Ben Richardson, CEO at SulNOx, confident they can cost-effectively decarbonise commercial shipping. Watch the video here.
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Nice plug for RNWH yesterday from fund manager Chris Mcvey of Octopus Investments, from 55m 15 seconds in:
- "great market positions"
- "inorganic and organic growth story"
- "good scope for upgrades"
- "good management team"
- "consolidating into other sectors"
- "trading on a very modest multiple"
- "they'll do more consolidation", i.e acquisitions
Which says it all :o))
Https://www.youtube.com/watch?v=gatHu8VaBvY
SCSW had a nice write-up of RNWH's interims in their June issue, with this positive summary paragraph:
"Net cash was £17m, down from £20m, despite spending £13m on a bolt on acquisition last November of Enisca, a water services business. And now of course, there are no pension scheme contributions, having bought-in the schemes last year, so with a further £80m facility from banks, Scott has plenty of firepower for an eps enhancing deal before long. Even without a deal, the longer daylight hours in H2 will repeat the usual seasonal bias so Renew looks well placed to beat the forecast of £51.2m pretax profit/eps 60.3p."
Andrew Hore on i.i.i wrote this on Friday, rating RNWH a Buy:
"Engineering services provider Renew Holdings RNWH concentrates on maintenance work rather than large infrastructure construction projects, which makes it less risky than construction companies. There is a specialist building subsidiary, but this is small, and the growth is coming from the core engineering services provided to rail, water, highways, etc. The contracts are cost plus, so inflationary cost rises are passed on.
Renew Holdings increased interim revenues by 14% to £471.8 million, while organic growth was nearly 12%. November 2022 acquisition Ensica, which provides services in the water sector, made an initial contribution in the period. Earnings were 5% ahead at 27.4p per share. The interim dividend is 6% higher at 6p. Net cash is £17 million. The group order book is worth £890 million.
Full-year pre-tax profit should reach at least £61 million, although like all UK companies, earnings growth is held back by the higher corporation tax rate.
The prospective 2022-23 valuation multiple is just over 12, while the forecast yield is nearly 2.5%. Shore Capital recently pointed out that Renew Holdings has met or beaten expectations each year since 2006, while underlying earnings have grown at a cumulative annual growth rate of 18% since 2011. The share price has risen by more than 600% over the past 10 years. The consistent track record suggests that the rating is too low, and the shares are good value."
There's an encouraging snippet for RNWH in VP.'s AGM statement this morning:
"The infrastructure sector, including water, transmission and rail in particular, has remained supportive and we continue to work with our customers on delivery of the longer term regulatory driven capital investment programmes"
Nice £25m contract with Network Rail for second stage of upgrades in Monmouthshire following extended rainfall/landslides:
Https://www.networkrailmediacentre.co.uk/news/network-rail-begins-preparation-for-second-phase-of-gbp-25m-resilience-upgrade-between-monmouthshire-and-gloucestershire
Seymour Civil recruiting hard to enable further growth, particularly in water:
Https://www.hartlepoolmail.co.uk/news/people/seymour-civil-engineering-makes-four-new-appointments-to-its-leadership-team-in-hartlepool-4207526
Extracts:
"These appointments come as Seymour announces its desire to expand further in energy, water, highways and industry"
"I’m excited to have joined the Seymour Civil Engineering team at this exciting time for the business, helping to build on our long-established reputation within the UK water market and leading our drive to achieve our vision to be the ‘leading water sector specialist’ for our chosen key clients.”
AmcoGiffen have just been awarded a £5m contract to rebuild the fire-damaged Troon station:
Https://news.railbusinessdaily.com/amcogiffen-awarded-contract-for-troon-station-rebuild/
QTS have announced a senior hire to aid their expansion in England:
Https://news.railbusinessdaily.com/qts-training-announces-senior-hire-to-bolster-capabilities-in-midlands-and-yorkshire/
"Lorna Gibson, Director of QTS Training said: “It’s great to have welcomed Phil at such an exciting time for us. His vast knowledge and experience will prove hugely beneficial to QTS Training, particularly as we scale up our operations at our English training centres.
