Last close As at 05/08/2026
GBP8.68
▲ 0.09 (0.01%)
Market capitalisation
—
Research: Industrials
The recent AGM update was consistent with FY18 commentary; guidance and our estimates are unchanged. Year-to-date progress is clearly visible in three divisions where market conditions appear to be favourable. In the fourth (Hazardous), new customer demand is successfully building; management’s expectation remains for this to start to be met during H2, subject to regulatory clearance. Flagged merger integration benefits for FY19 are as before. The intention to move to euro-based reporting with the H119 results is entirely logical and reflects the company’s primary source of profitability.
Written by
Renewi |
So far, so good |
AGM update |
Industrial support services |
24 July 2018 |
Share price performance
Business description
Next events
Analyst
Renewi is a research client of Edison Investment Research Limited |
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The recent AGM update was consistent with FY18 commentary; guidance and our estimates are unchanged. Year-to-date progress is clearly visible in three divisions where market conditions appear to be favourable. In the fourth (Hazardous), new customer demand is successfully building; management’s expectation remains for this to start to be met during H2, subject to regulatory clearance. Flagged merger integration benefits for FY19 are as before. The intention to move to euro-based reporting with the H119 results is entirely logical and reflects the company’s primary source of profitability.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/17 |
779.2 |
26.0 |
3.7 |
3.1 |
18.8 |
4.4 |
03/18 |
1,565.7 |
52.1 |
4.9 |
3.1 |
14.4 |
4.4 |
03/19e |
1,589.9 |
70.6 |
6.6 |
3.1 |
10.6 |
4.4 |
03/20e |
1,622.2 |
86.7 |
8.2 |
3.5 |
8.6 |
4.9 |
Note: *PBT and EPS (fully diluted) are normalised, excluding pension net finance costs, amortisation of acquired intangibles and exceptional items.
FY19 starts in line with existing guidance
Brief updates were provided on each of the four divisions. The largest of these is Commercial, where the initial roll-out experience for a new IT platform has been favourable in Belgium (where completion is expected by year end) and is now underway in the Netherlands (a larger, more complex market with roll-out variations). As a backdrop, local volume and pricing conditions appear to be good albeit with some tightness in incinerator capacity. Reference to calmer paper and plastics recyclate pricing is helpful but perhaps less significant for Renewi than other operators. In Hazardous, management has reiterated an expectation that ATM soil remediation operations should resume full production during H2; there is clear demand building although regional authority regulators remain a hurdle. Elsewhere, the Monostreams and Municipal divisions are both trading ahead of the prior year thus far and Municipal’s Ottawa facility is moving to an improved volume footing following a revised customer agreement. At the group level, we are reminded that Renewi is on track to realise €30m of merger integration benefits by the end of FY19 (ie an incremental €15m in this financial year).
Valuation: Curious retracement
Having responded well to the FY18 results announcement at the end of May, Renewi’s share price has retraced back towards 52-week lows pre-results. Even adjusting for the final dividend (ex 2.1p DPS on 28 June) this reversal looks curious in the light of unchanged estimates, which offer a three-year EPS CAGR to 2021 in excess of 20%. A PEG of 0.7x and the FY21 P/E and EV/EBITDA (adjusted for pensions cash) of 8.0x and 4.7x respectively suggest little credit is being given for the growth profile and greater operational cohesion to be realised. An expected FY19 4.4% dividend yield adds to the total return potential.
