Last close As at 07/08/2026
GBP8.68
▲ 0.09 (0.01%)
Market capitalisation
—
Research: Industrials
Having reported good progress in the seasonally stronger H1, Renewi’s latest update for H2 to date reaffirms management expectations for the year. Importantly, the merger integration programme is very much on track and the next significant phases are underway. A UK Municipal contract review has been flagged, but our estimates are unchanged in all respects ahead of more detailed year-end update commentary. Share price weakness has brought forward valuation attractions, in our view.
Written by
Renewi |
In-line trading update |
Trading update |
Industrial support services |
15 February 2018 |
Share price performance
Business description
Next events
Analyst
Renewi is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Having reported good progress in the seasonally stronger H1, Renewi’s latest update for H2 to date reaffirms management expectations for the year. Importantly, the merger integration programme is very much on track and the next significant phases are underway. A UK Municipal contract review has been flagged, but our estimates are unchanged in all respects ahead of more detailed year-end update commentary. Share price weakness has brought forward valuation attractions, in our view.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/16 |
614.8 |
21.6 |
4.3 |
3.1 |
21.5 |
3.3 |
03/17 |
779.2 |
26.0 |
3.7 |
3.1 |
25.0 |
3.3 |
03/18e |
1,531.4 |
51.0 |
4.8 |
3.1 |
19.2 |
3.3 |
03/19e |
1,554.3 |
70.6 |
6.6 |
3.1 |
14.0 |
3.3 |
Note: *PBT and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles and exceptional items.
Focusing on operational improvements
Overall group trading performance so far in the second half has met management expectations. Similarly, each of the four divisions appears to be demonstrating their usual seasonal characteristics, with operational improvements a key focus. At the same time they have also shown an ability to cope with some adverse market developments (eg soil treatment volume reduction, reduced waste export to China) while also moving forward through the integration programme, commissioning a new Canadian Municipal facility and extending the glass recycling JV (Maltha). The company has given early notification of onerous contract reviews regarding UK Municipal operations. The outcome of this will be known before the year end and the extent of any related exceptional items may or may not be partly offset by lower than expected FY18 integration costs incurred.
Integration progressing, contract reviews pending
We are reminded that FY18 integration benefits will be at least in line with the €12m flagged for the year and there is no change on guidance for a total expected €40m annualised benefits by FY20. Moving the Commercial division operations onto common IT platforms is a significant workstream for FY19, with region-by-region roll-out expected to commence during the year. Our estimates are unchanged in all respects at this stage. UK Municipal onerous contract reviews are likely to result in modest underlying estimate changes in due course and we will address this when more detail is available at the year end.
Valuation: Reasonable value, benefits to come
