TIDMRNWH
RNS Number : 2618N
Renew Holdings PLC
19 May 2020
Renew Holdings plc
("Renew" or the "Group")
Half-year Report
A record H1, strong cash generation, resilient trading through
Covid-19
Renew (AIM: RNWH), the Engineering Services Group supporting UK
infrastructure, announces its interim results for the six months
ended 31 March 2020. The Group has delivered another record trading
period, seeing strong cash generation and trading performance,
inclusive of the contribution from the acquisition of Carnell
Support Services in January 2020. The integration of the business
has progressed well and the results are in line with the Board's
expectations.
Financial Highlights:
H1 2020 H1 2019
Revenue GBP313.6m GBP301.0m
---------- ----------
Adjusted operating profit* GBP19.9m GBP18.4m
---------- ----------
Profit before tax GBP15.2m GBP14.5m
---------- ----------
Adjusted operating margin* 6.4% 6.1%
---------- ----------
Adjusted earnings per
share* 20.1p 19.2p
---------- ----------
*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 the Group's 2019 Annual Report and
Accounts.
-- Engineering Services revenue grew 4% to GBP293.1m (2019: GBP281.6m)
-- Engineering Services adjusted operating profit* increased by 7% to GBP20.5m (2019: GBP19.1m)
-- Increase in Engineering Services order book to GBP591m (2019: GBP531m)
-- Net debt of GBP16.1m (2019: GBP17.2m)
Ø Headroom in our available facilities of c.GBP55m plus GBP15m
uncommitted accordion facility
-- Broadened service offering into the Highway market, following the acquisition of Carnell
-- Resilient in the face of Covid-19, with approx. 80% of
activities continuing during the crisis
Ø Interim dividend payment suspended, as stated in the trading
update on 1 April 2020
David Forbes, Chairman of Renew, said: " Our strong trading
performance and cash generation in the first half of the year, is
reflective of the reliable long-term nature of the UK
infrastructure markets in which we operate, a strategy reinforced
in the Government's latest Budget when they committed to investing
GBP640bn in infrastructure over the next 5 years(7) .
Where we are able to satisfy the requirements of the Covid-19
safety guidelines, we continue to work closely with our customers
directly delivering essential network services. In total,
approximately 80% of our activities have continued during the
crisis as they are deemed critical to the Covid-19 response.
Following the UK Government's recovery strategy launched on 10 May
2020, we are addressing immediate opportunities to remobilise the
remaining 20% of our operations and we anticipate this positive
momentum will continue.
The strength of the Group's position in its markets and the
essential nature of the work we undertake gives the Board
confidence that Renew remains well placed to play a significant
role in the long-term opportunities that will emerge across UK
infrastructure, a sector that will play an important role in
rebuilding our economy.
The Board and I would like to take this opportunity to thank all
of our colleagues who have continued to deliver our essential
services during this difficult time."
Enquiries:
Renew Holdings plc Tel: 0113 281 4200
Paul Scott, CEO
Sean Wyndham-Quin, CFO
Numis Securities Limited (Nominated Adviser Tel: 020 7260 1000
& Broker)
Stuart Skinner/ Kevin Cruickshank
Walbrook PR Tel: 020 7933 8780 or renew@walbrookpr.com
Paul McManus Mob: 07980 541 893
Lianne Cawthorne Mob: 07584 391 303
About Renew Holdings plc
Engineering Services , which accounts for over 90% of Group
revenue and over 95% of operating profit, focuses on the key
markets of Rail, Infrastructure, Energy (including Nuclear) and
Environmental, 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 and
Science markets in London and the Home Counties.
Renew was pleased to be awarded the London Stock Exchange's
Green Economy Mark which recognises companies that contribute to
positive environmental outcomes.
For more information please visit the Renew Holdings plc
website: www.renewholdings.com
Chief Executive's Review
As a leading provider of essential engineering support services
to UK infrastructure networks, Renew operates in the regulated
Rail, Infrastructure, Energy and Environmental markets. Our
essential infrastructure maintenance and renewal services are
underpinned by regulatory requirements and, as such, benefit from
long-term visible cycles of investment. Our differentiated business
model delivers reliability and a competitive advantage and is key
to the Group's success in these markets.
How we are responding to the Covid-19 pandemic
We continue to respond decisively and effectively to the ongoing
challenges of the Covid-19 pandemic. The health, safety and
wellbeing of our people and all stakeholders continues to be our
highest priority especially during this unprecedented period. I
continue to be immensely proud of the reaction to this event by my
colleagues and our entire workforce who remain fully committed to
complying with the UK Government's safety guidelines whilst
delivering essential services.
Where it remains safe to do so we continue to operate across the
majority of our sectors; albeit some disruption has been
inevitable. In Rail and Highways, which account for the majority of
our engineering activity, we are working closely with our public
sector customers in areas designated critical to the Covid-19
response. We continue to see clear commitment and ongoing demand
for our directly delivered maintenance and renewal services. Water
and Telecommunications have also been designated 'critical sectors'
and our key workers continue to be deployed across all network
areas where we have framework contracts. In total, approximately
80% of our activities have continued as they are in areas deemed
critical to the Covid-19 response.
In response to the escalation of the Covid-19 pandemic, the
Board has been focused on taking actions to preserve cash and
protect liquidity in a way that does not compromise the long-term
prospects of the business. These include deferral of all
non-essential capital expenditure, a hiring freeze, deferral of VAT
payments (GBP2.6m deferred in March 2020), utilisation of the
Government's Coronavirus Job Retention Scheme (c.15% of the
workforce furloughed) and a temporary 20% reduction in the salaries
of the Board and senior management from 1 April 2020. As stated in
the trading update on 1 April 2020, the Board has suspended payment
of the interim dividend which would ordinarily have been paid to
shareholders in July 2020. We understand the importance of the
dividend to our shareholders and will keep our dividend policy
under review in the coming months.