Exhibit 1: Financial summary
£m |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
2021e |
March |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|
|
|
|
|
|
|
|
|
Revenue |
614.6 |
633.4 |
601.4 |
614.8 |
779.2 |
1,565.7 |
1,589.9 |
1,622.2 |
1,659.6 |
Cost of Sales |
(511.6) |
(528.3) |
(506.1) |
(517.8) |
(653.3) |
(1,276.9) |
(1,296.6) |
(1,323.0) |
(1,353.5) |
Gross Profit |
103.0 |
105.1 |
95.3 |
97.0 |
125.9 |
288.8 |
293.3 |
299.2 |
306.1 |
EBITDA |
88.4 |
88.5 |
72.6 |
69.2 |
81.6 |
156.9 |
181.7 |
201.3 |
207.9 |
Operating Profit (before GW and except.) |
44.9 |
45.6 |
34.3 |
33.4 |
36.5 |
69.1 |
92.4 |
108.5 |
113.9 |
Net Interest |
(10.8) |
(12.6) |
(11.4) |
(11.2) |
(10.3) |
(14.2) |
(16.2) |
(16.2) |
(16.0) |
Other Finance |
(3.9) |
(2.9) |
(1.5) |
(1.6) |
(2.2) |
(5.1) |
(7.9) |
(7.9) |
(7.9) |
JV/Associates |
0.3 |
0.3 |
0.8 |
1.0 |
2.0 |
2.3 |
2.3 |
2.3 |
2.3 |
Intangible Amortisation |
(2.5) |
(2.3) |
(1.9) |
(1.8) |
(2.1) |
(5.8) |
(5.8) |
(5.8) |
(5.8) |
Non Trading & Exceptional Items |
(37.8) |
(20.2) |
(40.3) |
(21.8) |
(85.0) |
(95.7) |
(30.0) |
(9.3) |
0.0 |
Profit Before Tax (Edison norm) |
30.5 |
30.4 |
22.2 |
21.6 |
26.0 |
52.1 |
70.6 |
86.7 |
92.3 |
Pension net finance costs |
(0.3) |
(0.3) |
(0.5) |
(0.5) |
(0.3) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
Profit Before Tax (Renewi norm) |
30.2 |
30.1 |
21.7 |
21.1 |
25.7 |
51.5 |
70.0 |
86.1 |
91.7 |
Profit Before Tax (FRS 3) |
(10.1) |
7.6 |
(20.5) |
(2.5) |
(61.4) |
(50.0) |
34.2 |
71.0 |
85.9 |
Tax - headine |
(1.1) |
(5.8) |
2.3 |
(1.5) |
0.5 |
2.6 |
(17.0) |
(20.6) |
(21.5) |
Profit After Tax (norm) |
22.8 |
23.2 |
20.5 |
19.3 |
20.1 |
39.1 |
52.9 |
65.5 |
70.1 |
Profit After Tax (FRS 3) |
(11.2) |
1.8 |
(18.2) |
(4.0) |
(60.9) |
(47.4) |
17.1 |
50.4 |
64.3 |
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding (m) |
448.3 |
448.9 |
449.1 |
449.5 |
536.3 |
799.9 |
800.1 |
800.1 |
800.1 |
EPS - Edison norm (p) FD |
5.1 |
5.1 |
4.5 |
4.3 |
3.7 |
4.9 |
6.6 |
8.2 |
8.7 |
EPS - Renewi norm (p) FD |
5.0 |
5.1 |
4.4 |
4.2 |
3.7 |
4.8 |
6.5 |
8.1 |
8.7 |
EPS - FRS 3 (p) |
(7.9) |
(6.3) |
(3.8) |
(0.9) |
(11.4) |
(5.9) |
2.1 |
6.3 |
8.0 |
Dividend per share (p) |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.05 |
3.45 |
3.60 |
|
|
|
|
|
|
|
|
|
|
Gross Margin (%) |
16.8 |
16.6 |
15.9 |
15.8 |
16.2 |
18.4 |
18.4 |
18.4 |
18.4 |
EBITDA Margin (%) |
14.4 |
14.0 |
12.1 |
11.3 |
10.5 |
10.0 |
11.4 |
12.4 |
12.5 |
Operating Margin (before GW and except.) (%) |
7.3 |
7.2 |
5.7 |
5.4 |
4.7 |
4.4 |
5.8 |
6.7 |
6.9 |
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET |
|
|
|
|
|
|
|
|
|
Fixed Assets |
772.1 |
744.4 |
737.3 |
670.4 |
1,420.9 |
1,456.3 |
1,463.2 |
1,463.6 |
1,458.3 |
Intangible Assets |
251.8 |
211.1 |
173.8 |
194.5 |
603.3 |
606.3 |
600.1 |
590.4 |
578.5 |
Tangible Assets |
375.3 |
322.7 |
282.9 |
297.0 |
587.4 |
623.0 |
636.1 |
646.2 |
652.8 |
Investments |
145.0 |
210.6 |
280.6 |
178.9 |
230.2 |
227.0 |
