26 November 2024

 

Renew Holdings plc

 

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

 

Final Results

 

Record financial performance

 

Renew (AIM: RNWH), the leading Engineering Services Group supporting the maintenance and renewal of critical infrastructure, announces its final results for the year ended 30 September 2024 ("the period").

 

Financial Highlights

 

Year ended 30 September	2024*	2023*	Change
Group revenue1	£1,057.0m	£887.6m	19.1%
Adjusted operating profit1	£70.9m	£62.4m	13.8%
Operating profit	£61.2m	£57.7m	6.1%
Adjusted operating margin1	6.7%	7.0%	(30bps)
Profit before tax	£60.2m	£56.8m	6.0%
Adjusted earnings per share1	65.9p	62.3p	5.8%
Full year dividend	19.0p	18.0p	5.6%
Pre IFRS 16 net cash1	£25.7m	£35.7m	(28.0%)

 ^{*Following the disposal of Walter Lilly post period end, the financial statements have been amended to exclude its trading result from profit for the year from continuing activities. Its result has been included in discontinued activities. All FY23 comparatives have been restated  accordingly, in compliance with IFRS 5.}

·	Another record financial performance with revenue, cash generation and operating profit all ahead of initial market expectations.
·	Group revenue increased 19.1% to £1,057.0m (FY2023: £887.6m), with organic growth of 16.6%.
·	Group order book remained strong at £889m (FY2023: £777m), underpinned by long-term framework positions.
·	Net cash position (pre-IFRS16) of £25.7m (FY2023: £35.7), in line with expectations.
·	Full year dividend of 19.00p (FY2023: 18.00p), an increase of 5.6%, reflecting the strong trading performance, forward momentum and the Board's positive outlook.
·	Strong balance sheet and best-in-class returns profile leaves us well positioned to take further advantage of the Government's ongoing commitment to maintain and upgrade the UK's critical infrastructure.

 

Operational Highlights

·	In Rail we have entered CP7 in our strongest framework position yet across all regions and remain the largest provider of maintenance and renewals services to Network Rail nationally and the third largest supplier overall.
·	In Water we have resecured most of our key AMP7 positions as well as increasing the number of frameworks and clients heading into AMP8. We now work for 10 of the 12 combined waste and water companies, compared with 3 at the beginning of AMP7.
·	In line with our strategy of appraising selective, value-accretive M&A, we successfully completed three acquisitions. This included the bolt-on acquisitions of TIS and Route One as well as the acquisition of Excalon, which has enabled our expansion into a new complementary sector with high barriers to entry and strong growth potential.
·	Exceeded ambitious prior year health & safety targets, ensuring our workplace remains a safe and secure working environment for all.

 

Post-period End

·	On 4 October 2024 we exited from the Specialist Building market with the disposal of Walter Lilly, in line with our overarching strategy of focusing activities on Specialist Engineering.
·	On 7 October 2024 we acquired Full Circle, securing entry into the attractive onshore wind services market which is forecast to grow at 7.7% CAGR from 2024 to 2030. The business represents a compelling strategic fit for the Group, with its leading market position enabling us to capitalise on the green energy transition.

 

Outlook

·	Exciting new growth opportunities with entry into renewables and electricity distribution and transmission markets.
·	Good M&A pipeline supported by a strong balance sheet.
·	Strong order book moving into 2025.

Paul Scott, CEO of Renew, commented:

 

"I am very pleased to report we have delivered another excellent performance in FY24 with significant organic and acquisitive growth. We have further strengthened our order book and expanded our service offering, strengthening the foundations of our business.

 

"The Group successfully delivered three value-accretive acquisitions in the period and post-period end we executed our strategic exit from Specialist Building as well as entering into the high-growth onshore wind services market with the acquisition of Full Circle.

 

"The start of new control periods in our largest sectors along with access to new market sectors marks a particularly exciting milestone for the Group and I am confident we are entering FY25 well placed to deliver on our ambitious long term growth strategy. On behalf of the Board, I would like to thank all of our colleagues for their outstanding dedication to delivering our mission-critical services 365 days a year."

 

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
Deutsche Numis (Nominated Adviser and Joint Broker)	020 7260 1000
Stuart Skinner / Kevin Cruickshank / Will Wickham
Peel Hunt LLP (Joint Broker)	020 7418 8900
Ed Allsopp / Pete Mackie / Charlotte Sutcliffe
FTI Consulting (Financial PR)	020 3727 1000
Alex Beagley / Tom Hufton / Amy Goldup / Matthew Young	Renew@fticonsulting.com

 

 

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 on Engineering Services in the key markets of Rail, Infrastructure, Energy (including Wind and Nuclear) and Environmental which are largely governed by regulation and benefit from non-discretionary spend with long-term visibility of committed funding.

