Renewi — Recycling 2.0

Renewi (LSE: RWI)

Last close As at 22/06/2024

GBP6.93

4.00 (0.58%)

Market capitalisation

GBP559m

More on this equity

Research: Industrials

Renewi — Recycling 2.0

Renewi offers one of the few ways to invest in the circular economy and recycling agenda, as highlighted by Macquarie’s recent interest. The reversal of recent strong recyclate pricing and a softer construction sector in the Netherlands has affected the recovery. Profits are still significantly ahead of pre-COVID levels with much of the recovery (eg Mineralz) and the full potential of the capex programme still to come, and to be followed by the drive to achieve management’s mid-term financial targets.

David Larkam

Written by

David Larkam

Analyst, Industrials

Renewi_resized

Industrials

Renewi

Recycling 2.0

Interim results

Industrial support services

13 November 2023

Price

570p

Market cap

£457m

€1.15/£

Net debt (€m) pre-PPPs and leases at 30 September 2023

383

Shares in issue

80.3m

Free float

98.8%

Code

RWI

Primary exchange

LSE

Secondary exchange

Amsterdam Euronext

Share price performance

%

1m

3m

12m

Abs

(21.3)

15.5

2.0

Rel (local)

(21.3)

18.1

0.6

52-week high/low

734p

450p

Business description

Renewi is a leading waste-to-product company in some of the world’s most advanced circular economies, with operations primarily in the Netherlands, Belgium and the UK. Its activities span the collection, processing and resale of industrial, hazardous and municipal waste.

Next events

January/February 2024

Q3 trading update

Analyst

David Larkam

+44 (0)20 3077 5700

Renewi is a research client of Edison Investment Research Limited

Renewi offers one of the few ways to invest in the circular economy and recycling agenda, as highlighted by Macquarie’s recent interest. The reversal of recent strong recyclate pricing and a softer construction sector in the Netherlands has affected the recovery. Profits are still significantly ahead of pre-COVID levels with much of the recovery (eg Mineralz) and the full potential of the capex programme still to come, and to be followed by the drive to achieve management’s mid-term financial targets.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

03/22

1,869

105.3

98.0

0.0

6.7

N/A

03/23

1,892

103.7

90.0

0.0

7.3

N/A

03/24e

1,914

85.9

75.0

5.0

8.8

0.8

03/25e

1,964

101.4

88.0

10.0

7.4

1.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

H124 results

Sales declined 2% in H124, primarily due to lower volumes, particularly Commercial Waste Netherlands in the construction & demolition (C&D) sector along with lower recyclate prices and some timing delays in the Water business. Operating margins declined from 7.9% in H123 to 5.4%, leading to underlying EBIT from €75.2m to €50.7m. Net finance costs increased to €19.8m and associates income to €0.4m, leaving underlying PBT of €31.3m. Underlying EPS declined from 56c to 27c. Core net debt was broadly stable at €383m with core net debt/EBITDA of 2.1x. The outlook is more positive, including benefits from further cost actions (€15m annualised savings), full benefits from recent plant expansions and Mineralz & Water volume improvement.

Capital market targets

The capital markets event in October provided medium-term targets along with greater detail on the underlying drivers (see Edison’s note A circular economy champion). The key targets are for at least 5% organic sales growth, high single-digit operating margins, free cash flow generation of at least 40% of EBITDA and a return on capital (ROCE) of over 15%. Our review of peers suggests that the first two should be achievable, while cash generation is likely to depend on the exceptional cash expenses. Our focus will be on ROCE, a key determinate of management custody of resources and encouragingly a component of management’s LTIP.

Forecasts and valuation

We have updated our forecasts to take into account the weaker performance in the Commercial Waste Netherlands business along with a slightly higher tax rate and minorities. We have reduced FY24 PBT from €92m to €86m and EPS from 81c to 75c, and FY25 PBT from €104m to 101m and EPS from 92c to 88c. We have reduced our FY24 core net debt expectation from €429m to €406m. Our core DCF valuation reduces marginally from 825p to 819p. Our peer-based valuation has reduced from 724p to 680p due to lower short-term profit expectations and recent stock market weakness.