“We have huge ambitions to grow our business in the next few years and Phil will play a crucial role in this, helping to grow both the team and the level of training services we offer."
And here's nice coverage of Shepley's 75 years in business and their nuclear contracts at Sellafield etc:
Https://www.timesandstar.co.uk/news/23589838.firm-engineered-success-75-years/
Excellent news for RNWH yesterday, with OFWAT accelerating £2.2 billion of water infrastructure investment:
"Ofwat approves early start for £2.2bn water infrastructure investment with companies under pressure to cut leaks and river pollution
Ofwat has approved acceleration of 33 investments by water firms worth £2.2bn
They include measures to improve water quality and install smart metres
The water industry watchdog has given the green light to the acceleration of around £2.2billion worth of investments to reduce leaks and river pollution.
Ofwat said on Tuesday it has approved 33 investment schemes put forward by water companies, which include measures to improve water quality and install smart meters.
The first tranche of investments is set to begin in the next two financial years, from 2023 to 2025, with projects to be completed by 2030.
etc"
Https://www.thisismoney.co.uk/money/markets/article-12237483/Ofwat-gives-green-light-2-2bn-investments-water-firms.html?ico=mol_desktop_moneymarkets-newtab&molReferrerUrl=https%3A%2F%2Fwww.dailymail.co.uk%2Fmoney%2Fmarkets%2Findex.html&_gl=1*4bivnt*_ga*MzIwNDgxMjkxLjE2NjQwNTQwMzU.*_ga_XE0XLFFF16*MTY4NzkzMTQ0Ni44NS4xLjE2ODc5MzE1NDEuMC4wLjA.&_ga=2.249081607.1443197997.1687845082-320481291.1664054035
RNWH went ex-div last Thursday with the 6p interim dividend, so it's encouraging to now see the share price higher at 725p-729p than it was last week taking the divi into account.
Excellent news which should bring further attention here:
Https://www.lse.co.uk/news/london-briefing-bats-glo-doesnt-abf-buys-national-milk-records-tp6q4p1z2p1ymio.html
"Berenberg starts Renew Holdings with 'buy' - price target 950 pence"
Following the 90% increase in RNWH's Specialist Building's order book to £110m since the year end, an encouraging news update issued late last week from Walter Lilly:
Https://www.walterlilly.co.uk/our-facilities-management-department-turns-two/
I think it shows that the purchase of Enisca was prescient. The pressure to deal with the sewage problem has been building for a long time and therefore it was only a matter of time before a large amount of money was promised to deal with it. It is logical that Enisca would have been more expensive to buy once news of that investment was known, so well done RNWH for moving when they did.
Agreed. And given the amount of money the National Grid is going to have to spend to include renewable projects over the coming years, does anyone know of a AIM company that would be in line for that kind of work?
Big news yesterday was that the water companies are planning to TRIPLE their spending on sewage, wastewater etc before 2030 to £10 billion.
This is of course after all the hoo-ha about polluted rivers and oceans in the UK.
Not great news for water bills, but terrific news for RNWH given their increased presence in this sector following the acquisition of Enisca:
Https://eandt.theiet.org/content/articles/2023/05/water-companies-apologise-for-sewage-spills-announce-transformation-plan/
"The order book here has strengthened to £110m (HY22: £66.0m), providing good visibility for the second half and into 2024.
The net operating cash inflow was £24m and free cash inflow £22.6m, lifting period end net cash to £17.0m after £13.3m was incurred on acquisitions.
The overall Group order book at 31 March 2023 has strengthened to £890m (HY22: £771m) underpinned by long-term framework positions.
Trading has started well in the second half of the year and the strong forward order book underpins confidence that the full year will be in line with the Board's expectations.
The interim dividend was lifted 5.8% to 6.00p with the forecast full year payout of 18.15p reprsenting a yield of approx. 2.5% at the current 6732p share price.
This consistent performer, which is a popular stock for IHT planning portfolios, continues to deliver."
Https://www.investorschampion.com/channel/blog/looking-good-puzzling-valuations-stonking-small-cap-update
"Renew: looking good as always
Renew Holdings (AIM: RNWH), the Engineering Services Group supporting the maintenance and renewal of critical UK infrastructure, announced excellent interim results for the six months ended 31 March 2023.
