Interim Results

RNS Number : 4548S

Renew Holdings PLC

19 May 2009

 



Renew Holdings plc

('Renew' or the 'Group')

Interim results for the half year ended 31 March 2009

Renew, the specialist engineering and construction services group, announces results with operating profit* sustained at £3.2m and the interim dividend maintained at 1.0p.

Financial Highlights

	H1 2009	H1 2008
Revenue	£171.6m	£192.9m
Operating profit*	£3.2m	£3.2m
Profit before tax*	£3.5m	£3.9m
Adjusted earnings per share*	5.22p	5.82p
Earnings per share	3.74p	5.61p
Dividend per share	1.0p	1.0p

*prior to exceptional items and amortisation charges

Operational Highlights

• Operating margin* increased to 1.8% (2008: 1.7%)

• Group order book at 31 March 2009 £221m (30 September 2008: £219m)

• 77% of orders secured in the period from specialist sectors 

• Specialist Engineering growth of 15%

• Specialist Engineering now expected to represent 40% of Group revenue going forward

• Decisive action taken to reduce capacity in Specialist Building, providing annual savings of £7m

• Net cash balance £17.5m (2008: £25.7m)

• Two bolt-on Specialist Engineering acquisitions enhancing offering in Water and Nuclear sectors

• Interim dividend maintained at 1.0p (2008: 1.0p)

Roy Harrison OBE, Chairman, commented: 

'The economic climate continues to provide a challenging business environment. Despite these difficult trading conditions, our Specialist Engineering business has continued to grow with stable margins. Our healthy cash position and debt free balance sheet adds security to the resilient characteristics of our specialist businesses.' 

19 May 2009

Renew Holdings plc	Tel: [phone]
Brian May, Group Chief Executive
John Samuel, Group Finance Director
Brewin Dolphin	Tel: [phone]
Andrew Kitchingman
Sean Wyndham-Quin
College Hill	Tel: [phone]
Adam Aljewicz
Mark Garraway

CHAIRMAN'S STATEMENT

The six months ended 31 March 2009 has produced satisfactory results with Group operating profit, prior to exceptional items and amortisation charges, of £3.2m (2008: £3.2m) on revenue of £171.6m (2008: £192.9m). This improvement in operating margin from 1.7% to 1.8% reflects the Group's continued emphasis on quality of earnings rather than revenue growth.

Group profit after tax, prior to exceptional items and amortisation charges, was £3.1m (2008: £3.5m). An exceptional charge of £1.0m relating to the final account settlement of the last legacy construction contract has been borne in the first half. A tax charge of £0.1m has been sustained all of which relates to deferred tax. No current year corporation tax charge is expected for the year. Earnings per share, prior to exceptional items and amortisation charges, were 5.22p (2008: 5.82p).

As previously announced, the deteriorating market conditions in Specialist Building necessitate a 23% reduction in capacity and an exceptional charge of £2.5m for redundancy and other restructuring costs in the second half of the financial year. Annual savings of over £7m will result.  

The Board is maintaining the interim dividend at 1.0p per share (2008: 1.0p) which will be paid on 6 July 2009 to shareholders on the register on 5 June 2009.

In October 2008, we acquired C.&A. Pumps Limited ('C.&A.') which added to our Water industry capability. In May 2009, we agreed to acquire Mothersill Engineering, a specialist machining and fabrication business, which enhances our offering to the Nuclear industry.

The Group's net cash balance was £17.5m (2008: £25.7m). The reduction mainly comprises the outflow of working capital attributable to lower revenue, the £1.8m acquisition of C.&A. and the £3.0m cash settlement of the legacy BB&EA pension scheme statutory debt.

The Group's strategy remains to grow our Specialist Engineering business both organically and by acquisition. Specialist Engineering is currently expected to represent 40% of future revenue and 70% of operating profit. We remain active in seeking out further complementary acquisitions.  

In Specialist Building, the Board has acted promptly and decisively to reduce the operational fixed cost base in response to deteriorating market conditions. While the current trading conditions endure for Specialist Building, the Group will continue to focus on project selectivity, risk management and cost control to ensure that this business stream remains profitable albeit on lower levels of activity.

Our balance sheet remains debt free with substantial cash resources enabling the Group to take advantage of selective opportunities as they arise. The specialist nature of our business provides a resilient platform for the Group to trade profitably through the recession.   