 

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

Chairman's statement

 

Introduction

I am pleased to announce that the Group achieved another year of record financial performance, with excellent organic revenue growth, a robust operating profit margin, strong operating cash generation and the delivery of a number of successful acquisitions. These exceptional results underscore the Group's core capabilities and strong presence in long-term, sustainable growth sectors.

 

Differentiated business model

Our differentiated compounding 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 with an unwavering commitment to health and safety. Operating in complex, challenging and highly regulated environments, our markets have high barriers to entry. We directly employ a highly skilled workforce which enables us to be extremely responsive to our clients' needs and we are committed to adding value through innovation and collaboration.

 

Results

Group revenue¹ increased to £1,057.0m (2023: £887.6m) with adjusted¹ operating profit increasing to £70.9m (2023: £62.4m) and an adjusted¹ operating margin of 6.7% (2023: 7.0%). Statutory operating profit was £61.2m (2023: £57.7m). The adjusted¹ earnings per share has increased by 5.8% to 65.9p (2023: 62.3p) and basic earnings per share was 55.6p (2023: 58.4p). The Group had a pre-IFRS 16 net cash¹ position of £25.7m (2023: £35.7m), in line with our expectations.

 

During the period we were delighted to announce three strategically compelling acquisitions, each of which is progressing in line with our pre-acquisition integration and performance plan:

 

Excalon Holdings Limited is a leading infrastructure contractor specialising in the provision of high voltage and extra high voltage infrastructure to the UK electricity sector. Excalon has a number of long-term frameworks with electricity Distribution Network Operators ("DNOs") across the UK, which broadens Renew's exposure to another critical UK infrastructure market.  This acquisition presents tremendous long-term growth opportunities by providing the Group with access to both new and existing frameworks that we would not previously have been able to win.

 

Route One Holdings (Wakefield) Ltd was acquired by Renew's subsidiary business, Carnell Group Holdings Ltd. Route One is a multidisciplinary specialist engineering business providing bridge deck maintenance and protection in the UK Highways sector. Route One has a number of long-term frameworks on the National Highways Scheme Delivery Frameworks across England and will expand Carnell's offering by adding several new capabilities to the Group's highways business.

 

T.I.S. Cumbria Ltd (TIS) is a leading nuclear manufacturing and fabrication specialist. In line with the Group's strategy, the acquisition enhanced Renew's nuclear services offering by immediately doubling manufacturing capacity and strengthened Renew's position in the growing nuclear decommissioning and new build markets.

 

Post period end, we were very pleased to announce the acquisition of  Full Circle Group Holding B.V., a specialist provider of repair, maintenance and monitoring services for onshore wind turbines in the UK and Europe. The acquisition of Full Circle represents an exciting opportunity for the Group to enter the high-growth and fragmented onshore wind services market and signifies the first move to accessing end markets outside of the UK through a low-risk and disciplined approach. We are delighted to welcome the management and staff of Full Circle to the Renew family.

 

Additionally,  post period end, the Group disposed of Walter Lilly & Co. Limited on a cash free/debt free basis to Size Holdings Limited. The disposal sees the Group exit its only remaining Specialist Building business and is consistent with the Group's strategy of focusing activities on Specialist Engineering where it targets end markets delivering maintenance and renewals programmes that benefit from long-term, non-discretionary funding programmes. 

 

Buoyed by the recent acquisitions, Renew's progress against the Group strategy has accelerated significantly over 2024 and the Group continues to strengthen its market-leading position in its chosen long-term growth markets.

 

Dividend

The Group's strong trading performance, cash position and positive outlook give the Board the confidence to propose a final dividend of 12.67p (2023: 12.00p) per share. If approved by shareholders, this will represent a full year dividend of 19.00p (2023: 18.00p) per share, an increase of 5.6%.

 

ESG

We remain committed to achieving net zero by no later than 2040 driven by our Climate and Nature Steering Group that comprises representatives from all the Group's subsidiary businesses and which focuses on developing the Group's climate opportunities and climate-related financial disclosure reporting.  We were also 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.

 

We recognise the positive impact our business can have on the broader community, and we are committed to building stronger connections with local schools, educational institutions and our surrounding communities. The training and development of our colleagues remain essential to the Group's long-term success and we now have around 330 trainees, apprentices and graduates across the business.

 

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.

 

During the year, the reporting structure of the Group was reviewed in order to address the growth in both size and complexity of the Group. The Board supported the creation of an Executive Board which comprises the Group's Chief Executive Officer, Chief Financial Officer, Group Commercial Director and the Sector Directors. The Executive Board will report to the Chief Executive Officer. The Executive Board will assist the Chief Executive Officer with the day to day management of the Group's subsidiary businesses.