The Group recently refinanced its working capital facilities as
part of the acquisition of Carnell Support Services ("Carnell") in
January 2020 and now has a revolving credit facility ("RCF")
provided by HSBC and NatWest of GBP44.2m, expiring in January 2024.
In addition, the Group has a GBP10m unsecured overdraft facility.
As at 31 March 2020, headroom in our available facilities was
approximately GBP55m, plus a GBP15m uncommitted accordion facility
on the RCF. The Group's cash generation has continued to be strong
since the end of March with our regulated public sector customers
adhering to the Government's Public Procurement Notice guidelines,
that encourages prompt payment.
In order to provide a picture of the impact Covid-19 has had on
our various market sectors we have provided a specific commentary
in each of the following sector reviews. In general, while there is
naturally some disruption, the Group's inherently defensive
qualities are providing a good degree of resilience in these
unprecedented circumstances.
Group results
The Group has seen record trading in the first half of the year.
Adjusted(1) operating profit increased 8% to GBP19.9m (2019:
GBP18.4m) on revenue of GBP313.6m (2019: GBP301.0m). Adjusted(1)
operating margin, increased to 6.4% (2019: 6.1%). Adjusted(1)
earnings per share was 20.1p (2019: 19.2p). Statutory profit before
income tax was GBP15.2m (2019: GBP14.5m). The Group's order book at
31 March 2020 was GBP690m (2019: GBP580m) and includes significant
new awards during the first half of the year. Since 31 March 2020
we have seen no significant change in the order book
characteristics as a consequence of the pandemic. At 31 March 2020,
the Group had net debt of GBP16.1m (2019: GBP17.2m) which reflects
the Group's continued focus on cash generation and conservative
approach to gearing. Included in this amount is the balance
outstanding on the term loan used to fund the acquisition of QTS
which is GBP17.5m.
The results include a contribution from Carnell which was
acquired in January 2020. The integration of the business has
progressed well and its results are in line with our
expectations.
Engineering Services
Engineering Services revenue was GBP293.1m (2019: GBP281.6m)
with an adjusted(1) operating profit of GBP20.5m (2019: GBP19.1m)
resulting in an operating margin of 7.0% (2019: 6.8%). At 31 March
2020, the Engineering Services order book was GBP591m (2019:
GBP531m).
Across our Engineering Services markets we focus on directly
delivering high volumes of non-discretionary maintenance and
renewals tasks. The average task size is comparatively small which
minimises financial and contractual risk compared with those
businesses delivering larger enhancement schemes.
Rail
Over the current 5-year investment cycle, Control Period 6
("CP6"), which runs to 2024, Network Rail will spend GBP48bn on the
network which includes a circa 25 per cent increase in spending on
operations, maintenance, support and renewals activities compared
to Control Period 5(2) . As a major provider of infrastructure
services to Network Rail nationally, we support the day-to-day
operation of the network by directly delivering essential asset
maintenance through our long-term CP6 frameworks.
When the lockdown restrictions were imposed in March, our
largest customer Network Rail confirmed their intention to proceed
with all our planned works where we were able to comply with the UK
Government's Covid-19 safety guidelines. We have experienced
limited site closures to-date and in some cases we have taken the
opportunity to deliver some schemes ahead of plan while the network
has been running at limited capacity. We remain operational in all
Network Rail routes and regions where, during April and into May,
we have seen activity levels similar to those experienced prior to
the pandemic's impact.
During the period we secured new positions on the CP6 Wales and
Western 5-year Renewals frameworks across all 5 lots, where we will
deliver a programme of engineering services to assets across the
rail network including bridges, embankments, tunnels and
electrification & plant. We were also awarded a further rail
drainage framework in Scotland, complementing our existing rail
drainage framework positions. We continue to operate on the
Multidisciplinary Renewals and Geotechnical & Earthworks 5-year
frameworks in Scotland as well as on existing frameworks for Slab
Track in Scotland and for Station Information & Security
Systems and Telecoms nationally. We provide a range of integrated
services across the rail network which include civils asset
management, signalling, fencing, devegetation and drainage.
In response to the effects of Storm Ciara and Storm Dennis in
February 2020, which flooded rail and road networks across the
country, we have seen significant and sustained demand for our
emergency support services across the most severely impacted
locations in Wales, North West and Central, Eastern and Scotland.
Working around the clock, despite the challenging weather
conditions and remote locations, our teams undertook vital works to
ensure the integrity and safety of the railway for passengers and
freight customers, minimising disruption and protecting community
transport links. Works included repairs to a major landslide
between Thornhill and Dumfries in Scotland and slope failure
repairs at Auldgirth, Scotland. Emergency repairs were also
undertaken on the Glasgow South Western Line following a
significant landslip and at a number of locations on the Hereford
to Newport Line in South Herefordshire.
Through our framework agreements with London Underground, we
deliver specialist electrical, plant and power schemes. In addition
to these frameworks we are also undertaking a number of depot
control system and major depot refurbishment schemes. Work on
Merseyrail's Principal Contractors 3-year framework and on the
Transport for Wales STRIDE framework continues.
In the period we were awarded our first project to deliver a
temporary compound for HS2. We are in negotiations to provide
further compounds as part of a larger programme to establish around
100 similar facilities over the next 2 years.
Infrastructure
To support the Group's growth strategy, in January 2020 we were
pleased to announce the acquisition of Carnell Support Services.
Carnell is a leading provider of specialist engineering services on
the Strategic Road Network where it directly delivers
non-discretionary renewals and maintenance through long-term
framework agreements. Post the period end, Carnell was awarded
additional Asset Delivery frameworks in Areas 6 and 8, for its
largest customer, Highways England. Carnell's complementary
services are an excellent fit with the Group's established and
proven strategy.
