061 67,939 80,000
----------- ------------ -----------
Goodwill of GBP54,193,000 arises on acquisition and will be reviewed for impairment one year after the acquisition as permitted by IFRS 3. The goodwill is attributable to the expertise and workforce of the acquired business. Other intangible assets, provisionally valued at GBP17,469,000, represent customer relationships and contractual rights, were also acquired and will be amortised over their useful economic life in accordance with IFRS 3. Deferred tax has been provided on this amount. Amortisation of this intangible asset commenced from June 2018.
9 Preliminary financial information
The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2018 or 2017. Statutory accounts for 2017 have been delivered to the registrar of companies. The auditor has reported on those accounts; his reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2018 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.
10 Alternative performance measures
Renew uses a variety of alternative performance measures ('APM') which, although financial measures of either historical or future performance, financial position or cash flows, are not defined or specified by IFRSs. The Directors use a combination of APMs and IFRS measures when reviewing the performance, position and cash of the Group.
The APMs used by the Group are defined below:
Net Cash/(Debt) - This is the cash and cash equivalents less bank debt. The Directors consider this to be a good indicator of the financing position of the Group.
Adjusted operating profit and adjusted profit before tax - Both of these measures are reconciled to total operating profit and total profit before tax on the face of the consolidated income statement. The Directors consider that the removal of exceptional items and amortisation provides a better understanding of the underlying performance of the Group.
Adjusted operating margin - This is calculated by dividing operating profit before exceptional items and
amortisation of intangible assets by group revenue from continuing activities both of which are visible on
the face of the income statements. The Directors believe that removing exceptional items and amortisation
from the operating profit margin calculation provides a better understanding of the underlying performance of the Group.
Adjusted earnings per share - This measure is reconciled to the earnings per share calculation based on earnings before exceptional items and amortisation in Note 9 of the 2018 Annual Report and Accounts. The Directors believe that removing exceptional items and amortisation from the EPS calculation provides a better understanding of the underlying performance of the Group.
Group Revenue - This measure is visible on the face of the income statement as Revenue: Group including share of joint venture.
Group order book, Engineering Services order book and Specialist Building order book - This measure is calculated by the Directors taking a conservative view on secured orders and visible workload through long-term frameworks.
Adjusted Engineering Services revenue - This measure is visible in 2018 Annual Report & Accounts Note 2 part (a) business analysis as Engineering Services Revenue from continuing activities. The Directors consider this to be a good indicator of the underlying performance of the Group's Engineering Services business.
Adjusted Engineering Services operating profit - This measure is visible in the 2018 Annual Report & Accounts Note 2 part (a) business analysis as Engineering Services operating profit before exceptional items and amortisation of intangible assets. The Directors consider this to be a good indicator of the underlying performance of the Group's Engineering Services business.
Adjusted Engineering Services operating profit margin - this is calculated in the same way as adjusted operating profit margin but based on the adjusted Engineering Services operating profit and the Adjusted Engineering services revenue figures as set out above.
11 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the year ended 30 September 2018 will be posted to shareholders as soon as practicable and a copy will be made available on the Group's website:
www.renewholdings.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR UNONRWUAAUAA
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