gretel
07 Jun 2018
Positive interview with CEO Brief interview with the CEO here:[link] targeting growth following £80m acquisitionRenew Holdings, the listed engineering services group, is targeting further growth both organically and through acquisitions following a recent £80m deal.Earlier this month (May 2018), the Leeds-based group agreed a deal to acquired QTS Group, a Scotland-headquartered rail contractor with bases across the UK.The company reported an operating profit of £12.9m on £262.2m turnover in its interim results for the six months ended 31 March 2018.Chief executive Paul Scott told Insider: "QTS adds in the region of £70m in revenue to the group. The priority for the rest of the financial year is to integrate it successfully. Thereafter, we'll look to grow organically and will focus on the synergies between the businesses."One of the key attractions of QTS is that it has pushed out across the regions and now operates nationally across the rail network. It fits strategically with our existing business."Scott added that further growth is being targeted following the integration of QTS, both organically and through acquisitions.He said: "We're targeting organic growth across our three main sectors. In infrastructure, we renewed our place on the Civils and Buildings Asset Management Frameworks. We also secured a place on the Environment Agency’s Flood and Coastal Risk Management Framework."We will also continue to be acquisitive. We're looking at the markets that we understand and are looking for businesses we're familiar with but we'll consider all options."
dazedandconfused
25 May 2018
Re: The IC says Buy today Always a SELL sign...
tejo
24 May 2018
Re: time to sell As you say, Guitarsolo, each to his own. I find it is much harder to know when to sell, than when to buy, and in both cases one can make mistakes. Sometimes when a share has risen to such an extent that it distorts the balance of my portfolio, I top slice and that is usually when I regret it afterwards. However, when I start to become uneasy about a company and about the actions it is taking, I am happy to take the profit or loss and move on, irrespective of the consequences. I realised a healthy gain with Renew and wish it good fortune in the future and hope the acquisition restores the momentum and works out well, despite my misgivings.
Guitarsolo
23 May 2018
Re: Time to sell Each to their own Tejo. I hope you've been in long enough that you have made a nice profit.RNWH has traded sideways for a while now. But that is after a period of dramatic share price growth so perhaps it was about time. Gretel frequently highlights some of the good things about Renew (it's recurring fees, high future visibility, essential services etc). The QTS acquisition is earnings enhancing (in fact QTS as a better profit margin than Renew as a whole). The placing discount is annoying but I'd get over it. After all, it was only an extra 20% of shares offered at about a 15% discount depending on your price. So that's 3% dilution overall which I will take for the benefit of a larger company with the greater cushion of larger revenues for essential services and ahead of a large expansion of Capex in rail - just where QTS and Renew are strong. A P/E of ~11, falling to ~10 for 2019 is too cheap in my opinion for a well managed company that has delivered steady double digit growth for many years past and hopefully many years to come. I'm quite happy to hold to benefit from that growth. Guitarsolo
gretel
22 May 2018
The IC says Buy today and concludes as follows:"IC ViewThe plethora of challenges means shares in Renew have traded sideways for several months, despite recent earnings upgrades. We don't think a forward price to earnings value of 11 times fully accounts for the potential of the QTS acquisition and the recovery in the wider group. Buy."As regards the prior post, the QTS acquisition is actually highly earnings-enhancing, and complementary to RNWH's existing rail business. Forecasts have been increased by both Numis and WH Ireland, who both now go for around 40p EPS for the year starting this October.The reasons for the non-offering of the placing to PIs have already been documented by me on the bb. They're valid reasons, and frankly the extra dilution from whether the placing could have been done at say 380p-390p is immaterial.The stability of the share price post-placing well above the placing price says it all.RNWH is a support services group. You wouldn't expect it to have tangible assets, and you would expect it to have lots of goodwill from acquisitions.RNWH's strength comes in the form of many contracts with high recurring income rather than large exposure via a few one-off contracts, together with high exposure to essential, non-discretionary expenditure from public bodies who WILL pay their customers in full and (generally!) on time.