ROY HARRISON OBE

Chairman

19 May 2009 

CHIEF EXECUTIVE'S REVIEW

Overview

Our Specialist Engineering business grew first half revenue by 15% from £50.4m to £58.2m. Operating profit also grew by 14% from £1.9m to £2.2m in the period. This represented 70% (2008: 63%) of Group operating profit and an operating margin of 3.8% (2008: 3.9%), and reflects the growing importance of Specialist Engineering to the Group. The Board has reclassified our Rail infrastructure activities from Specialist Building to Specialist Engineering as this reflects better the nature of work carried out.  

Specialist Building recorded an operating profit of £1.7m (2008: £2.4m) on revenue of £113.4m (2008: £139.7m). The lower operating margin of 1.5% (2008: 1.7%) and the reduced revenue reflect the difficult economic circumstances within which this business stream is operating, and, as previously announced, further reductions in both revenue and margin are expected to occur in the second half. Emphasis has remained on project selectivity both to manage risk and to protect quality of earnings.  

The Group's order book at 31 March 2009 was £221m compared to £219m at 30 September 2008 and £248m one year ago. 41% of this is in Specialist Engineering. The order book excludes potential workflow from the Group's 35 framework agreements, 15 of which are in Specialist Engineering. It is the Board's continuing view that the potential value of these frameworks should not be included in the confirmed order book. During the first half, 85% of work secured in the period was in the public sector. 77% of orders secured were in our specialist sectors with 75% on negotiated or two stage terms and 86% with repeat customers.  

Review of Operations

Specialist Engineering

Nuclear

Shepley Engineers continues to be engaged at five different Nuclear licensed sites including a major presence at Sellafield where it has been operating for over 50 years and continues to be the largest Tier 2 mechanical and electrical contractor.

The majority of the workload is secured through four Sellafield frameworks all of which have been extended during the period. In addition, preferred bidder positions are expected to provide a further £10m of revenue over the next two years.

In May 2009, we agreed the acquisition of Mothersill Engineering, a specialist machining and fabrication business located near Sellafield and serving the Nuclear industry, for £0.4m in cash. In the year ended 31 December 2008, Mothersill recorded revenue of £0.8m and an operating profit of £0.2m.

Safety remains of primary importance and, in addition to receiving a number of awards during the period, both Shepley and its subsidiary PPS Electrical achieved the milestone of 1m man hours without a reportable accident.

  Land Remediation

As anticipated, due to the downturn in the UK house building industry, activity in our specialist land remediation business, VHE, remains subdued and supports our decision to reposition this business last year. This repositioning was marked by the significant award of the £15m Cudworth and West Green Bypass for Barnsley MBC, our fifth recent project for this client.

Remediation activity continues to be secured through opportunities arising under Part 11A of the Environment Act and from our National Grid Properties framework.

Water

Seymour and C.&A. currently have five frameworks with Northumbrian Water ('NWL') and the Environment Agency ('EA'). The largest framework, with NWL under AMP4, continues until 2011 and during the period experienced good activity levels with over £8m of new projects secured. Both businesses are in the process of new framework negotiations with these and other clients.

In October 2008, we acquired C.&A. for £1.8m. Together, Seymour and C.&A. form a £30m specialist Water business in the North East. Since the acquisition, C.&A. has performed in line with expectations, securing one of its largest ever projects, from NWL, during the period.  

Rail

In October 2008, YJL Infrastructure was appointed to the Vendor Capital Programme framework with London Underground. In the first six months, we have received three significant orders. These include major upgrades to Marble Arch and Notting Hill Gate underground stations jointly valued at £30m. During the period, we have extended our client base and successfully completed a complex £5m project to create a Peak Hour Subway at Waterloo for Network Rail.

Specialist Building

Social Housing

Following the recent success in securing a framework with Notting Hill Housing Trust, Allenbuild now has a position on 10 frameworks which jointly provide access to a £650m market. During the period we successfully completed the £16m Mare Street project for Metropolitan Housing and secured over £40m of new orders including projects for Network Housing (£14m), Hexagon Housing (£13m) and Genesis Housing (£9m).

Retail

As anticipated the retail sector has been quiet throughout the first six months of the year, although a number of smaller value projects have been secured with repeat clients.  

Science and Education

In addition to four existing frameworks in the North West, Allenbuild has also been appointed to the LHC Education Framework for the North which is expected to provide annual opportunities of £20m for a four year period. Contracts secured in the period included projects for Liverpool Hope University and Wakefield MBC. Work is nearing completion on the Queen Mary Innovation Centre (£20m) and the science fit out project for Eisai Pharmaceuticals (£12m). Allenbuild remains in preferred builder status for the £58m Kirklees College Waterfront project.

