Bright future forecast for engineering group as profits and revenues rise

Leeds-headquartered engineering group, Renew Holdings, has hailed continued momentum and strong organic growth as it posts a record first half performance.

Releasing its interim results for the six months ended 31 March 2024, the group reports a 17.2% revenue rise to £552.8m (HY 2023: £471.8m) along with a 15.2% increase in pre-tax profits to £30.3m (HY 2023: £26.3m).

Chief executive Paul Scott said, “I am very pleased to report we have delivered another record trading performance in the period.

“Our success in delivering sustainable growth is testament to the hard work of our dedicated colleagues and the resilient and differentiated nature of our high-quality, low-risk business model as well as the mission-critical nature of our work.

“We are delighted with our early success in extending and securing frameworks across the new funding periods in Water and Rail.

“These successes, together with the core characteristics which underpin the markets in which we operate, provide highly visible revenue streams and reinforce our significant confidence in delivering against our growth targets in the medium to long-term.”

Renew adds that during this period it successfully completed the bolt-on acquisitions of TIS Ltd and post period end, Route One Infrastructure, with the integration of both businesses progressing well.

It says the strong momentum seen in the first six months has carried through to the start of the second half, underpinning confidence in the full year outturn.

And the group notes that from 1 April 2024 to 31 March 2029, Network Rail has committed to spending £31.9bn on renewals and maintenance. Renew says this aligns with its own core strengths as the network’s largest provider of multidisciplinary maintenance and renewal engineering services.

Scott added, “Despite all of those macroeconomic challenges that have been thrown at us, the business model has resilience. It doesn’t get any easier. But record results are no surprise to us. The results are marginally ahead of where we anticipated the business to be.

“But I think you’ve got to drill into the detail, and understand that we have a differentiated offering to others who operate in our sector, in terms of the kind of work that we seek out. We seeking out work that is non discretionary in nature. They are essential – essential UK infrastructure, asset improvement and renewal and maintenance is what we choose to choose to do.”

Renew’s model shielded it somewhat from inflationary pressures, Scott said. Its projects were typically long term and allowed for increasing costs, and it employed people directly.

“That makes us very different, less exposed, and more commercially stable, which is why the profitability is more reliable than others operating in our sectors,” Scott said. Cost inflation did still have an impact, and Renew was consciously becoming more efficient and productive through the use of automation and innovation.

While opportunities in road and rail remained strong, Scott saw further expansion by moving into other sectors. The firm had struggled to move organically into electricity transmission and distribution, for instance. “We’re looking through our M&A activity to make some progress in that particular market sector. It has all of the ingredients that have created the success of Renew elsewhere. It’s a regulated market, you have to be skilled to operate in it, direct delivery works well in that segment, it’s very reliable, and it’s under-invested.

“And we have to do catch-up in that market if we are to get anywhere near Net Zero 2050 and our sustainability agenda. That network has to be reconfigured. So our M&A activity is looking closely at that sector and possibly renewable energy.”

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