Engineering group sees profits dip during period it disposed of loss-making division
Engineering group Renew Holdings has seen its half year revenues and pre-tax profits dip during a period where it disposed of a loss-making group and focused on renewing contracts across its energy, infrastructure an environment divisions.
For the six months to 31 March, the AIM-listed West Yorkshire-based engineering services group reported group revenues of £262m, down from £281m in H1 2017; and a drop in pre-tax profits from £5.6m for the same period last year to £2m in the most recent reporting period.
In February, Renew disposed of loss-making division Forefront, an engineering services business focused in the gas infrastructure market.
Speaking with TheBusinessDesk.com this morning, chief executive Paul Scott said: “That was a disappointment but a necessary intervention. The debt had a financial impact and moving forward we no longer have a loss making division within the business.”
Paul Scott, chief executive of Renew Holdings
Scott said the half-year results were in line with management expectations and that he was pleased to report that the firm’s order book had strengthened, currently standing at £472m, up from £435m in 2017. The firm announced an interim dividend increase of 11% to 3.33p (2017: 3.00p).
During the period, the firm re-secured contracts with the Environment Agency and Network Rail. Scott said it was pleasing to have secured these as often re-bidding to be on frameworks could be a distraction. “If you look at the history of the group, we have never lost a customer. We have grown work in line with our customers,” added Scott.
Post period end, the firm announced the acquisition of QTS for a cash consideration of £80m, funded by a successful equity placing of £45m and £35m debt facility. Scott said: “We were delighted to announce the acquisition of QTS. We are now integrating the business into the Renew group.
“There was an opportunity last year to acquire the business and we were in an exclusive position in January. The business fits extremely well into the Renew model, it is a market we understand.”
QTS Group is a specialist independent rail contractor based in Scotland and has a longstanding relationship with Network Rail, operating under long-term framework positions. The acquisition is expected to increase Renew’s market share, footprint and specialist positioning in the rail market, a market with high barriers to entry.
Scott said that Renew looked for such synergies when acquiring other firms “on occasion” but would also look for further organic growth moving forward.
David Forbes, who became chairman of Renew Holdings in January, said: “This period has seen Renew deliver another set of interim results in line with management expectations. The Group’s strategy remains to develop its engineering services business both organically and through selective acquisitions which was demonstrated by the post period end acquisition of QTS, positioning the Group to continue to generate shareholder value.”