Interim results

Sales declined 2% in H124, primarily due to lower volumes, particularly in some Commercial Waste sectors such as C&D along with lower recyclate prices. Operating margins declined from 7.9% in H123 to 5.4%, albeit H123 was supported by strong recyclate pricing suggesting the 6.1% in H223 may be a more realistic comparator. Exceptionals were positive driven by changes to the discount rates used for the UK Municipal provisions. Cash flow was controlled, highlighted by a working capital inflow of €5m. Core net debt increased marginally to €383m and the group retains facilities of €705m. Core net debt/EBITDA increased to 2.1x due to lower EBITDA.

Exhibit 1: Summary financial performance (€m)

H123

H223

H124

Turnover

952.0

940.3

937.1

Operating margin

7.9%

6.1%

5.4%

Underlying EBIT

75.2

57.7

50.7

Exceptionals

10.0

(20.6)

14.8

Reported EBIT

85.2

37.1

65.9

Finance costs

(12.0)

(16.3)

(19.8)

Associates

0.4

PBT reported

71.6

21.5

45.4

PBT before exceptionals

61.6

42.1

31.3

Underlying EPS (c)

56

35

27

Underlying net cash/(debt)

(388)

(371)

(383)

Total net cash/(debt)

(696)

(695)

(688)

Core net debt/EBITDA

1.7x

1.8x

2.1x

Source: Renewi

Commercial Waste division

Exhibit 2: Commercial Waste division (€m)

H121

H221

H122

H222

H123

H223

H124

Netherlands

Sales

396.8

431.6

442.3

453.9

459.3

472.7

457.3

Operating margin

5.3%

7.6%

9.8%

11.0%

8.8%

7.7%

5.6%

Operating profit

21.1

32.6

43.2

49.9

40.3

36.6

25.8

Belgium

Sales

198.5

214.4

228.9

238.0

235.1

233.3

237.5

Operating margin

4.2%

6.9%

9.4%

8.9%

12.0%

10.4%

10.3%

Operating profit

8.3

14.8

21.5

21.1

28.1

24.3

24.5

Division

Inbound

510.1

522.1

535.6

537.4

538.4

551.2

562.2

Outbound

53.9

76.5

97.8

114.4

115.3

102.7

87.1

On-site

18.2

23.1

25.7

27.4

31.6

32.0

32.3

Other

12.8

23.9

11.5

10.7

9.1

17.0

11.7

Turnover

595.0

645.6

670.6

689.9

694.4

702.9

693.3

Operating margin

4.9%

7.3%

9.6%

10.3%

9.9%

8.7%

7.3%

Operating profit

29.4

47.4

64.7

71.0

68.4

60.9

50.3

Source: Renewi

The top line of the Commercial Waste division was stable as price increases offset lower volumes and recyclate pricing. Profitability declined due to market softness and time lags in price increases implemented to offset cost inflation. Two key elements of note were:

Recyclate prices weakened by an average of c 20%. This is evidenced in the ‘Outbound’ revenue line declining from €115m in H123 to €87m. Ferrous, paper and plastic pricing has returned towards long-term levels although wood remains high. While management looks to offset recyclate price volatility through price pass-through agreements, the remaining, effectively unhedged, recyclates have had a significant impact on profitability.

Reduced C&D activity in the Netherlands due to economic weakness and pressure on nitrogen emissions, where the government is looking to reduce emissions in the construction sector by 60% by 2030, promoting a shift to electrification with a €42m subsidy fund, is providing a temporary hiatus. The softer market is highlighted in the reduced value of building starts being seen.

Exhibit 3: Netherlands building projects started (€m)

Source: Centraal Bureau voor de Statistiek

Mineralz & Water division

The performance of the Mineralz & Water (M&W) division was affected by lower volumes in ATM and planned maintenance pulled forward. Activity improved in Q2 with a positive H2 expected. The Mineralz business has contracts signed for 450ktpa, which underpin management expectation of a €5m profit uptick in the second half.

Exhibit 4: M&W division performance (€m)

H121

H221

H122

H222

H123

H223

H124

Sales

90.4

92.4

93.6

100.3

93.3

97.6

88.4

Operating margin

2.5%

-2.2%

4.3%

1.8%

2.8%

-2.2%

1.7%

Operating profit

2.3

(2.0)

4.0

1.8

2.6

(2.1)

1.5

Source: Renewi

Specialities division

Key to the Specialities division were the solid performances from Coolrec (electronic and electrical equipment waste) and Maltha (glass waste) despite the impact of lower recyclate pricing on margins. The UK municipal businesses’ performances remains weak and cash consumptive, with the operations still subject to the current review.