Renew's activities are focused into two business streams: Engineering Services, which accounts for over 98% of the Group's adjusted operating profit, focuses on the key markets of Rail, Infrastructure, Energy (including Nuclear) and Environmental, which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.
Specialist Building focuses on the Science, Landmark and High Quality Residential markets in London and the Home Counties.
Group revenue in the period increased 13.8% to £471.8m which includes a contribution from the acquisition of Enisca since December, as well as organic growth of 11.6%. Group adjusted operating profit was 8.8% higher at £28.3m with the adjusted operating profit margin 6.0% (HY22: 6.3%).
Across the two business streams…
Engineering Services activities saw revenues climb 15% to £435.8m with adjusted operating profit up 11.6% to £29.7m. Performance was driven by continued positive momentum in the Rail, Infrastructure and Environmental sectors, with the Engineering Services order book standing at a highly supportive £780m at 31 March 2023 (31 March 2022: £705m).
The Government's Autumn Statement re-confirming a commitment to a record £600bn investment in transforming the UK's infrastructure to meet the target of net zero carbon emissions by 2050 is good news for Renew. As are ambitious plans to scale up affordable, clean, homegrown power and build thriving green industries to boost the UK's energy security.
Within this, Network Rail, a significant customer for the Group is expected to invest £44bn over Control Period 7, which runs from 2024 to 2029 with expenditure expected to focus on operations, maintenance, and renewal of the national rail network. This plays to the Group’s strengths as does the Government's commitment to a rail decarbonisation programme including a significant investment in electrification programmes, as part of the overall UK target to deliver net zero by 2050.
Of the £24bn committed over a five-year period to England's strategic road network, £11.9bn of this funding is ringfenced for operations, maintenance and renewals which gives Renew a unique advantage from which it has continued to benefit.
With pressure on public expenditure as a result of the difficult macroeconomic environment, Renew is seeing an increased focus on maintaining and renewing existing assets instead of major infrastructure enhancement projects.
Revenue in the Specialist Building business was broadly flat at £36.0m (HY22: £36.9m), with operating profit £0.5m (HY22: £0.6m). "
Thanks for sharing Rivaldo.
History suggests that with £17m in cash (and presumably rising by about £2m a month) they will be able to make a suitable acquisition for cash (or mostly cash) as soon as the right opportunity presents.
I note you found an entry of c.£550k for aborted acquisition costs, so they are obviously actively looking but, more importantly, remain suitably discerning. RNWH is a very high quality business, even if it is not exciting.
It bobs around being my largest investment by value and I am very happy with it.
Guitarsolo
Here's Shore Capital's full conclusion from their latest note:
"Forecasts
We increase our revenue forecast by 6% to £920m and our adjusted operating profit forecast by 3% to bring us in line with the top end of consensus at £62m. Our revenue forecast implies 8.4% growth, which we consider to be conservative given the growth achieved in H1 and the order book. We see very low downside risk to profit forecasts, given the cost-plus nature of the group’s contracts. Due to the increased tax rate, we currently forecast minimal growth in adjusted EPS, but see scope for revenue upgrades.
We believe EPS could be ahead of our current number and consensus by a high single-digit percentage. Renew has consistently had a very high level of visibility with c.70% of current year forecast sales usually in the order book. This has helped the group meet or beat consensus profit forecasts in every year since the group came into its current form in 2006.
Valuation and recommendation
We believe Renew presents an attractive opportunity for investors to benefit from the UK government’s commitment to spend £600bn on infrastructure from 2022 to 2027. Given the nature of Renew’s variable, cost-plus contracts, we believe it is very well placed to pass on inflationary pressures to customers. We also believe it is protected against economic downturns given that its revenue is driven by the public sector. We continue to believe Renew has a lower risk profile than the market perceives, possibly due to associations with peers servicing much larger fixed contracts.
We maintain our BUY recommendation and 950p DCF-based fair value (30% upside). As of yesterday's closing price, the shares trade on 12x our conservative FY23F EPS forecast and 7x on an EV/EBITDA basis.
