Renew Holdings Regulatory News (RNWH)

27 Nov 2007 07:00

Renew Holdings PLC27 November 2007 Renew Holdings plc("Renew" or the "Group") Final results for the year ended 30 September 2007 Renew, the specialist construction services Group, today announces an excellentset of results with profit before tax up 55%, strong growth in cash flow and a50% dividend increase. Financial Highlights 2007 2006Turnover (ongoing operations) £347.8m £341.7m +2%Profit before interest £5.0m £3.5m +44%Profit before tax £7.2m £4.6m +55%Earnings per share 11.9p 10.0p +19%Dividend per share (full year) 1.8p 1.2p +50%Net cash balance £24.4m £19.4m +26% Operational Highlights • Strong performance across the Group o Specialist Engineering profits up 20% o Specialist Building profits up 42% • Excellent order book growth, up 21% to £252m o Repeat orders up to 72% o Negotiated, framework and two stage tendered work up to 68% o Strong order intake since the year end • Acquisition of Seymour adding water sector to Specialist Engineering o Northumbrian Water framework extended to 2011 • New performance targets in place for 2010 o Turnover of at least £500m o Specialist Engineering to represent a third of Group turnover o Operating profit margin of 2.5% Roy Harrison, Chairman, commented: "The Group is now in a position of strength and we have exceeded all of ourperformance targets for the year. We continue to grow cash backed profits inour robust markets. There is substantial work being done in pursuing furtherstrategic acquisitions. The Board is confident that the excellent progress madeduring the year will continue. " 27 November 2007 Enquiries: Renew Holdings plc Tel: (On 27 November) 020 7457 2020Brian May, Chief Executive Tel: (Thereafter) 0113 281 4200John Samuel, Finance Director College Hill Tel: 020 7457 2020Matthew Gregorowski A presentation for analysts is taking place at 08.30 this morning at the officesof College Hill, The Registry, Royal Mint Court, EC3N 4QN. The report and accounts will be posted to shareholders in due course and copiesof this announcement are available upon request from the Company Secretary, YewTrees, Main Street North, Aberford LS25 3AA or via the company's website:www.renewholdings.co.uk CHAIRMAN'S STATEMENT Introduction I am pleased to report a strong set of financial results and that the Group hasmade further excellent progress in line with its strategic objectives. InSpecialist Engineering we have continued to grow revenue, further enhanced bythe acquisition of Seymour, and have maintained our strong margins. InSpecialist Building we have seen excellent growth in operating margins at steadylevels of revenue. We are experiencing buoyant demand for the Group's specialist services in ourchosen market sectors, with the Group order book up 21% in the period. Theorder book also reflects a higher quality of work founded on strong levels ofrepeat business from key clients and a further increase in the proportion ofwork won within our specialist market sectors, which remain robust. We continue to be recognised for the high quality and standard of work we areconsistently delivering to our customers and have received awards andcommendations for a number of our businesses, specifically in the areas ofenvironmental, design and innovation. Particularly pleasing is the excellentprogress we are making in Health & Safety, which continues to be a key area offocus across the Group, reflected by a significant reduction in our AccidentIncidence Rate and recognised by a number of RoSPA awards. Results and Dividend Group turnover from ongoing operations for the year ended 30 September 2007 was£347.8m (2006: £341.7m) and profit before tax was £7.2m (2006: £4.6m). Earningsper share were 11.85p (2006: 10.00p). The Group's net cash balance at 30September was £24.4m (2006: £19.4m) after paying for the £5.9m acquisition ofSeymour outlined below. Net assets have increased to £10.1m from £5.3m. The Board is proposing a final dividend of 1.2p per share, which will be paid on 25 February 2008 to shareholders on the register as at 18 January 2008. Thiswill result in a dividend of 1.8p per share for the full year (2006: 1.2p), a50% increase, reflecting the Group's progressive dividend policy and the Board'sconfidence in the Group's future prospects. Growth Strategy On 26 July 2007, the Group announced another acquisition in the form of Seymour(Civil Engineering Contractors) Limited ("Seymour"), the water engineeringservices provider, for a net cash consideration of £5.9m, expanding the Group'sSpecialist Engineering activities into the water