Last close As at 05/08/2026
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Market capitalisation
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Research: Industrials
Renewi’s Q3 update flagged a continuation of favourable recyclate prices and incremental windfall gains reflected in increased FY22 guidance. In a historical context, these earnings benefits are likely to be temporary – cash benefit is retained of course – and the rating perhaps suggests that investors are not fully focused on the more significant and sustainable strategic profit uplift being targeted by FY25.
Written by
Renewi |
Recyclate prices drive further FY22 upgrade |
Q3 trading update |
Industrial support services |
17 February 2022 |
Share price performance
Business description
Next events
Analyst
Renewi is a research client of Edison Investment Research Limited |
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Renewi’s Q3 update flagged a continuation of favourable recyclate prices and incremental windfall gains reflected in increased FY22 guidance. In a historical context, these earnings benefits are likely to be temporary – cash benefit is retained of course – and the rating perhaps suggests that investors are not fully focused on the more significant and sustainable strategic profit uplift being targeted by FY25.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/20 |
1,775.4 |
54.3 |
53.6 |
5.2 |
14.9 |
0.7 |
03/21 |
1,693.6 |
47.1 |
44.7 |
0.0 |
16.9 |
N/A |
03/22e |
1,812.6 |
94.0 |
87.1 |
0.0 |
8.7 |
N/A |
03/23e |
1,862.8 |
78.5 |
72.5 |
17.9 |
10.4 |
2.4 |
Note: *PBT and EPS (fully diluted) are normalised, excluding pension net finance costs, amortisation of acquired intangibles and exceptional items.
Secondary materials prices remain firm in Q3
Renewi’s Q3 update included substantially similar trading features to those seen in the first half. Some further volume disruption in the Netherlands and Belgium relating to local lockdown conditions in the period was noted, but this has been more than compensated for by sustained strength in recyclate prices, further boosting the expected contribution from the Commercial Waste division in particular. Elsewhere, Mineralz & Water income streams are as previously reported. A flagged legislative update on the use of recycled materials in secondary mineral products would be welcome in principle – providing suppliers and users alike with greater clarity regarding applications – although the timing and conclusions of such a review are indeterminate at this stage. At the end of December, pre-IFRS 16 net debt had reduced further to just over €300m, leaving plenty of headroom for the company’s strategic investment programme.
Taking windfall gains and investing for growth
The company has set out a clear, three-pronged growth strategy and is robustly maintaining the near- (€5m EBIT benefit from Renewi 2.0 in FY22) and medium-term (€60m EBIT increment versus FY20 by FY25) expectations set out previously. For FY22, EBIT guidance has again been raised to ‘at least €120m’; the uplift in our estimates to this level is essentially driven by the inferred €14m further recyclate margin contribution in H2 flagged in the update. With no estimate changes beyond FY22 at this stage, headline earnings progression is distorted by the expected c €40m y-o-y gain from higher recyclate prices in FY22. Permanent gains from strategic investment should more than replace these windfall benefits in due course and we would expect this to be recognised in the company’s rating.
Valuation: Earnings and share price moves opposed
Since hitting an 840p 12-month high in November (following H122 results), Renewi’s share price has re-traced by almost 25% to current levels. As a result, the company is sitting on FY23e P/E and EV/EBITDA multiples of 10.4x and 5.3x respectively. No H121 dividend was declared and no timing guidance issued for a return to making payments; the position is being kept under review in the context of wider group capital allocation requirements.
