Final Results

RNS Number : 8500H

Renew Holdings PLC

29 November 2022

 

929 November 2022

Renew Holdings plc

("Renew" or the "Group" or the "Company")

Final Results

Continued outperformance reflects differentiated, low-risk nature of business model

Renew (AIM: RNWH), the leading Engineering Services Group supporting the maintenance and renewal of critical UK infrastructure, announces its preliminary results for the year ended 30 September 2022 ("the Period").

Financial Highlights

Year ended 30 September 2022	FY2022	FY2021	Change
Group revenue1	£849.0m	£791.0m	+7.3%
Adjusted operating profit1	£58.8m	£51.2m	+14.8%
Operating profit	£50.0m	£41.1m	+21.7%
Adjusted operating margin1	6.9%	6.5%	+45bps
Profit before tax	£49.5m	£40.8m	+21.4%
Adjusted earnings per share1	59.5p	50.5p	+17.8%
Full year dividend	17.0p	16.0p	+6.3%

●	Record results reflecting the core strengths of the Group and the resilient nature of our differentiated, high-quality, low-risk business model
●	Group order book of £775m (FY2021: £749m)
●	Net cash position (pre-IFRS16) of £20.2m (FY2021: Net debt £13.7m)
●	Final dividend of 11.33p reflecting strong cash position and positive outlook
●	De-risking of balance sheet with completion of Amco Pension Scheme buy-in

Operational Highlights

●	Secured position as second largest supplier of road restraint systems in the country with the successful collaboration of AmcoGiffen and Carnell for National Highways
●	Significant expansion of water client list following the successful integration of Browne
●	Framework extensions secured in Scotland and Eastern which leave the Group ideally placed ahead of CP7 determinations
●	Meaningful improvements in the Group's safety performance

Current Trading & Outlook

●	Trading momentum has continued into the new financial year
●	Whilst Renew is not immune to the challenging macroeconomic environment, structural growth drivers in our end markets have never been more attractive
●	Government reiterated infrastructure as a growth priority and restated its commitment to invest over £600bn2 on infrastructure by 2027
●	Post-period end acquisition of Enisca Group Limited, adding new capabilities to Renew's water business

Paul Scott, CEO of Renew, commented:

"Given the difficulties faced by most UK businesses in 2022, I am extremely pleased to be presenting another set of record results for the Group. This continued success would not be possible without the incredible hard work of our colleagues who I would like to thank on behalf of the Board. The last three years have presented a unique set of unprecedented circumstances and our continued outperformance in each year illustrates the resilient nature of our differentiated, high-quality, low-risk business model. We have made good progress across all our divisions and post-period end we were pleased to welcome Enisca to the Renew family who will add new capabilities to our water business.  

As we look ahead, we are committed to building on our strengths and will continue to leverage the combined expertise of our subsidiary businesses. Pleasingly, our positive trading momentum has continued into the new financial year and we enter 2023 with a strong order book and believe the structural growth drivers in our end markets, underpinned by committed regulatory spend, continue to provide the Group with significant opportunities."

For further information, please contact:

Renew Holdings plc	www.renewholdings.com
Paul Scott, Chief Executive Officer	via FTI Consulting
Sean Wyndham-Quin, Chief Financial Officer	020 3727 1000
Numis Securities Limited (Nominated Adviser and Joint Broker)	020 7260 1000
Stuart Skinner / Kevin Cruickshank
Peel Hunt LLP (Joint Broker)	020 7418 8900
Mike Burke / Harry Nicholas / Charles Batten
FTI Consulting (Financial PR)	020 3727 1000
Alex Beagley / Sam Macpherson / Rafaella de Freitas	[e-mail]

About Renew Holdings plc

Renew is a leading UK Engineering Services business, performing a critical role in keeping the nation's infrastructure functioning efficiently and safely. The Group operates through independently branded subsidiaries across its chosen markets, delivering non-discretionary maintenance and renewal tasks through its highly skilled, directly employed workforce.

Renew's activities are focused into two business streams: Engineering Services, which accounts for over 95 per cent 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 High Quality Residential, Landmark and Science markets in London and the Home Counties.

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

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.

Chairman's statement

Introduction

As the new Chairman I am pleased to announce that the Group achieved a record financial performance, with continued growth in revenue and profit and strong operating cash generation, again reflecting the core strengths of the Group and our well-established positions in attractive and sustainable growth markets. Supported by the commercial terms within our frameworks, the Group continues to successfully manage the well documented inflationary pressures and supply chain challenges in the wider economy.

Differentiated business model

Our differentiated business model and the services we provide continue to support key infrastructure assets in regulated markets. Our markets enjoy committed funding which provides visible, reliable and resilient revenues via long-term programmes.

We deliver non-discretionary maintenance and renewals tasks and have little exposure to the financial and contractual risks of larger enhancement schemes. Operating in complex, challenging and highly regulated environments, our markets have high barriers to entry, and we directly employ a highly skilled workforce which enables us to be extremely responsive to our clients' needs.

Results

Group revenue¹ increased to £849.0m (2021: £791.0m) with adjusted¹ operating profit increasing to £58.8m (2021: £51.2m) and an adjusted¹ operating margin of 6.9% (2021: 6.5%). Statutory operating profit was £50.0m (2021: £41.1m). The adjusted¹ EPS has increased by 17.8% to 59.5p (2021: 50.5p) and basic earnings per share was 47.8p (2021: 38.7p). The Group had a pre IFRS16 net cash¹ position of £20.2m (2021: net debt £13.7m), in line with our expectations.

Post period end we were delighted to announce the acquisition of Enisca Group Limited. This acquisition represents an excellent strategic fit, adding new capabilities to Renew's water business and will form a key part of the Group's strategy to maximise the opportunities presented by AMP8. We have worked closely with Enisca for many years as JV partners and we are delighted to welcome all the Enisca employees to the Renew Group. The acquisition was funded out of the Group's cash and existing debt facilities.

Dividend

The Group's strong trading performance, cash position and positive outlook give the Board the confidence to propose a final dividend of 11.33p (2021: 11.17p) per share. This will be paid on 3 March 2023 to shareholders on the register as at 10 February 2023, with an ex-dividend date of 9 February 2023. This will represent a full year dividend of 17.0p (2021: 16.0p) per share, an increase of 6.3%.

Environmental, Social and Governance

Environmental

We are committed to achieving net zero by no later than 2040, ahead of the 2050 target date set by the Government. During 2022, our initiatives to achieve this included developing the Group's wider sustainability strategy and our TCFD reporting. We have continued to work on our net zero planning and the innovative working practices that will support both the Group and its clients in achieving critical sustainability objectives.

We are pleased to retain our London Stock Exchange's Green Economy Mark, which recognises those companies that derive over 50 per cent of revenue from products and services that are contributing to environmental objectives. Renew plays an important role in helping to achieve Government aims for greater sustainable infrastructure.

Social

We understand the value that businesses can provide to the wider community. During the year we continued to engage with local schools and education providers, supporting our local communities and undertaking a range of charity events. We invest heavily in the training and development of our colleagues including over 270 trainees, apprentices and graduates. We also continue to invest in the Group's management development programme, Renew Inspiring Successful Executives (RISE). We remain committed to making Renew an attractive and diverse employer and to support this objective, we have created a number of diversity forums across the Group aimed at improving our performance in this important area.

Governance

As a Board, we are responsible for ensuring the effective application of high levels of governance within our business, balancing the interests of all our stakeholders. As a minimum, the Group complies with the QCA Corporate Governance Code, more details of which can be found in the corporate governance section of the Group's website. Risk management is led by the Board, which reviews the Group's risk profile on an ongoing basis alongside the Audit and Risk Committee.

Board changes

In May, David Forbes resigned as the Group's Chairman and from the Board after almost 11 years. The Board would like to thank David for his outstanding contribution to the transformation of the Group during his tenure.

Following a process run by the Nomination Committee, I was appointed as Group Chairman and Chair of the Nomination Committee.  Additional Board changes include Shatish Dasani, Chair of the Audit & Risk Committee, assuming the responsibility of Senior Independent Director and Stephanie Hazell, Non-executive Director, appointed as Chair of the Remuneration Committee. I have been a member of the Renew Board for the last five years and, as Chairman, remain focused on providing the right environment that ensures that the Group continues to grow in a sustainable manner and that we deliver on our strategic plans.

On 9 December 2021, Louise Hardy was appointed as Non-executive Director and subsequently resigned on 10 March 2022 to take up a non-executive position at another listed company.

On 1 November 2022, we were pleased to announce the appointment of Liz Barber as a Non-executive Director. Liz brings a wealth of experience gained over 12 years' in the regulated water sector, an established market for Renew. Combined with her financial background, Liz will complement the Board's current skillset and will be invaluable as we continue on our growth journey.

People and safety

As a Board we recognise the critical role our employees play in the success of the Group and we sincerely thank all our colleagues for their ongoing dedication and hard work. We remain focused on the mental and physical wellbeing of our colleagues.

We are committed to ensuring a safe working environment to ensure that none of our colleagues, or those who work with us, are injured during the conduct of our operations. During the year we have had an increased focus on the behavioural aspects of safety to further improve our safety record. 

Future focus

The Group is supported in the delivery of its long-term strategy through effective relationships with our directly employed workforce, customers, suppliers, shareholders, and wider stakeholders and these are critical to the continued success of the business as we build on our track record of consistently creating shareholder value.

We will continue to deliver our strategic priorities whilst focusing on our environmental, social and governance responsibilities and on our approach to diversity and inclusion as we move through 2023 and beyond.

The Group was pleased to see the Chancellor's recent Autumn Statement where he confirmed the Government's commitment to infrastructure spending which leaves Renew ideally placed as we look ahead. The Board expects to continue to deliver growth, both organic and through strategic earnings-enhancing acquisitions. Our differentiated business model and the reliable long-term nature of the UK infrastructure markets give the Board continued confidence despite the wider uncertain economic outlook.

David Brown

Chairman

29 November 2022

¹ Renew uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in Note 9.

Chief Executive Officer's Review

Record year underpinned by resilience and reliability 

The financial year ended 30 September 2022 has, for most UK businesses, been defined by challenging macroeconomic and geopolitical circumstances, resulting in an operating environment that is very different from where we were 12 months ago. While Renew is not immune to all of the headwinds this environment has caused, it is pleasing to be able to report another set of record results for the Group. During the last three years we have operated through national lockdowns, a global pandemic, high inflation, resourcing challenges and materials shortages, despite which, we have delivered record results in each of those three years. This period, perhaps more than any other, has highlighted the resilient nature of our differentiated, high-quality, low-risk business model. The Group's continued outperformance would not be possible without the incredible hard work of all our directly employed colleagues across the business and, on behalf of the Board, I would like to thank them for their tireless work throughout what was an extraordinary year.

We remain committed to delivering engineering infrastructure solutions for a sustainable future. Our focus on critical asset maintenance and renewal means we are not dependent on large, capital-intensive contract awards, providing Renew with a significantly lower risk profile than others in our industry. We perform a mission-critical role in keeping the nation's infrastructure functioning efficiently and safely as a leading provider of essential maintenance and renewals-led engineering services, operating in regulated markets including rail, highways, mobile telecommunications, civil nuclear, water and environmental.

As part of the pledge to level up the economy and reach net-zero carbon emissions by 2050, and as confirmed in the Autumn Statement, the Government remains committed to a record £600bn² investment in transforming the UK's infrastructure and we continue to benefit from an increased focus on maintaining and renewing assets as part of this shift. Renew has a vital role to play in supporting the sustainable infrastructure of the future and we have also made good progress on our own sustainability agenda this year and remain committed to achieving net-zero emissions across the Group by 2040.

Supported by the commercial terms within our frameworks, the Group has successfully managed industry-wide material shortages and inflation challenges throughout the year, delivering operating profit, margin and revenue ahead of strong prior year comparatives. This performance reinforces Renew's ability to deliver consistently and reliably through the economic cycle thanks to our differentiated and resilient business model, the critical nature of our work and the committed, long-term, highly visible spending cycles that underpin our end markets.

There were countless achievements across the Group throughout the year and while it is impossible to mention them all, it's worth highlighting a few of note. We were pleased to be able to record an improvement in the Group's safety performance. The successful collaboration of AmcoGiffen and Carnell for National Highways saw the Group become the second largest supplier of road restraint systems in the country, while our water division expanded its client list with the extremely successful integration of Browne into the Renew family. Separately, our Rail division secured framework extensions in Scotland and Eastern which leave the Group ideally placed ahead of CP7 determinations in 2023.

Acquisitions form a key feature of our strategic ambition to deliver compounding shareholder returns. We finished the year with a robust balance sheet and this together with our strong operational cash generation leaves us uniquely positioned to continue to appraise selective value-accretive M&A opportunities in the industries and sectors where we operate. As we expand through M&A, we will continue to leverage collaboration opportunities between our brands, providing a unique advantage when applying for frameworks.

Post period end we were delighted to announce the acquisition of Enisca Group Limited, a multi-disciplinary design, engineering and construction business providing mechanical, electrical, instrumentation, control and automation (MEICA) services to the water industry. This acquisition represents an excellent strategic fit, adding new capabilities to Renew's water business and will form a key part of the Group's strategy to maximise the opportunities presented by AMP8. We have worked closely with Enisca for many years as JV partners and we are delighted to welcome all the Enisca employees to the Renew Group.

Our chosen markets continue to see significant levels of investment providing us with organic growth opportunities through our focus on asset management programmes with non-discretionary funding and high barriers to entry. We enter 2023 with a strong forward orderbook supported by long-term contracts with repeat clients and framework agreements that provide barriers to entry which protect our current market share and provide a solid platform for growth. We look to the future with optimism, confident in the spending plans of our clients which are underpinned by strategic national need and committed regulatory spend.

Renew's strengths

Renew has a number of core strengths which provide distinct competitive advantages in our chosen markets and leave us well placed to build on our strong track record of long-term value creation:

●	The health, safety and wellbeing of our colleagues, and those impacted by our work, remains our number one priority and we have implemented industry leading safe working practices for the Group's employees and operations.
●	We operate a differentiated, diversified, low-risk, low-capital operating model, providing critical asset maintenance and renewals services that are not dependent on large, high-risk, capital-intensive contract awards.
●	Our directly employed workforce enables us to provide a more efficient and valuable service to our clients, reducing our exposure to sub-contractor pricing volatility and being able to deliver extremely responsive solutions.
●	The commercial terms within our frameworks mean we are able to proactively and effectively manage cost inflation.
●	Our businesses are well established in complex, challenging and highly regulated markets with significant barriers to entry, which demand a highly skilled and experienced workforce and a proven track record of safe delivery.
●	We work in markets underpinned by resilient, long-term growth dynamics and highly visible, reliable, committed regulatory spending periods, providing predictable cashflows.
●	We have a proven track record of sustainable value creation, reliable revenue growth and strong returns on capital thanks to our highly cash generative earnings model and clearly defined strategy.
●	We are committed to growing the business both organically and through selective complementary acquisitions while maintaining a disciplined approach to capital allocation and risk underpinned by a strong balance sheet.
●	We have strong relationships in place with all our stakeholders, from our workforce to our customers, suppliers, communities and shareholders.
●	Our model of compounding earnings through the redeployment of internally generated cashflows enables us to execute on our strategy of delivering reliable and consistent growth for all our stakeholders.

Compelling market drivers

Our businesses bring exposure to attractive long-term, non-discretionary structural growth drivers. Increasing demand for the maintenance and renewal of existing UK infrastructure is driven by a number of factors including:

●	a commitment by the Government to level up the economy by investing £600bn3 in an infrastructure-led recovery, two-thirds of which will be in the transport and energy sectors, with fiscal stimulus measures likely to flow through to lower cost infrastructure maintenance programmes ahead of larger, more capital-intensive enhancement schemes;
●	greater focus on sustainability and climate change as part of the UK's target of reaching net-zero carbon emissions by 2050, together with flood risk prevention measures and investment in nuclear projects, renewables and rail electrification programmes;
●	population growth increasing the pressure on housing, energy, water and demand for natural resources;
●	technological innovation driving a shift towards digital roads, smart cities and the transformation of transport and telecommunications networks; and
●	increased Government regulation to improve safety, efficiency and resilience of key infrastructure assets leading to more demanding maintenance, renewal and upgrading requirements.

Our track record of resilient growth and long-term value creation

Renew has a strong track record of sustainable value creation through the economic cycle thanks to the Group's high-quality, value-accretive compounding earnings model. Over the past five years, we have delivered:

·   Adjusted¹ earnings per share growth of 68 per cent;

·   an increase in our adjusted¹ operating margin from 6.5 per cent to 6.9 per cent;

·   Group organic revenue growth of 1.9 per cent and total revenue growth of 7.3 per cent; and

·   five strategic acquisitions supported largely by our strong free cash flow.

Our track record of reliable revenue growth, cash generation and conservative approach to gearing has resulted in our ability to deliver highly predictable, consistent organic earnings growth as well as funding for the acquisition of complementary businesses that meet our strategic requirements.

Results overview

During the period, Group revenue¹ of £849.0m (2021: £791.0m), an increase of 7.3% partly as a result of the full year impact of Browne, which was acquired in March 2021. The Group achieved an adjusted¹ operating profit of £58.8m (2021: £51.2m) with an adjusted¹ operating profit margin of 6.9% (2021: 6.5%). As at 30 September 2022, the Group had pre-IFRS 16 net cash¹ of £20.2m (30 September 2021: net debt £13.7m).

Underpinned by long-term framework positions, the Group's order book at 30 September 2022 has remained strong at £775m (2021: £749m).

Refinancing

Post the year-end, the Group has refinanced its debt facilities with its existing banking partners HSBC UK Bank plc and National Westminster Bank plc and has introduced a new bank into the banking syndicate, Lloyds Banking Group plc. The new facility comprises an £80m secured revolving credit facility committed until November 2026.

Amco pension buy-in

As previously announced, the Trustee of the Amco Group Pension Scheme ("Amco Scheme"), in consultation with the Board, entered into a "buy-in" agreement with a specialist insurer on 8 April 2022. This transaction will ensure the security of the benefits of the Amco Scheme's pensioners and deferred members and, while the Group remains legally responsible for the scheme, the transaction has eliminated all of the Group's exposure to investment and funding risks in the Amco Scheme. The transaction also improves the long-term security of members' benefits. As a result of this buy-in, and the previous buy-in that occurred in 2013, all of the Amco Scheme's liabilities are now matched with corresponding annuities. The "buy-in" will be completed using Amco Scheme assets plus an additional, one off, cash contribution which is expected to be around £1.6m to purchase annuities from the specialist insurer which match corresponding pension liabilities, where the annuity policy remains an asset of the Amco Scheme.

Dividend

The Group's strong trading performance, cash position and positive outlook gives the Board the confidence to propose a final dividend of 11.33p per share, an increase of 1.4 per cent over the prior year final dividend of 11.17p. This will be paid on 3 March 2023 to shareholders on the register as at 10 February 2023, with an ex-dividend date of 9 February 2023. This will represent a full year dividend of 17p (2021: 16p) per share.

Engineering Services

Our Engineering Services activities account for over 95 per cent of the Group's adjusted¹ operating profit and delivered revenue¹ of £778.9m (2021: £706.7m) with an adjusted¹ operating profit of £59.1m (2021: £51.5m) resulting in an adjusted¹ operating margin of 7.6% (2021: 7.3%). At 30 September 2022, the Engineering Services order book was £717m (2021: £679m).

Rail

Network Rail is investing £53bn⁴ over the current Control Period (CP6), which runs to 2024. Network Rail is a significant strategic customer for the Group and during the period the Group became the third largest provider of engineering services to Network Rail nationally. CP6 has an increased focus on operational support, renewal and maintenance works, which plays to our strengths, as does the Government's commitment to its rail decarbonisation programme. This will include significant investment in electrification programmes as part of the overall UK target to deliver net-zero by 2050.

As the largest provider of multidisciplinary maintenance and renewals engineering services to Network Rail, we support the day-to-day operation of the rail network nationally, directly delivering essential asset maintenance through our long-term CP6 frameworks. The Group assists Network Rail through our mission-critical renewals and maintenance services supporting assets including bridges, embankments, tunnels, drainage systems, signalling and electrification.

During the period, we continued to add new positions including the Southern Buildings and Civils Framework and the Structures Integrity Framework in the South, while also securing further fencing and vegetation management work under CP6 and new frameworks for Transport for Wales. We also secured work on the Transpennine Upgrade and have seen growth in our renewals work bank. Pleasingly, we are beginning to see the early signs of the electrification market come to life as part of the UK Government's plan to decarbonise the nation's railways. We have begun electrification work on the Midland Main Line and the Aberdeen to Glasgow line and see a greater emphasis on rail electrification as we move into Control Period 7 (CP7).

Importantly, we secured a one-year framework extension in Scotland which leaves the Group ideally placed to seize further opportunities as we move into CP7. We have also made excellent progress on preparations to resecure our framework positions for CP7.

Innovation remains a key differentiator for the Group and during the period we maintained our position as the leading rail plant innovator in the country. We have received positive recognition from our clients for the efficiency of our work which is in part a result of our relentless pursuit to implement industry-leading innovations. Our Rail MegaVac and Mega Chipper V2 are just two recent examples of innovations we have brought to market and our teams continue to evaluate other opportunities to make our work more efficient and sustainable.

The compelling maintenance-focused structural growth drivers within this sector and Renew's high quality engineering expertise leave the Group ideally positioned to deliver long-term, profitable growth in Rail particularly as we see opportunities present themselves in the current and future Control Periods. Our team remains focused on securing our existing frameworks which are coming up for renewal while continuously appraising other areas for organic growth. The early stages of increased electrification on the railways bode well for future CP7 framework applications where our three rail brands have formed a collaborative and unique position for Overhead Line Electrification delivery, another key strategic pillar for the Group.

Infrastructure

Highways

Following the Group's successful entry into the Highways market via its acquisition of Carnell in January 2020, it has continued to go from strength to strength. We made good progress during the period, delivering essential asset maintenance and critical infrastructure renewals underpinned by non-discretionary regulatory requirements.

The UK Government has committed to an unprecedented level of spending on England's strategic road network as part of its second Road Investment Strategy ("RIS2"). Of the £24bn⁵, £11.9bn of funding is ringfenced for operations, maintenance and renewals which represents a significant opportunity for Renew. Importantly, this trend looks set to continue with increased spend in renewals forecast over the next 10 years with a focus on structures, concrete pavement and road restraints.

Recently, Transport Focus, the independent watchdog representing the interests of users of England's motorways, submitted its six strategic objectives for RIS3⁶. The objectives build on the first two strategies and while all six objectives are important, Transport Focus notes that those of the greatest importance relate to the top three road user priorities: improved quality of road surfaces; safer design and upkeep of the road network; and better management of roadworks. This continued focus on renewals and maintenance plays well into the Group's capabilities as we move into RIS3.

During the period, work commenced on the National Highways Scheme Delivery Framework ("SDF") across five framework lots, covering civil engineering, road restraint systems and drainage disciplines, worth £147m over six years. The road restraint lots will be delivered through a collaboration between two of the Group's subsidiary businesses, AmcoGiffen and Carnell, illustrating the integration and collaboration potential of our brands. The joint venture between AmcoGiffen and Carnell, was the only successful joint venture on the SDF and makes the Group the second largest supplier of road restraint systems in the country. Following this key strategic advancement, the Group continues to pursue further opportunities where it can leverage the combined expertise of its subsidiaries.

With the continued focus on renewals and maintenance on the country's strategic road network, Renew remains uniquely placed to seize attractive growth and market share opportunities within Highways.

Aviation

During the period we were appointed to the 5-year Manchester Airports Group £700m Civils Framework to deliver medium-sized civil-engineering projects valued between £3m - £10m. This will support its programme of infrastructure development across its three airports namely, Manchester, East Midlands and Stansted. Works are expected to gather momentum in late 2023 onwards.

Wireless telecoms

As the UK Government continues to invest in wireless technology to improve the nation's connectivity, the sector remains an attractive growth area for the Group. An estimated £30bn⁷ is required to upgrade the nation's broadband networks to gigabit-capable speeds, which includes the Government's £5bn investment in Project Gigabit to upgrade the UK's broadband infrastructure, a significant component of which is 5G, the expansion of the Shared Rural Network and the £500m programme to extend 4G mobile coverage to 95% of the UK.

The Group is well positioned to benefit from various upcoming projects to cater for the increasing demand for 5G services. We operate across 3UK's programme of cell site densification and VMO2 and MBNL's three-year 5G services frameworks. We are progressing well in our works with EE and BT to remove Huawei equipment from UK networks by 2027 and we have secured contracts with Vodafone and VMO2 to deliver acquisition, design and construction services.

Growing investment in fibre by Openreach, Virgin and Altnets, underpinned by Government regulation, presents a strong opportunity in the sector, and we continue to build on our long-term relationships with the main UK network operators, equipment vendors and managed service providers.

Energy

Nuclear

The Government's total nuclear decommissioning provision is estimated at £124bn⁸ over the next 120 years, with around 75% of the total spend allocated to Sellafield which is the largest of the Nuclear Decommissioning Authority's sites and where we remain a principal Mechanical, Electrical and Instrumentation services contractor. The Nuclear Decommissioning Authority is increasing investment in decommissioning at Sellafield, Magnox and Dounreay with EDF stations being brought into public ownership.

Having worked for over 75 years in civil nuclear, we provide a multidisciplinary service through our large complement of highly skilled employees who operate to demanding nuclear standards, including decontamination and decommissioning services, operational support and asset care, as well as waste retrieval in high-hazard areas such as legacy storage ponds and silos. As such, the Group can take advantage of opportunities in the decommissioning stage and the new nuclear build programme.

In the period, the Group has secured a number of decommissioning and decontaminating contracts. We are excited to have won our first project to plan decommissioning of facilities at AWE - Aldermaston, and a separate decontamination project for the recently closed THORP nuclear fuel reprocessing plant.

We continue to operate across a number of long-term frameworks at Sellafield and we are collaborating with Programme and Project Partners ("PPP") to secure further growth opportunities. PPP is a 20-year framework for the delivery of a broad range of major projects for the site, with £7bn in the programme pipeline.  We have also secured memorandum of understanding ("MOU") to support three of these projects. In a joint venture, the Group has delivered the installation of the first waste retrieval machine within the highest hazard building on the site. Our work at Sellafield positions us well for opportunities in the Major Projects Programme and we continue to build relationships outside of Sellafield at Magnox and Dounreay and AWE, broadening opportunities for decommissioning contracts.

This year has seen significant changes to the Government's stance towards nuclear energy. Turbulent energy markets and high gas prices have exposed the issues of over reliance on foreign supplies. In April 2022, the Government launched the British Energy Security Strategy, identifying new nuclear as an important part of its plans to ensure greater energy independence. The strategy will see a significant acceleration in investment in new nuclear, with an ambition of new nuclear producing up to 24GW by 2050, representing 25% of projected electricity demand⁹.

Whilst most existing plants will be shut down by the end of the decade, the Government has simultaneously set a target to commence construction of up to three new nuclear plants in the next 10 years, with the approval of a £100m investment in Sizewell C¹⁰ (estimated to be a £30bn project), £210m allocated to Small Modular Reactors (SMR's)¹¹ and the establishment of Great British Nuclear. This sizeable investment in new nuclear represents an exciting growth area for the Group.

Our contract to support Rolls Royce at Hinkley Point "C" for manufacturing and installation of key components is progressing well and we have a MOU in place to support the manufacture of Rolls Royce's Small Modular Reactor.

Electric Vehicle Charging

The UK Government's commitment to ban the sale of non-electric new cars by 2030 provides the Group with another exciting growth opportunity. This target has been identified as a key priority in supporting the Government's net zero emissions targets as well as its ambition to become the fastest nation in the G7 to decarbonise road transport¹².

As part of its plans, the Government committed to remove charging infrastructure as both a perceived, and a real, barrier to the adoption of electric vehicles and has allocated a £950m Rapid Charging Fund¹³ to support the rollout of at least 6,000 high powered charge points across England's motorways and major A-roads by 2035. An additional sum of over £500m of funding has been granted to support local authorities to find innovative ways to increase local charge point coverage, as well as the launch of the £10m Local EV Infrastructure pilot project¹⁴.

The sector has seen over £3bn invested in recent years¹⁵. Large vehicle fleet owners such as Amazon, XPO and Post Office are investing in vehicle charging infrastructure to support return to base electric fleets.

Our projects during the year included the delivery of Volvo bus and truck electrical infrastructure and charging projects UK wide, providing EV infrastructure for Amazon distribution facilities, the Post Office and the installation of EV and network upgrades in nine mainline Network Rail stations.

Thermal Power, Renewables, Networks, Transmission and Distribution

Our essential engineering maintenance services continue in a number of the UK's thermal power stations. We are progressing delivery of our work on the Minor Works Framework with National Grid and our Minor Civils Framework with Western Power Distribution and have secured additional contracts for works on the SSE Hydro Tunnels Framework and the Drax Electrical Framework.

The Group is an accredited Independent Connection Provider (ICP), supporting electrical system upgrades required for EV and Telecoms. Our offer is unique and provides a consultative solution for the delivery of large-scale electrical charging infrastructure.

Renew is focused on leveraging opportunities in the electricity transmission and distribution market. This is expected to grow as a consequence of the changing energy generation mix where we note that Ofgem has announced more than £20bn¹⁶ of initial funding to strengthen the transition to low carbon technologies.

Environmental

Water

In Water, we continue to benefit from the UK Government's commitment to spend £51bn¹⁷ over AMP7 into 2025 with increased expenditure on capital maintenance, asset optimisation and supply resilience including dam safety and infrastructure refurbishment schemes. The market is underpinned by committed regulatory spend and long-term growth opportunities.

AMP7 has been characterised by a focus on cost efficiency & leak reduction resulting in an increase in planned expenditure on capital maintenance, asset optimisation & supply resilience. As we enter Year 3, we expect to see an increasingly accelerated programme of regulatory spend over the final years of the current AMP cycle, given the lower level of expenditure in the early part of the cycle.

Our offer of mains renewal, scheduled repairs and maintenance as well as extensive 24/7 emergency reactive works remains one of our key strengths, providing specialised, mission-critical services for clients around the UK. With water companies increasing expenditure on capital maintenance and asset optimisation, we are in a strong position to fulfil any new works in these areas.

During the period we continued our work with Dŵr Cymru Welsh Water ("DCWW") and currently hold a number of contracts with market-leading companies including for the Pressurised Pipelines Framework and the Capital Delivery Alliance Civils & Pipeline Framework. We are delighted that for the first time, we have secured a place on the DCWW Major Civils 8-year Framework, a key strategic target for the Group.

Elsewhere, we have been awarded a new framework with Severn Trent and we continue engagements for Bristol Water on mains renovation, Wessex Water on the Phosphate Removal Programme and we are maintaining and renewing existing assets on operational treatment and distribution facilities (AMP7 Minor Civils Framework) with Yorkshire Water.

During 2021, we welcomed Browne into the Renew family and that acquisition has continued to strengthen our offering and footprint in the sector. Browne has seamlessly integrated into the Group, continues to trade ahead of management's expectations and helped the Group to expand our Water client base. During the period we added Thames Water, Affinity Water, South East Water and Southern Water to our growing list of clients.

We also continue to see long-term opportunities with existing clients Scottish Canals and Peel Ports.

Flood & Coastal

Changing weather conditions have highlighted the need for investment in flood defence, and the UK Government has committed £5.2bn¹⁸ over the next six years to improve flood defence infrastructure. This includes plans to improve protection to 336,000 properties exposed during the floods in 2019, with similar programmes being planned in devolved budgets for Scotland & Wales.

The Group currently undertakes work for the Environment Agency ("EA") on the EA Flood and Coastal Erosion Framework. With growing investment in the segment, and increased pressure on governments to improve the UK's resilience for climate change, the Group is well-positioned to expand its presence in the sector. We also continue to work on national frameworks for the Canal and River Trust, Scottish Canals and Natural Resources Wales.

Specialist Restoration

As reported in our interim results, we are progressing well with works at the Palace of Westminster, now entering the new flat roofs phase at the site, through the award of a five-year Conservation Framework. This market continues to present a number of long-term opportunities for our specialist capabilities. In the period we were appointed to schemes at Tollcross in Glasgow and Royal Botanic Garden Edinburgh.

Specialist Building

Revenue was in line with the Group's expectations at £70.1m (2021: £84.4m) reflecting a continued focus on contract selectivity and risk management. Operating profit was £1.7m (2021: £1.6m). In Specialist Building, the order book was £58m (2021: £70m).

Our Specialist Building business focuses on the High Quality Residential, Landmark and Science markets in London and the Home Counties.

The High Quality Residential market continues to be robust and we are active on a number of schemes across the capital. The Group was also awarded several other landmark schemes during the period including for the National History Museum. Our essential work for the Medical Research Council is nearing completion and we have recently been appointed on a scheme for Imperial College London's Department of Infectious Diseases.

Environmental, Social and Governance (ESG)

Our purpose is to provide essential engineering services to maintain and renew critical infrastructure networks. It is well recognised that investment into low-carbon infrastructure will be fundamental in delivering the Government's ambition to reach net-zero emissions in the UK by 2050. Indeed, it is the Board's ambition that the Group will achieve net zero by no later than 2040.

From the rail network and digitally assisted roads to high-speed telecoms and clean energy, Renew has a key enabling role to play on the frontline of efforts to decarbonise the economy. Our long-term approach to sustainability, which has always been at the heart of our business, is more relevant now than ever before.

Since the introduction of our quantitative targets at the Group's interim results in May 2021, we are pleased to report good progress on our ESG strategy across four key areas:

· take climate action;

· operate responsibly;

· empower our people; and

· build social value.

We continue to advance our strategy, and this year we have focused on implementing TCFD disclosure and developing next steps for 2023. Pleasingly, we have also taken the necessary steps to retain our LSE Green Economy Mark. Further details of our comprehensive approach to ESG will be set out in the Group's 2022 Annual Report and Accounts.

Our people

Our people are the most important part of our business and I, on behalf of the Board, would once again like to thank them for all their hard work throughout the year.

Our highly skilled, directly employed workforce are essential to our high-quality, low-risk, resilient and differentiated business model. In response to the increase in the cost of living and to ensure we retain our talent, we have undertaken a number of initiatives to support our employees during this difficult economic time.  Pleasingly, we remain below the industry average attrition rate and expect this to continue as a consequence of the initiatives we have rolled out during the period.

M&A - A key growth driver

Our high-quality compounding earnings model enables the Group to redeploy internally generated cashflow in a disciplined manner, creating value through highly selective and strategically complementary M&A opportunities that supplement our profitable organic growth. We have a strong record of successfully identifying, acquiring and integrating value-enhancing acquisitions, more recently improving our capabilities in the Water sector through the acquisition of Browne in 2021, whilst successfully entering the Highways market in 2020 through the acquisition of Carnell. Both of these brands have outperformed expectations and now form key elements of our growth strategy going forward. We continue to actively appraise opportunities that fit within our strict acquisition criteria and will supplement our existing capabilities and extend our footprint into untapped markets in the UK. The M&A landscape remains dynamic and we will remain disciplined in our pursuit of targets in terms of both valuations and strategic fit. 

Outlook - moving forward with confidence

The year has once again highlighted the differentiated and resilient nature of our, high-quality, low-risk business model. In the face of incredibly challenging political and economic circumstances, the Group has delivered another record set of results supported by the commercial terms within our frameworks.

Despite recent political instability, the UK Government remains committed to its plans to level up the economy and reach net-zero by 2050 through long-term, record levels of committed investment with an increased focus on maintaining and renewing assets. This commitment was confirmed in the Chancellor's recent Autumn Statement when he said "I am not cutting a penny from our capital budgets in the next two years and maintaining them at that level in cash terms for the following three years." The UK Government has also sharpened its focus on infrastructure to improve climate resilience and energy self-sufficiency, investing in renewable sources and nuclear capabilities. To this end, the structural growth drivers in our end markets have never been more attractive and we remain uniquely positioned to seize both organic and acquisitive growth opportunities.

Our business model is built on solid foundations, evidenced by strong and well-established market positions across key infrastructure sectors with visible, non-discretionary spending cycles. The spending plans of our clients are underpinned by strategic national needs and regulatory commitments. In line with previous years, we have entered the new financial year with our order book in a strong position and trading in the new year has begun positively.

As we look ahead, we are committed to building on our strengths and will continue to leverage the combined expertise of our subsidiary businesses in 2023, following their successful collaboration on a number of projects this year as we target new areas for organic growth while simultaneously appraising acquisitive opportunities in our end markets. Our chosen markets continue to see significant levels of investment which gives us confidence in the Group's future prospects as we move into 2023 and into new framework cycles across our sectors of expertise.

Paul Scott

Chief Executive Officer

29 November 2022

1	Renew uses a range of statutory performance measures and alternative performance measures when reviewing the performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation to statutory performance measures, are included in Note 9.
2	HM Treasury, Autumn budget and spending review 2022 - October 2022
3	HM Treasury, Autumn budget and spending review 2022 - October 2022
4	Network Rail Delivery Plan, Control Period 6, High Level Summary - 26 March 2020
5	UK Government Department for Transport, Planning ahead for the Strategic Road Network - December 2021
6	Transport Focus, Putting road users at the heart of the Road Investment Strategy for 2025-2030 - October 2022
7	UK Government Department for Digital, Culture, Media & Sport, Future Telecoms Infrastructure Review - 23 July 2018
8	Nuclear Decommissioning Authority, Nuclear Provision: the cost of cleaning up Britain's historic nuclear sites - 4 July 2019
9	British Energy Security Strategy - April 2022
10	British Energy Security Strategy - April 2022
11	British Energy Security Strategy - April 2022
12	Taking Charge: the electric vehicle infrastructure strategy - March 2022
13	Taking Charge: the electric vehicle infrastructure strategy - March 2022
14	Taking Charge: the electric vehicle infrastructure strategy - March 2022
15	Taking Charge: the electric vehicle infrastructure strategy - March 2022
16	Ofgem RIIO-ED2 Draft Determinations - Overview Document - 29 June 2022
17	Ofwat PR19 final determinations, December 2019
18	UK Government Department for Environment, Food and Rural Affairs, Flood and coastal erosion risk management - 29 July 2021

Group income statement
for the year ended 30 September
		Before	Exceptional		Before	Exceptional
		exceptional	items and		exceptional	items and
		items and	amortisation		items and	amortisation
		amortisation	of intangible		amortisation	of intangible
		of intangible	assets		of intangible	assets
		assets	(see Note 3)	Total	assets	(see Note 3)	Total
		2022	2022	2022	2021	2021	2021
	Note	£000	£000	£000	£000	£000	£000
Revenue: Group including share of joint ventures*		849,048	-	849,048	790,995	-	790,995
Less share of joint ventures' revenue*		(32,772)	-	(32,772)	(15,356)	-	(15,356)
Group revenue from continuing activities	2	816,276	-	816,276	775,639	-	775,639
Cost of sales		(693,336)	-	(693,336)	(666,454)	-	(666,454)
Gross profit		122,940	-	122,940	109,185	-	109,185
Administrative expenses		(68,184)	(8,527)	(76,711)	(57,985)	(10,070)	(68,055)
Other operating income		3,655	-	3,655	-	-	-
Share of post-tax result of joint ventures		362	(267)	95	11	-	11
Operating profit	2	58,773	(8,794)	49,979	51,211	(10,070)	41,141
Finance income		16	-	16	19	-	19
Finance costs		(573)	-	(573)	(836)	-	(836)
Other finance income - defined benefit pension schemes		33	-	33	428	-	428
Profit before income tax	2	58,249	(8,794)	49,455	50,822	(10,070)	40,752
Income tax expense	5	(11,330)	1,782	(9,548)	(11,096)	2,427	(8,669)
Profit for the year from continuing activities		46,919	(7,012)	39,907	39,726	(7,643)	32,083
Loss for the year from discontinued operations	4			(2,242)			(1,620)
Profit for the year attributable to equity holders of the parent company				37,665			30,463
Basic earnings per share from continuing activities	7	59.52p	(8.89)p	50.63p	50.51p	(9.72)p	40.79p
Diluted earnings per share from continuing activities	7	59.13p	(8.87)p	50.43p	50.09p	(9.63)p	40.46p
Basic earnings per share	7	59.52p	(11.74)p	47.78p	50.51p	(11.78)p	38.73p
Diluted earnings per share	7	59.13p	(11.70)p	47.60p	50.09p	(11.68)p	38.41p

* Alternative performance measure, please see Note 9 for further details.

Group statement of comprehensive income
for the year ended 30 September
								2022	2021
								£000	£000
Profit for the year attributable to equity holders of the parent company								37,665	30,463
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined benefit pension schemes								347	(25,672)
Movement on deferred tax relating to the pension schemes								(240)	9,026
Total items that will not be reclassified to profit or loss								107	(16,646)
Items that are or may be reclassified subsequently to profit or loss:
Exchange movement in reserves								-	(8)
Total items that are or may be reclassified subsequently to profit or loss								-	(8)
Total comprehensive income for the year attributable to
equity holders of the parent company								37,772	13,809

Group statement of changes in equity
for the year ended 30 September
								Share		Capital		Cumulative		Share based
						Share		premium		redemption		translation		payments		Retained		Total
						capital		account		reserve		adjustment		reserve		earnings		equity
						£000		£000		£000		£000		£000		£000		£000
At 1 October 2020							7,856		66,378		3,896		1,316		821		40,180		120,447
Transfer from income statement for the year																	30,463		30,463
Dividends paid																	(10,354)		(10,354)
New shares issued							12										647		659
Recognition of share based payments															258				258
Exchange differences													(8)						(8)
Actuarial movement recognised in pension schemes																	(25,672)		(25,672)
Movement on deferred tax relating to the pension schemes																	9,026		9,026
At 30 September 2021							7,868		66,378		3,896		1,308		1,079		44,290		124,819
Transfer from income statement for the year																	37,665		37,665
Dividends paid																	(13,281)		(13,281)
New shares issued							18												18
Recognition of share based payments															658				658
Vested share option transfer															(362)		362		-
Reclassification on closure of overseas subsidiaries													(1,308)						(1,308)
Actuarial movement recognised in pension schemes																	347		347
Movement on deferred tax relating to the pension schemes																	(240)		(240)
At 30 September 2022							7,886		66,378		3,896		-		1,375		69,143		148,678

Group balance sheet
At 30 September
			2022	2021
				(restated*)
			£000	£000
Non-current assets
Intangible assets - goodwill			138,445	139,698
- other			22,385	29,241
Property, plant and equipment			17,834	16,254
Right of use assets			15,519	17,247
Investment in joint ventures			5,538	5,708
Retirement benefit asset			2,230	661
Deferred tax assets			2,899	2,301
			204,850	211,110
Current assets
Inventories			2,613	2,078
Assets held for resale			1,250	1,250
Trade and other receivables			164,590	157,416
Current tax assets			-	1,382
Cash and cash equivalents			20,218	881
			188,671	163,007
Total assets			393,521	374,117
Non-current liabilities
Lease liabilities			(8,640)	(9,421)
Retirement benefit obligation			(1,049)	(152)
Deferred tax liabilities			(7,568)	(8,067)
Provisions			(338)	(441)
			(17,595)	(18,081)
Current liabilities
Borrowings			-	(14,609)
Trade and other payables			(212,684)	(207,667)
Lease liabilities			(5,884)	(6,180)
Current tax liabilities			(595)	-
Provisions			(8,085)	(2,761)
			(227,248)	(231,217)
Total liabilities			(244,843)	(249,298)
Net assets			148,678	124,819
Share capital			7,886	7,868
Share premium account			66,378	66,378
Capital redemption reserve			3,896	3,896
Cumulative translation adjustment			-	1,308
Share based payments reserve			1,375	1,079
Retained earnings			69,143	44,290
Total equity			148,678	124,819

*Reclassification from accruals to provisions (please see accounting policy Note 1)

Group cashflow statement
for the year ended 30 September
		2022	2021
		£000	£000
Profit for the year from continuing operating activities		39,907	32,083
Share of post-tax trading result of joint ventures		(95)	(11)
Impairment and amortisation of intangible assets		8,109	6,463
Research and development expenditure credit		(1,353)	-
Defined benefit pension scheme G.M.P. equalisation/past service deficit		-	2,805
Depreciation of property, plant and equipment and right of use assets		10,136	10,504
Profit on sale of property, plant and equipment		(830)	(649)
Increase in inventories		(534)	(405)
Increase in receivables		(7,455)	(15,289)
Increase in payables and provisions		10,986	3,996
Current and past service cost in respect of defined benefit pension scheme		23	61
Cash contribution to defined benefit pension schemes		(315)	(560)
Charge in respect of share options		657	258
Finance income		(16)	(19)
Finance expense		540	408
Interest paid		(573)	(836)
Income taxes paid		(7,595)	(7,335)
Income tax expense		9,548	8,669
Net cash inflow from continuing operating activities		61,140	40,143
Net cash outflow from discontinued operating activities		(3,977)	(976)
Net cash inflow from operating activities		57,163	39,167
Investing activities
Interest received		16	19
Dividend received from joint venture		265	60
Proceeds on disposal of property, plant and equipment		1,514	1,263
Purchases of property, plant and equipment		(5,056)	(4,042)
Acquisition of subsidiaries net of cash acquired		-	(33,343)
Net cash outflow from investing activities		(3,261)	(36,043)
Financing activities
Dividends paid		(13,281)	(10,354)
Issue of share equity		18	659
New loan		18,000	10,000
Loan repayments		(22,373)	(18,752)
Repayments of obligations under lease liabilities		(6,693)	(7,410)
Net cash outflow from financing activities		(24,329)	(25,857)
Net increase/(decrease) in continuing cash and cash equivalents		33,550	(21,757)
Net decrease in discontinued cash and cash equivalents		(3,977)	(976)
Net increase/(decrease) in cash and cash equivalents		29,573	(22,733)
Cash and cash equivalents at beginning of year		(9,355)	13,396
Effect of foreign exchange rate changes on cash and cash equivalents		-	(18)
Cash and cash equivalents at end of year		20,218	(9,355)
Bank balances and cash		20,218	881
Bank overdraft		-	(10,236)
Cash and cash equivalents at end of year		20,218	(9,355)

Notes

1 Basis of preparation

The consolidated financial statements for the year ended 30 September 2022 have been prepared in accordance with UK adopted International accounting standards ("Adopted IFRS"). These preliminary results are extracted from those financial statements.

Going concern

The Board has concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous review of financial forecasts and available resources. The Directors have robustly tested the going concern assumption in preparing these financial statements, taking into account the Group's liquidity position at 30 September 2022. The Directors have considered the results of the stress testing of key assumptions and consider the likelihood of events or circumstances that would impact the going concern assessment as collectively remote. The Directors have reviewed the period to 31 December 2023.

Prior year restatement

In the prior year, £6.0m of provisions were incorrectly recorded as accruals.  This has resulted in previously reported trade and other payables reducing by £6.0m and previously reported provisions increasing by £6.0m. This reclassification impacts the balance sheet only.  There is no impact to any other primary statement or note to the financial statements. The impact at the beginning of the prior period (1 October 2020) would be to increase provisions and reduce accruals by £6.0m.

2 Segmental analysis

The Group is organised into two operating business segments plus central activities 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;

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; and

Central activities, which include the leasing and sub-leasing of some UK properties and the provision of central services to the operating subsidiaries.

						Group including	Less	Group revenue	Group revenue
						share of joint	share of joint	from continuing	from continuing
						ventures	ventures	activities	activities
Revenue is analysed as follows:						2022	2022	2022	2021
						£000	£000	£000	£000
Engineering Services						778,917	(32,772)	746,145	691,207
Specialist Building						70,125	-	70,125	84,425
Segment revenue						849,042	(32,772)	816,270	775,632
Central activities						6	-	6	7
						849,048	(32,772)	816,276	775,639

				Before
				exceptional	Exceptional
				items and	items and
				amortisation	amortisation
				of intangible	of intangible
				assets	assets
				2022	2022	2022	2021
				£000	£000	£000	£000
Engineering Services				59,123	(8,376)	50,747	42,456
Specialist Building				1,679	-	1,679	1,613
Segment operating profit				60,802	(8,376)	52,426	44,069
Central activities				(2,029)	(418)	(2,447)	(2,928)
Operating profit				58,773	(8,794)	49,979	41,141
Net financing costs				(524)	-	(524)	(389)
Profit on ordinary activities before income tax				58,249	(8,794)	49,455	40,752

Engineering Services segment operating profit for the year ended 30 September 2021 is stated after charging exceptional costs of £3,607,000 and amortisation of £6,463,000, resulting in a total charge before taxation of £10,070,000 (see Note 3).

3 Exceptional items and amortisation of intangible assets							2022	2021
							£000	£000
Defined benefit pension scheme guaranteed minimum pension equalisation							-	1,107
Amco defined benefit scheme past service cost deficit							-	1,698
Aborted acquisition costs/acquisition costs							418	802
Total losses arising from exceptional items							418	3,607
Amortisation of intangible assets							7,123	6,463
Impairment of intangible asset							1,253	-
Total exceptional items and amortisation charge before income tax							8,794	10,070
Taxation credit on exceptional items and amortisation							(1,782)	(2,427)
Total exceptional items and amortisation charge							7,012	7,643

Last year's Annual Report reported that on 20 November 2020 the High Court handed down a further judgment in the Lloyds Banking case regarding equalising guaranteed minimum pension benefits. The judge found that pension schemes do have a liability to pay top-ups to members who transferred out in the past. The effect of this for the schemes has been estimated by the actuaries as an additional liability of £1,107,000.

Last year the Amco defined benefit scheme recognised an actuarial estimate of £1,698,000 additional liabilities from extending the Barber window to be in line with recent legal advice received by the Trustee as part of a potential "buy-in" transaction to remove the scheme's investment and funding risk.  This legal advice indicates that the scheme may not have equalised normal pension age (NPA) as previously assumed in the early 1990's, and that the NPA for members in service in May 1991 may be 60 for a higher proportion of their service.

During the year the Company incurred £418,000 of costs on an unsuccessful acquisition opportunity. Last year's acquisition costs related to the acquisition of J Browne Group Holdings Ltd and Rail Electrification Ltd on 26 March 2021 and 28 May 2021 respectively.

The Board has separately identified the charge of £7,123,000 (2021: £6,463,000) for the amortisation of the fair value ascribed to certain intangible assets, other than goodwill, arising from the acquisitions of Giffen Holdings Ltd, QTS Group Ltd, Carnell Group Holdings Ltd. J Browne Group Holdings Ltd and Rail Electrification Ltd.

The Directors have made a full provision of £1,253,000 against Britannia's goodwill carrying value following the decision to wind down that company's operations.

4 Loss for the year from discontinued operations					2022	2021
					£000	£000
Revenue					-	-
Expenses					(2,242)	(1,620)
Loss before income tax					(2,242)	(1,620)
Income tax charge					-	-
Loss for the year from discontinued operations					(2,242)	(1,620)

On 31 October 2014,  the Board reached an agreement to sell Allenbuild Ltd to Places for People Group Ltd. As a term of the disposal Renew Holdings plc retained both the benefits and the obligations associated with a number of Allenbuild contracts which have resulted in the requirement for an additional £3,353,000 (2021:£1,620,000) accrual. This is as a result of the settlement of historic claims during the financial year and a subsequent internal reassessment of the likely costs required to settle other known contractual disputes.

This expense was offset by the recycling of the foreign currency translation reserve of £1,308,000.

5 Income tax expense
(a) Analysis of expense in year							2022	2021
							£000	£000
Current tax:
UK corporation tax on profits of the year							(10,692)	(8,719)
Adjustments in respect of previous period							(193)	25
Total current tax							(10,885)	(8,694)
Deferred tax - defined benefit pension schemes							(87)	601
Deferred tax - other timing differences							1,424	(576)
Total deferred tax							1,337	25
Income tax expense in respect of continuing activities							(9,548)	(8,669)
(b) Factors affecting income tax expense for the year
							2022	2021
							£000	£000
Profit before income tax							49,455	40,752
Profit multiplied by standard rate
of corporation tax in the UK of 19% (2021: 19%)							(9,396)	(7,743)
Effects of:
Expenses not deductible for tax purposes							(1,705)	(837)
Timing differences not provided in deferred tax							1,721	1,476
Change in tax rate							25	(1,590)
Adjustments in respect of previous period							(193)	25
							(9,548)	(8,669)

Deferred tax has been provided at a rate of 25% (2021: 25%) following the decision that the UK corporation tax rate should increase to 25% (effective from 1 April 2023) and substantively enacted on 24 May 2021. The deferred tax asset and liability at 30 September 2022 has been calculated based on these rates, reflecting the expected timing of reversal of the related temporary timing differences (2021: 25%).  The Group has available further unused UK tax losses of £23.7m (2021: £25.3m) to carry forward against future taxable profits. A substantial element of these losses relates to activities which are not forecast to generate the level of profits needed to utilise these losses. A deferred tax asset has been provided to the extent considered reasonable by the Directors, where recovery is expected to be recognisable within the foreseeable future.  The unrecognised deferred tax asset in respect of these losses amounts to £5.9m (2021: £5.2m).

6 Dividends
				2022	2021
				Pence/share	Pence/share
Interim (related to the year ended 30 September 2022)				5.67	4.83
Final (related to the year ended 30 September 2021)				11.17	8.33
Total dividend paid				16.84	13.16
				£000	£000
Interim (related to the year ended 30 September 2022)				4,472	3,800
Final (related to the year ended 30 September 2021)				8,809	6,554
Total dividend paid				13,281	10,354

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 11.33p per Ordinary Share be paid in respect of the year ended 30 September 2022.  This will be accounted for in the 2022/23 financial year.

7 Earnings per share
					2022				2021
				Earnings	EPS	DEPS	Earnings		EPS	DEPS
				£000	Pence	Pence	£000		Pence	Pence
Earnings before exceptional items and amortisation				46,919	59.52	59.30		39,726	50.51	50.09
Exceptional items and amortisation				(7,012)	(8.89)	(8.87)		(7,643)	(9.72)	(9.63)
Basic earnings per share - continuing activities				39,907	50.63	50.43		32,083	40.79	40.46
Loss for the year from discontinued operations				(2,242)	(2.85)	(2.83)		(1,620)	(2.06)	(2.05)
Basic earnings per share				37,665	47.78	47.60		30,463	38.73	38.41
Weighted average number of shares ('000)					78,825	79,125			78,655	79,304

The dilutive effect of share options is to increase the number of shares by 299,750 (2021: 649,000) and reduce basic earnings per share by 0.18p (2021: 0.32p). 

8 Preliminary financial information

The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2022 or 2021. Statutory accounts for 2021 have been delivered to the registrar of companies. The auditor has reported on those accounts; his reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor 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 2022 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.

9 Alternative performance measures

Renew uses a variety of alternative performance measures ('APM') which, although financial measures of either historical or future performance, financial position or cash flows, are not defined or specified by Adopted IFRSs. The Directors use a combination of APMs and Adopted IFRS measures when reviewing the performance, position and cash of the Group.

The Directors believe that APMs provide a better understanding of the underlying trading performance of the business because they remove the impact of non-trading related accounting adjustments.  Furthermore, they believe that the Group's shareholders use these APMs when assessing the performance of the Group and it is therefore appropriate to give them prominence in the Annual Report and Accounts.

The APMs used by the Group are defined below:

Net Cash/(Debt) - This is the cash and cash equivalents less bank debt. This measure is visible in Note 32 in the Annual Report & Accounts. The Directors consider this to be a good indicator of the financing position of the Group.

Adjusted operating profit (£58.773m) and adjusted profit before tax (£58.249m) -  Both of these measures are reconciled to total operating profit and total profit before tax on the face of the consolidated income statement. The Directors consider that the removal of exceptional items and amortisation provides a better understanding of the underlying performance of the Group. The equivalent GAAP measures are operating profit (£49.979m) and profit before tax (£49.455m).

Adjusted operating margin (6.9%) - This is calculated by dividing operating profit before exceptional items and amortisation of intangible assets (£58.773m) by group revenue including share of joint venture (£849.048m) both of which are visible on the face of the income statement.  The Directors believe that removing exceptional items and amortisation from the operating profit margin calculation provides a better understanding of the underlying performance of the Group. The equivalent GAAP measure is operating profit margin (6.1%) which is calculated by dividing operating profit (£49.979m) from

group revenue from continuing operations venture (£816.276m).

Adjusted earnings per share (59.52p) - This measure is reconciled to the earnings per share calculation based on earnings before exceptional items and  amortisation in Note 7. The Directors believe that removing exceptional items and amortisation  from the EPS calculation provides a better understanding of the underlying performance of the Group.

Group Revenue  (£849.048m) - This measure is visible on the face of the income statement as Revenue: Group including share of joint venture.

Group order book, Engineering Services order book and Specialist Building order book - This measure is calculated by the Directors taking a conservative view on secured orders and visible workload through long-term frameworks.

Engineering Services revenue (£778.917m) - This measure is visible in Note 2 business analysis as Engineering  Services Revenue including share of joint venture. The Directors consider this to be a good indicator of the underlying performance of the Group's Engineering Services business.

Adjusted Engineering Services operating profit (£59.123m) - This measure is visible in Note 2 business analysis as Engineering Services operating profit before exceptional items and amortisation of intangible assets. The Directors consider this to be a good indicator of the underlying performance of the Group's Engineering Services business. The GAAP equivalent measure is Engineering Services operating profit (£50.747m) which is also visible in Note 2.

Adjusted Engineering Services operating profit margin (7.6%) - This is calculated in the same way as adjusted operating profit margin but based on the adjusted Engineering Services operating profit (£59.123m) and the Engineering Services revenue (£778.917m) figures as set out above. The equivalent GAAP measure is Engineering Services operating profit margin (6.8%) which is calculated by dividing Engineering Services operating profit (£50.747m) from Engineering Services revenue from continuing operations (£746.145m).

10 Post balance sheet events

Acquisition

On 29 November 2022 the Company announced that it had agreed to acquire the entire issued share capital of Enisca Group Limited, a leading specialist water contractor based in Northern Ireland for a cash consideration of £15.6m on a cash free, debt free basis. The acquisition was funded by a combination of cash and the Group's existing revolving credit facility.  There is no deferred consideration payable.  Further information will be included in the Interim Report and Accounts for the six months ended 31 March 2023.

Refinancing

Post the year-end, the Group has refinanced its debt facilities with its existing banking partners HSBC UK Bank plc and National Westminster Bank plc and has introduced a new bank into the banking syndicate, Lloyds Banking Group plc. The new facility comprises an £80m secured revolving credit facility committed until November 2026.

11 Posting of Report & Accounts

The Group confirms that the annual report and accounts for the year ended 30 September 2022 will be posted to shareholders as soon as practicable and a copy will be made available on the Group's website:

www.renewholdings.com

 

END

 

 

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