sector. The integration ofSeymour is progressing well and the business is trading in line with ourexpectations. As Brian May outlines in more detail in his Chief Executive's review, wecontinue to seek organic growth in our current specialist areas of activity,whilst pursuing further strategic acquisitions in Specialist Engineering. Management and Head Office On 1 October 2006, John Bishop FCA joined the Board as non-executive director,and on 31 October 2006, Arnold Wagner OBE stepped down from the Board as anon-executive director. During the year the Group relocated its head office to Aberford, near Leeds, andstreamlined its head office function. Certain key appointments were also made,including that of our Group Lawyer and Company Secretary, Ben Feather, whojoined Renew from HBOS after spending several years with Addleshaw Goddard inLeeds. Auditors We have been reviewing our engagements with a number of the professionaladvisors to the Group and, following a competitive tender process, in July 2007the Board appointed KPMG Audit Plc as auditors in succession to RSM RobsonRhodes LLP. Outlook The Group is now in a position of strength. All of the performance targets setat the beginning of the year have been exceeded. We continue to grow cashbacked profits in key areas of the market where we see further opportunities fororganic growth and there is substantial work being done in pursuing furtherstrategic acquisitions. The Board is confident that the excellent progress madeduring the year will continue. Roy Harrison, Chairman27 November 2007 CHIEF EXECUTIVE'S REVIEW Overview Another year of strong performance has been delivered across all of ourbusiness, with profit before tax up 55%. This profit growth has been matched bycash, which remains a primary objective, and we have achieved our target ofdelivering a 2% Group profit before tax a year earlier than anticipated. TheGroup strategy which has been progressively implemented over the last two yearsis now firmly established, both operationally and culturally, and its benefitsare reflected in these very positive results. All of our specialist market sectors continue to demonstrate robustfundamentals. During the year we grew our Specialist Engineering activitiesorganically by over 20%, whilst expanding into new markets through theacquisition of Seymour, a specialist contractor in the water sector. This wasachieved whilst maintaining target margins and, following the acquisition,Specialist Engineering is now expected to account for more than 20% of Groupturnover. In Specialist Building we maintained turnover at a similar level to last yearwhile increasing operating profits by 42%, with margins up to 1.4% from 1.0%.This is an excellent achievement and demonstrates the significant improvement inrisk management as we progress towards our target of 2% operating margins inSpecialist Building within the next two years. Group operating margins increased by 40% during the year and, as a result, wehave set a new objective for the Group of achieving an operating profit marginof at least 2.5% by 2010. The Group order book has grown by more than 21% during the period and the orderintake since the end of the financial year has been very strong. The securedforward order book at 30 September 2007 stood at £252m, compared to £209m a yearago. Our selective approach to winning new contracts has meant the proportionof new orders that fall within our specialist areas of activity has increased tonearly 80%. The level of contracts secured from repeat customers has alsoincreased to 72%. Our level of negotiated, framework and two stage tendered workreached 68%. This gives us greater earnings visibility and further reduces risk,both of which remain key objectives going forward. REVIEW OF OPERATIONS Specialist Engineering I am delighted that the quality of our Specialist Engineering work is beingrecognised both by our customers and third parties. VHE was awarded theSpecialists in Construction Award from Construction News and was runner up inBrownfield Briefing's Remediation Innovation Awards. It was also awarded theRoSPA Gold Medal in May in recognition of five consecutive years of Gold Awards.Shepley Engineers was awarded a second consecutive RoSPA President's Award foran outstanding performance in Health & Safety at work over an eleven yearperiod. Seymour won two CECA training awards and was runner up for North EastCECA Project of the Year. In Nuclear, the largest spend within the national civil nuclear legacy programmeis at Sellafield in Cumbria, where Shepley Engineers have worked continuouslyfor