Further endorsement of this acquisition was provided when the
Government confirmed in its latest Budget that it would spend
GBP27.4bn as part of its 5-year Road Investment Strategy
("RIS2")(3) . GBP11.9bn of this funding will be ringfenced for
operations, maintenance and renewals, a significant increase from
GBP5.1bn in RIS1(4) .
Highways England remains focused on safely maintaining critical
services to support the Strategic Road Network and the UK
Government is clear that the industry should continue to operate
whilst observing the Covid-19 safety guidelines. We remain
operational across all areas for Highways England which is
reflective of the resilience of this new market sector for Renew.
During April and May, we have experienced similar levels of
activity to those seen prior to the pandemic's impact.
In Wireless Telecoms, a sector also designated critical at this
time, we have experienced limited interruption with some access
restrictions across London. We continue to support the network
operators to ensure the operation of critical services where it
remains safe for our employees to do so. We have seen a significant
increase in work across our framework contracts throughout the UK
as the 5G roll-out accelerates including the first of several large
packages to carry out 5G street works installations. We are
gradually seeing a return to pre-Covid-19 activity levels and we
anticipate this positive momentum will continue.
Energy
The Nuclear Decommissioning Authority continues to commit around
GBP3bn(5) per annum on the decommissioning programme across its 17
nuclear licensed sites in the UK. We operate on sites that command
approximately 90 per cent of this provision. The largest of these
sites is Sellafield in Cumbria, where we remain a principal
mechanical, electrical and instrumentation contractor.
We further strengthened our position at Sellafield in the period
with the appointment to both lots of the 4-year Fabrication and
Machining Spares Framework where we will be supplying engineering
components to very demanding nuclear standards. We continue to work
on numerous high hazard retrievals and risk reduction activities
across the site through established, long-term framework agreements
for decontamination, decommissioning and waste management. Our
Decommissioning Delivery Partnership Framework, which runs to 2026,
delivers work across some of the most hazardous areas including
waste retrieval from legacy storage ponds and silos.
The Sellafield site instigated emergency measures at the start
of the Covid-19 lockdown and consequently all site work activity
was suspended. This remained the case until the end of April 2020
when it restarted work on one prioritised programme. It still
remains unclear when the suspended programmes will be recommenced.
We continue to work very closely with this long-term customer, with
which we have contractual protection measures, to retain our highly
qualified resources and to cover the majority of costs associated
with the interruption whilst assisting with the development of
plans for the resumption of decommissioning activities.
At Springfields, all activity was initially suspended with the
lockdown at the end of March. During April approximately 50 per
cent of our activities, including operational support and
decommissioning, recommenced at the site and we anticipate this
positive momentum will continue.
Elsewhere in nuclear, we continue to work on the 7-year
Decommissioning Services Framework at Dounreay and to support Rolls
Royce on its Diesel Generator Programme at Hinkley Point 'C'.
Our essential engineering maintenance services at 6 of the UK's
thermal power stations, including Drax, have continued with little
interruption. We also have a Minor Works framework with National
Grid as well as securing a Minor Civils framework with Western
Power Distribution in the period.
Environmental
We provide a range of engineering services to support the
renewal and maintenance of water infrastructure assets including
those on clean and wastewater networks, flood alleviation and
coastal protection systems. Spending on the latest 5-year
investment cycle (AMP7) is estimated to be circa GBP50bn(6) as
demand continues to be driven by population growth, ageing
infrastructure and environmental considerations. These long-term
renewal programmes require sustained investment through our
clients' operational expenditure budgets.
Work continues for all our water clients and the Environment
Agency where we are able to comply with the UK Government's
Covid-19 safety guidelines. The nature of the essential maintenance
and renewals tasks we undertake designates our teams as key workers
and we remain fully operational across all our frameworks.
Since the extensive flooding that was caused by Storm Ciara and
Storm Dennis in February 2020, we have been extremely busy
delivering critical reactive works, through our framework
agreements, to keep the water network operational. These essential
works interrupted the delivery of regular planned maintenance and
renewals works which are now recommencing.
For D r Cymru Welsh Water, we operate on the Pressurised
Pipelines Framework, Major Civils Framework and the Capital
Delivery Alliance Civils contracts across the region. In addition
to ongoing maintenance and renewals tasks, we have provided
extensive 24/7 emergency reactive works on the water network during
the period to ensure continuity of supply. As an approved dam
safety contractor, we continue to grow our portfolio of work with
the award of 2 new dam infrastructure schemes.
Works continue with Wessex Water and Bristol Water as they
develop their plans for AMP7. With new client Yorkshire Water, we
will carry out engineering works to existing assets on operational
treatment and distribution facilities over the next 5 years through
the AMP7 Minor Civils Framework.
In the latest Budget the Government committed a record
investment of GBP5.2bn (7) over the next 6 years to improve flood
defences nationally. We see this as a major growth opportunity,
where we currently work for customers including the Environment
Agency and Canal and Rivers Trust delivering essential maintenance
and improvement works nationally.
In Land Remediation, we have experienced disruption across our
site activities due to the Covid-19 pandemic. A number of
remediation sites have now reopened with enhanced safety protection
in line with the UK Government's Covid-19 guidelines. In the period
we worked on regeneration schemes for Homes England and Harworth
Estates.
In Specialist Restoration, site work at the Palace of
Westminster was suspended at the start of the Covid-19
restrictions, however, we have continued with renovation activities
in our restoration workshop. Working closely with this client we
have gradually restarted site operations and anticipate this
momentum will continue.
Specialist Building
We specialise in the High Quality Residential and Science
markets in London and the Home Counties. During the period, work
continued uninterrupted on schemes for our Science clients
including schemes for Defra and MRC London Institute of Medical
Science. We experienced some disruption in the High Quality
Residential sector in Central London; however, we are actively
working with all of our clients in developing plans to safely
resume site operations in May and June 2020. The Group continues to
be selective in these markets where we have a long-established
track record.