Exhibit 1: Financial summary
m |
2018 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
|||
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|||
PROFIT & LOSS |
|
|
Sterling |
Euros |
Euros |
Euros |
Euros |
Euros |
Euros |
Euros |
|
Revenue |
|
|
1,565.7 |
1,760.3 |
1,780.7 |
1,775.4 |
1,693.6 |
1,812.6 |
1,862.8 |
1,928.2 |
|
Cost of Sales |
|
|
(1,276.9) |
(1,419.2) |
(1,470.4) |
(1,467.5) |
(1,408.5) |
(1,489.3) |
(1,535.2) |
(1,584.3) |
|
Gross Profit |
|
|
288.8 |
341.1 |
310.3 |
307.9 |
285.1 |
323.3 |
327.6 |
343.9 |
|
EBITDA |
|
|
156.9 |
176.3 |
179.7 |
167.1 |
159.8 |
198.4 |
186.7 |
195.5 |
|
Operating Profit (before GW and except.) |
|
69.1 |
82.5 |
85.5 |
87.6 |
73.0 |
120.0 |
105.8 |
112.1 |
||
Net Interest |
|
|
(14.2) |
(15.0) |
(14.4) |
(18.5) |
(14.0) |
(12.8) |
(13.8) |
(14.3) |
|
Other Finance |
|
|
(5.1) |
(7.1) |
(8.4) |
(15.7) |
(13.5) |
(13.5) |
(13.5) |
(13.5) |
|
JV/Associates |
|
|
2.3 |
2.6 |
0.4 |
0.9 |
1.6 |
0.3 |
0.0 |
0.0 |
|
Intangible Amortisation |
|
|
(5.8) |
(6.7) |
(6.4) |
(6.4) |
(3.3) |
(3.3) |
(3.3) |
(3.3) |
|
Non-Trading & Exceptional Items |
|
|
(95.7) |
(108.4) |
(145.1) |
(107.1) |
(25.9) |
(13.0) |
(12.0) |
(6.0) |
|
Profit Before Tax (Edison norm) |
|
|
52.1 |
63.0 |
63.1 |
54.3 |
47.1 |
94.0 |
78.5 |
84.3 |
|
Pension net finance costs |
|
|
(0.6) |
(0.7) |
(0.6) |
(0.2) |
0.3 |
(0.1) |
0.0 |
0.0 |
|
Profit Before Tax (Renewi norm) |
|
|
51.5 |
62.3 |
62.5 |
54.1 |
47.4 |
93.9 |
78.5 |
84.3 |
|
Profit Before Tax (statutory) |
|
|
(50.0) |
(52.8) |
(89.0) |
(59.4) |
18.2 |
77.6 |
63.2 |
75.0 |
|
Tax - headline |
|
|
2.6 |
1.4 |
12.4 |
(1.1) |
(7.2) |
(18.5) |
(19.6) |
(21.1) |
|
Profit After Tax (norm) |
|
|
39.1 |
47.2 |
47.5 |
41.0 |
35.5 |
70.5 |
58.9 |
63.3 |
|
Profit After Tax |
|
|
(47.4) |
(51.5) |
(76.6) |
(60.5) |
11.0 |
59.1 |
43.6 |
54.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
|
|
80.0 |
80.0 |
79.7 |
79.5 |
79.5 |
8.0 |
8.0 |
8.0 |
|
EPS - Edison norm (p/c) FD |
|
|
48.6 |
58.7 |
60.3 |
53.6* |
44.7 |
87.1 |
72.5 |
77.9 |
|
EPS - Renewi norm (p/c) FD |
|
|
48.0 |
54.0 |
59.7 |
53.5 |
45.0 |
87.1 |
72.5 |
77.9 |
|
EPS - (p/c) |
|
|
(59.1) |
(67.8) |
(116.5) |
(98.0) |
13.9 |
73.2 |
53.6 |
66.6 |
|
Dividend per share (p/c) |
|
|
30.5 |
34.6 |
16.8 |
5.2 |
0.0 |
0.0 |
17.9 |
20.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
|
|
18.4 |
19.4 |
17.4 |
17.3 |
16.8 |
17.8 |
17.6 |
17.8 |
|
EBITDA Margin (%) |
|
|
10.0 |
10.0 |
10.1 |
9.4 |
9.4 |
10.9 |
10.0 |
10.1 |
|
Operating Margin (before GW and except.) (%) |
|
|
4.4 |
4.7 |
4.8 |
4.9 |
4.3 |
6.6 |
5.7 |
5.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
1,456.3 |
1,669.2 |
1,439.6 |
1,616.8 |
1,617.8 |
1,606.2 |
1,649.0 |
1,666.3 |
|
Intangible Assets |
|
|
606.3 |
699.3 |
605.6 |
610.1 |
602.2 |
599.7 |
592.3 |
584.9 |
|
Tangible Assets (inc RoU assets) |
|
|
623.0 |
710.8 |
629.1 |
790.9 |
794.5 |
799.7 |
849.9 |
874.6 |
|
Investments |
|
|
227.0 |
259.1 |
204.9 |
215.8 |
221.1 |
206.8 |
206.8 |
206.8 |
|
Current Assets |