more than 25 years. Shepley Engineers is the largest mechanical andelectrical contractor at Sellafield with a workforce in excess of 400 people.Overall activity is well balanced between operational asset support and thedecommissioning and demolition of redundant facilities. During the year ShepleyEngineers was awarded four long-term frameworks at Sellafield, the mostimportant being the major Multi Disciplinary Site Wide Framework, where thecompany is one of three Tier 2 contractors alongside Amec and Hertel. Thisframework is worth in excess of £25m over the next two years and includes anoption for a further two year extension. In Land Remediation, VHE was reappointed as a term contractor by National GridProperty Limited to continue remediation works on sites across the UK. Thisthree year framework contract is worth £10m per annum with an option to extendit for a further two years. Major contracts with other clients include theremediation of former coal-fired power stations in Rugeley in Staffordshire andStella South near Gateshead. Both entailed substantial land reclamation tocreate clean development platforms for future housing development. In Water, the Group acquired Seymour, a leading civil engineering business inthe North East of England, in July 2007. Seymour carries out waterinfrastructure development and maintenance, flood alleviation and coastalprotection and urban renewal works for the public and private sectors. Seymourhas a long-standing relationship with Northumbrian Water and has recently hadits framework agreement extended until 2011. Recent contracts also include a£6m coastal protection scheme completed over two phases at Seaton Carew, and acontract to install a new raw water main at Teesside Power Station. Theintegration of Seymour is progressing well and we are confident of growing thebusiness as part of the enlarged Group. Specialist Building Our Specialist Building businesses have experienced a strong increase in repeatbusiness as well as a number of industry commendations including RIBA, RISC andBREEAM awards for architectural design, innovation and environmentalconstruction. In Social Housing, Allenbuild now has six framework agreements with majorhousing associations in the South East. We have recently been awarded a £15mcontract by Metropolitan Housing Association to build 106 new apartments andretail space in Hackney. We have a pipeline of projects with Logic Homes inexcess of £60m and more than £40m with other framework partners. Allenbuild isactively incorporating Modern Methods of Construction into its social housingworkload and is committed to achieving zero defects on all projects. In Retail, Britannia Construction secured a number of new clients anddevelopments, including its appointment as a framework contractor to Marks &Spencer, and continued to strengthen its relationships with existing customerssuch as Tesco. A £6m redevelopment of Fareham Town Shopping Centre for DominionCorporate Trustees was started in the summer for a new 32,000 sq ft extension tothe existing shopping mall. Allenbuild also completed the £6m North WalkDevelopment at the Crystal Peaks Shopping Centre in Sheffield for Hermes, andsecured repeat business with Dransfield Properties for the £5m Jasper Squaredevelopment in Tunstall. This sector is experiencing a very strong level ofenquiries. In Restoration and Refurbishment, a notable scheme undertaken by the Group wasthe £13m restoration of the historic iron fabric at St Pancras Station, London.We continue to see strong demand from the high quality residential sector inLondon with a number of prestigious high quality projects underway. We alsocommenced a new framework with Grosvenor, which involves the refurbishment ofseveral properties in Mayfair and Belgravia. The £8m refurbishment of WalmsleyHouse into 170 student units for Investream was completed, the second projectfor this client, illustrating the high level of repeat business we conduct inthis specialist sector. In Science and Education, Walter Lilly enjoyed a successful year with projectsfor University College, London and the Burlington Danes laboratory fit out aspart of the Imperial College framework, as well as securing the £20m Queen MaryInnovation Centre construction project for the Queen Mary University, London.Work also continued for longstanding client GlaxoSmithKline's research anddevelopment arm with two laboratory refurbishment projects. Allenbuild commencedthe construction of the £17m Rossington All Saints Secondary School and SportsVillage for the Diocese of Sheffield. It has also completed the