  Restoration and Refurbishment

The high-end residential sector in London continues to provide good workload for Walter Lilly. Work continues on the £37m scheme at Grosvenor Crescent and a £25m private residence in Regents Park. We are preferred bidder on a further £38m project for a private client in London. During the period we were also awarded the 7 July Memorial in Hyde Park, work at Chiswick House and the first phase of the restoration of the cast iron roof at the Palace of Westminster.

BRIAN MAY

Chief Executive

19 May 2009 

  Group Income Statement

for the six months ended 31 March 2009

	Notes	Before Exceptional items and amortisation of intangible assets	Exceptional items and amortisation of intangible assets (see Note 2)	Six months ended   31 March		Six months ended   31 March	Before Exceptional items and amortisation of intangible assets	Exceptional items and amortisation of intangible assets (see Note 2)	Year ended 30 September
		2009	2009		2009	2008	2008	2008	2008
		Unaudited	Unaudited		Unaudited	Unaudited	Audited	Audited	Audited
		£000	£000		£000	£000	£000	£000	£000
Group revenue from continuing activities	2	171,602	-		171,602	192,850	390,557	-	390,557
Cost of sales		(150,351)	(1,006)		(151,357)	(169,232)	(347,820)	-	(347,820)
Gross profit		21,251	(1,006)		20,245	23,618	42,737	-	42,737
Administrative expenses		(18,092)	(162)		(18,254)	(20,532)	(35,137)	(2,765)	(37,902)
Operating profit	2	3,159	(1,168)		1,991	3,086	7,600	(2,765)	4,835
Finance income		395	-		395	800	1,618	-	1,618
Finance costs		(41)	-		(41)	(207)	(254)	-	(254)
Other finance income - defined benefit pension scheme		-	-		-	250	543	-	543
Profit before income tax	2	3,513	(1,168)		2,345	3,929	9,507	(2,765)	6,742
Income tax expense	3	(389)	282		(107)	(569)	(2,209)	727	(1,482)
Profit for the period attributable to equity holders of the parent company		3,124	(886)		2,238	3,360	7,298	(2,038)	5,260
Basic earnings per share	4				3.74p	5.61p			8.78p
Diluted earnings per share	4				3.62p	5.47p			8.55p
Proposed dividend	5				1.00p	1.00p			2.00p

There were no exceptional items in the six months ended 31 March 2008. Administrative expenses for that period included an amortisation charge of £124,000.

Group Statement of Recognised Income and Expense

for the six months ended 31 March 2009

	Six months ended 31 March	Six months ended 31 March	Year ended 30 September
	2009	2008	2008
	Unaudited	Unaudited	Audited
	£000	£000	£000
Profit for the period attributable to equity holders of the parent company	2,238	3,360	5,260
Exchange movements in reserves	1,279	20	574
Movements in actuarial deficit	-	-	(497)
Movement on deferred tax relating to the defined pension scheme	-	-	116
Total recognised income and expense for the period attributable to equity holders of the parent company	3,517	3,380	5,453

Group Balance Sheet
at 31 March 2009
	Notes	31 March	31 March	30 September
		2009	2008	2008
		Unaudited	Unaudited	Audited
		£000	£000	£000
Non-current assets
Intangible assets: goodwill		9,351	8,516	8,548
Intangible assets: other		621	744	620
Property, plant and equipment		5,719	5,035	4,503
Deferred tax assets		3,962	4,987	4,069
		19,653	19,282	17,740
Current assets
Inventories		8,557	8,499	6,367
Trade and other receivables		80,008	94,149	87,766
Current tax assets		-	-	455
Cash and cash equivalents		17,656	25,817	28,289
		106,221	128,465	122,877
Total assets		125,874	147,747	140,617
Non-current liabilities
Obligations under finance leases		(12)	(59)	(10)
Retirement benefit obligations		(518)	(2,702)	(1,479)
Deferred tax liabilities		(306)	(418)	(256)
Provisions		(1,068)	(1,172)	(1,068)
		(1,904)	(4,351)	(2,813)
Current liabilities
Borrowings		(139)	(85)	(110)
Trade and other payables		(106,402)	(126,751)	(119,246)
Obligations under finance leases		(48)	(243)	(67)
Current tax liabilities		-	(1,049)	(159)
Provisions		(689)	(2,530)	(3,941)
		(107,278)	(130,658)	(123,523)
Total liabilities		(109,182)	(135,009)	(126,336)
Net assets		16,692	12,738	14,281
Share capital		5,990	5,990	5,990
Share premium account		5,893	5,893	5,893
Capital redemption reserve		3,896	3,896	3,896
Cumulative translation adjustment		1,703	(130)	424
Share based payments reserve		323	165	233
Profit and loss account		(1,113)	(3,076)	(2,155)
Total equity	6	16,692	12,738	14,281