Revenue was in line with the Group's expectations at GBP20.5m
(2019: GBP19.4m) reflecting a continued focus on contract
selectivity and risk management. Operating profit was GBP0.4m
(2019: GBP0.3m), with an operating margin of 2.0% (2019: 1.5%). In
Specialist Building, the order book was GBP99m (2019: GBP49m).
Board changes
In February 2020 we were pleased to announce the appointment of
Stephanie Hazell to the Renew Board as a Non-Executive Director
from 1 March 2020. Stephanie has over 20 years' relevant experience
working in high profile businesses including PricewaterhouseCoopers
LLP, Orange SA, Virgin Management Ltd and National Grid Plc, where
she held the position of director, strategy and corporate
development. Stephanie is an industrial partner at Infracapital and
a non-executive director for a number of its investments.
Stephanie's appointment will bring additional valuable experience
in a number of the Group's existing markets and strategic
experience across the Infrastructure sector to assist in the
development and delivery of the Group's established strategy.
Sustainability
In order to be able to deliver long-term value for all our
stakeholders, we continue to embed robust environmental, social and
governance ("ESG") practice and procedures throughout our business.
Examples in the period include our work to develop the diversity of
the Board and improvements in training and wellness opportunities
for all our employees. Our subsidiary businesses also continue to
work towards obtaining the latest environmental accreditations. The
Group's strong core values underpin our approach to sustainable
ESG, and we consider these to be fundamental to the long-term
sustainability of the Group.
Outlook
Our strong trading performance and cash generation in the period
is reflective of the reliable long-term nature of the UK
infrastructure markets in which we operate, a strategy reinforced
in the Government's latest Budget when it committed to investing
GBP640bn in infrastructure over the next 5 years(7) . The
acquisition of Carnell has broadened our service offering into the
Highways market, increasing the opportunities available to the
Group under this long-term spending programme.
Where we are able to satisfy the requirements of the Covid-19
safety guidelines, we continue to work closely with our customers
directly delivering essential network services. In total,
approximately 80% of our activities have continued during the
crisis as they are deemed critical to the Covid-19 response.
Following the UK Government's recovery strategy launched on 10 May
2020, we are addressing immediate opportunities to remobilise the
remaining 20% of our operations and we anticipate this positive
momentum will continue.
The strength of the Group's position in its markets and the
essential nature of the work we undertake give the Board confidence
that Renew remains well placed to play a significant role in the
long-term opportunities that will emerge across UK infrastructure,
a sector that will play an important role in rebuilding our
economy.
Paul Scott
Chief Executive
19 May 2020
(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 the Group's 2019 Annual Report and
Accounts.
(2) CP6 Network Rail Strategic Business Plan - Summary, 9
February 2018.
(3) Department for Transport, Road Investment Strategy 2: 2020 -
2025, March 2020.
(4) Department for Transport, Road Investment Strategy: for the
2015/16-2019/20 Road Period, March 2015
(5) NDA Business Plan 1 April 2019 to 31 March 2022, March
2019.
(6) Water UK - A Manifesto for Water, Summary of the Water
Industry's Plans in England 2020 - 25, 3 September 2018.
(7) Budget 2020 - What you need to know: Government website, 11
March 2020.
Our differentiated business model:
* Our Infrastructure, Energy and Environmental markets * Provides visible, reliable and resilient revenues v
enjoy committed funding ia
long-term maintenance and renewal programmes
* We deliver non-discretionary maintenance and renewals * We have little exposure to the financial and
tasks contractual risks facing those businesses that
deliver large enhancement schemes funded by capex
spend
* In rail maintenance our average task size is less
than GBP20k
* Mainly funded from opex budgets
--------------------------------------------------------------
* Markets with high barriers to entry
* We work in complex, challenging and highly regulated
environments
--------------------------------------------------------------
* We employ a highly skilled, directly employed * Underpins safe working practices
workforce
* Creates a culture of responsiveness to client needs
* Reduces our exposure to sub-contractor pricing
volatility
--------------------------------------------------------------
* We have a proven track record of revenue growth, * Presenting an attractive, long-term investment case
profitability and cash generation
--------------------------------------------------------------
Condensed consolidated income statement
for the six months ended 31 March
2020
Exceptional Exceptional
Before items Before items
exceptional and exceptional and
items amortisation items amortisation
and of intangible and of
amortisation assets amortisation intangible Year
of (see Six months of assets ended
intangible Note ended intangible (see Note 30
assets 3) 31 March assets 3) September
2020 2020 2020 2019* 2019 2019 2019
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue: Group
including
share of joint
venture 2 313,566 - 313,566 300,978 600,631 - 600,631
Less share of
joint
venture's
revenue - - - - (709) - (709)
------------- -------------- ----------- ----------- ------------- -------------- ----------
Group revenue
from
continuing
activities 2 313,566 - 313,566 300,978 599,922 - 599,922
Cost of sales (268,924) - (268,924) (258,964) (514,299) - (514,299)
------------- -------------- ----------- ----------- ------------- -------------- ----------
Gross profit 44,642 - 44,642 42,014 85,623 - 85,623
Administrative
expenses (24,699) (3,910) (28,609) (26,848) (47,390) (10,788) (58,178)
Share of
post-tax
result of
joint
venture - - - - 96 - 96
------------- -------------- ----------- ----------- ------------- -------------- ----------
Operating
profit 2 19,943 (3,910) 16,033 15,166 38,329 (10,788) 27,541
Finance income 1 - 1 1 50 - 50
Finance costs (863) - (863) (691) (1,244) - (1,244)
Other finance
income
- defined
benefit
pension
schemes - - - - 615 - 615
------------- -------------- ----------- ----------- ------------- -------------- ----------
Profit before
income
tax 2 19,081 (3,910) 15,171 14,476 37,750 (10,788) 26,962
Income tax
expense 4 (3,755) 504 (3,251) (2,749) (7,306) 2,601 (4,705)
------------- -------------- ----------- ----------- ------------- -------------- ----------
Profit for the
period
attributable
to
equity holders
of
the parent
company 15,326 (3,406) 11,920 11,727 30,444 (8,187) 22,257
------------- -------------- ----------- ----------- ------------- -------------- ----------
Basic earnings
per
share 5 20.06p (4.46p) 15.60p 15.58p 40.43p (10.88p) 29.55p
Diluted
earnings
per share 5 19.90p (4.42p) 15.48p 15.49p 40.13p (10.79p) 29.34p
------------- -------------- ----------- ----------- ------------- -------------- ----------
Proposed
dividend 6 0.00p 3.83p 11.50p
----------- ----------- ----------
*Operating profit for the six months ended 31 March 2019 is
stated after charging GBP3,264,000 of amortisation cost (see Note
3).
Condensed consolidated statement of comprehensive income
for the six months ended 31 March 2020
Six months ended Year ended
31 March 30 September
2020 2019 2019
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Profit for the period attributable
to equity holders of the parent company 11,920 11,727 22,257
-------------- ---------- -------------
Items that will not be reclassified
to profit or loss:
Movement in actuarial valuation of
the defined benefit pension schemes - - 3,543
Movement on deferred tax relating
to the defined benefit pension schemes - - (1,240)
-------------- ---------- -------------
Total items that will not be reclassified
to profit or loss - - 2,303
-------------- ---------- -------------
Items that are or may be reclassified
subsequently to profit or loss:
Exchange movement in reserves (5) (5) 28
Total items that are or may be reclassified
subsequently to profit or loss (5) (5) 28
-------------- ---------- -------------
Total comprehensive income for the
period attributable to equity holders
of the parent company 11,915 11,722 24,588
-------------- ---------- -------------
Condensed consolidated statement of changes in equity
for the six months ended 31 March 2020
Share Capital Cumulative Share Total
based
Share premium redemption translation payments Retained equity
capital account reserve adjustment reserve earnings Unaudited
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 October 2018 7,527 51,684 3,896 1,311 698 10,355 75,471
Transfer from income
statement for the period 11,727 11,727
Dividends paid (5,020) (5,020)
New shares issued 6 220 226
Recognition of share
based payments (272) (272)
Exchange differences (5) (5)
-------- -------- ----------- ------------ --------- ---------- ----------
At 31 March 2019 7,533 51,904 3,896 1,306 426 17,062 82,127
Transfer from income
statement for the period 10,530 10,530
Dividends paid (2,885) (2,885)
Recognition of share
based payments 150 150
Exchange differences 33 33
Actuarial movement recognised
in the pension schemes 3,543 3,543
Movement on deferred
tax relating to the pension
schemes (1,240) (1,240)
-------- -------- ----------- ------------ --------- ---------- ----------
At 30 September 2019 7,533 51,904 3,896 1,339 576 27,010 92,258
Transfer from income
statement for the period 11,920 11,920
Dividends paid (5,770) (5,770)
New shares issued 322 15,024 15,346
Recognition of share
based payments (4) (4)
Exchange differences (5) (5)
-------- -------- ----------- ------------ --------- ---------- ----------
At 31 March 2020 7,855 66,928 3,896 1,334 572 33,160 113,745
-------- -------- ----------- ------------ --------- ---------- ----------
Condensed consolidated balance sheet
at 31 March 2020
31 March 30 September
2020 2019 2019
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Non-current assets
Intangible assets -
goodwill 125,092 105,282 105,282
- other 26,442 12,727 9,463
Property, plant and
equipment 22,242 20,182 20,932
Right of use assets* 10,157 - -
Investment in joint
venture 39 123 139
Retirement benefit
assets 27,936 23,271 25,554
Deferred tax assets 1,462 1,502 1,416
------------------------- ------------- ----------------
213,370 163,087 162,786
------------------------- ------------- ----------------
Current assets
Inventories 1,675 1,624 2,632
Assets held for resale 1,500 1,500 1,500
Trade and other receivables 110,700 119,133 118,623
Current tax assets 1,334 - -
Cash and cash equivalents 31,430 8,999 11,667
146,639 131,256 134,422
------------------------- ------------- ----------------
Total assets 360,009 294,343 297,208
------------------------- ------------- ----------------
Non-current liabilities
Borrowings (38,750) (17,498) (13,123)
Obligations under finance
leases** (10,320) (2,645) (3,214)
Deferred tax liabilities (14,755) (10,353) (10,598)
Provisions (452) (298) (452)
------------------------- ------------- ----------------
(64,277) (30,794) (27,387)
------------------------- ------------- ----------------
Current liabilities
Borrowings (8,750) (8,752) (8,752)
Trade and other payables (167,512) (166,527) (164,450)
Obligations under finance
leases** (5,714) (2,228) (2,546)
Current tax liabilities - (1,864) (1,804)
Provisions (11) (2,051) (11)
(181,987) (181,422) (177,563)
------------------------- ------------- ----------------
Total liabilities (246,264) (212,216) (204,950)
------------------------- ------------- ----------------
Net assets 113,745 82,127 92,258
------------------------- ------------- ----------------
Share capital 7,855 7,533 7,533
Share premium account 66,928 51,904 51,904
Capital redemption
reserve 3,896 3,896 3,896
Cumulative translation
adjustment 1,334 1,306 1,339
Share based payments
reserve 572 426 576
Retained earnings 33,160 17,062 27,010
------------------------- ------------- ----------------
Total equity 113,745 82,127 92,258
------------------------- ------------- ----------------
*The Group has adopted IFRS 16 from 1 October 2019 using
the modified retrospective transition option. Under this
option, the comparative information is not restated.
(See Note 1.)
** At 31 March 2020 current lease obligations included
GBP3,301,000 of additional liabilities and non-current
lease obligations included GBP6,925,000 of additional
liabilities recognised under IFRS 16.
Condensed consolidated cashflow statement
for the six months ended 31 March 2020
Six months ended Year ended
31 March 30 September
2020 2019 2019
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Profit for the period from continuing
operating activities 11,920 11,727 22,257
Share of post-tax trading result of
joint venture - - (96)
Impairment and amortisation of intangible
assets 2,148 3,264 6,528
Defined benefit pension scheme guaranteed
minimum equalisation - - 4,260
Depreciation* 4,749 2,826 5,561
Profit on sale of property, plant and
equipment (308) (377) (621)
Decrease/(increase) in inventories 245 67 (210)
Decrease in receivables 20,647 7,187 7,769
Decrease in payables (5,005) (11,946) (15,239)
Current and past service cost in respect
of defined benefit pension scheme 25 30 46
Cash contribution to defined benefit
pension schemes (2,382) (2,847) (5,279)
Credit in respect of share options (4) (272) (122)
Finance income (1) (1) (50)
Finance expense 863 691 629
Interest paid (863) (691) (1,244)
Income taxes paid (5,372) (2,600) (5,524)
Income tax expense 3,251 2,749 4,705
Net cash inflow from continuing operating
activities 29,913 9,807 23,370
Net cash (outflow)/inflow from discontinued
operating activities (213) 1,585 71
----------- ---------- -------------
Net cash inflow from operating activities 29,700 11,392 23,441
----------- ---------- -------------
Investing activities
Interest received 1 1 50
Dividend received from joint venture 100 - 80
Proceeds on disposal of property, plant
and equipment 376 581 939
Purchases of property, plant and equipment (1,710) (1,680) (2,619)
Acquisition of subsidiaries net of cash
acquired (40,512) - -
----------- ---------- -------------
Net cash outflow from investing activities (41,745) (1,098) (1,550)
Financing activities
Dividends paid (5,770) (5,020) (7,905)
Issue of Ordinary Shares 15,346 226 226
New loan 49,000 - -
Loan repayments (23,375) (4,375) (8,750)
Repayment of obligations under finance
leases** (3,394) (1,303) (3,076)
----------- ---------- -------------
Net cash inflow/(outflow) from financing
activities 31,807 (10,472) (19,505)
Net increase/(decrease) in continuing
cash and cash equivalents 19,975 (1,763) 2,315
Net (decrease)/increase in discontinued
cash and cash equivalents (213) 1,585 71
----------- ---------- -------------
Net increase/(decrease) in cash and
cash equivalents 19,762 (178) 2,386
Cash and cash equivalents at the beginning
of the period 11,667 9,179 9,179
Effect of foreign exchange rate changes
on cash and cash equivalents 1 (2) 102
Cash and cash equivalents at the end
of the period 31,430 8,999 11,667
----------- ---------- -------------
Bank balances and cash 31,430 8,999 11,667
----------- ---------- -------------
* Additional depreciation on the Group's right of use assets due
to the adoption of IFRS 16 amounted to GBP1,863,000 for the six
months ended 31 March 2020.
** Additional lease repayments of GBP1,794,000 were recorded due
to the adoption of IFRS 16 for the six months ended 31 March
2020.
Notes to the condensed consolidated accounts
1. Basis of preparation
(a) The condensed consolidated interim financial report for the
six months ended 31 March 2020 and the equivalent period in 2019
has not been audited or reviewed by the Group's auditor. It does
not comprise statutory accounts within the meaning of Section 435
of the Companies Act 2006. It has been prepared under the
historical cost convention and on a going concern basis in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union. The report does not
comply with IAS 34 "Interim Financial Reporting", which is not
currently required to be applied for AIM companies and it was
approved by the Directors on 19 May 2020.
(b) The accounts for the year ended 30 September 2019 were
prepared under IFRS and have been delivered to the Registrar of
Companies. The report of the auditor on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498(2) or (3) of the
Companies Act 2006. In this report, the comparative figures for the
year ended 30 September 2019 have been audited. The comparative
figures for the period ended 31 March 2019 are unaudited.
(c) For the year ending 30 September 2020, one new accounting
standard IFRS 16 "Leases" has been adopted by the EU, applied and
have been implemented for the condensed consolidated interim
financial report. The accounting policies adopted in the
preparation of the condensed consolidated interim financial report
are consistent with those adopted in the Group's accounts for the
year ended 30 September 2019 except for the impact of IFRS 16.
IFRS 16 has become effective for the year ending 30 September
2020 and replaces the requirements of IAS 17 "Leases". The Group
has adopted IFRS 16 using the modified retrospective approach under
which the cumulative effect of adoption is recognised through
reserves, with comparatives continuing to be reported under IAS 17.
An asset representing the Group's right as a lessee to use a leased
item and a liability for the associated future lease payments, has
been recognised for all leases, subject to limited exemptions for
short-term leases and low-value lease assets. The cost of leases
has been recognised in the condensed consolidated income statement
split between depreciation of the lease asset and a finance charge
on the lease liability. This is similar to the accounting for
finance leases under IAS 17, but different to the accounting for
operating leases (under which no lease asset or lease liability was
recognised, and operating lease rentals were charged to the
condensed consolidated income statement on a straight-line
basis).
As a result of adopting the new accounting standard for the six
months ended 31 March 2020, the Group's profit before tax has
reduced by GBP69,000 and operating profit has increased by
GBP79,000. The reduction in profit before tax is the net impact of
GBP148,000 of additional finance charges and GBP1,863,000 of
additional depreciation, replacing GBP1,942,000 of operating lease
rental charges. Finance charges under IFRS 16 are front-loaded in
the early part of the lease term and, when using the modified
retrospective approach to adoption, this resulted in the overall
cost of leases being greater than the operating lease charges would
have been under IAS 17.
The Group adopted IFRS 16 with a date of initial application of
1 October 2019 using the modified retrospective approach whereby
the right of use asset on transition equalled the lease liability.
The comparative information for the six months ended 31 March 2019
and for the year ended 30 September 2019 has not been restated and
continues to be reported under IAS 17.
The Group applied the following measures/exemptions available on
transition to IFRS 16, to leases previously classified as operating
leases:
- On transition to IFRS 16, the Group elected to apply the
practical expedient to grandfather the assessment of which
transactions are leases. It applies IFRS 16 only to contracts that
were previously identified as leases. Contracts that were not
identified as leases under IAS 17 and IFRIC 4 were not reassessed
for whether there is a lease. Therefore, the definition of a lease
under IFRS 16 was applied only to contracts entered into or changed
on or after 1 October 2019.
- The Group has relied on its previous assessment of whether
leases are onerous in accordance with IAS 37 immediately before the
date of application as an alternative to performing an impairment
review.
- The Group has not recognised right of use assets and
liabilities for leases of low value or for which the lease term
ends within 12 months of the date of initial application , on a
lease-by-lease basis; and
- The Group has applied a single discount rate to a portfolio of
leases with reasonably similar characteristics (such as leases with
a similar remaining lease term in a similar class of underlying
assets).
The Group has changed its accounting policies and updated its
internal processes and controls related to leasing. The new
definition of a lease has been applied to contracts entered into
from 1 October 2019.
Lease accounting policy
The Group has relied upon the exemption under IFRS 16 to exclude
the impact of low-value leases and leases that are short-term in
nature (defined as leases with a term of 12 months or less). Costs
on these leases are recognised on a straight-line basis as an
operating expense within the income statement. All other leases are
accounted for in accordance with this policy.
The Group has various lease arrangements for properties (e.g.
office buildings and storage facilities), vehicles, and other
equipment including plant and machinery. At the inception of a
lease contract, the Group assesses whether the contract conveys the
right to control the use of an identified asset for a certain
period of time and whether it obtains substantially all the
economic benefits from the use of that asset, in exchange for
consideration. The Group recognises a lease liability and a
corresponding right of use asset with respect to all such lease
arrangements in which it is a lessee.
A right of use asset is capitalised on the balance sheet at cost
which comprises the present value of future lease payments
determined at the inception of the lease adjusted for any lease
payments made at or before the commencement date, plus any initial
direct costs incurred in addition to an estimate of costs to remove
or restore the underlying asset. Where a lease incentive is
receivable, the amount is offset against the right of use asset at
inception. Right of use assets are depreciated using the
straight-line method over the shorter of the estimated useful life
of the asset or the lease term and are assessed in accordance with
IAS 36 "Impairment of Assets" to determine whether the asset is
impaired and to account for any loss.
The lease liability is initially measured at the present value
of lease payments as outlined above and is subsequently increased
by the interest cost on the lease liability and decreased by any
payments made. Lease payments comprise fixed lease rental payments.
Lease liabilities are classified between current and non-current on
the balance sheet.
The key estimate applied by management relates to the assessment
of the incremental borrowing rate adopted by the Group to discount
the future lease rentals to present value in order to measure the
lease liabilities at 1 October 2019. The weighted average rate
applied by the Group at transition was 3.0%.
The impact on the Group's opening balance sheet at 1 October
2019 as a result of the adoption of IFRS 16 was as follows:
GBP000
Net assets at 30 September 2019 92,258
Right of use assets recognised 10,001
Lease liabilities recognised (10,001)
------------------
Net assets at 1 October 2019 92,258
------------------
Applying the Group's incremental borrowing rate to discount the
operating lease commitments reported at 30 September 2019 results
in a liability of GBP10.0m. This reconciles to the right of use
asset recognised as follows:
GBP000
Operating lease commitments at 30 September 2019 10,885
Recognition exemption for short-term and low-value
leases (272)
Discount using the incremental borrowing rate at
1 October 2019 (612)
------------------
Right of use asset recognised at 1 October 2019 10,001
------------------
(d) The Board has reviewed the principal risks and uncertainties
affecting the Group in the context of the impact of the Covid-19
pandemic. The Board recognises that the impact of Covid-19 is being
felt across all aspects of the Group's operations and that the
overall risk environment has increased as a result of the pandemic.
Despite this, the Board considers that the principal risks and
uncertainties set out in the Group's accounts for the year ended 30
September 2019 are still appropriate and has taken additional
actions to address those risks specifically arising from Covid-19.
In this context, the Directors have reviewed financial forecasts
and are satisfied that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
the Group continues to adopt the going concern basis in preparing
the condensed consolidated interim financial report.
This condensed consolidated interim financial report is being
sent to all shareholders and is also available upon request from
the Company Secretary, Renew Holdings plc, 3175 Century Way, Thorpe
Park, Leeds, LS15 8ZB, or via the website www.renewholdings.com
.
2. Segmental analysis
Operating segments have been identified based on the internal
reporting information provided to the Group's Chief Operating
Decision Maker. From such information, Engineering Services and
Specialist Building have been determined to represent operating
segments.
Group revenue
from continuing
activities
Six months ended
31 March
Group Group
including including Group revenue
share Less share share Less share from continuing
of joint of joint of joint of joint activities
venture venture venture venture Year ended
30 September
2020 2020 2020 2019 2019 2019 2019
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
Revenue is
analysed
as follows: GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Engineering
Services 293,093 - 293,093 281,552 564,478 (709) 563,769
Specialist
Building 20,473 - 20,473 19,426 36,125 - 36,125
Inter segment
revenue (965) - (965) (633) (1,461) - (1,461)
----------- ----------- ----------- ----------- ----------- ----------- -----------------
Segment revenue 312,601 - 312,601 300,345 599,142 (709) 598,433
Central activities 965 - 965 633 1,489 - 1,489
----------- ----------- ----------- ----------- ----------- ----------- -----------------
Group revenue from
continuing
operations 313,566 - 313,566 300,978 600,631 (709) 599,922
----------- ----------- ----------- ----------- ----------- ----------- -----------------
Six months ended
31 March
Before Before
exceptional Exceptional exceptional Exceptional
items items items items
and and and and
amortisation amortisation amortisation amortisation Year
of of of of ended
intangible intangible intangible intangible 30
assets assets assets assets September
2020 2020 2020 2019* 2019 2019 2019
Unaudited Unaudited Unaudited Unaudited Audited Audited Audited
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Analysis of
operating
profit
Engineering
Services 20,542 (3,910) 16,632 15,832 39,410 (6,788) 32,622
Specialist
Building 415 - 415 333 882 - 882
------------- ------------- ---------- ---------- ------------- ------------- ----------
Segment
operating
profit 20,957 (3,910) 17,047 16,165 40,292 (6,788) 33,504
Central
activities (1,014) - (1,014) (999) (1,963) (4,000) (5,963)
------------- ------------- ---------- ---------- ------------- ------------- ----------
Operating
profit 19,943 (3,910) 16,033 15,166 38,329 (10,788) 27,541
Net
financing
expense (862) - (862) (690) (579) - (579)
------------- ------------- ---------- ---------- ------------- ------------- ----------
Profit
before
income
tax 19,081 (3,910) 15,171 14,476 37,750 (10,788) 26,962
------------- ------------- ---------- ---------- ------------- ------------- ----------
* Operating profit for the six months ended 31 March 2019 is
stated after charging GBP3,264,000 of amortisation cost (see Note
3).
3. Exceptional items and amortisation of intangible assets
Six months ended Year ended
31 March 30 September
2020 2019 2019
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Defined benefit pension scheme guaranteed minimum pension
equalisation - - 4,260
Acquisition cost 1,762 - -
Total charges arising from exceptional items 1,762 - 4,260
Amortisation of intangible assets 2,148 3,264 6,528
---------- ---------- --------------------------
Total exceptional items and amortisation charge before income
tax 3,910 3,264 10,788
Taxation credit on exceptional items and amortisation (504) (555) (2,601)
---------- ---------- --------------------------
Total exceptional items and amortisation charge 3,406 2,709 8,187
---------- ---------- --------------------------
4. Income tax expense
Six months ended Year ended
31 March 30 September
2020 2019 2019
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
Current tax:
UK corporation tax on profit
for the period (2,774) (2,218) (5,291)
Adjustments in respect of previous
periods - - 208
---------- ---------- -------------
Total current tax (2,774) (2,218) (5,083)
Deferred tax (477) (531) 378
---------- ---------- -------------
Income tax expense (3,251) (2,749) (4,705)
---------- ---------- -------------
5. Earnings per share
Six months ended 31 March Year ended 30 September
2020 2019 2019
Unaudited Unaudited Audited
Earnings EPS DEPS Earnings EPS DEPS Earnings EPS DEPS
GBP000 Pence Pence GBP000 Pence Pence GBP000 Pence Pence
Earnings
before
exceptional
items and
amortisation 15,326 20.06 19.90 14,436 19.18 19.06 30,444 40.43 40.13
Exceptional
items and
amortisation (3,406) (4.46) (4.42) (2,709) (3.60) (3.57) (8,187) (10.88) (10.79)
---------- ---------- ------- ---------- ---------- ------- --------- ------------------ --------
Basic
earnings
per share 11,920 15.60 15.48 11,727 15.58 15.49 22,257 29.55 29.34
---------- ---------- ------- ---------- ---------- ------- --------- ------------------ --------
Weighted
average
number
of shares 76,405 77,016 75,285 75,721 75,308 75,856
---------- ------- ---------- ------- ------------------ --------
The dilutive effect of share options is to increase the number
of shares by 611,000 (March 2019: 436,000; September 2019: 548,000)
and reduce the basic earnings per share by 0.12p (March 2019:
0.09p; September 2019: 0.21p).
6. Dividends
The proposed interim dividend is 0.00p per share (2019:
3.83p).
7. Acquisition of subsidiary
On 30 January 2020, the Company acquired the whole of the issued
share capital of Agger Ltd ("Agger") for a cash consideration of
GBP38m plus a net cash and working capital adjustment of GBP5.7m.
The acquisition was funded by a placement of 3,157,894 new ordinary
shares raising GBP15m, and a revolving credit facility provided by
HSBC Bank plc and NatWest Bank plc.
The value of the assets and liabilities of Agger at the date of
acquisition were:
Book value Adjustments Fair value
GBP000 GBP000 GBP000
Non-current assets
Intangible assets
-goodwill 12,142 7,668 19,810
-other - 19,127 19,127
Property, plant and
equipment 905 - 905
Right of use assets 63 - 63
13,110 26,795 39,905
---------------- ------------ -----------
Current assets
Inventories 20 - 20
Trade and other receivables 13,523 - 13,523
Current tax asset 540 - 540
Cash and cash equivalents 3,203 - 3,203
17,286 - 17,286
---------------- ------------ -----------
Total assets 30,396 26,795 57,191
---------------- ------------ -----------
Non-current liabilities
Obligations under
finance leases (36) - (36)
Deferred tax liabilities - (3,634) (3,634)
(36) (3,634) (3,670)
---------------- ------------ -----------
Current liabilities
Trade and other payables (9,779) - (9,779)
Obligations under
finance leases (27) - (27)
(9,806) - (9,806)
---------------- ------------ -----------
Total liabilities (9,842) (3,634) (13,476)
---------------- ------------ -----------
Net assets 20,554 23,161 43,715
---------------- ------------ -----------
Goodwill of GBP19,810,000 arises on acquisition and is
attributable to the expertise and workforce of the acquired
business. Other intangible assets, provisionally valued at
GBP19,127,000, 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 February 2020.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value
of assets and liabilities using information available up to 12
months after the date of acquisition. Fair value has been
calculated using Level 3 inputs as defined by IFRS 13.
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
IR FLFFRERITLII
(END) Dow Jones Newswires
May 19, 2020 02:00 ET (06:00 GMT)
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