main phase ofthe British Library's £13m Additional Storage Programme, the world's firstlarge-scale automated document retrieval complex to use oxygen depletiontechnology as a fire resistance strategy. Property and other activities The on time and on budget completion of a major development project for WichfordPLC valued at over £15m demonstrated how the Group's various capabilities indevelopment, land remediation and construction could be brought togethersuccessfully and profitably. We continue to look for other suitable developmentopportunities and have recently started construction of a specialistmanufacturing building in Cumbria for an American client. We also continue torealise surplus land both in the UK and USA and I am confident of further landrealisations in 2007/08. People We continue to attach great importance to Health & Safety practices across theGroup. I am delighted to report that during the year we have decreased theAccident Incidence Rate by 41%, which given our annual target of a 10% reductionis a major achievement. The improvement in the Group's performance is a testament to the hard work anddedication of all of our employees, for which the Board is extremely grateful. Strategic Update The benefits of our strategic focus and improved management practices arebecoming increasingly evident. Our specialist activities are also wellpositioned in serving robust market sectors with good potential for growth. Thisprovides an excellent platform for the future and we will continue to expand ourpresence in our existing areas of activity both organically and, in SpecialistEngineering, via further strategic acquisitions. The Group's strong financialposition and cash generation provides excellent flexibility for funding anyfuture acquisitions. Our goal is, within the next three years, for the Group's Specialist Engineeringactivities to increase to at least a third of Group turnover. We are targetingGroup turnover of at least £500m by 2010, however we will not lose sight of ourprimary objective of delivering increased cash backed profits from progressiveoperating margin improvement, with a corresponding target of a Group operatingprofit margin of 2.5% by the same date. Brian May, Chief Executive27 November 2007 GROUP PROFIT & LOSS ACCOUNTFor the year ended 30 September 2007 Note Total Total 2007 2006 £000 £000 Turnover: Group & share of joint ventures 349,129 365,266Less share of joint ventures' turnover (980) (2,823)Continuing operations 347,770 341,698Discontinued operations 379 20,745Group turnover 1 348,149 362,443Cost of sales (311,486) (328,393)Gross profit 36,663 34,050Administrative expenses (31,646) (30,577)Profit on ordinary activities before interest 1 5,017 3,473Interest receivable 2,199 1,561Interest payable (768) (1,437)Other finance income - FRS17 pension 745 1,042Profit on ordinary activities before taxation 7,193 4,639Taxation (charge)/credit on ordinary activities 2 (95) 1,349Profit for the financial year 7,098 5,988Basic earnings per Ordinary share 4 11.85p 10.00pDiluted earnings per Ordinary share 4 11.63p 9.95p GROUP STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES Total TotalFor the year ended 30 September 2007 2007 2006 £000 £000 Profit for the financial year 7,098 5,988Exchange movement in reserves (150) (119)Movements in defined benefit pension scheme (1,804) (6,175)Movement on deferred tax relating to the defined benefit 427 1,186pension schemeTotal recognised gains and losses for the year 5,571 880 GROUP BALANCE SHEETAt 30 September 2007 2007 2006 £000 £000Fixed assetsIntangible assets: Goodwill 8,741 4,527Tangible assets 5,188 3,819 Investments in joint ventures:Loans to joint ventures 751 561Share of gross assets 3,623 4,429Share of gross liabilities (1,321) (1,722) 3,053 3,268 16,982 11,614Current assetsStocks and work in progress 6,391 18,673Debtors: due after more than one year 3,902 4,346Debtors: due within one year 85,118 77,093Cash at bank and in hand 24,565 19,735 119,976 119,847Creditors: amounts falling due in less than one (122,352) (121,555)yearNet current liabilities (2,376) (1,708)Total assets less current liabilities 14,606 9,906Creditors: amounts falling due after more than oneyearOther creditors (1,899) (1,821)Net assets excluding pension liability 12,707 8,085Pension liability (2,562) (2,769)Net assets 10,145 5,316 Capital and reservesShare capital 5,990 5,990Share premium account 5,893 5,893Capital redemption reserve 3,896 3,896Revaluation reserve 73 73Share based payments reserve 97 -Profit and loss account (5,804) (10,536)Equity shareholders' funds 10,145 