Group Cash Flow Statement
for the six months ended 31 March 2009
	Six months ended	Six months ended	Year ended
	31 March	31 March	30 September
	2009	2008	2008
	Unaudited	Unaudited	Audited
	£000	£000	£000
Profit for the period	2,238	3,360	5,260
Amortisation of intangible assets	162	124	248
Depreciation	796	834	1,708
Profit on sale of property, plant and equipment	(19)	(94)	(262)
(Increase)/decrease in inventories	(598)	(2,015)	716
Decrease/(increase) in receivables	9,429	(8,806)	2,405
(Decrease)/increase in payables	(18,155)	9,891	(1,599)
Current service costs in respect of defined benefit pension scheme	36	36	72
Cash contribution to defined benefit pension scheme	(997)	(893)	(2,106)
Expense in respect of share options	90	68	136
Finance income	(395)	(1,050)	(2,161)
Finance costs	41	207	254
Interest paid	(41)	(207)	(254)
Income taxes received/(paid)	296	-	(1,344)
Income tax expense	107	569	1,482
Net cash (outflow)/inflow from operating activities	(7,010)	2,024	4,555
Investing activities
Interest received	395	800	1,618
Proceeds on disposal of property, plant and equipment	79	194	1,267
Purchases of property, plant and equipment	(1,191)	(781)	(2,028)
Acquisition of subsidiary net of cash acquired	(1,828)	-	(32)
Net cash (outflow)/inflow from investing activities	(2,545)	213	825
Financing activities
Dividends paid	(1,196)	(719)	(1,317)
Repayment of obligations under finance leases	(71)	(245)	(470)
Net cash outflow from financing activities	(1,267)	(964)	(1,787)
Net (decrease)/increase in cash and cash equivalents	(10,822)	1,273	3,593
Cash and cash equivalents at beginning of period	28,179	24,400	24,400
Effect of foreign exchange rate changes	160	59	186
Cash and cash equivalents at end of period	17,517	25,732	28,179
Bank balances and cash	17,656	25,817	28,289
Bank overdrafts	(139)	(85)	(110)
	17,517	25,732	28,179

NOTES TO THE ACCOUNTS

Note 1.  Basis of preparation

(a) The interim financial report for the six months ended 31 March 2009 and the equivalent period in 2008 have not been audited or reviewed by the Group's auditors. They do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. They have been prepared under the historical cost convention and on a going concern basis in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. This interim financial report does not comply with IAS34 'Interim Financial Reporting', which is not currently required to be applied for AIM companies. The Group has reclassified the activities of its rail infrastructure subsidiary, YJL Infrastructure Limited, from its building segment to its engineering segment and restated the comparative figures accordingly. This interim report was approved by the Directors on 19 May 2009.

(b) The accounts for the year ended 30 September 2008 were prepared under IFRS. The auditors issued an unqualified opinion on them and they have been delivered to the Registrar of Companies. In this report, the comparative figures for the year ended 30 September 2008 have been audited. The comparative figures for the period ended 31 March 2008 are unaudited.

(c) The Directors are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future.  

This interim statement is being sent to all shareholders and is also available upon request from the Company Secretary, Renew Holdings plc, Yew Trees, Main Street North, Aberford, West Yorkshire LS25 3AA, or via the website www.renewholdings.com.

Note 2.  Segmental analysis

For management purposes the Group is organised into three business streams: Building, Engineering, and Property and central activities. These operating segments are the basis on which the Group reports its primary segmental information.                                        

Segmental information about the Group's continuing operations is presented below:

	Six months ended 31 March	Six months ended 31 March	Year ended 30 September
	2009	2008	2008
	Unaudited	Unaudited	Audited
Revenue is analysed as follows:	£000	£000	£000
Building	113,419	139,697	287,044
Engineering	58,210	50,420	100,795
Property and central activities	8	5,674	8,213
Inter divisional revenue	(35)	(2,941)	(5,495)
Group revenue from continuing operations	171,602	192,850	390,557

  Note 2.  Segmental analysis (continued)