Exhibit 5: Specialities division performance (€m)

Division

Coolrec & Maltha

UK

H123

H124

H123

H124

H123

H124

Sales

186.3

178.7

76.3

85.9

110.0

92.8

Operating margin

6.1%

5.8%

10.9%

9.9%

2.7%

1.9%

Operating profit

11.3

10.3

8.3

8.5

3.0

1.8

Source: Renewi

Exceptional charges

The exceptional costs were significantly reduced in the period. The change in provisions reflect the changes to discount rates. The amortisation of acquired intangibles has increased due to the Westpoort acquisition made in 2022.

Exhibit 6: Exceptional operating profit items

Item

€m

Renewi 2.0 improvement programme

(1.0)

Portfolio management activity

0.3

Changes in long-term provisions

17.1

Ineffectiveness and impact of termination of cash flow hedges

0.7

Amortisation of acquisition related intangibles

(3.0)

Non-trading and exceptional items in PBT

14.1

Item

Renewi 2.0 improvement programme

Portfolio management activity

Changes in long-term provisions

Ineffectiveness and impact of termination of cash flow hedges

Amortisation of acquisition related intangibles

Non-trading and exceptional items in PBT

€m

(1.0)

0.3

17.1

0.7

(3.0)

14.1

Source: Renewi

Cash flow and financial position

Net debt rose marginally due to the legacy issues and investment in growth capex. Management is guiding to an outflow of €30–35m for the full year, suggesting a slightly higher outflow in H2, which we would expect to include the c €5m cost of the additional restructuring programme and we have assumed no further working capital improvements.

Exhibit 7: Cash flow profile

Source: Renewi

Outlook

Management guidance for the full year is unchanged from the comment made in the October update: ‘Current and ongoing demand conditions expected to be largely offset by the increasing contribution from cost actions, meaning the Group’s full year performance is expected to be broadly in line with the Board’s expectations’.

Commercial Waste Belgium will fully benefit from the new site at Ghent to support the latest Vlarema 8 legislation. Commercial Waste Netherlands will benefit from the Acht site development but is expected to see continued softness in the C&D business but margin improvement from cost cutting (€15m group annual savings are targeted primarily in Commercial Waste Netherlands starting December 2023), pricing and operational improvements. The division will also see the benefit, or lack of headwind, from falling recyclate prices, which appear to have stabilised. M&W will see significant improvement as ATM volumes increase and Mineralz throughput increases.

Forecasts

We have updated our forecasts to take into account the weaker performance than we had anticipated in the Commercial Waste Netherlands business along with a slightly higher tax rate and minorities. Clearly there is risk on the timing of the cost savings programme and the expected improvement in M&W volumes. A full financial summary can be found on page 12.

Exhibit 8: Forecast changes

FY24e

FY25e

€m

Old

New

Change

Old

New

Change

Revenues

1,925

1,914

-0.6%

2,007

1,964

-2.1%

Normalised operating profit

129

125

-3.6%

147

144

-2.0%

Normalised operating profit margin

6.7%

6.5%

-0.2%

7.3%

7.3%

0.0%

Normalised PBT

92

86

-7.0%

104

101

-2.6%

Reported PBT

82

75

-8.0%

98

95

-2.7%

Normalised basic EPS (c)

81

75

-8.0%

92

88

-4.0%

Dividend per share (c)

5

5

0.0%

10

10

0.0%

Closing core net debt/(cash)

429

406

-5.2%

441

421

-4.4%

Source: Edison Investment Research


Capital markets day

The recent capital markets event confirmed many of the positive trends for recycling highlighted in our preview note. Arguably the most interesting aspect was the medium-term financial targets management provided, highlighted in Exhibit 9. This section focuses on the achievability of these goals.

Exhibit 9: Key management targets

Source: Renewi. Note: *Cash flow before dividends, growth projects and M&A. **FY23 revenue growth including Westpoort acquisition.