We consider this valuation to be anomalously cheap, given the company’s consistent c.30% ROIC, 18% adjusted EPS CAGR since 2011 and current net cash position."
Nice Buy tip in the IC tonight too:
Https://www.investorschronicle.co.uk/news/2023/05/16/renew-s-low-risk-model-drives-results/
"Renew's low-risk model drives results
This maintenance contractor’s low-risk model offers decent returns
May 16, 2023
Order book up 15 per cent to £890mn
Net cash of £17mn provides scope for acquisitions
Even in the technical world of construction, Renew Holdings (RNWH) is at the dull end of the market.
It doesn’t announce major project wins to build towers or power plants, rather places on framework agreements for maintenance programmes with titlessuch as CP7 (rail), AMP7 (water) or RIS2 (highways).
These are less risky than big-ticket contracting, though, with agreements mainly allowing for inflation to be passed through. Renew has used the steady cash flows these generate to reinvest – the £15.6mn acquisition of water specialist Enisca in November was its eighth over the past decade.
Even after funding this, it finished the first half with net cash (excluding leases) of £17mn, having generated cash flow from operations of £24.1mn (2022: £22.9mn). It also started the second half well, with its £890mn order book 15 per cent ahead of the same period last year.
This means there is scope for more deals. “We continue to be on the lookout”, chief financial officer Sean Wyndham-Quin said. “We’re seeing a lot of opportunities, but there’s nothing which has met our threshold.”
Shore Capital said Renew enjoys “a very high level of visibility”, with 70 per cent of forecast sales typically in its order book. This has helped it to either meet or beat consensus profit forecasts each year since 2006.
As such, the broker’s analysts view the company’s current share price of 12 times forecast earnings as “anomalously cheap”, although this is just about in line with its five-year average. But given the fact that Renew has generated an 18 per cent compound annual growth rate in earnings per share over the past 12 years, the shares still seem good value. Buy."
Shore Capital this morning retain their 950p price target and Buy recommendation.
They say the current share price is "anomalously cheap".
There's now "increased scope for upgrades", and they state EPS could be ahead of consensus - and their own "conservative" forecast - by "a high single-digit percentage".
It's worth noting that Shore Capital are NOT one of the two house brokers, so this view is entirely independent.
The 728p mid-price is now up 6p today, but this stock must be re-rated at some point soon given the largely impeccable record of recent years, the huge forward income visibility and the high growth rate potential in a multitude of areas.
Excellent H1 results today, as we've come to expect.
PBT is up 21% on revenue up 14%, and RNWH are nicely on track to meet forecasts of around 60p EPS to 30th September.
Plus there's now a fast-rising £17m cash pile, with the dividend up 6% suggesting an annual 18p dividend.
All divisions are doing well - including the Specialist Building division where the order book is up by two-thirds.
The overall order book is up a whopping 15% since the year end to £890m, which bodes well.
And there's mention of further acquisitions. I note there were £554k of aborted acquisition costs so RNWH are evidently being careful about their next moves. And EPS though up by 5% was held back by an increased tax charge.
These very encouraging results (and the optimistic narrative) should continue to support broker price targets from Numis etc of 900p or thereabouts.
Looking good into next Tuesday's interims - a nice £296,800 buy at 742p today was noticeable.
Up to 741p now, and some buying earlier at 749p. Looking good.
This new commentary from Unicorn is posted elsewhere by davebowler:
"Unicorn's view-
We met with the management of Renew Holdings during this quarter, who reiterated the strength of the company’s low-risk business model, its exposure to long-term structural growth drivers and the resilience of its end markets. The management of the firm remained positive regarding their current and future performance, and their ability to successfully navigate the challenging market environment. The company also released a trading update shortly after the quarter-end, reporting encouraging activity levels, a healthy order book, and positive cash generation."
Firstly, a nice £3.5m bonus mostly benefiting this H2 from this Scottish rail weather resilience works programme being carried out by QTS:
Https://uk.news.yahoo.com/flood-resilience-begin-nine-months-101424897.html
Secondly, Amco-Giffen picking up work in the Channel Islands for airport maintenance:
Https://www.airportsinternational.com/article/channel-islands-makes-medevac-changes