tejo
22 May 2018
Time to sell Having held Renew for several years, I am unhappy at recent events and have decided to sell. The interim results were weak and following the inequitable share placing the likely eps figures will be weak for several years despite the optimistic spin put on the acquisition. The Numis attempt to support the sp through their unconvincing reasoning was only to be expected, their having orchestrated the placing. The Board talks about a successful placing. Successful for all, apart from the shareholders who have seen their equity diluted and their share values reduced. The Balance Sheet looks vulnerable with a large negative current asset position and the majority of the asset value being goodwill. This is no longer the type of company that attracted me in the first place and , for me, it is time to go.
gretel
22 May 2018
Numis: Buy with 500p target Numis retain their Buy and 500p target - their annualised P/E is only 9.9:"RENEW (BUY 500P) Interims results in line and positive outlook, key points: 1. Interim PBT of £12.5m was in line with NSe and we look to maintain full year results for this and next year (9/18E PBT £29.1m, EPS 35.1p, 9/19E PBT £37.1m, EPS 39.7p), though would point out that we recently increased estimates by +2% and +9% respectively to take account of the QTS acquisition. DPS was increased 11% to 3.33p. 2. H1 net debt of £2.5m was in line with NSe and also in keeping with comments initially made by management at the AGM about the impact of 'slower than usual payment profile' which we argued at the time related to Renew's rail business. Management indicates that recovery of this is progressing as expected, and we continue to expect that total quantum of the WIP increase to be recovered will be c.£7m and we also retain our FY net debt figure (which was adjusted at the time of the QTS acquisition to account for the portion of debt funding for the deal). 3. Engineering Services profit was marginally ahead of last year when treating Forefront as a discontinued activity (disposed in February), and revenue reflected both some H1 adverse weather impact and also a flat profile as the Rail CP5 programme comes to a close. EBIT margin rose from 5.6% to 5.8% over this period, however, and with orderbook +9% (showing progress across all three parts of the division) plus the expected shift upwards in rail spend from 2019 onwards, we expect resumption in top-line growth in H2 and beyond. 4. Specialist Building continues to operate a highly selective approach so while we expect some normalisation of revenue back toward NSe £72m for the full year (and H1 revenue was some 24% below last year), we expect the full year EBIT contribution to be flat. 5. Conclusion. Interims as expected, though it is comforting that rail-related working capital flows are being recovered in line with expectations and that management confidence about the outlook in rail remains positive. Elsewhere, in both Engineering Services and Specialist Building, trading is in line with expectations. Post the QTS acquisition, the shares offer an attractive mix both in terms of rail exposure (ahead of the major shift up in opex spend from 2019 onwards), and scope to organically grow in other areas of non-discretionary infrastructure opex. Moreover, the 13% EPS growth we forecast for next year looks attractive given the 12/18E annualised P/E of 9.9x, and we believe Renew merits a forward P/E nearer 12x given track record and outlook. We retain our target price and BUY recommendation."
gretel
22 May 2018
Interims out - looking good for the year Interim results are out. The historic numbers are flat. However, the order books have grown nicely, and in H1 Engineering Services was up in terms of profitability despite slightly lower revenues. The Specialist Building division has had a harder time, which has dragged the overall figures down.With Engineering's order books up 9%, the exit from Forefront and the earnings-enhancing QTS acquisition, the reasons for optimism for H2 are clear.With expected revenues for the year to September already fully secured, achieving forecasts of 34p-35p EPS shouldn't be a problem, and there may even be a beating of expectations if all goes well.
gretel
17 May 2018
RNS: Polar Capital buying and above 5% RNS - Polar Capital have bought 3.84m shares and now own more than 5% of RNWH:[link]
gretel
13 May 2018
Numis' new forecasts Numis' exact new forecasts are as follows:to 30/9/18 : 35.1p EPS, 9.5p dividendto 30/9/19 : 39.7p EPS, 10p dividendSo in just a few months' time, RNWH will be on a P/E of only 10. Too low imho.It's easy to see Numis' 500p target being achieved in good time, as 500p would be a P/E of only 12.6. If this acquisition is as good as it seems to be, it could just be transformational and get the share price quite a lot higher than 500p.
