Renew Holdings Regulatory News (RNWH)

Renew Holdings plc

("Renew" or the "Group")

Preliminary results

Renew (AIM: RNWH), the Engineering Services Group supporting UK infrastructure, announces record preliminary results for the year ended 30 September 2012 ahead of expectations.

Financial Highlights

Operational Highlights

·; Engineering Services revenue up 24% to £214.1m (2011: £172.8m)

·; Engineering Services adjusted operating profit* up 28% to £9.6m (2011: £7.5m) - an increase in margin to 4.5% (2011: 4.3%)

·; Group order book up 16% to £331m (2011: £286m) with Engineering Services order book up 31% to £235m (2011: £179m)

·; Nuclear order book up 51% to £109m (2011: £72m)

·; Net debt reduced to £5.5m (2011: £6.8m)

* Adjusted results are shown prior to exceptional items of £1.1m (2011: £5.2m), amortisation charges of £0.5m (2011: £0.4m) and a £2.4m loss from a discontinued operation.

Commenting on the results, Roy Harrison OBE, Chairman said: "Our recent success in key framework appointments in Nuclear, Rail and Water together with our strong list of future opportunities demonstrates that the Group is pursuing the right strategy, evidenced by our growing forward order book and our record financial results."

Enquiries:

About Renew Holdings plc

Engineering Services, which accounts for over 60% of Group revenue and over 90% of operating profit, focuses on the key markets of Energy (including Nuclear), Environmental and Infrastructure, which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.

Specialist Building focuses on New Build Affordable Housing, High Quality Residential and Retail markets in the South of England.

The Group has 76 framework agreements; 62 of these are in Engineering Services with 45 of those being maintenance in nature.

For more information please visit the Renew Holdings plc website: www.renewholdings.com

Chairman's Statement

Results

The Group has achieved record results for the year ended 30 September 2012, ahead of market expectations, and has strengthened its position as a provider of Engineering Services to UK infrastructure.

Profit before income tax was up 22% to £10.0m (2011: £8.2m) on Group revenue of £337.4m (2011: £352.8m). Adjusted earnings per share increased by 43% to 13.9p (2011: 9.7p). Basic earnings per share increased by 259% to 7.9p (2011: 2.2p)

Results for the year are stated after charging exceptional costs and amortisation charges of £1.6m (2011: £5.6m) and a loss of £2.4m from the discontinued operation, C&A Pumps Ltd, which was sold in November 2012 for a nominal consideration. These amounts have been excluded from the adjusted financial results to show the underlying performance of the business. The exceptional costs in the period of £1.1m (2011: £5.2m) relate to the planned scale down of Specialist Building and the integration of our rail business following the acquisition of Amco.

It is particularly pleasing that Engineering Services revenue grew by 24% to £214.1m (2011: £172.8m), with operating profit prior to exceptional items and amortisation up 28% to £9.6m (2011: £7.5m), an increase in margin to 4.5% from 4.3%. Both our Nuclear and Rail businesses, which represent over 60% of our Engineering Services activity, performed strongly and have growing order books for both the new financial year and beyond.

In Specialist Building, our focus on selective niche markets in the South, has delivered increased operating profit of £2.1m (2011: £1.9m) prior to exceptional items and an improvement in margin to 1.7% from 1.1% on revenue of £123.1m (2011: £178.9m).

The Group's contracted order book at 30 September 2012 stood at £331m (2011: £286m), a 16% increase from one year ago, with the Engineering Services order book up 31% to £235m (2011: £179m).

The Group has reduced net debt to £5.5m (2011: £6.8m) comprising a loan of £7.5m (2011: £12.5m) and cash of £2.0m (2011: £5.7m).

Dividend

The Board is proposing a final dividend at 2.10p per share, increasing the full year dividend by 5% to 3.15p (2011: 3.00p). The dividend will be paid on 4 March 2013 to shareholders on the register as at 1 February 2013. The dividend is 4.4x (2011: 3.2x) covered by adjusted earnings per share.

Outlook

The Group is successfully positioned as a provider of engineering services to key clients in the UK's Energy, Environmental and Infrastructure markets, and has been reclassified on the London Stock Exchange as a Business Support Services company.