Underlying EBIT margin

Exhibit 10 highlights management’s roadmap for margin expansion.

Exhibit 10: Company margin roadmap

Source: Renewi

Recyclate prices have been volatile and were particularly beneficial in FY22 and Q123. Hence the correct starting point is arguably best reflected in the H223 margin of 6.1%. Below we consider the major steps in a little more detail.

Digitisation and SG&A savings

The Renewi 2.0 programme has been completed with €20m of savings being generated (€17.8m in FY23). The digitisation programme is expected to generate further internal operational benefits while management initiates additional cost actions. Overall, management has targeted internal savings of €15m a year, which would add 90bp to operating margins.

UK Muni solved

Exiting will reduce revenue by c €200m and assuming 2% operating margin, we estimate this would add 70bp to operating margins.

Recycling rate & quality

Investment to increase the percentage of recycling (target from 63.6% to 75%) and the quality of recyclates should boost returns. Increasing recycling reduces incineration costs as Renewi does not own any such facilities; we note that ‘cost of waste’ accounted for 36% of the cost base in FY23. Higher-quality recyclates not only improve pricing but also assist in moving away from the commodity pricing fluctuations.

Growth

Investment is being targeted in areas that promote recycling and recyclate quality. The €60m investment in advanced recycling at Ghent, Puurs and Limberg provides the clearest example. Recent Vlarema 8 legislation in Flanders requires companies to increase the level of waste sorting and recycling, with up to 24 different waste streams to be identified with significant penalties for non-compliance. This should lead to more waste being diverted away from incineration/landfill and additional processing, adding value to the stream and profitability to Renewi.

M&W recovery

Key is the soil remediation business, which has been loss making but historically generated over 10% margins. Management is looking to double throughput with contracts for a 50% increase to 450kt already in place. This will provide greater overhead recovery while the move to higher-value products (sand, gravel and filler) should also assist in turning around the fortunes of ATM. 10% ROS would add c €20m to EBIT and improve group margins by c 100bp.

Headwinds

On the negative front, there will clearly be challenges from inflationary pressures, which management will aim to pass through via pricing along with the inevitable ebbs and flows of recyclate pricing, as seen in FY23.

Overall

Our analysis suggests that the benefits from digitisation/SG&A, UK Muni resolution and M&W recovery, which we have also separated out, would achieve the targeted margin improvement. This leaves additional potential from the growth and recycling initiatives depending on the ability to offset the current inflationary headwinds. Peer group analysis has limitations due to the differing business models, but Exhibit 11 shows the potential for best in class, which is clearly management’s goal.

Exhibit 11: Peer group underlying operating margins

2021/22

2022/23

Befesa

18.1%

11.3%

Groupe Pizzorno

9.7%

6.0%

Lassila & Tikanoja

5.7%

4.9%

Seche

8.6%

9.3%

Veolia

6.2%

7.2%

Average

9.7%

7.7%

Median

8.6%

7.2%

Renewi

7.0%

6.3%

Source: Company reports, Edison Investment Research

Organic growth

Exhibit 12 highlights the group’s recent growth profile including the impact from COVID-19 in FY21 and recyclate pricing in FY22. Management’s plan for 5% organic revenue growth compares to the 3% seen over the last five years.

Exhibit 12: Organic sales growth

Source: Renewi, Edison Investment Research

Management set out some clear targeted avenues for expansion, which are being backed by significant capex (€30.8m in FY23 and expected to be €50m in FY24).

Exhibit 13: Key growth drivers

Activity

Revenue growth potential (€m)

Key driver

Construction & demolition

50

Market set to recover after slowdown 2022–24. Growth from partnerships and higher-value recycling options from innovations

Glass

40

Regulation, eg European target to boost collection for recycling from 79% (2020) to 90% by 2030, along with innovation, eg solar panel recycling and geographic expansion

Organics

100

Upscaling from incineration/composting to primary products such as fibreboard

Plastics

35

Demand for recyclate in Europe to double driven by consumer company sustainability drive

Zero waste solutions

50

Emerging market as companies look to address their waste/sustainability targets, eg recent contract with Schiphol airport

Total

275

Source: Renewi

The €275m revenue growth potential would translate to only c 3% annual growth. This is similar to the historical growth rate of 3% over a five-year period when the focus was on internal operational performance and margin improvements, suggesting a positive underlying market clearly exists, which should also assist. Current inflation pricing trends are also likely to promote the top line. It is also worth reviewing the growth being achieved by Renewi’s European peers, clearly above the 5% management target.