Renewi’s share price has eased back along with the wider UK equity market since the middle of January and now sits towards the lower end of its six-month trading range (93p-108p). While not immune to cyclical trends, the company’s significant exposure to growing European economies and with sizeable internal integration gains to come should be a relative attraction to investors in our view. On our estimates the FY19e P/E has fallen to 14.0x with an EV/EBITDA multiple (adjusted for pensions cash) of 6.8x already representing reasonable value on a nearer-term horizon.
Exhibit 1: Financial summary
£m |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
|||||
Year end 31 March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||||
PROFIT & LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenue |
|
|
717.3 |
750.1 |
614.6 |
633.4 |
601.4 |
614.8 |
779.2 |
1,531.4 |
1,554.3 |
1,588.4 |
|||
Cost of Sales |
|
|
(601.9) |
(622.9) |
(511.6) |
(528.3) |
(506.1) |
(517.8) |
(653.3) |
(1,263.4) |
(1,282.3) |
(1,310.4) |
|||
Gross Profit |
|
|
115.4 |
127.2 |
103.0 |
105.1 |
95.3 |
97.0 |
125.9 |
268.0 |
272.0 |
278.0 |
|||
EBITDA |
|
|
100.0 |
105.0 |
88.4 |
88.5 |
72.6 |
69.2 |
81.6 |
161.2 |
184.8 |
199.8 |
|||
Operating Profit (before GW and except.) |
49.7 |
53.4 |
44.9 |
45.6 |
34.3 |
33.4 |
36.5 |
71.4 |
94.0 |
108.0 |
|||||
Net Interest |
|
|
(14.2) |
(10.8) |
(10.8) |
(12.6) |
(11.4) |
(11.2) |
(10.3) |
(19.9) |
(23.0) |
(21.0) |
|||
Other Finance |
|
|
(0.3) |
(6.4) |
(3.9) |
(2.9) |
(1.5) |
(1.6) |
(2.2) |
(2.6) |
(2.6) |
(2.6) |
|||
JV/Associates |
|
|
0.0 |
0.1 |
0.3 |
0.3 |
0.8 |
1.0 |
2.0 |
2.1 |
2.2 |
2.3 |
|||
Intangible Amortisation |
|
|
(3.9) |
(3.7) |
(2.5) |
(2.3) |
(1.9) |
(1.8) |
(2.1) |
(5.8) |
(5.8) |
(5.8) |
|||
Non-Trading & Exceptional Items |
|
(10.1) |
(2.7) |
(38.1) |
(20.5) |
(40.8) |
(22.3) |
(85.3) |
(30.0) |
(25.9) |
(9.9) |
||||
Profit Before Tax (norm) |
|
|
35.2 |
36.3 |
30.5 |
30.4 |
22.2 |
21.6 |
26.0 |
51.0 |
70.6 |
86.7 |
|||
Profit Before Tax (FRS 3) |
|
|
21.2 |
29.9 |
(10.1) |
7.6 |
(20.5) |
(2.5) |
(61.4) |
15.2 |
38.9 |
71.0 |
|||
Tax - headline |
|
|
0.7 |
(4.2) |
(1.1) |
(5.8) |
2.3 |
(1.5) |
0.5 |
(11.0) |
(17.7) |
(21.7) |
|||
Profit After Tax (norm) |
|
|
25.9 |
26.6 |
22.8 |
23.2 |
20.5 |
19.3 |
20.1 |
38.3 |
53.0 |
65.0 |
|||
Profit After Tax (FRS 3) |
|
|
21.9 |
25.7 |
(11.2) |
1.8 |
(18.2) |
(4.0) |
(60.9) |
4.3 |
21.3 |
49.3 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Average Number of Shares Outstanding (m) |
448.0 |
448.0 |
448.3 |
448.9 |
449.1 |
449.5 |
536.3 |
799.8 |
799.8 |
799.8 |
|||||
EPS - normalised (p) |
|
|
5.8 |
5.9 |
5.1 |
5.1 |
4.5 |
4.3 |
3.7 |
4.8 |
6.6 |
8.1 |
|||
EPS - FRS 3 (p) |
|
|
4.9 |
5.7 |
(7.9) |
(6.3) |
(3.8) |
(0.9) |
(11.4) |
0.6 |
2.6 |
6.1 |
|||
Dividend per share (p) |
|
|
2.88 |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.45 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Gross Margin (%) |
|
|
16.1 |
17.0 |
16.8 |
16.6 |
15.9 |
15.8 |
16.2 |
17.5 |
17.5 |
17.5 |
|||
EBITDA Margin (%) |
|
|
13.9 |
14.0 |
14.4 |
14.0 |
12.1 |
11.3 |
10.5 |
10.5 |
11.9 |
12.6 |
|||
Operating Margin (before GW and except.) (%) |
6.9 |
7.1 |
7.3 |
7.2 |
5.7 |
5.4 |
4.7 |
4.7 |
6.0 |
6.8 |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed Assets |
|
|
767.9 |
751.6 |
772.1 |
744.4 |
737.3 |
670.4 |
1,420.9 |
1,464.8 |
1,457.7 |
1,451.0 |
|||
Intangible Assets |
|
|
289.6 |
271.4 |
251.8 |
211.1 |
173.8 |
194.5 |
603.3 |
584.6 |
579.0 |
568.4 |
|||
Tangible Assets |
|
|
397.5 |
390.9 |
375.3 |
322.7 |
282.9 |
297.0 |
587.4 |
647.2 |
645.7 |
649.6 |
|||
Investments |
|
|
80.8 |
89.3 |
145.0 |