 

Board changes

On 2 April 2024, having served on the Board as Executive Director (Rail) for more than 8 years, Andries Liebenberg informed the Board of his intention to retire effective 31 January 2025. The Board would like to take this opportunity to thank Andries for the significant contribution he has made to the Group since his appointment and to wish him well in his retirement.

 

People and safety

The Board deeply values the essential contributions of its employees to the Group's success, and it sincerely thanks all its colleagues for their unwavering commitment and dedication. We remain focused on ensuring the mental and physical wellbeing of all our colleagues and continue to provide support through a number of schemes, including our Employee Assistance Programme.

 

Our goal is to foster a secure working environment that safeguards all our colleagues and those who work with us from injury throughout our operations. The Group's health and safety performance is discussed as a priority at each Board meeting and during the year we continued to focus on the behavioural science aspects of safety to further improve our strong safety record.

 

Future focus

The delivery of our long-term strategy is built on effective relationships with our directly employed workforce, customers, suppliers, shareholders and wider stakeholders, and these are critical to the ongoing success of the business. 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 2025 and beyond.

 

The Group's unique compounding business model, best-in-class returns profile and strong balance sheet mean we are well positioned to take further advantage of the Government's ongoing commitment to maintain and upgrade the UK's critical infrastructure.  We are confident as a Board in achieving continued growth both through organic expansion and strategic earnings enhancing M&A.

 

David Brown

Chairman

25 November 2024

 

Chief Executive Officer's Review

The Group has delivered another year of outstanding performance with strong organic revenue, cash generation and operating profit all ahead of initial market expectations. Once again, these results are testament to the resilience and differentiated nature of our high-quality, low-risk, compounding business model, alongside the robust demand we continue to see in our end markets focused on the repair and maintenance of critical infrastructure. I am very proud of the strong operational performance this financial year and the brilliant work our teams have delivered; the foundations of the business have never been stronger than they are today. Importantly, during the period we have  enjoyed increasing success in  securing new, and extending existing frameworks, helping to cement our market leading position and allowing us to capitalise on the significant number of growth opportunities across all of our end markets. As well as a strong operational performance, our M&A activities in the period have broadened our capabilities and moved us into new and exciting growth markets. In line with the Group's strategy, post period end, we disposed of the Group's only remaining Specialist Building business, completing the transition to a pure play engineering services provider., and further bolstered our end market exposure through the acquisition of Full Circle.

Our focus on the maintenance and renewal of existing critical infrastructure means we are not dependent on large, capital-intensive contract awards, which positions the Group with a significantly lower risk profile than others operating in our sectors. Supported by the commercial terms within our frameworks, alongside the typically short execution periods of the work we undertake, we have been able to minimise the impact of the macroeconomic challenges facing the UK. Once again, our business model has delivered revenue and net cash for the year ahead of market consensus, with operating profit also marginally ahead. Moreover, our work continues to be underpinned by highly visible, committed, long-term spending cycles and with public expenditure remaining at the top of the news agenda the government has reaffirmed its commitment to investing in the maintenance and renewal of critical UK infrastructure as part of its plans to begin a "decade of national renewal" as set out post-period end in the Autumn Budget².

This year we have delivered many notable operational successes, but, given that I can only highlight a few of the achievements, in Rail I am pleased to say we have started CP7 with a broader geographic reach and a wider range of frameworks than we had in CP6. In Water we have also gone from strength to strength, broadening the service offering for each of our clients. We have resecured most of our key AMP7 positions as well as increasing the number of frameworks and clients as we head into AMP8. It is a remarkable accomplishment that we now work for 10 of the 12 combined waste and water companies, compared to three at the beginning of AMP7. We look forward to the start of AMP8, which commences 1 April 2025, that has an anticipated addressable budget for Renew of £35bn committed to investment in new infrastructure.

In line with our strategy of appraising selective, value-accretive M&A opportunities, during the period we successfully completed three acquisitions for consideration in aggregate of up to £37m. In October 2023, we completed the bolt-on acquisition of T.I.S., which is now fully integrated and is delivering its planned strategic benefits including doubling our nuclear fabrication manufacturing capacity, allowing us to take advantage of increasing demand across the decommissioning and new nuclear build programmes. In April 2024, we acquired Route One Infrastructure and its integration is progressing well and in line with the preacquisition plan. The acquisition has expanded Renew's service offering, adding new capabilities with its particular expertise in providing end-to-end solutions for road bridge deck maintenance and protection, which provides the Group with another route to market on the strategic highways programme. In June 2024, we acquired Excalon, a leading infrastructure contractor specialising in the provision of high voltage and extra high voltage infrastructure to the UK electricity sector. This acquisition is significant as it has allowed us to expand into a new complementary sector with high barriers to entry and strong growth potential. I am pleased to confirm this acquisition is largely complete and has proved to be an excellent strategic fit, providing the Group with access to a number of new and existing frameworks that we would not have otherwise been able to win.