Exhibit 14: Peer organic growth

2021

2022

H1 2023

Groupe Pizzorno

6.5%

8.9%

18.7%

Lassila & Tikanoja

6.6%

6.4%

1.6%

Seche

9.4%

14.4%

8.5%

Veolia (waste operations)

11.8%

6.8%

3.3%

Average

8.6%

9.1%

8.0%

Median

8.0%

7.9%

5.9%

Source: Edison Investment Research

Cash generation

Management is targeting operational free cash generation, which includes maintenance capex but excludes growth orientated capex, equal to 40% of EBITDA against 10% seen in FY23. Our analysis in Exhibit 15 assumes five years as ‘medium term’ and incorporating the operating targets suggests this is achievable, provided the legacy liabilities (UK Muni, ATM and COVID tax) are all resolved and the medium-term margin targets are achieved. Note that overall cash generation will be restricted due to growth capex (€30.8m in FY23 and expected to be €50m in FY24 with plan to invest c 30% of free cash flow) and the announced plan to recommence paying dividend (3-4x cover suggests a €40m annual cash cost in the medium-term scenario).

Exhibit 15: Operational cash generation (€m)

FY23

Medium term

Comment

Revenue

1,892

2,200

Operating margin

9.0%

In line with management targets

EBIT

133

198

Depreciation

124

135

EBITDA

257

333

Maintenance capex inc leases

(135)

(135)

Maintenance capex=depreciation

Working capital

(24)

(6)

10% of annual sales growth

Share scheme charges

3

3

Pension cash top-up

(4)

(3)

Provision (ATM, UK Muni, COVID tax)

(33)

Restructuring/other

3

Interest

(21)

(23)

Tax

(21)

(40)

27% cash tax rate

Operational free cash

25

129

Operational free cash to EBITDA

10%

39%

Source: Edison Investment Research

ROCE

The company is targeting >15% ROCE, up from 10.6% reported in FY23, suggesting c 5% improvement. Our analysis uses a slightly different return on capital formula (underlying EBIT to total assets less current liabilities), which produces a slightly lower figure. As Exhibit 16 highlights, Renewi’s performance is not out of line with peers.

Exhibit 16: Peer ROCE

Dec 21/Mar 22

Dec 22/Mar 23

Befesa

10.5%

10.5%

Groupe Pizzorno

11.8%

7.7%

Lassila & Tikanoja

10.2%

9.7%

Seche

8.4%

9.7%

Veolia

6.2%

8.3%

Average

9.4%

9.2%

Median

10.2%

9.7%

Renewi

11.0%

9.4%

Source: Edison Investment Research

Going forward, margin expansion will assist as will the commercialisation of the investment capex. The impact of any exit of the UK Muni businesses, particularly on the balance sheet, is unclear at present. Hence, we see improvement potential but also see 15% ROCE as the hardest target for management to achieve.

Summary

There are clear positive market fundamentals at both the European level (eg the European Green Deal) and the local level (eg Flanders’ Vlarema 8 advanced waste sorting requirements). Combined with the expansionary capex, we see the 5% growth target as achievable, as peers are also reporting. Much of the expansion will be in higher-value sorting, recyclates and services, which, along with the internal actions, should boost returns. The key will be ROCE to ensure that management is generating real value. Here, we note that ROCE accounts for 25% of management’s LTIP, suggesting positive alignment and incentive.

UK municipal operations

Management has initiated a review of the UK municipal operations. Exhibit 17 highlights the continued cash consumption from these activities. Hence an exit would be positive for both ongoing financials and, we would expect, for investor sentiment.

