Last close As at 06/08/2026
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Research: Industrials
While COVID-19 has had some impact on Renewi’s markets, the extent is less than anticipated by management earlier in the year. Consequently, we are able to nudge up current year estimates (PBT up by €4m in a low base year) ahead of the H121 results. The latest strategic phase is in its early stages of implementation and management is clearly focused on delivering a significant uplift in profitability under this three-year programme.
Written by
Renewi |
FY21 estimates raised following H1 update |
H120 pre-close update |
Industrial support services |
1 October 2020 |
Share price performance
Business description
Next events
Analyst
Renewi is a research client of Edison Investment Research Limited |
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While COVID-19 has had some impact on Renewi’s markets, the extent is less than anticipated by management earlier in the year. Consequently, we are able to nudge up current year estimates (PBT up by €4m in a low base year) ahead of the H121 results. The latest strategic phase is in its early stages of implementation and management is clearly focused on delivering a significant uplift in profitability under this three-year programme.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/19 |
1,780.7 |
63.1 |
6.0 |
1.7 |
3.6 |
7.8 |
03/20 |
1,775.4 |
54.3 |
5.4 |
0.5 |
4.2 |
2.4 |
03/21e |
1,560.4 |
10.6 |
0.9 |
0.0 |
22.9 |
N/A |
03/22e |
1,691.3 |
42.2 |
3.9 |
0.0 |
5.5 |
N/A |
03/23e |
1,754.5 |
66.1 |
6.2 |
0.6 |
3.5 |
2.6 |
Note: *PBT and EPS (fully diluted) are normalised, excluding pension net finance costs, amortisation of acquired intangibles and exceptional items. FY20 is on an IFRS 16 basis.
Further recovery in Commercial volumes
Renewi’s pre-close statement included some divisional highlights of a COVID-19 affected H121 trading period. In Commercial, both the Netherlands and Belgium have improved the rate of volume recovery y-o-y in Q2 versus Q1. In the former case, the Q2 outturn was -4% (Q1: -6%) and in the latter -10% (Q1: -24%, including -15% in June). Understandably, some mix changes have been seen – reflecting underlying sector activity – and while recyclate prices have remained weak, cost reduction and pricing actions have been taken accordingly. ATM (now part of the Mineralz & Water division) is still in the foothills of its recovery, but late-stage discussions for thermally treated soil offtake are ongoing and interest is growing in downstream graded building materials supporting investment in storage silos. In addition, indications are that order books are building for inbound contaminated soil for treatment. For the group as a whole, €10m cost savings have been achieved ytd, which appears to be ahead in run rate terms of the €15m previously targeted.
Cash flow control and estimates increased
The period-end core net debt position was €407m (€457m at the end of March); adjusting for temporary tax deferral timing effects, underlying cash flow has been broadly neutral, we believe. Deferred tax payment horizons are set to be extended in the Netherlands, so the benefit to Renewi and others is likely to go beyond FY21 now. Management remains ‘suitably cautious’ regarding the macro outlook but with trading better than guidance and extended deferred cash tax/net debt benefits, we have increased our FY21 PBT estimate by €4m ahead of the H121 results.
Valuation: Recovery potential not reflected
Latterly, Renewi’s share price has traded at the lower end of its range in FY21 to date, sitting on FY22e P/E and EV/EBITDA multiples of 5.5x and 4.1x respectively. While earnings have been affected by COVID-19 in the current year, our estimates include recovery and internal profit improvement initiatives such that FY23 earnings are expected to exceed those generated in FY19 and FY20. Successful implementation of the new strategy would return profitability back to (and possibly beyond) 2018 levels when the share price was 100p+.