210.6 |
280.6 |
178.9 |
230.2 |
233.0 |
233.0 |
233.0 |
|||
Current Assets |
|
|
244.1 |
233.6 |
247.3 |
265.1 |
224.0 |
177.0 |
348.2 |
362.1 |
367.2 |
371.9 |
|||
Stocks |
|
|
9.9 |
10.5 |
11.0 |
9.4 |
6.9 |
6.8 |
19.9 |
18.7 |
18.3 |
18.6 |
|||
Debtors |
|
|
179.7 |
163.3 |
160.9 |
151.5 |
156.3 |
135.5 |
253.4 |
270.4 |
275.9 |
280.3 |
|||
Cash |
|
|
54.5 |
59.8 |
75.4 |
104.2 |
60.8 |
34.7 |
74.9 |
73.0 |
73.0 |
73.0 |
|||
Current Liabilities |
|
|
(276.4) |
(238.7) |
(248.9) |
(229.6) |
(277.4) |
(227.2) |
(483.2) |
(465.3) |
(467.5) |
(441.7) |
|||
Creditors |
|
|
(237.1) |
(226.5) |
(230.7) |
(226.3) |
(202.4) |
(224.8) |
(466.8) |
(452.0) |
(452.5) |
(453.8) |
|||
Short term borrowings |
|
|
(39.3) |
(12.2) |
(18.2) |
(3.3) |
(75.0) |
(2.4) |
(16.4) |
(13.3) |
(15.0) |
12.1 |
|||
Long Term Liabilities |
|
|
(338.2) |
(375.9) |
(444.2) |
(504.7) |
(432.5) |
(434.2) |
(845.7) |
(927.4) |
(926.3) |
(925.2) |
|||
Long term borrowings |
|
|
(222.6) |
(253.8) |
(234.5) |
(253.8) |
(140.8) |
(224.9) |
(482.4) |
(555.1) |
(555.1) |
(555.1) |
|||
Other long term liabilities |
|
|
(115.6) |
(122.1) |
(209.7) |
(250.9) |
(291.7) |
(209.3) |
(363.3) |
(372.3) |
(371.2) |
(370.1) |
|||
Net Assets |
|
|
397.4 |
370.6 |
326.3 |
275.2 |
251.4 |
186.0 |
440.2 |
434.2 |
431.1 |
456.0 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating Cash Flow |
|
|
99.4 |
109.9 |
67.7 |
78.6 |
55.8 |
72.2 |
27.9 |
98.1 |
150.8 |
183.1 |
|||
Net Interest |
|
|
(9.3) |
(13.4) |
(11.5) |
(13.2) |
(12.8) |
(12.8) |
(19.0) |
(24.0) |
(23.0) |
(21.0) |
|||
Tax |
|
|
(4.1) |
(7.1) |
1.9 |
(1.6) |
(5.7) |
(4.8) |
(5.3) |
(9.0) |
(15.7) |
(19.7) |
|||
Net Capex |
|
|
(67.3) |
(74.8) |
(50.1) |
(27.1) |
(37.2) |
(25.8) |
(41.2) |
(99.0) |
(89.5) |
(90.9) |
|||
Acquisitions/disposals |
|
|
2.5 |
(19.6) |
(59.2) |
(54.1) |
(67.3) |
18.2 |
39.5 |
0.0 |
0.0 |
0.0 |
|||
Equity Financing |
|
|
0.1 |
0.0 |
0.4 |
0.2 |
0.1 |
0.3 |
136.5 |
0.1 |
0.0 |
0.0 |
|||
Dividends |
|
|
(11.9) |
(13.3) |
(13.7) |
(13.7) |
(13.7) |
(13.7) |
(15.1) |
(24.4) |
(24.4) |
(24.4) |
|||
Net Cash Flow |
|
|
9.4 |
(18.3) |
(64.5) |
(30.9) |
(80.8) |
33.6 |
123.3 |
(58.1) |
(1.7) |
27.1 |
|||
Opening core net debt/(cash) |
|
319.7 |
207.4 |
206.2 |
177.3 |
152.9 |
155.0 |
192.6 |
423.9 |
495.4 |
497.1 |
||||
HP finance leases initiated |
|
|
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|||
Other |
|
|
102.9 |
19.5 |
93.4 |
55.3 |
78.7 |
(71.2) |
(354.6) |
(13.4) |
(0.0) |
(0.0) |
|||
Closing core net debt/(cash) |
|
|
207.4 |
206.2 |
177.3 |
152.9 |
155.0 |
192.6 |
423.9 |
495.4 |
497.1 |
470.0 |
|||
Closing PPP/PFI non-recourse net debt |
0.0 |
52.0 |
100.1 |
151.2 |
222.6 |
91.1 |
87.1 |
84.8 |
84.8 |
84.8 |
|||||
Source: Renewi accounts, Edison Investment Research
|
||||||||||||
|
||||||||||||
QEX Logistics is a New Zealand-based logistics company that facilitates the growing direct trade between New Zealand/Australia and China. As a key bridge between the two countries into China, QEX has quickly established itself as a trusted supplier of services to enable the swift and economic export of dairy products and health supplements. Future plans to diversify its product range and replicate its model in Australia provide significant growth opportunities. Ronnie Xue, the young, entrepreneurial CEO (who retains 80% of shares), is helped by an experienced and strong set of independent directors, including Conor English and Danny Chan.