The positive strategic momentum of the Group has continued into the new financial year. On 4 October 2024 we announced the Group's exit from the Specialist Building market with the disposal of Walter Lilly, in line with our overarching strategy of focusing activities on Specialist Engineering. Following this, on 7 October 2024, we were pleased to announce the acquisition of Full Circle and our entry into the high-growth onshore wind services market. Full Circle is a specialist provider of repair, maintenance and monitoring services for onshore wind turbines in the UK and Europe. It represents a compelling strategic fit for the Group, with its leading market position enabling us to capitalise on the green energy transition as governments in the UK and across Europe have reaffirmed their commitment to achieving net zero carbon emissions by 2050. As a result of these commitments, the onshore wind services market is forecast to grow at 7.7% CAGR from 2024 to 2030.

Ensuring the health, safety and wellbeing of our colleagues and those in the communities in which we operate has always been our highest priority and I would like to take this opportunity to thank our dedicated teams for their unwavering commitment to health and safety throughout the last year. Our strong track record here stands as a testament to the collective efforts of every individual within our organisation and I take immense pride in the fact that we have not only met but exceeded our prior year health & safety targets, ensuring that our workplace remains a safe and secure working environment for all.

In summary, FY24 has been another excellent year for Renew as we have delivered terrific organic and acquisitive growth, significantly strengthened our order book, grown the list of capabilities within our business, all translated through to beating initial market expectations. The start of the CP7 and AMP8 control periods in Rail and Water in particular mark an exciting time for the Group and I am confident we are entering FY25 with significant momentum to further deliver on our ambitious growth strategy. The business is in excellent shape, and on behalf of the Board, I would like to thank all of our colleagues, without whom this year's performance would simply not have been possible. Our hardworking teams continue to go above and beyond to deliver outstanding work executing on our commitment to providing our clients with our mission-critical, highly responsive, services 365 days a year.

Our track record of resilient compounding 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:

 

·	Group organic revenue growth of 51 per cent and total revenue growth of 76 per cent;
·	adjusted earnings per share growth of 63 per cent;
·	an increase in dividends of 65 per cent from 11.5p to 19p per share;
·	an increase in our adjusted operating margin from 6.4 per cent to 6.7 per cent; and
·	seven strategic acquisitions supported largely by our strong free cash flow, deploying £124m.

 

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 revenue increased to £1,057.0m (FY2023: £887.6m), with organic growth of 16.6% and the Group achieved an adjusted operating profit of £70.9m (FY2023: £62.4m). Statutory operating profit was £61.2m (FY2023: £57.7m). Adjusted operating profit margin was 6.7%. As at 30 September 2024, the Group had pre-IFRS16 net cash of £25.7m (30 September 2023: net cash £35.7m). The Group's order book at 30 September 2024 remained strong at £889m (FY2023: £777m) underpinned by long-term framework positions.

Dividend

The Group's robust trading performance, cash position and strong forward order book have given the Board the confidence to declare a final dividend of 12.67p (FY2023: 12.00p) per share. This represents a full year dividend of 19.00p which is a 5.6 per cent increase over the prior year. This will be paid on 14 March 2025 to shareholders on the register as at 7 February 2025, with an ex-dividend date of 6 February 2025.

Rail

We have entered the new control period in our strongest position yet across all regions, with a number of new and existing frameworks creating notable opportunities for the Group. Network Rail's Control Period 7 (CP7) runs from 2024 to 2029 and expenditure is expected to be focused on operations, maintenance and renewal of the national rail network, playing into our core strengths. The broader UK rail sector is underpinned by predictable cash flows due to committed regulatory spending and we welcome the commitment made by the Labour government to enact its plan to reform the performance of rail services laying the groundwork for the transition to Great British Railways. This  single industry body will be tasked with improving services, and the operation, maintenance and improvement of all UK rail infrastructure. We fully support railway reform and are confident that at the heart of these plans is an imperative to improve the efficiency, reliability and safe operation of the entire network. Crucially, in order to execute this stated strategy, the Government, and its chosen delivery body, will need to accelerate its commitment to the renewal and maintenance of the rail infrastructure across the UK. Renew has already established its leading market position in these areas as we continue to deliver long-term national frameworks and we remain deeply embedded in delivering renewal and maintenance programmes in all of the national rail regions.

Network Rail, already a significant strategic customer for the Group, has committed £45.4bn³ of investment over the period and within this allocation, the maintenance and renewal budget has increased 9% from CP6 to £31.9bn.

Renew remains the largest provider of maintenance and renewals services to Network Rail nationally and the third largest supplier overall. This strong relationship, alongside our framework success rate and geographic coverage across the UK, positions us well to benefit from ongoing government investment as we look to expand our current involvement by targeting new additional CP7 frameworks.

We have continued to selectively expand our Rail client base outside of Network Rail and overall, we commenced CP7 in a significantly stronger framework position than at the start of CP6. Whilst we note that the start of CP7 has been slower than expected, we remain confident that this will normalise through the control period  as we have seen historically.

Looking ahead, other significant UK rail market growth opportunities that we are targeting include Project Reach⁴, which will deliver a comprehensive upgrade of Network Rail's trackside fibre cable and wireless infrastructure to create a safer, more modern and digitally-connected railway and the wider rail electrification programme which is required to achieve Network Rail's Net Zero targets. Alongside aging assets, there is increasing pressure on the network in terms of improving climate resilience given the increasing rate of extreme weather events as well as the need to make rail travel more accessible, more reliable and more environmentally friendly, all of which will provide the Group with significant growth opportunities moving forward. 

We remain committed to the training and development of our rail colleagues and are pleased to report that our Rail Skills Academy has continued to go from strength to strength. It is already widely recognised as a leader in the industry and we look forward to developing this further. During the period, we were also awarded a Training Excellence Award for the innovative Controller Of Site Safety ("COSS") Academy Programme which has revolutionised delivery and lineside safety both internally and throughout our supply chain.

Infrastructure

Highways

During the period, we have made further progress within Highways, continuing to execute on work banks that are a part of the current National Highways Scheme Delivery Framework (SDF), running to 2027, which includes five framework lots covering civil engineering, road restraint systems and drainage disciplines, worth more than £147m over the six-year period. We are expecting to unlock further growth in this sector as eight Design-Build-Finance-Operate ( DBFO) highways schemes are due to be handed back to National Highways in 2026 increasing the overall strategic roads network maintained by National Highways by 10%, an additional 1,842 lane miles. These roads will also require significant investment before they can be handed back, providing additional opportunities for growth. The inclusion of the legacy concrete pavement programme in the SDF from April 2025 will enable us to take greater market share.

Elsewhere, the AGC collaboration (AmcoGiffen & Carnell) continues to be an incredibly successful partnership, driving increased revenue growth, as we remain the second largest provider of road restraint systems in the network.

As the UK Governments second Road Investment Strategy (RIS2) comes towards a close, preparatory consultations for RIS3, which is scheduled to commence in April 2025, have indicated it will focus on carbon reduction, with a notable shift away from new roads to maintenance work that will involve prioritising funding on road structures, pavements and road restraints. The announcement of RIS3 has now been delayed until January 2025 due to the UK General Election, however, the focus on renewals and capital maintenance is expected to mean that the budget for highway maintenance will be double that of RIS2 (£4.3bn) and clearly plays to our core strengths as a business, uniquely positioning us to deliver further growth.

The maintenance of the UK's strategic highways network has never been more important. By 2025, 70% of National Highways network of roads and bridges will be more than 45 years old⁵ and, as such, the prioritisation of renewing the network's structures & rigid pavements is essential.

Our acquisition of Route One, a multi-disciplinary specialist engineering business operating in the UK Highways, in April 2024, for an enterprise value of £5.0m, has significantly expanded our capabilities in this market with its particular expertise in bridge and structures maintenance and repairs. Route One has a number of long-term frameworks on the SDF and as such the acquisition represents an excellent strategic fit for the Group, allowing us to unlock more growth across the strategic highways network. 

Aviation 

Our strategy to increase market share in Aviation through both medium and long term frameworks has paid dividends with our recent success in bidding for the latest Manchester Airport Group (MAG) Airfields Framework,  and we are pleased to confirm we were the only supplier to secure places at all three airports: Stansted, Manchester and East Midlands, building on our existing capital and airside maintenance framework positions with MAG and Leeds Bradford Airport (LBA). During the period our teams also mobilised the Manchester Capital Delivery Framework Pier 2, Phase 2, and Taxiways.

Further to this, the growth opportunities available to the Group in airport asset renewals and maintenance are increasing with six of the eight largest UK airports undertaking major investment programmes. As such, aviation continues to be an area of focus for the Group and we are proud to have organically moved into this sector, which has significant barriers to entry. We look forward to continuing to seize new opportunities as we develop our credentials in this area.