Guitarsolo
11 May 2018
Re: Interesting reasons for placing price Thanks Gretel, Interesting info and, if true, means we should give the BoD a bit of leniency (although the scoundrels did still find time to participate themselves, albeit only in a small way). I do not know QTS but a quick look at their figures shows a super-healthy profit margin and at £80m was only 9.2 times earnings which is pretty reasonable if those earnings hold up. And there is every reason to think they will because QTS looks like it should be a good fit with the rest of Renew's rail business. I suspect therefore that Renew was QTS' preferred acquirer and that, as you say, matching others' bids with ready cash sealed the deal. I'll get over not participating in the placing - it's just one of those things that annoys the private investor isn't it? More importantly, RNWH need to churn out the cash, pay back the debt and then start upping the dividend, for Guitarsolo!
gretel
11 May 2018
Interesting reasons for placing price Having done a little investigating, the explanation for the placing price etc is most interesting, and certainly not what I thought 
))There was a LOT of competition for the QTS acquisition. RNWH had to act very quickly to compete with the all-cash offers being made by others.In normal circumstances this would not have been an issue. However, apparently RNWH are now 40% owned by IHT funds (which surprised me). IHT funds are not allowed by HMRC to hold large cash balances. So, although they wanted to participate, these funds were unable on very short notice to stump up large amounts and could only participate to the extent of available funds.This left a hole in the fundraising. Obviously retail investors could not fill this hole via a rights issue etc due to the necessity for speed. Thus non-IHT institutional investors could demand a larger discount for quick and easy funding. Which they did.The discount was unwelcome and nasty. But overall the level of dilution to RNWH is pretty immaterial given the difference between the actual discount of around 14% and a discount of say 5%-7% which might have been achieved in less pressured circumstances.Hopefully looking back in a year we'll find the share price at 500p or whatever and the acquisition will have begun to pay off on its obvious potential.
tejo
10 May 2018
Numis Of course Numis have upgraded their forecast, which means, if they are right, the ordinary shareholder has been very poorly treated. but there again this should come as no great surprise. Sadly, Directors and advisers work for themselves firs,t making a lot of money in the process. It has always been thus in the City and there is absolutely nothing that shareholders and the public can do about it.
Guitarsolo
10 May 2018
Re: Numis upgrade: Buy with 500p target If Numis is so positive about RNWH why did it only achieve 355p for the placing! There is something conflictious about being the nomad and organising a placing with their other clients. Exactly who were Numis working for here? RNWH to achieve the best price, or Numis' investor clients who want to get the biggest discount? I would suggest the latter since they gave them a near 20% discount to a realistic price (425p) and then promptly said that they think the acquisition is good news and slap a 500p price target on it. Given how cheaply companies can borrow at the moment, I would have thought a larger loan would have been cheaper than offering a placement at such a discount. I think the board need to provide an explanation why they agreed to this - including why they participated in the discount placement but PIs couldn't. Guitarsolo - aware that conflictious is not a real word, but I like it so it should bePS. I took the opportunity to pick up another 2,000 shares yesterday at 386.5p.
gretel
10 May 2018
Numis upgrade: Buy with 500p target Confirmation of Numis' upgrade to Buy and 500p target price:[link] upgrades Renew Holdings after acquisitionNumis Securities has upgraded engineering services group Renew Holdings (RNWH) following the £80 million acquisition of specialist rail contractor QTS. Analyst Howard Seymour lifted his recommendation from ‘add’ to ‘buy’ with a target price of 500p, although investors took fright at the news, sending the shares 33p or 8% down at 380p. Seymour said there were ‘two major positives’ to the deal; the first is that QTS operates a similar type of business so the acquisition ‘provides a range of complementary services and geographic potential that will offer significant organic opportunities for growth’.The second positive is it is taking place ‘a year ahead of the structural shift in rail spending’ that will increase opex spend so ‘the enlarged group will have the highest relative exposure to this major opportunity of all our universe, so Renew will be the best way to invest in this area’."