Exhibit 1: Financial summary
m's |
2018 |
2018 |
2019 |
2020* |
2021e |
2022e |
2023e |
||
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|
|
Sterling |
Euros |
Euros |
Euros |
Euros |
Euros |
Euros |
Revenue |
|
|
1,565.7 |
1,760.3 |
1,780.7 |
1,775.4 |
1,560.4 |
1,691.3 |
1,754.5 |
Cost of Sales |
|
|
(1,276.9) |
(1,419.2) |
(1,470.4) |
(1,467.5) |
(1,295.2) |
(1,399.5) |
(1,447.5) |
Gross Profit |
|
|
288.8 |
341.1 |
310.3 |
307.9 |
265.3 |
291.7 |
307.0 |
EBITDA |
|
|
156.9 |
176.3 |
179.7 |
167.1 |
125.5 |
159.1 |
183.0 |
Operating Profit (before GW and except.) |
69.1 |
82.5 |
85.5 |
87.6 |
44.5 |
76.6 |
99.0 |
||
Net Interest |
|
|
(14.2) |
(15.0) |
(14.4) |
(18.5) |
(19.0) |
(19.5) |
(18.0) |
Other Finance |
|
|
(5.1) |
(7.1) |
(8.4) |
(15.7) |
(14.9) |
(14.9) |
(14.9) |
JV/Associates |
|
|
2.3 |
2.6 |
0.4 |
0.9 |
0.0 |
0.0 |
0.0 |
Intangible Amortisation |
|
|
(5.8) |
(6.7) |
(6.4) |
(6.4) |
(6.4) |
(6.4) |
(6.4) |
Non-trading & exceptional items |
|
|
(95.7) |
(108.4) |
(145.1) |
(107.1) |
(14.0) |
(10.0) |
(6.0) |
Profit Before Tax (Edison norm) |
|
52.1 |
63.0 |
63.1 |
54.3 |
10.6 |
42.2 |
66.1 |
|
Pension net finance costs |
|
|
(0.6) |
(0.7) |
(0.6) |
(0.2) |
(0.2) |
(0.2) |
(0.2) |
Profit Before Tax (Renewi norm) |
|
51.5 |
62.3 |
62.5 |
54.1 |
10.4 |
42.0 |
65.9 |
|
Profit Before Tax (statutory) |
|
|
(50.0) |
(52.8) |
(89.0) |
(59.4) |
(10.0) |
25.6 |
53.5 |
Tax - headline |
|
|
2.6 |
1.4 |
12.4 |
(1.1) |
(2.5) |
(10.1) |
(15.9) |
Profit After Tax (norm) |
|
|
39.1 |
47.2 |
47.5 |
41.0 |
8.0 |
32.0 |
50.2 |
Profit After Tax |
|
|
(47.4) |
(51.5) |
(76.6) |
(60.5) |
(12.6) |
15.4 |
37.6 |
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
799.9 |
799.9 |
796.7 |
794.9 |
794.9 |
794.9 |
794.9 |
|
EPS - Edison norm (p/c) FD |
|
|
4.9 |
5.9 |
6.0 |
5.4 |
0.9 |
3.9 |
6.2 |
EPS - Renewi norm (p/c) FD |
|
|
4.8 |
5.4 |
6.0 |
5.4 |
0.9 |
3.9 |
6.2 |
EPS - (p/c) |
|
|
(5.9) |
(6.8) |
(11.7) |
(9.8) |
(1.7) |
1.8 |
4.6 |
Dividend per share (p/c) |
|
|
3.05 |
3.46 |
1.68 |
0.52 |
0.00 |
0.00 |
0.56 |
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
18.4 |
19.4 |
17.4 |
17.3 |
17.0 |
17.3 |
17.5 |
EBITDA Margin (%) |
|
|
10.0 |
10.0 |
10.1 |
9.4 |
8.0 |
9.4 |
10.4 |
Operating Margin (before GW and except.) (%) |
4.4 |
4.7 |
4.8 |
4.9 |
2.9 |
4.5 |
5.6 |
||
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
1,456.3 |
1,669.2 |
1,439.6 |
1,616.8 |
1,606.7 |
1,605.1 |
1,607.0 |
Intangible Assets |
|
|
606.3 |
699.3 |
605.6 |
610.1 |
599.6 |
589.1 |
578.6 |
Tangible Assets (inc RoU assets) |
|
|
623.0 |
710.8 |
629.1 |
790.9 |
791.3 |
800.2 |
812.6 |
Investments |
|
|
227.0 |
259.1 |
204.9 |