Last year, the Board declared its ambition to grow turnover to over £500m by 2014, through both organic growth and selective acquisitions, with targets that Engineering Services will account for at least 70% of Group revenue and that the Group operating margin will exceed 3%. These results and our strong forward order book demonstrate that the Group is well placed to achieve these targets.

Our acquisition of Amco in February 2011 has proved highly successful, delivering results ahead of our expectations and generating cash such that we have now repaid 50% of the £15m term loan taken out for the acquisition. Our reducing net debt and net gearing of 62% (2011: 76%) together with our interest cover of over 16x provides the Group with funding flexibility should further suitable acquisition opportunities be identified.

Our Engineering Services operations continue to focus on securing further sustainable framework positions, concentrating on areas of non-discretionary spend. In Specialist Building, our businesses are delivering improved operating margins as they target the stable markets of High Quality Residential, New Build Affordable Housing and Retail in the South, where the Group has particular expertise and experience.

The Board believes our key markets and framework positions provide good and continuing opportunities through 2013 and beyond and that the Group is well positioned to deliver further profitable growth.

R J Harrison OBE

Chairman

27 November 2012

Chief Executive's Review

The Group has made further progress in growing its Engineering Services business which focuses on supporting the maintenance and renewal of UK infrastructure increasing both revenue and operating profit. Specialist Building has increased its operating margin in the year and is concentrated on sustainable markets in the South.

Engineering Services

Renew provides integrated engineering services nationwide focusing on the highly regulated markets of Energy, Environmental and Infrastructure. The Group concentrates on the renewal and maintenance of essential operational assets delivered through its multidisciplinary workforce employed by our strong local and independently branded businesses.

Our strategy is delivering both strong financial results and growth. Revenue in Engineering Services grew by 24% to £214.1m (2011: £172.8m) and now accounts for 63% of ongoing Group revenue and over 90% of operating profit. Operating margin increased to 4.5% (2011: 4.3%).

The Engineering Services order book is growing strongly and is underpinned by 62 frameworks, an increase of 22% in the year, of which 45 are for maintenance work. Non-discretionary orders account for 95% of the £235m (2011: £179m) order book which has grown by 31% in the year.

Our order book in Energy grew by 51% to £124m (2011: £82m), by 14% in Environmental to £33m (2011: £29m) and by 15% in Infrastructure to £78m (2011: £68m).

It remains the Group's strategy to grow its Engineering Services both organically and by targeting earnings enhancing acquisitions in sustainable markets. The recent appointment of Paul Scott, Managing Director of our Nuclear business, as Engineering Services Director, will assist in developing our integrated offering to these markets.

Energy

Renew operates nationally in the nuclear, renewable and traditional power generation sectors where work concentrates on the critical planned and reactive maintenance and asset renewal programmes. Much of the work is delivered through our 24 framework agreements.

In Nuclear, Renew operates across the Nuclear Decommissioning Authority ("NDA") estate in high hazard reduction programmes, decommissioning and in operational asset care. We are strongly positioned with engagements on 9 licenced nuclear sites that command around 70% of the NDA's £3bn annual expenditure. Within that budget, over 55% of the spend is allocated to Sellafield, where we have been active for over 60 years and where we are the principal provider of mechanical and electrical services.

Our revenue at Sellafield grew by 12% in the last twelve months and has grown by over 150% in the last 7 years. All of our 2012/13 revenue budget in Nuclear is already secured in an order book that has grown by 51% to £109m (2011: £72m).

Operational asset care is vital to Sellafield which derives substantial revenue from spent fuel management and reprocessing. For the last 15 years we have carried out production operations support under the Multi Discipline Site Works framework. Since the year end, we have again been appointed as one of three participants to deliver work packages worth up to £280m over 4 years commencing in April 2013. During the year, we were also appointed as the sole mechanical and electrical partner to Stobbarts on the £58m Site Wide Asset Care framework which runs until April 2016.

During the year, in high hazard risk reduction, we were appointed as sole participant to the 4 year £26m Bulk Sludge Retrievals Framework and we deliver a wide range of decommissioning tasks through the Decommissioning Framework Agreement which is secured until 2015. The Evaporator D programme is the UK's largest current nuclear project where our mechanical and electrical services contract has recently been extended to provide over £50m of work through to completion in 2015. We are able to secure positions on these highly sensitive programmes due to the large number of our employees who carry the highest level of site security clearance.