5,316 GROUP CASH FLOW STATEMENTFor the year ended 30 September 2007 Note Total Total 2007 2006 £000 £000 Net cash inflow from operating activities 5 21,878 10,661 Returns on investments and servicing of financeInterest received 2,199 1561Interest paid (768) (1,437) 1,431 124TaxationNet corporation tax paid (107) (36) Capital expenditure and financial investmentPayments to acquire tangible fixed assets (1,060) (1,291)Proceeds on sale of tangible fixed assets 308 393Loans advanced to joint ventures (231) (149) (983) (1,047) Acquisitions and disposalsAcquisition of a subsidiary (6,821) (664)Cash obtained on acquisition of subsidiaries and businesses 889 65 (5,932) (599) Equity dividends paid to shareholders (839) (360) 3 Cash inflow before financing 15,448 8,743 FinancingMovement in short-term borrowings - (3,600)Repayment of mortgage - (8,363)(Repayment of)/additional development loans (9,795) 9,795Finance lease payments (543) (686) (10,338) (2,854)Increase in cash during the year 5,110 5,889 Reconciliation of net cash flow to movement in net fundsIncrease in cash during the year 5,110 5,889Movement in borrowings 10,053 2,556Changes in net funds arising from cash flows 15,163 8,445 Other non-cash movements (280) 256Movement in net funds during the year 14,883 8,701 Opening net funds 8,970 269Closing net funds 23,853 8,970 NOTES TO THE ACCOUNTS 1) Segmental analysis 2007 2006 £000 £000Turnover is analysed as follows: Building 265,289 271,888Engineering 68,777 54,553Inter divisional turnover (3,265) (8,999)Property and central activities 17,949 27,079Discontinued operations 379 20,745Group and share of joint ventures' turnover 349,129 365,266Less: Share of joint ventures' turnover (980) (2,823)Group turnover 348,149 362,443 Analysed as to:Continuing operations 347,770 341,698Discontinued operations 379 20,745Group turnover 348,149 362,443 Analysis of profit on ordinary activities:Building 3,700 2,603Engineering 3,374 2,810Property and central activities (2,057) (1,940)Discontinued operations - -Profit on ordinary activities before interest: 5,017 3,473Net financing income 2,176 1,166Profit on ordinary activities before taxation: 7,193 4,639 2) Taxation (charge)/credit on ordinary activities Analysis of (charge)/credit in year 2007 2006 £000 £000Current tax:UK corporation tax on profits of the year (291) -Adjustments in respect of previous periods - (74) (291) (74)Foreign tax (107) (2)Total current tax (398) (76)Deferred tax - pensions (616) -Deferred tax - other 919 1,425Total deferred tax 303 1,425Taxation (charge)/credit on profit on ordinary activities (95) 1,349 3) Dividends 2007 2006 Pence/share Pence/share Interim (related to the year ended 30 September 2007) 0.60 0.40Final (related to the year ended 30 September 2006) 0.80 0.20Total dividend paid 1.40 0.60 £000 £000Interim (related to the year ended 30 September 2007) 359 240Final (related to the year ended 30 September 2006) 480 120Total dividend paid 839 360 4) Earnings per Ordinary share 2007 2006 Weighted WeightedFRS 22 basis average average number number Earnings of shares EPS Earnings of shares EPS £000 000 Pence £000 000 Pence Basic earnings per share 7,098 59,899 11.85 5,988 59,899 10.00Dilutive effect of share options 1,154 (0.22) - 254 (0.05)Diluted earnings per share 7,098 61,053 11.63 5,988 60,153 9.95 5) Cash flow 2007 2006 £000 £000 Operating profit 5,017 3,473Amortisation of goodwill 356 306Depreciation 1,326 1,523Profit on sale of fixed assets (85) -Decrease/(increase) in stocks and work in progress 11,910 (9,551)Increase in operating debtors and prepayments (3,067) (866)Decrease in current asset investments - 16,643Increase/(decrease) in creditors and accruals 7,573 (1,152)Net movement on pension deficit included within operating profit 79 68Cash contribution to defined benefit scheme (1,534) (1,246)Charge in respect of share options 97 -Realisation of joint venture assets 206 1,463 Net cash inflow from operating activities 21,878 10,661 6) Preliminary announcement The financial information set out above does not constitute the Company'sconsolidated statutory accounts for the years ended 30 September 2007 or 2006but is derived from those accounts. Statutory accounts for the year ended 30September 2006 have been delivered to the Registrar of Companies, and those forthe year ended 30 September 2007 will be delivered following the Company'sAnnual General Meeting. The auditors have reported on those accounts; theirreports were unqualified and did not contain statements under section 237(2) or(3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange