Renewi performs better than expected in first half

Waste-to-products business Renewi reported revenue on a pro forma basis of £782.9m for its first half on Thursday, up 4% at constant currency or 11% at actual rates.

The FTSE 250 company said underlying EBIT, on a pro forma basis, was ahead 21% at constant currency and 33% at actual rates in the six months to 30 September.

Reported underlying profit before tax was 102% firmer at constant currency at £34.2m, and ahead 123% at actual rates.

Exceptional and non-trading items were £12.0m in the period, £8.2m of which related to the company’s merger as it had previously advised.

Statutory profit before tax was £22.2m, swinging from a statutory loss of £0.9m at the same time last year.

Underlying earnings per share were up 6% at constant currency to 3.2p per share, or up 19% at actual rates.

Core net debt stood at £435.9m, including adverse currency movement of £11.6m, and the company’s core net debt-to-EBITDA ratio of 2.8x was said to be better than management expectations.

The board maintained its interim dividend at 0.95p per share.

“We are pleased to report a very strong first half performance for Renewi, driven by good operational performance, improving end markets in our Benelux divisions, and earlier than expected merger benefits,” said chief executive Peter Dilnot.

“Against this backdrop, we announced on 23 October that our expectations for the full year ending 31 March had significantly increased.”

On the operational front, Renewi said it saw “very strong” overall trading performance throughout the period, with profit growth at constant currency significantly ahead of its expectations, further increased at the reported level by the weakness of sterling.

Commercial waste apparently performed particularly strongly, with underlying EBIT up 38% to £36.2m.

Netherlands underlying EBIT grew by 73% on revenue up 7% as a result of improving economic growth and construction market recovery, together with securing some merger benefits earlier than anticipated, the board explained.

Hazardous waste also delivered a good performance, with underlying EBIT up 5% to £13.7m.

Increased cleaning activity and merger benefits were supported by a positive first half from, ATM despite a reduced throughput of soil from mid-August

Monostreams performed well too, with underlying EBIT up 29% to £9.5m.

Operational improvements in Maltha were gaining traction, Renewi said, and the Mineralz business delivered “strong” results.

As expected, Municipal recorded an operating loss of £4.9m due to continued market headwinds and contractual constraints.

Underlying progress in the UK was offset by the loss of subsidies at Wakefield and a lack of feedstock at Westcott Park.

Previously-reported operational challenges in Canada also impacted performance, and would continue to do so in the second half

Renewi said synergy and integration projects were progressing “well”, with savings of €4.6m recorded in the first half, as the company remained on track to deliver the committed €12m for the full year.

The board said it was maintaining a “clear” long-term growth strategy, based on Renewi's “unique position” to meet increasing recycling demand from both regulatory push and customer pull.

“We have made good progress with our integration and the transition to one unified operating model,” Peter Dilnot added.

“We remain on track with the target synergies and delivering significant value accretion from the merger in the year ending 31 March 2019 and thereafter.

“Longer term, Renewi is well placed to meet the growing need for recycling with a clear strategy to deliver sustainable growth, margin expansion and attractive returns.”