Our predominant position on the site makes us a partner of choice on major programmes. A good example of this is our appointment as a Supply Chain Partner to Morgan Sindall which recently announced its appointment as preferred delivery partner for a potential £1.1bn contract delivering a range of essential services at the Sellafield site, under the Infrastructure Strategic Alliance. These services will include the maintenance of steam and electricity generation, water supply, chemical storage and distribution, drainage networks and all transport infrastructure at the site.

The Group undertakes work at 8 other nuclear licenced sites across the UK including work on the 2 year decommissioning and demolition contract associated with a redundant Fuel Manufacturing Facility at Springfields for Westinghouse. We continue to support the consortia involved in the Nuclear New Build programme where we provide skills in stainless steel fabrications.

We continue to provide support at some of the UK's largest traditional power stations, where we provide maintenance services under 7 framework agreements. There are also increasing opportunities in the renewables market and we are active in investment programmes in biomass and hydro generation technologies where we are currently delivering initial works on two 3 year hydroelectric frameworks with Scottish Water and Welsh Water.

Environmental

The Group has extensive expertise in water infrastructure development and operational maintenance, flood alleviation, river and coastal defences and land remediation. A large portion of work in this sector is procured under long term framework agreements.

In Water, we continue to work for Northumbrian Water under the 10 year AMP5 programme. In addition to carrying out works under the major waste water project framework we now have a position on 7 non-discretionary maintenance frameworks which accounts for 80% of ongoing activity. In particular we have developed specialist skills in providing services to the existing trunk mains network both in cleaning and general maintenance. This shift in the profile of our work in the Water sector has led to a doubling of our order book at the year end and an improvement in margins which we expect to build upon in 2012/13.

In Land Remediation, we extended our 16 year relationship with National Grid where we were reappointed to 3 remediation frameworks nationally. Also in the year we were appointed to the Environment Agency's National Contaminated Land Remediation Contractors framework which runs to 2015. Ongoing work for the Environment Agency is delivered through 7 minor works and river maintenance frameworks for civil, mechanical and electrical services.

Infrastructure

The Group continues to access the rail, highways and industrial markets across the UK where work is underpinned by 17 framework agreements for the delivery of integrated civil, mechanical and electrical engineering services.

The majority of activity this year has been in Rail where we have seen a 23% increase in our order book to £74m (2011: £60m). Our focus is on the renewal, refurbishment and maintenance of operational assets for clients, including our largest client Network Rail where we remain a leading provider of engineering maintenance works. These works include off-track renewal and maintenance of line side structures including tunnels, bridges and viaducts, mechanical and electrical installations and the delivery of a wide range of planned and reactive maintenance services. We have particular skills in managing complicated tunnel refurbishment projects and earlier this year completed our largest individual project at Ore Tunnel near Hastings.

During the year our existing Asset Management frameworks were renewed for up to 5 years and extended by a new framework appointment in Scotland. These frameworks, along with our established Buildings and Civils Delivery Partnership framework agreements, where we have seen increased spend, have reinforced our position with Network Rail as the only provider delivering these services nationally.

The recent McNulty Report recommends the devolution of responsibility so that decisions are made as close to customers and the market as possible. Network Rail has commenced implementation of these recommendations by appointing management responsible for the 10 operating routes. As the only national provider of off-track maintenance of existing assets, with 12 local depots spread across the country, these initiatives play to our strengths and we are well placed to support our key Rail client as these changes are implemented.

Specialist Building

The Group's Specialist Building activities are focused in the South targeting the High Quality Residential, New Build Affordable Housing and Retail markets. These niche markets, in which we have particular experience and expertise, provide sustainable opportunities for the future. Following our decision to withdraw from public sector building markets in the North, Specialist Building revenue reduced as expected to £123.1m (2011: £178.9m) whilst delivering operating profits up 11% at £2.1m (2011: £1.9m) and increasing operating margin to 1.7% (2011: 1.1%), thereby justifying our strategy.