215.8 |
215.8 |
215.8 |
215.8 |
Current Assets |
|
|
366.2 |
418.0 |
533.3 |
503.3 |
493.3 |
392.3 |
410.0 |
Stocks |
|
|
23.3 |
26.6 |
26.0 |
20.7 |
18.3 |
19.7 |
20.4 |
Debtors |
|
|
279.0 |
318.4 |
456.9 |
288.1 |
267.0 |
283.1 |
292.0 |
Cash |
|
|
63.9 |
73.0 |
50.4 |
194.5 |
208.0 |
89.5 |
97.6 |
Current Liabilities |
|
|
(545.8) |
(631.0) |
(758.3) |
(635.2) |
(646.9) |
(643.2) |
(633.8) |
Creditors |
|
|
(532.9) |
(616.3) |
(639.6) |
(618.4) |
(630.1) |
(626.4) |
(617.0) |
Short term borrowings |
|
|
(12.9) |
(14.7) |
(118.7) |
(16.8) |
(16.8) |
(16.8) |
(16.8) |
Long Term Liabilities |
|
|
(894.3) |
(1,019.9) |
(895.1) |
(1,249.6) |
(1,230.4) |
(1,116.1) |
(1,107.4) |
Long term borrowings |
|
|
(489.7) |
(558.9) |
(483.7) |
(634.9) |
(634.9) |
(534.9) |
(534.9) |
Other long-term liabilities |
|
|
(404.6) |
(461.0) |
(411.4) |
(614.7) |
(595.5) |
(581.2) |
(572.5) |
Net Assets |
|
|
382.4 |
436.3 |
319.5 |
235.3 |
222.7 |
238.2 |
275.8 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
128.4 |
143.6 |
86.8 |
167.8 |
167.9 |
132.4 |
170.1 |
Net Interest |
|
|
(16.9) |
(19.1) |
(17.7) |
(27.0) |
(25.6) |
(26.1) |
(24.6) |
Tax |
|
|
(6.7) |
(7.6) |
(13.2) |
(10.1) |
(16.5) |
(2.5) |
(10.1) |
Net Capex |
|
|
(81.2) |
(92.3) |
(99.4) |
(73.4) |
(77.3) |
(87.3) |
(92.3) |
Acquisitions/disposals |
|
|
(4.1) |
(4.8) |
22.7 |
81.0 |
0.0 |
0.0 |
0.0 |
Equity Financing |
|
|
0.6 |
0.6 |
(2.7) |
0.6 |
0.0 |
0.0 |
0.0 |
Dividends |
|
|
(24.4) |
(27.6) |
(27.4) |
(8.6) |
0.0 |
0.0 |
0.0 |
Net Cash Flow |
|
|
(4.3) |
(7.3) |
(50.9) |
130.3 |
48.5 |
16.4 |
43.1 |
Opening core net debt/(cash) |
|
|
423.9 |
492.7 |
500.0 |
552.0 |
457.2 |
443.7 |
462.2 |
IFRS16 lease capital repayments |
|
|
0.0 |
0.0 |
0.0 |
(38.5) |
(35.0) |
(35.0) |
(35.0) |
Other |
|
|
(10.5) |
(0.0) |
(1.1) |
3.0 |
0.0 |
0.0 |
0.0 |
Closing core net debt/(cash) |
|
|
438.7 |
500.0 |
552.0 |
457.2 |
443.7 |
462.2 |
454.1 |
Closing PPP/PFI non-recourse net debt |
|
82.9 |
94.6 |
95.4 |
90.0 |
90.0 |
90.0 |
90.0 |
|
IFRS16 Lease finance |
|
|
|
|
|
202.7 |
204.7 |
206.7 |
208.7 |
Source: Company, Edison Investment Research. *EPS for continuing businesses in FY20 was 5.1c and the 5.4c figure shown includes discontinued operations
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Research: TMT
Expert System’s H120 financial results were affected by COVID-19 restrictions and the start of investment in the company’s new five-year growth plan. So far in H220, the company is making good progress in executing this plan, with funds raised to support the required investment and technology development on track to launch the new end-to-end SaaS platform in Q121.