|
|
366.2 |
418.0 |
533.3 |
503.3 |
338.4 |
410.3 |
399.0 |
426.0 |
|
Stocks |
|
|
23.3 |
26.6 |
26.0 |
20.7 |
20.6 |
21.8 |
22.5 |
23.2 |
|
Debtors |
|
|
279.0 |
318.4 |
456.9 |
288.1 |
266.3 |
305.0 |
311.6 |
319.7 |
|
Cash |
|
|
63.9 |
73.0 |
50.4 |
194.5 |
51.5 |
83.5 |
64.9 |
83.2 |
|
Current Liabilities |
|
|
(545.8) |
(631.0) |
(758.3) |
(635.2) |
(644.6) |
(734.1) |
(732.6) |
(736.7) |
|
Creditors |
|
|
(532.9) |
(616.3) |
(639.6) |
(618.4) |
(632.3) |
(623.9) |
(622.4) |
(626.5) |
|
Short term borrowings |
|
|
(12.9) |
(14.7) |
(118.7) |
(16.8) |
(12.3) |
(110.2) |
(110.2) |
(110.2) |
|
Long Term Liabilities |
|
|
(894.3) |
(1,019.9) |
(895.1) |
(1,249.6) |
(1,068.6) |
(966.9) |
(961.0) |
(962.0) |
|
Long term borrowings |
|
|
(489.7) |
(558.9) |
(483.7) |
(634.9) |
(382.8) |
(305.0) |
(325.0) |
(345.0) |
|
Other long-term liabilities |
|
|
(404.6) |
(461.0) |
(411.4) |
(614.7) |
(685.8) |
(661.9) |
(636.0) |
(617.0) |
|
Net Assets |
|
|
382.4 |
436.3 |
319.5 |
235.3 |
243.1 |
315.5 |
354.3 |
393.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
|
|
128.4 |
143.6 |
86.8 |
167.8 |
258.2 |
182.4 |
177.6 |
198.0 |
|
Net Interest |
|
|
(16.9) |
(19.1) |
(17.7) |
(27.0) |
(20.6) |
(20.0) |
(21.0) |
(21.5) |
|
Tax |
|
|
(6.7) |
(7.6) |
(13.2) |
(10.1) |
(14.8) |
(13.8) |
(23.5) |
(19.6) |
|
Net Capex |
|
|
(81.2) |
(92.3) |
(99.4) |
(73.4) |
(62.3) |
(100.9) |
(127.0) |
(104.0) |
|
Acquisitions/disposals |
|
|
(4.1) |
(4.8) |
22.7 |
81.0 |
2.4 |
0.8 |
0.0 |
0.0 |
|
Equity Financing |
|
|
0.6 |
0.6 |
(2.7) |
0.6 |
0.4 |
1.2 |
0.0 |
0.0 |
|
Dividends |
|
|
(24.4) |
(27.6) |
(27.4) |
(8.6) |
0.0 |
0.0 |
(4.7) |
(14.7) |
|
Net Cash Flow |
|
|
(4.3) |
(7.3) |
(50.9) |
130.3 |
163.3 |
49.7 |
1.4 |
38.3 |
|
Opening core net debt/(cash) |
|
|
423.9 |
492.7 |
500.0 |
552.0 |
457.2 |
343.6 |
331.7 |
370.3 |
|
IFRS 16 lease capital repayments |
|
|
0.0 |
0.0 |
0.0 |
(38.5) |
(40.4) |
(40.0) |
(40.0) |
(40.0) |
|
Other |
|
|
(10.5) |
(0.0) |
(1.1) |
3.0 |
(9.3) |
2.1 |
0.0 |
0.0 |
|
Closing core net debt/(cash) |
|
|
438.7 |
500.0 |
552.0 |
457.2 |
343.6 |
331.7 |
370.3 |
372.0 |
|
Closing PPP/PFI non-recourse net debt |
|
|
82.9 |
94.6 |
95.4 |
90.0 |
87.8 |
79.6 |
79.6 |
79.6 |
|
IFRS 16 Lease finance |
|
|
|
|
|
202.7 |
247.8 |
245.7 |
250.7 |
255.7 |
|
Source: Company data, Edison Investment Research. Note: *EPS for continuing businesses in FY20 was 51c and the 54c figure shown includes discontinued operations. Please note that the company’s shares underwent a 10:1 consolidation on 19 July 2021.
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Research: TMT
Checkit’s FY22 trading update confirmed it closed the year broadly in line with our revenue forecasts and, due to several contracts signed close to year end, beat our annualised recurring revenue (ARR) forecast with 44% y-o-y growth to £8.2m, versus our £7.6m forecast. We maintain our estimates for FY22 and FY23, noting the higher level of ARR at year-end supports our FY23 revenue growth forecast.