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Renew lifts turnover 23% to £356m

22 Nov 11 Renew has brushed aside the gloom surrounding construction with an impressive set of results for the year to 30 September 2011 " increasing turnover by nearly a quarter to £356m.

However, profit before tax fell to £2.5m (2010: £4.0m), due to exceptional charges of £5.7m relating to restructuring.

Of this, £3.4m was accounted for by redundancies following its exit from non-specialist public building markets, and £1.4m by the acquisition of Amco.

The group order book was down slightly £285m (2010: £304m), though its engineering services order book increased 118% to £179m (2010: £82m).

Net debt of £6.8m was “in line with expectations following the Amco acquisition”.

Renew now positions itself as an engineering services business. This revenue was £176.7m (2010: £127.4m) and now accounts for over 60% of group revenue and over 80% of operating profit. Operating margins improved to 4.2% (2010: 3.3%).

Renew's target markets are energy, environmental and infrastructure.

Chief executive Brian May said the group's strategy is to “grow our presence in these markets, both organically and by acquisition”.

Energy

In energy, Renew operates in the nuclear, gas, coal, wind, hydro and biomass power generation sectors. Much of the work is delivered through 24 framework agreements, primarily for maintenance work.

In the nuclear sector, it operates at nine nuclear licenced sites in the UK, and has enjoyed record revenue during the year.

At Sellafield, where Renew is the largest M&E contractor, its multi discipline site wide framework has been extended to September 2012.

In addition, it was appointed to the decommissioning and demolition framework, until March 2015, with a spend of over £30m per annum.

Environmental

Renew specialises in the water, flood alleviation, coastal defence and land remediation sectors, providing multidisciplinary engineering services across 16 framework agreements.

Northumbrian Water is its largest client in the water sector, and Renew was reappointed under AMP5 to the major waste water project framework which runs initially to 2015. It has also been appointed to a number of non-discretionary maintenance framework agreements.

In Land Remediation, its subsidiary VHE has been appointed to 3 framework agreements with National Grid.

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Renew also provides civil, mechanical and electrical services under five minor works and river maintenance framework agreements for the Environment Agency.

Infrastructure

Most of Renew's highways and industrial projects are small scale.

Most of its revenue is in the rail sector where it provides engineering maintenance works to Network Rail.

In May, its new acquisition Amco was appointed by Network Rail to the building and civils delivery partnership framework agreements with a value of £100m per annum. 

Another subsidiary, YJL Infrastructure, has been integrated with Amco to serve this framework.

Specialist Building

Renew has three specialist building businesses which target the new build social housing, high quality residential, and retail markets. Revenue was £178.9m (2010: £163.1m) with operating margin maintained at 1.1%.

The firm has 13 framework agreements with housing associations which provide access to a £600m annual market spend. Included are three new framework appointments with Estuary Housing Association, Hyde Housing Association and London and Quadrant Housing Trust, where the first project has commenced on site at Lynton Road.

In high quality residential, activities are focused in London and the Home Counties where the market remains strong.

In retail, Renew was recently awarded a project to construct a new Tesco store at Widnes which is on-site.

Outlook

Brian May: “The acquisition of Amco has accelerated the transformation in the shape of the group and offers Renew opportunities for further growth in engineering services markets.

“Over the last five years, our engineering services activities have grown organically by 93% and, when combined with our acquisitions, now represent annual revenue of more than £200m as well as providing 80% of the group's operating profit.

“The development of our engineering services business has also improved group operating margin and created a platform of sustainable revenue generated from over 50 framework agreements with major clients, most of which operate in regulated markets.

“These framework agreements, together with expected extensions and renewals, provide good visibility of income and quality of earnings both for the coming year and beyond.”

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