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Currency in GBP
Last close As at 26/05/2023
GBP5.71
▲ −15.00 (−2.56%)
Market capitalisation
GBP458m
Research: Industrials
Renewi’s FY22 results reflect a strong performance across the group. The results came in ahead of FY21 comparatives and our FY22 forecasts. Management guided that it expects FY23 to be ahead of previous guidance. Driving this performance were price increases that outpaced inflation in waste and recyclates, coupled with volume gains (which are still below pre-COVID levels) and cost savings. There was a shift in tone, with the group now transitioning its focus on margin recovery to growth. Growth is expected to come from both organic and acquisitions. The group is targeting €60m in additional EBIT from circular innovations, continued recovery at ATM and the Renewi 2.0 programme. A further €100m in investment is planned to support this growth, and yesterday the acquisition of Paro, an Amsterdam-based commercial waste and recycling business, was announced for an enterprise value of €67m, funded from existing group facilities. The focus on the circular economy to meet net zero targets is a key investment theme for the years ahead, and Renewi is an example of the growth and improving financial results being achieved from the circular economy tailwinds. We are reviewing our forecasts in light of the strong FY22 results.
Written by
Neil Shah
Renewi |
Strong FY22, raising guidance for FY23 |
FY22 results |
Industrial support services |
25 May 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 FY22 results reflect a strong performance across the group. The results came in ahead of FY21 comparatives and our FY22 forecasts. Management guided that it expects FY23 to be ahead of previous guidance. Driving this performance were price increases that outpaced inflation in waste and recyclates, coupled with volume gains (which are still below pre-COVID levels) and cost savings. There was a shift in tone, with the group now transitioning its focus on margin recovery to growth. Growth is expected to come from both organic and acquisitions. The group is targeting €60m in additional EBIT from circular innovations, continued recovery at ATM and the Renewi 2.0 programme. A further €100m in investment is planned to support this growth, and yesterday the acquisition of Paro, an Amsterdam-based commercial waste and recycling business, was announced for an enterprise value of €67m, funded from existing group facilities. The focus on the circular economy to meet net zero targets is a key investment theme for the years ahead, and Renewi is an example of the growth and improving financial results being achieved from the circular economy tailwinds. We are reviewing our forecasts in light of the strong FY22 results.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/20 |
1,775.4 |
54.3 |
53.6 |
5.2 |
15.0 |
0.6 |
03/21 |
1,693.6 |
47.1 |
44.7 |
0.0 |
17.9 |
N/A |
03/22 |
1,869.2 |
105.2 |
98.0 |
0.0 |
8.2 |
N/A |
03/23e |
1,862.8 |
78.5 |
72.5 |
17.9 |
11.1 |
2.2 |
Note: *PBT and EPS (fully diluted) are normalised, excluding pension net finance costs, amortisation of acquired intangibles and exceptional items.
Renewi’s FY22 results showed revenues up 10% to €1,869m, underlying EBIT up 83% to €133.6m with margins at 7.1% and underlying EPS up 118% to 98 cents. Core net debt reduced to €303m (FY21: €344m) and net debt to EBITDA reduced to 1.4x from 2.2x. The numbers came in ahead of our forecasts: reported adjusted PBT of €105.2m compares to our FY22 forecast of €104m, while adjusted EPS of 98 cents was ahead of our FY22 forecast of 96.5 cents.
The group is shifting its narrative from margin recovery to growth. The results were accompanied by the announcement that Renewi is making its first acquisition since the creation of Renewi in 2017. The group is paying €67m for Paro, an Amsterdam-based commercial waste and recycling business, funded from existing group facilities. For the year ended 31 December 2021, Paro reported revenues of €43m, EBITDA of €9.9m and EBIT of €7.3m, implying a valuation of 1.6x sales and 9.2x EBIT.
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Research: TMT
FY22 could be characterised as a year of robust global demand for technology solutions, with the ability to meet that demand constrained by supply chain issues, semiconductor shortages and a growing backlog of pending orders. This led to a strong year for all three of Datatec’s divisions, which would have been even stronger if orders could have been fully met. Datatec’s reported revenue for FY22 was US$4.64bn, up 13%, with adjusted EBITDA rising by 16% to US$177m, representing a 3.8% margin (FY21: 3.7%). Highlighting the operational gearing of the business, underlying EPS rose 38% to 18.7 US cents per share versus our forecast FY22 EPS of 17.0 US cents. As a result, the group declared a dividend of ZAR1.11 (FY21: ZAR1.00) in addition to the special dividend, taking the total dividend paid for the year to c 39.2 US cents per share. Net debt at 28 February 2022 rose to US$130m (FY21: US$61m), beating our FY22 forecast of US$166m, with strong cash generation partly mitigating the build-up of inventory. We remain positive about the group’s prospects in FY23, despite continuing economic and geopolitical uncertainties. Datatec trades on c 3.8x FY22 EV/adjusted EBITDA, which we believe understates the group’s performance and prospects. In light of the FY22 results, we propose to review to review our forecasts shortly.
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