Exhibit 17: Private finance initiative portfolio

Contract 

Financial close 

Full service commitment 

Contract expiry 

Interests in special purpose vehicle 

Argyll & Bute 

September 2001 

April 2003 

September 2026 

100%

Cumbria 

June 2009 

April 2013 

June 2034 

100%

Wakefield 

January 2013 

December 2015 

February 2038 

50.001%

Barnsley, Doncaster and Rotherham 

March 2012 

July 2015 

June 2040 

100%

East London Waste Authority 

December 2002 

August 2007 

December 2027 

20%

Source: Renewi

Exhibit 18: UK private finance initiative cash spend

Source: Renewi

Valuation

Our note A circular economy champion contained a detailed valuation and methodology; an update for the key discounted cash flow (DCF) and peer group valuations is provided below. Exhibit 19 highlights our new valuation and changes, incorporating our revised forecasts. Based on short-term profitability metrics (FY24 and FY25) and softening peer stock prices, the peer group based valuation sees the greatest impact. Our longer-term orientated DCF valuation remains virtually unchanged.

Exhibit 19: Valuation changes (pence per share)

Old

New

Change

DCF

825

819

-0.7%

Peer group

724

680

-6.1%

Take-out

1,238

1,207

-2.5%

Source: Edison Investment Research

Exhibit 20: DCF valuation sensitivity (pence per share)

Terminal growth rate

WACC

1.0%

2.0%

3.0%

4.0%

5.0%

12.0%

331

380

439

514

610

11.5%

392

449

518

606

722

11.0%

460

525

607

712

852

10.5%

535

611

708

834

1,006

10.0%

619

709

823

977

1,191

9.5%

713

819

957

1,145

1,418

9.0%

819

945

1,113

1,348

1,701

8.5%

940

1,092

1,298

1,596

2,065

8.0%

1,079

1,263

1,521

1,907

2,552

7.5%

1,239

1,466

1,793

2,307

3,233

Source: Edison Investment Research

Exhibit 21: Quoted peer group valuation

2023

2024

2023

2024

2023

2024

Applied multiple

EV/EBIT

EV/EBITDA

P/E

Peer group rating (x)

13.6

11

6.3

5.7

17.2

14.2

Renewi* (EBIT/EBITDA/EPS)

127

139

252

265

78

85

Implied valuation (€m)

1725

1532

1586

1512

Provisions (€m)

(306)

(306)

(306)

(306)

Debt (€m)

(406)

(422)

(406)

(422)

Finance leases (€m)

(246)

(246)

(246)

(246)

Pension deficit (€m)

(30)

(30)

(30)

(30)

Implied market cap (€m)

736

528

598

509

Number of shares (m)

80.5

80.7

80.5

80.7

Value per share (€c)

915

655

742

630

1,349

1,203

Exchange rate (€/£)

1.15

1.15

1.15

1.15

1.15

1.15

Value per share (p)

795

569

646

548

1,173

1,046

Provision adjustment

(331)

(331)

Value per share (p)

795

569

646

548

843

715

Source: Edison Investment Research. Note: *Renewi financials have been calendarised.


Exhibit 22: Financial summary

2021

2022

2023

2024e

2025e

Year to March (€m)

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

1,693.6

1,869.2

1,892.3

1,914.2

1,964.0

Cost of Sales

(1,408.5)

(1,512.5)

(1,538.4)

(1,554.4)

(1,590.9)

Gross Profit

285.1

356.7

353.9

359.9

373.2

EBITDA

202.2

261.5

257.0

250.0

270.4

Operating profit (before amort. and excepts.)

73.0

133.6

132.9

124.8

144.0

Amortisation of acquired intangibles

(3.3)

(3.4)

(5.0)

(5.5)

(6.0)

Exceptionals

(33.6)

(6.2)

(5.6)

(5.0)

0.0

Reported operating profit

36.1

124.0

122.3

114.3

138.0

Net Interest

(26.8)

(28.8)

(29.2)

(38.9)

(42.7)

Joint ventures & associates (post tax)

1.6

0.5

0.0

0.0

0.0

Profit Before Tax (norm)

47.8

105.3

103.7

85.9

101.4

Profit Before Tax (reported)

10.9

95.7

93.1

75.4

95.4

Reported tax

(5.4)

(20.3)

(26.5)

(18.8)

(23.8)

Profit After Tax (norm)

35.8

78.8

75.6

62.7

74.0

Profit After Tax (reported)

5.5

75.4

66.6

56.5

71.5

Minority interests

(0.1)

(0.9)

(3.7)

(2.5)

(3.0)