In High Quality Residential, the Group's activities are focused in and around London where the market remains strong with over £400m of current opportunities identified. Our experience in this sector as a leading quality provider with particular skills in providing the temporary works engineering solutions to extend properties below ground, continues to prove a differentiator and provides opportunity for early involvement in schemes.

In New Build Affordable Housing, the Group has recently been appointed to a new framework with Catalyst Housing where, as one of 7 providers, we will access up to an advertised £350m of projects over the next 4 years. The Group now has a position on 14 framework agreements with leading Housing Associations which provide access to a £700m annual market.  

In Retail, there remains good visibility of opportunities with new clients including Morrisons and Odeon Cinemas. We continue our 24 year relationship with Tesco and remain the preferred fit out contractor for Cineworld.

People

We are committed to the safety of our employees and those who work with us evidenced in the record reduction in the Group's Accident Incidence Rate during 2012, now at its lowest figure in 7 years, a reduction of 87% over that period.

The strong financial results demonstrate the skills and determination of all our employees. The success of the Group depends on our employees continued hard work and commitment, for which the Board would like to express its gratitude.

Summary

Renew provides engineering services to support the essential ongoing operations of critical UK infrastructure through experienced local delivery teams. The Group is focused on developing its maintenance, refurbishment and renewal activities in its target regulated sectors where sustainable revenue is generated through its core maintenance and renewal frameworks with major clients, many of which the Group has worked with for a number of years.

Our recent success in key framework appointments in Nuclear, Rail and Water together with our strong list of future opportunities demonstrates that the Group is pursuing the right strategy, evidenced by our growing forward order book and our record financial results.

Brian May

Chief Executive

27 November 2012 

Group income statement

For the year ended 30 September 2012

Group balance sheet

At 30 September 2012

* Balance sheet has been restated for hindsight fair value adjustment on acquisition of Amco Group Holdings Ltd.

Group cash flow statement

For the year ended 30 September

Notes

1 International Financial Reporting Standards

The consolidated financial statements for the year ended 30 September 2012 have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These preliminary results are extracted from those financial statements.

2 Segmental analysis

The Group's businesses are organised into two operating segments which form the basis of the segment information reported below. These segments are:

Engineering Services, which comprises the Group's engineering activities which are characterised by the use of the Group's skilled engineering workforce, supplemented by specialist subcontractors where appropriate, in a range of civil, mechanical and electrical engineering applications and:

Specialist Building, which comprises the Group's building activities which are characterised by the use of a supply chain of subcontractors to carry out building works under the control of the Group as principal contractor.

3 Exceptional items and amortisation of intangible assets

The Board has determined that certain charges to the income statement should be separately identified for better understanding of the Group's results.

During the year, the Group has incurred £1,120,000 of exceptional redundancy and restructuring costs. £634,000 of these costs relate to Specialist Building where further staff reductions have been made to align the segment with the current trading environment. £486,000 relates to Engineering Services which primarily relates to the integration of our rail businesses following the acquisition of Amco Group Holdings Ltd.

The Board has also separately identified the charge of £500,000 (2011: £404,000) for the amortisation of the fair value ascribed to certain intangible assets other than goodwill arising from the acquisitions of Seymour (C.E.C) Holdings Ltd and Amco Group Holdings Ltd.

Discontinued operation analysis

The discontinued operation, C&A Pumps Ltd, was sold on 14 November 2012 for a nominal consideration.

4 Income tax expense

Dividends are recorded only when authorised and are shown as a movement in equity rather than as a charge in the income statement. The Directors are proposing that a final dividend of 2.10p per Ordinary Share be paid in respect of the year ended 30 September 2012. This will be accounted for in the 2012/13 financial year.

6 Earnings per share

The dilutive effect of share options is to increase the number of shares by 2,594,000 (2011: 2,194,000) and reduce basic earnings per share by 0.32p (2011: 0.08p).

7 Preliminary financial information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2012 or 2011. The financial information for 2011 is derived from the statutory accounts for 2011 which have been delivered to the Registrar of Companies. The auditors have reported on the 2011 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2012 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.

8 Posting of Report & Accounts

The Group confirms that the annual report and accounts for the year ended 30 September 2012 will be posted to shareholders as soon as practicable and a copy will be made available on the Group's website:

www.renewholdings.com