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In-line FY20, coronavirus evaluation underway

Renewi 26 March 2020 Update
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Renewi

In-line FY20, coronavirus evaluation underway

Year-end &

initial COVID-19 update

Industrial support services

26 March 2020

Price

22.8p

Market cap

£182m

€1.17/£

Core group ongoing net debt
(ex-PPP/PFI finance and IFRS 16 leases, €m) at end September 2019

514

Shares in issue

800.1m

Free float

98.8%

Code

RWI

Primary exchange

LSE

Secondary exchange

Euronext Amsterdam

Share price performance

%

1m

3m

12m

Abs

(43.0)

(35.8)

(5.4)

Rel (local)

(28.0)

(12.3)

19.6

52-week high/low

45.0p

22.0p

Business description

Renewi is a waste-to-product company with operations primarily in the Netherlands, Belgium and the UK and was formed from the merger between Shanks Group and Van Gansewinkel Group in 2017. Its activities span the collection, processing and resale of industrial, hazardous and municipal waste.

Next events

FY20 results announcement

4 June 2020

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Renewi is a research client of Edison Investment Research Limited

FY20 is ending in line with expectations and ATM resumed soil shipments during Q4. Waste management is considered to be an essential service during the coronavirus pandemic; while the wider business impacts are evaluated, Renewi has outlined initial cash preservation measures. Our estimates have been adjusted only to reflect no final dividend expectation and additional non-underlying charges in FY20; potential coronavirus impacts beyond this are under review and not currently reflected.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

03/18

1,760.3

63.0

5.9

3.5

4.5

13.1

03/19

1,780.7

63.1

6.0

1.7

4.4

6.4

03/20e

1,675.7

39.7

3.7

0.5

7.2

1.9

03/21e

1,705.6

50.1

4.8

2.5

5.6

9.4

Note: *PBT and EPS (fully diluted) are normalised, excluding pension net finance costs, amortisation of acquired intangibles and exceptional items. Estimates are now on an IFRS 16 basis and for continuing businesses only.

ATM soil activities recovering as FY20 closes

For the closing year, Renewi’s performance is reported to have been in line with guidance overall with underlying divisional trading patterns very similar to those noted in the January update. Most noteworthy is ATM’s resumption of thermally treated soil deliveries to a first project following a two-year permitting hiatus and initial shipments of graded materials in the final quarter.

This positive news is tempered by recognition that the coronavirus pandemic is beginning to be reflected in waste volumes as FY20 draws to a close. Renewi’s operations have been classified as essential services and to date its multi-location business footprint has maintained full operational capacity. An expected downturn in waste volumes handled, driven by lower economic activity levels, is likely in turn to require managed capacity reduction. Established national government employment support structures in the Netherlands and Belgium – Renewi’s largest markets – are in position to provide financial assistance, with the prospect of announced UK support schemes coming on stream before too long.

End-FY20 core (pre-IFRS 16 and PFI/PPP non-recourse finance) net debt is expected to be sub €500m (c 3x EBITDA), consistent with our model. Headroom under existing banking facilities is approaching €200m. The strength and duration of coronavirus impacts on business activity levels are still to be quantified, but management is sensibly flagging €40m cash preservation measures in hand (passing the FY20 final dividend saves c €8m, the remainder to come from reduced capex). Unrelated additional FY20 non-underlying charges of c €32m are unlikely to have a material near-term cash flow impact.

The company’s proposed capital markets day has understandably been postponed and is now intended to coincide with the FY20 results announcement, scheduled for 4 June. At this time, Renewi will be reporting under a revised structure as individual companies within the current Monostreams division are being reallocated into three of the other four divisions (treating Commercial Waste as two regional divisions).

Exhibit 1: Financial summary

m's

2018

2018

2019

2020e

2021e

2022e

March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

Sterling

Euros

Euros

Euros

Euros

Euros

Revenue

 

 

1,565.7

1,760.3

1,780.7

1,675.7

1,705.6

1,740.3

Cost of Sales

 

 

(1,276.9)

(1,419.2)

(1,470.4)

(1,390.8)

(1,415.6)

(1,444.4)

Gross Profit

 

 

288.8

341.1

310.3

284.9

290.0

295.9

EBITDA

 

 

156.9

176.3

179.7

154.6

163.5

171.8

Operating Profit (before GW and except.)

69.1

82.5

85.5

74.0

81.4

88.2

Net Interest

 

 

(14.2)

(15.0)

(14.4)

(18.0)

(16.0)

(16.0)

Other Finance

 

 

(5.1)

(7.1)

(8.4)

(16.0)

(15.2)

(15.2)

JV/Associates

 

 

2.3

2.6

0.4

(0.3)

0.0

0.0

Intangible Amortisation

 

 

(5.8)

(6.7)

(6.4)

(6.6)

(6.6)

(6.6)

Non Trading & Exceptional Items

 

 

(95.7)

(108.4)

(145.1)

(125.8)

0.0

0.0

Profit Before Tax (Edison norm)

 

52.1

63.0

63.1

39.7

50.1

57.0

Pension net finance costs

 

 

(0.6)

(0.7)

(0.6)

(0.2)

(0.2)

(0.2)

Profit Before Tax (Renewi norm)

 

51.5

62.3

62.5

39.5

49.9

56.8

Profit Before Tax (statutory)

 

 

(50.0)

(52.8)

(89.0)

(92.9)

43.3

50.2

Tax - headline

 

 

2.6

1.4

12.4

(3.4)

(12.0)

(13.7)

Profit After Tax (norm)

 

 

39.1

47.2

47.5

29.9

38.1

43.3

Profit After Tax

 

 

(47.4)

(51.5)

(76.6)

(96.4)

31.3

36.5

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

799.9

799.9

796.7

794.6

794.6

794.6

EPS - Edison norm (p/c) FD

 

 

4.9

5.9

6.0

3.7

4.8

5.4

EPS - Renewi norm (p/c) FD

 

 

4.8

5.4

6.0

3.7

4.7

5.4

EPS - (p/c)

 

 

(5.9)

(6.8)

(11.7)

(12.2)

3.9

4.6

Dividend per share (p/c)

 

 

3.05

3.46

1.68

0.51

2.45

2.68

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

18.4

19.4

17.4

17.0

17.0

17.0

EBITDA Margin (%)

 

 

10.0

10.0

10.1

9.2

9.6

9.9

Operating Margin (before GW and except.) (%)

4.4

4.7

4.8

4.4

4.8

5.1

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

Fixed Assets

 

 

1,456.3

1,669.2

1,439.6

1,559.8

1,548.7

1,536.1

Intangible Assets

 

 

606.3

699.3

605.6

598.9

589.0

579.1

Tangible Assets (inc RoU assets)

 

 

623.0

710.8

629.1

753.6

752.4

749.7

Investments

 

 

227.0

259.1

204.9

207.3

207.3

207.3

Current Assets

 

 

366.2

418.0

370.9

375.5

369.1

369.7

Stocks

 

 

23.3

26.6

26.0

24.6

25.0

25.5

Debtors

 

 

279.0

318.4

294.5

274.2

279.2

284.7

Cash

 

 

63.9

73.0

50.4

76.8

64.9

59.5

Current Liabilities

 

 

(545.8)

(631.0)

(717.8)

(589.2)

(594.8)

(609.5)

Creditors

 

 

(532.9)

(616.3)

(599.1)

(570.6)

(576.2)

(590.9)

Short term borrowings

 

 

(12.9)

(14.7)

(118.7)

(18.6)

(18.6)

(18.6)

Long Term Liabilities

 

 

(894.3)

(1,019.9)

(895.1)

(1,132.1)

(1,082.9)

(1,033.8)

Long term borrowings

 

 

(489.7)

(558.9)

(483.7)

(548.6)

(548.6)

(548.6)

Other long term liabilities

 

 

(404.6)

(461.0)

(411.4)

(583.5)

(534.3)

(485.2)

Net Assets

 

 

382.4

436.3

197.6

214.0

240.1

262.5

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

128.4

143.6

86.8

139.1

168.8

185.8

Net Interest

 

 

(16.9)

(19.1)

(17.7)

(28.6)

(22.2)

(22.2)

Tax

 

 

(6.7)

(7.6)

(13.2)

(3.4)

(12.0)

(13.7)

Net Capex

 

 

(81.2)

(92.3)

(99.4)

(94.7)

(105.8)

(105.8)

Acquisitions/disposals

 

 

(4.1)

(4.8)

22.7

101.3

0.0

0.0

Equity Financing

 

 

0.6

0.6

(2.7)

0.3

0.0

0.0

Dividends

 

 

(24.4)

(27.6)

(27.4)

(8.6)

(5.2)

(14.2)

Net Cash Flow

 

 

(4.3)

(7.3)

(50.9)

105.4

23.6

30.0

Opening core net debt/(cash)

 

 

423.9

492.7

500.0

552.0

490.4

502.3

IFRS16 lease capital repayments

 

 

0.0

0.0

0.0

(35.4)

(35.4)

(35.4)

Other

 

 

(10.5)

(0.0)

(1.1)

(8.4)

0.0

0.0

Closing core net debt/(cash)

 

 

438.7

500.0

552.0

490.4

502.3

507.7

Closing PPP/PFI non-recourse net debt

 

82.9

94.6

95.4

89.3

89.3

89.3

IFRS16 Lease finance

 

 

 

 

 

144.0

102.4

60.8

Source: Company accounts, Edison Investment Research. Note: Estimates are on an IFRS 16 basis and for continuing businesses only.

General disclaimer and copyright

This report has been commissioned by Renewi and prepared and issued by Edison, in consideration of a fee payable by Renewi. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Renewi and prepared and issued by Edison, in consideration of a fee payable by Renewi. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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