	Before Exceptional items and amortisation of intangible assets  2009  Unaudited	Exceptional items and amortisation of intangible assets  2009 Unaudited	Six months ended 31 March 2009 Unaudited	Six months ended 31 March 2008 Unaudited	Before Exceptional items and amortisation of intangible assets  2009  Audited	Exceptional items and amortisation of intangible assets  2009  Audited	Year Ended 30 September 2008 Audited
	£000	£000	£000	£000	£000	£000	£000
Analysis of operating profit
Building	1,660	-	1,660	2,371	4,892	(889)	4,003
Engineering	2,214	(1,006)	1,208	1,942	3,469	(361)	3,108
Property and central activities	(715)	(162)	(877)	(1,227)	(761)	(1,515)	(2,276)
Operating profit	3,159	(1,168)	1,991	3,086	7,600	(2,765)	4,835
Net finance income	354	-	354	843	1,907	-	1,907
Profit before income tax	3,513	(1,168)	2,345	3,929	9,507	(2,765)	6,742

Exceptional items and amortisation of intangible assets

	Six months ended		Six months ended		Year ended
	31 March		31 March		30 September
	2009		2008		2008
	Unaudited		Unaudited		Audited
	£000		£000		£000
Loss on legacy final account settlement	1,006		-		-
Redundancy costs	-		-		1,471
Costs in relation to BB&EA pension scheme	-		-		1,168
Profit on disposal of plant fleet	-		-		(122)
Total exceptional items	1,006		-		2,517
Amortisation of intangible assets	162		124		248
	1,168		124		2,765

Exceptional items comprise £1,006,000 in respect of a final account settlement on the last of the basket of legacy construction contracts, which were originally provided against in 2005. Amortisation charges relate to the fair value ascribed to intangible assets other than goodwill arising from the acquisitions of Seymour (C.E.C) Holdings Limited and C. & A. Pumps Limited.

Note 3.  Income tax expense

	Six months ended 31 March	Six months ended 31 March	Year ended 30 September
	2009	2008	2008
	Unaudited	Unaudited	Audited
	£000	£000	£000
Current tax:
UK corporation tax on profits for the period	-	(569)	(159)
Adjustments in respect of previous periods	-	-	(409)
	-	(569)	(568)
Foreign tax	-	-	(51)
Total current tax	-	(569)	(619)
Deferred tax	(107)	-	(863)
Income tax expense	(107)	(569)	(1,482)

The Group has unused tax losses available to carry forward against future taxable profits, although a significant element of these losses relates to activities which are not forecast to generate the level of profits needed to utilise these losses. A related deferred tax asset of £3,660,000 (2008: £3,990,000) has been recognised to the extent considered reasonable by the directors.  

  Note 4.  Earnings per share            

		6 months ended 31 March				6 months ended 31 March				Year ended 30 September
			2009				2008				2008
		Earnings	EPS	DEPS		Earnings	EPS	DEPS		Earnings	EPS	DEPS
		£000	Pence	Pence		£000	Pence	Pence		£000	Pence	Pence
Earnings before exceptional costs and amortisation		3,124	5.22	5.05		3,484	5.82	5.68		7,298	12.18	11.87
Exceptional costs and amortisation		(886)	(1.48)	(1.43)		(124)	(0.21)	(0.20)		(2,038)	(3.40)	(3.32)
Basic earnings per share		2,238	3.74	3.62		3,360	5.61	5.47		5,260	8.78	8.55
Weighted average number of shares (000's)			59,899	61,878			59,899	61,392			59,899	61,497

The dilutive affect of share options is to increase the number of shares by 1,979,000 (March 2008: 1,598,000) and reduce the basic earnings per share by 0.12p (March 2008: 0.14p; September 2008: 0.23p).

Note 5.  Dividends        

The proposed interim dividend is 1.0p per share (2008 1.0p). This will be paid out of the Company's available distributable reserves to shareholders on the register on 5 June 2009, payable on 6 July 2009. In accordance with IAS 1, dividends are recorded only when paid and are shown as a movement in equity rather than as a charge in the income statement.

Note 6.  Reconciliation of movements in total equity

	Six months ended	Six months ended	Year ended
	31 March 2009	31 March 2008	30 September 2008
	Unaudited	Unaudited	Audited
	£000	£000	£000
Profit for the period	2,238	3,360	5,260
Dividends	(1,196)	(719)	(1,317)
	1,042	2,641	3,943
Other recognised gains and losses for the period	1,279	20	193
Movement in share based payments reserve	90	68	136
Net movement on total equity	2,411	2,729	4,272
Opening total equity	14,281	10,009	10,009
Closing total equity	16,692	12,738	14,281

 

END

 

 

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