Net income (normalised)

35.7

77.9

71.9

60.2

71.0

Net income (reported)

5.4

74.5

62.9

54.0

68.5

Av. Shares outstanding (m)

79.5

79.7

80.3

80.5

80.7

EPS - normalised (c)

45

98

90

75

88

EPS - normalised fully diluted (c)

45

98

89

74

87

EPS - basic reported (c)

7

93

78

67

85

Dividend (c)

0.0

0.0

0.0

5.0

10.0

Revenue growth (%)

10.4

1.2

1.2

2.6

Gross Margin (%)

16.8

19.1

18.7

18.8

19.0

EBITDA Margin (%)

11.9

14.0

13.6

13.1

13.8

Normalised Operating Margin

4.3

7.1

7.0

6.5

7.3

BALANCE SHEET

Fixed Assets

1,612.3

1,565.9

1,686.2

1,721.0

1,759.7

Intangible Assets

594.9

592.8

636.3

630.8

625.3

Tangible and Right-of-use Assets

794.5

767.4

871.0

911.3

955.5

Investments & other

222.9

205.7

178.9

178.9

178.9

Current Assets

355.7

385.9

399.3

388.6

400.2

Stocks

20.6

22.5

25.2

27.2

27.9

Debtors

247.7

269.3

289.6

279.6

290.5

Cash & cash equivalents

68.8

63.6

62.7

60.0

60.0

Other

18.6

30.5

21.8

21.8

21.8

Current Liabilities

(646.7)

(732.7)

(665.4)

(695.6)

(706.4)

Creditors

(546.2)

(528.4)

(521.8)

(518.8)

(529.6)

Tax and social security

(13.8)

(24.2)

(31.2)

(31.2)

(31.2)

Short term borrowings

(47.8)

(148.9)

(66.8)

(100.0)

(100.0)

Other

(38.9)

(31.2)

(45.6)

(45.6)

(45.6)

Long Term Liabilities

(1,083.7)

(880.9)

(1,072.8)

(1,007.6)

(982.7)

Long term borrowings

(689.1)

(518.7)

(681.6)

(681.4)

(696.5)

Other long term liabilities

(394.6)

(362.2)

(391.2)

(326.2)

(286.2)

Net Assets

237.6

338.2

347.3

406.4

470.8

Minority interests

(6.1)

(7.0)

(10.1)

(10.1)

(10.1)

Shareholders' equity

231.5

331.2

337.2

396.3

460.7

CASH FLOW

Operating Cash Flow

202.2

261.5

257.0

250.0

270.4

Working capital

82.4

(59.9)

(23.8)

5.0

(0.8)

Exceptional & other

(31.1)

(17.1)

(23.6)

(71.0)

(41.0)

Tax

(14.8)

(7.6)

(21.2)

(23.2)

(27.4)

Net operating cash flow

238.7

176.9

188.4

160.8

201.2

Capex

(57.6)

(77.3)

(118.1)

(112.0)

(120.0)

Acquisitions/disposals

(2.7)

(3.2)

(60.7)

0.0

0.0

Net interest

(15.9)

(17.2)

(21.3)

(39.5)

(43.3)

Equity financing

(1.2)

(1.6)

(4.7)

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

(8.0)

Net Cash Flow

161.3

77.6

(16.4)

9.3

29.9

Opening net debt/(cash)

(456.9)

(343.7)

(303.1)

(370.7)

(406.4)

FX

(6.4)

7.6

(0.2)

0.0

0.0

Other non-cash movements

(41.7)

(44.6)

(51.0)

(45.0)

(45.0)

Closing net debt/(cash)

(343.7)

(303.1)

(370.7)

(406.4)

(421.5)

Finance Leases (FRS16)

(236.7)

(221.9)

(245.8)

(245.8)

(245.8)

PPP non-recourse

(87.6)

(79.1)

(69.3)

(69.3)

(69.3)

Closing net debt/(cash)

(668.0)

(604.1)

(685.8)

(721.5)

(736.6)

Source: Company accounts, Edison Investment Research

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 £60,000 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 research department of Edison 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 2023 Edison Investment Research Limited (Edison).

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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 £60,000 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 research department of Edison 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 2023 Edison Investment Research Limited (Edison).

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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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