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Market capitalisation
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Research: Industrials
Renewi’s FY24 trading update was in line with management’s expectations and its improved cash generation is reassuring for investors. Attention is now likely to turn the strategic review of the UK Municipals with management stating that they remain on track to update markets by the end of June. This could lead to an exit of key liabilities and leave Renewi as an attractive circular economy investment with strong market positions and organic growth plans, which should assist in generating value, including a potential re-rating of the shares.
Renewi |
Solid trading and better cash generation |
Pre-close trading update |
Reason for publishing |
Industrial support services |
25 April 2024 |
Share price performance
Business description
Analyst
Renewi is a research client of Edison Investment Research Limited |
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Renewi’s FY24 trading update was in line with management’s expectations and its improved cash generation is reassuring for investors. Attention is now likely to turn the strategic review of the UK Municipals with management stating that they remain on track to update markets by the end of June. This could lead to an exit of key liabilities and leave Renewi as an attractive circular economy investment with strong market positions and organic growth plans, which should assist in generating value, including a potential re-rating of the shares.
Year end |
Revenue |
PBT* (€m) |
EPS* |
DPS |
P/E |
Yield |
03/22 |
1,869 |
105.3 |
98 |
0 |
6.6 |
N/A |
03/23 |
1,892 |
103.7 |
90 |
0 |
7.2 |
N/A |
03/24e |
1,843 |
69.9 |
60 |
5 |
10.8 |
0.8 |
03/25e |
1,891 |
83.1 |
71 |
10 |
9.1 |
1.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading in H224 was in line with management’s expectations and Renewi’s FY24 results are expected to be similar to consensus forecasts. Trading is benefiting from relatively stable end markets combined with recent cost actions (€15m per annum targeted savings announced at the interim results). Belgian Commercial Waste activity remains resilient, with growth from the new sorting lines established and benefiting from the Vlarema 8 enhanced sorting legislation. Netherlands experienced slight volume improvements, including in Construction and Demolition, the key area of weakness in H1, although the market remains soft. Mineralz & Water’s Waterside operations (water treatment) experienced the strong volume recovery anticipated after a soft H1, which included additional maintenance. The soil treatment business ramp-up continued with ‘end-of-waste’ regulatory status now achieved by gravel and filler with sand (the third product category) under review. In Specialities, Maltha (glass recycling) and Coolrec (waste electrical and electronic equipment recycling) continued to perform well despite headwinds from lower plastic recyclate pricing. Management has announced further streamlining of senior management, including consolidation of Netherlands and Belgium in Commercial Waste.
The strategic review of the UK Municipals operations is ongoing with an announcement from management expected by 30 June. Exiting these activities would be positive for investor sentiment as it eliminates significant liabilities from the balance sheet and removes an ongoing distraction for Renewi. If this leads to a corporate solution, we expect the process would be cash negative.
Renewi’s financial position has improved as core net debt (excluding PPP non-recourse debt and leases) was €367m at 31 March 2024 (€371m at 31 March 2023). This has been achieved through improved working capital, delayed commissioning of an advanced sorting line in Puurs, Belgium (part of the growth plan) and disposal of the vacant Hemweg, Amsterdam site following consolidation of the 2023 Paro acquisition. Management has reiterated it intends to pay a final dividend. We expect this to be limited in scale given the potential cash impact from any resolution of the UK Municipals.
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Research: TMT
Filtronic has signed a strategic partnership and commercial agreement with SpaceX which includes a production order worth £15.8m and warrants that could be exercised for up to 10% of existing share capital. Filtronic announced its first orders from SpaceX in January 2023, although the customer was unnamed at that point. Since then, SpaceX has placed orders totalling $43m (including yesterday’s order) for products to support the build out of its Starlink low Earth orbit (LEO) satellite constellation. The scale of these orders is such that we upgrade our forecasts, with the larger impact on FY25. We raise FY24 EPS by 19% and FY25 by 142%.