Communication Networks

As the market has evolved, we have broadened our capabilities in order to access wider opportunities and consequently we have renamed this segment Communication Networks.

During the period we have seen sustained momentum, achieving yet another record revenue performance in FY24. The country's connectivity remains a critical focus in the digital age and, as a result, we benefitted from strong demand across the sector as we continue to establish ourselves as a valued partner to the nation's largest network providers. We have observed considerable commitment to changes in the market, with significant capital allocated to addressing the UK's historic underinvestment in key assets within this sector. This creates substantial growth opportunities for us moving forward. We're also pleased with the progress of our strategy to expand our market access, and our plan to diversify the business has progressed well with frameworks in place with all four mobile networks: 3UK, Vodafone, Virgin Media O2 and EE.

Our sustained development of small cell work banks has progressed well during the year. We are also committed to growing our capabilities in servicing the private 5G market and through this, we have secured opportunities on three government-funded private 5G developments, positioning us well to grow this service with other private companies going forward as this network continues to develop. This represents a clear example of our business being well equipped to consistently evolve to meet the needs of our niche target end markets where we see considerable opportunities.

Through our ongoing work with the Shared Rural Network programme, we are also pleased to provide mobile phone and 4G connectivity for previously unserved rural communities in remote locations. We are in the process of completing phase one of the government-backed Shared Rural Network (SRN) rollout, Partial Not Spots, and are now developing the Total Not Spot Programme to enable connectivity in hard to reach locations including in the Scottish Highlands, Islands and a number of remote Welsh sites.

Energy

Nuclear

The UK Government continues to commit c.£4bn annually to its decommissioning programme of which c.75% is allocated at Sellafield. Throughout FY24, we have continued to see strong demand for our civil nuclear business and its multidisciplinary service offering. At Sellafield we continue to operate on a number of decommissioning frameworks and we remain one of the largest M&E contractors on the site.

Aside from Sellafield, we continue to secure opportunities to increase our presence in the civil nuclear market including in Springfield and AWE, and we are pleased to report that we have secured our first contract at Capenhurst. We also remain excited about the new growth opportunities that will be generated as part of the long-term frameworks for Nuclear Restoration Services and at Hinkley Point C. The UK Government's continued focus on decarbonising the country's energy supply to achieve its net zero targets by 2050 will require a significant commitment to shifting further towards cleaner energy systems, of which new nuclear is a vital component.

This commitment underpinned the creation of Great British Nuclear and the Government's target to commence construction of up to three new nuclear plants in the next 10 years⁶. This commitment ensures long-term and sustainable demand for our specialist manufacturing capabilities in high-grade nuclear components.

In October 2023 we acquired T.I.S., a nuclear manufacturing specialist, for a total cash consideration of £4.7m. The addition of T.I.S. to the business will double our manufacturing capacity and allow us to support existing clients and take advantage of increasing demand across the decommissioning and new nuclear build programmes and I am pleased to report that the integration has been a notable success.

Transmission and Distribution

In June 2024, we successfully completed the acquisition of Excalon Limited, a leading infrastructure contractor specialising in the provision of high voltage and extra high voltage infrastructure to the UK electricity sector, for a total consideration of up to £26m. This acquisition is consistent with our strategic objective of expanding into new complementary sectors that have high barriers to entry coupled with resilient attributes and I am pleased to report that the integration process is largely complete and in line with our expectations.

Excalon represents a significant opportunity for the Group, providing access to a number of new and existing frameworks that we would not have otherwise been able to win. The UK electricity DNO market is regulated by Ofgem and operates in 5-year control period funding cycles. The RIIO ED2 cycle commenced in April 2023 with the latest determination of funding set at £22.2bn. Entering this market allows Renew to access both the opportunities in ED2 as well as the upgrade of the grid that is required to support the UK's zero carbon generation and renewables sector. This acquisition represents our commitment to growth and innovation within critical infrastructure markets and strengthens our position for continued growth in this area moving forward.

Electric Vehicle Charging

As the UK Government continues working towards its ambition of achieving net zero emissions by 2050, we remain well positioned to play a significant role in helping drive the creation of the UK's EV charging infrastructure landscape. Through our strong relationships with leading charge point operators, we will continue to develop this division further and scale alongside the wider market.

Renewable Energy

Post the period end, in October 2024, we were pleased to announce the acquisition of Full Circle, a specialist provider of repair, maintenance and monitoring services for onshore wind turbines in the UK and Europe for a total cash consideration of £50.5m.

This acquisition represents a compelling strategic fit for Renew, entering the high-growth renewable energy services market with a leading position, in line with our stated strategy of capitalising on the green energy transition. With governments in the UK and across Europe reaffirming their commitment to achieving net zero carbon emissions by 2050, the opportunity within this sector is significant and growing at pace. Through the addition of Full Circle's best-in-class, direct delivery service model, we will be able to fully capitalise on this transition, while benefitting from the long-term, non-discretionary maintenance programmes that will continue to underpin it.

Renewable energy is forecast to become the largest component of Europe's total energy mix by 2050. The onshore wind market is well-established and forecast to grow at 7.7% CAGR over the next six years. The market for maintenance and renewal of these turbines is highly fragmented and represents a significant opportunity for Full Circle to grow organically and through acquisitions. As part of the Group, Full Circle will benefit from our proven track record of successful M&A and from its best practise experience in the wider engineering services market.

Environmental

Water

The Group continues to go from strength to strength in Water, through increasing collaboration between our four water brands and broadening our overall service offering. AMP7 has been incredibly successful for us and, as this control period comes to an end, we are particularly proud to highlight that we now work for 10 out of the 12 combined waste and water companies, increasing from three at the beginning of the current cycle. Importantly the overall scope of services we provide each utility has also grown considerably in this same control period, further strengthening our leading position in the market.

As we look confidently ahead to the start of AMP8, which commences 1 April 2025 and runs through to 2030, we are pleased to note that Ofwat's Draft Determination anticipates a total spend of £88bn. This marks an increase of over £37bn from AMP7, and of which, £35bn has been committed to investment in new infrastructure, representing a considerable increase on the £11bn investment in new infrastructure through AMP7. We look forward to receiving the Final Determinations that are due in January 2025, and are encouraged that proposed plans indicate significant room for future growth as we remain well placed to leverage the combined expertise across our water brands to service the following target areas that have been identified for AMP8:

·    £10bn committed to Storm Overflows with significant early investment to be delivered in AMP8;

·    Target to triple the replacement rate of mains pipework and reduce leakage by 13%;

·    £6bn committed to reduce nutrient pollution;

·    £4bn committed to boost the UK's water supply; and

·    £2bn committed to increase biodiversity and reduce greenhouse gas emissions by 11%

 

The acquisition of Enisca in November 2022 brought considerable momentum to the Group and has been a key driver behind our focus on broadening our service offering, which has proved hugely impactful as we have worked tirelessly to capitalise on the long-term opportunity in Water, achieving significant success in securing long-term frameworks for AMP8.

News of Thames Water's current financial position continues to be widely reported in the media and whilst this brings understandable concern for many in the sector, we are pleased to note that all Thames Water operations remain unaffected by internal issues and our maintenance and renewal frameworks will remain intact regardless of any refinancing or ownership changes. This serves to highlight the mission critical nature of our work, the funding underpin that it generally sees and the sustained necessity for the maintenance to critical UK infrastructure that we provide.

Flood and Coastal

The increasingly extreme weather conditions experienced each year persistently highlight the need for robust investment in the UK's flood defences and we continue to see an increased focus on climate and weather resilience across the UK's critical infrastructure providers. Our vital work for the Environment Agency is  testament to the consistent demand for our services in this sector, through its Asset Operations, Maintenance and Response Framework we continue to deliver on projects designed to tackle coastal erosion and sea flooding.  Importantly, post-period end in the Autumn Budget the UK Government also committed to investing £2.4 billion over two years in flood resilience to support the building of new flood defences alongside the maintenance of existing assets to protect communities, highlighting further scope for continued growth across the sector.

 

Specialist Restoration

In Specialist Restoration we have maintained our leading national position in specialist iron restoration and we are continuing to leverage the emerging long-term opportunities in the UK's gasholder markets.

 

Disposal of Walter Lilly

As announced on 4 October 2024, post-period end, Walter Lilly was acquired by Size Holdings Limited, a leading provider of premium quality construction, specialist crafts and maintenance services on a cash free/debt free basis. The transaction sees Renew exit its only remaining Specialist Building business and is consistent with our strategy of focusing activities on Specialist Engineering where we target end markets delivering maintenance and renewals programmes that benefit from long-term, non-discretionary funding programmes.

ESG

The UK Government's commitment to increasing investment in low carbon infrastructure will be essential to delivering on its net zero emissions targets by 2050 and Renew is ideally positioned to benefit from this transition. Our strong position in this area is highlighted by the fact that, during the period, we retained our LSE Green Economy Mark. This classification recognises London-listed companies that derive more than 50% of their revenues from products and services that contribute to environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy. Our post period end acquisition of Full Circle will further bolster our position in this area and provides us with strong foundations to scale alongside the expanding renewable energy market and fully capitalise on the significant opportunities available to us.

As noted at our interim results, we have established quantitative sustainability targets to embed our ESG strategy across the business and it is the Board's ambition that the Group will achieve net zero by no later than 2040. Our purpose-led approach to ESG is centred on four key commitments; taking climate action; operating responsibly; building social value and empowering our people.

Outlook

Post-period end in the Autumn Budget², we were pleased to see the UK Government reaffirm its commitment to investing in the maintenance and renewal of critical UK infrastructure as part of its plans to begin a "decade of national renewal". Our continued focus on non-discretionary spending means that we are well positioned to take advantage of this investment, particularly the prioritisation of maintenance and renewal. Whilst we note that the start of the new rail control period has been slower than expected, we remain confident that this will normalise through the cycle as we have seen historically.

Our strategic growth levers including innovation, collaboration, talent retention and attraction, alongside our differentiated business qualities and resilient model enable us to take full advantage of the long-term structural growth drivers in our targeted end markets. Further to this, our cash generative activities and strong balance sheet provide a solid platform for future organic and inorganic expansion.

The Group's strong order book continues to be underpinned by highly visible, committed, long-term spending cycles and we enter FY25 buoyed by our two new principal brands, Excalon and Full Circle, which have established us in new and highly compelling market sectors. The combination of the aforementioned factors gives the Board continued confidence in the Group's growth prospects and long term outlook.

Paul Scott

Chief Executive Officer

25 November 2024

 

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	https://www.gov.uk/government/publications/autumn-budget-2024/autumn-budget-2024-html#rebuilding-britain-1
3	https://www.networkrailmediacentre.co.uk/news/gbp-45bn-rail-improvement-plan-puts-climate-change-firmly-in-its-sights
4	www.networkrail.co.uk/wp-content/uploads/2023/05/Overview-of-CP7-efficiency-initiatives.pdf
5	National Highways State of The Nation plan: https://nationalhighways.co.uk/media/3v2nqsee/cre22_0102-srn-initial-report-2025-2030_vn-updated.pdf
6	https://www.gov.uk/government/news/shapps-sets-out-plans-to-drive-multi-billion-pound-investment-in-energy-revolution

 

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
		2024	2024	2024	2023	2023	2023
					(restated**)	(restated**)	(restated**)
	Note	£000	£000	£000	£000	£000	£000
Revenue: Group including share of joint ventures*		1,056,985	-	1,056,985	887,562	-	887,562
Less share of joint ventures' revenue*		(48,015)	-	(48,015)	(39,383)	-	(39,383)
Group revenue from continuing activities		1,008,970	-	1,008,970	848,179	-	848,179
Cost of sales		(867,306)	-	(867,306)	(719,534)	-	(719,534)
Gross profit		141,664	-	141,664	128,645	-	128,645
Administrative expenses		(74,980)	(9,479)	(84,459)	(70,236)	(4,413)	(74,649)
Other operating income		4,165	-	4,165	3,865	-	3,865
Share of post-tax result of joint ventures		25	(224)	(199)	77	(231)	(154)
Operating profit		70,874	(9,703)	61,171	62,351	(4,644)	57,707
Finance income		791	-	791	360	-	360
Finance costs		(1,828)	-	(1,828)	(1,285)	-	(1,285)
Other finance income - defined benefit pension schemes		90	-	90	66	-	66
Profit before income tax	5	69,927	(9,703)	60,224	61,492	(4,644)	56,848
Income tax expense		(17,771)	1,558	(16,213)	(12,296)	1,554	(10,742)
Profit for the year from continuing activities		52,156	(8,145)	44,011	49,196	(3,090)	46,106
Loss for the year from discontinued operations	4			(2,440)			(2,722)
Profit for the year				41,571			43,384

 

 

 

Basic earnings per share from continuing activities	7	65.91p	(10.30)p	55.61p	62.26p	(3.91)p	58.35p
Diluted earnings per share from continuing activities	7	65.88p	(10.29)p	55.59p	62.07p	(3.89)p	58.18p
Basic earnings per share	7	65.91p	(13.38)p	52.53p	62.26p	(7.35)p	54.91p
Diluted earnings per share	7	65.88p	(13.37)p	52.51p	62.07p	(7.33)p	54.74p

 

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

** The comparatives have been restated due to the classification of a component of the Group as a discontinued operation in the year. Please see Accounting policies i) Basis of accounts and preparation for further details.

 

Group statement of comprehensive income
for the year ended 30 September
								2024	2023
								£000	£000
Profit for the year								41,571	43,384
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined benefit pension schemes								81	387
Movement on deferred tax relating to the pension schemes								(5)	(106)
Total items that will not be reclassified to profit or loss								76	281
Total comprehensive income for the year net of tax								41,647	43,665