227.0 |
227.0 |
227.0 |
Current Assets |
247.3 |
265.1 |
224.0 |
177.0 |
348.2 |
366.2 |
371.7 |
353.6 |
401.4 |
Stocks |
11.0 |
9.4 |
6.9 |
6.8 |
19.9 |
23.3 |
23.1 |
23.4 |
23.9 |
Debtors |
160.9 |
151.5 |
156.3 |
135.5 |
253.4 |
279.0 |
284.8 |
289.1 |
294.1 |
Cash |
75.4 |
104.2 |
60.8 |
34.7 |
74.9 |
63.9 |
63.9 |
41.0 |
83.4 |
Current Liabilities |
(248.9) |
(229.6) |
(277.4) |
(227.2) |
(483.2) |
(545.8) |
(567.5) |
(526.1) |
(525.1) |
Creditors |
(230.7) |
(226.3) |
(202.4) |
(224.8) |
(466.8) |
(532.9) |
(525.3) |
(526.1) |
(525.1) |
Short term borrowings |
(18.2) |
(3.3) |
(75.0) |
(2.4) |
(16.4) |
(12.9) |
(42.2) |
0.0 |
0.0 |
Long Term Liabilities |
(444.2) |
(504.7) |
(432.5) |
(434.2) |
(845.7) |
(894.3) |
(892.3) |
(891.2) |
(897.1) |
Long term borrowings |
(234.5) |
(253.8) |
(140.8) |
(224.9) |
(482.4) |
(489.7) |
(489.7) |
(489.7) |
(489.7) |
Other long term liabilities |
(209.7) |
(250.9) |
(291.7) |
(209.3) |
(363.3) |
(404.6) |
(402.6) |
(401.5) |
(407.4) |
Net Assets |
326.3 |
275.2 |
251.4 |
186.0 |
440.2 |
382.4 |
375.1 |
399.9 |
437.4 |
|
|
|
|
|
|
|
|
|
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
Operating Cash Flow |
67.7 |
78.6 |
55.8 |
72.2 |
27.9 |
128.4 |
126.4 |
178.7 |
200.3 |
Net Interest |
(11.5) |
(13.2) |
(12.8) |
(12.8) |
(19.0) |
(16.9) |
(16.2) |
(16.2) |
(16.0) |
Tax |
1.9 |
(1.6) |
(5.7) |
(4.8) |
(5.3) |
(6.7) |
(13.0) |
(18.6) |
(20.5) |
Net Capex |
(50.1) |
(27.1) |
(37.2) |
(25.8) |
(41.2) |
(81.2) |
(102.0) |
(99.0) |
(94.5) |
Acquisitions/disposals |
(59.2) |
(54.1) |
(67.3) |
18.2 |
39.5 |
(4.1) |
0.0 |
0.0 |
0.0 |
Equity Financing |
0.4 |
0.2 |
0.1 |
0.3 |
136.5 |
0.6 |
0.0 |
0.0 |
0.0 |
Dividends |
(13.7) |
(13.7) |
(13.7) |
(13.7) |
(15.1) |
(24.4) |
(24.4) |
(25.6) |
(26.8) |
Net Cash Flow |
(64.5) |
(30.9) |
(80.8) |
33.6 |
123.3 |
(4.3) |
(29.3) |
19.3 |
42.4 |
Opening core net debt/(cash) |
206.2 |
177.3 |
152.9 |
155.0 |
192.6 |
423.9 |
438.7 |
468.0 |
448.7 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
93.4 |
55.3 |
78.7 |
(71.2) |
(354.6) |
(10.5) |
0.0 |
(0.0) |
(0.0) |
Closing core net debt/(cash) |
177.3 |
152.9 |
155.0 |
192.6 |
423.9 |
438.7 |
468.0 |
448.7 |
406.3 |
Closing PPP/PFI non-recourse net debt |
100.1 |
151.2 |
222.6 |
91.1 |
87.1 |
82.9 |
82.9 |
82.9 |
82.9 |
Source: Company accounts, Edison Investment Research
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Research: TMT
Keywords has taken a step into the games analytics market with the acquisition of Yokozuna Data (YD) for $1.5m. This follows the recent engineering acquisition of Snowed In (for C$4.5m) and the establishment of Keywords Ventures. We do not expect these developments to have a material effect on our forecasts in the near term, but they do highlight the company’s investment in building higher value-added, IP-based business lines. Given Keyword’s strong coverage of the gaming supply chain, we believe the business is well placed to gain leverage from these investments.