Hungry Renew Holdings on lookout for acquisitions

ENGINEERING and construction group Renew Holdings said it is homing in on acquisition targets as it looks to further bolster its specialist engineering business.

The Leeds-based group, which has been shifting its focus towards engineering in recent years, yesterday reported a year of growing profits but sinking revenues.

Renew said it is increasingly seeing "quality" acquisition targets appear on its radar, and hopes to spend some of its 16.2m net cash on at least one purchase.

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The group said pre-tax profits after exceptional items more than trebled to 3.99m in the year to the end of September, compared with 1.17m a year earlier. Revenues were down 8.3 per cent to 290.4m, on the back of tough construction markets. Shares in the group soared 13.4 per cent to 38p yesterday.

Chief executive Brian May said Renew is aiming for growth in both sales and profits this year, possibly boosted by acquisitions. It has an order book worth 304m, up 50 per cent on a year ago.

"We've had a couple of difficult years where there were not that many (acquisition targets) about and vendors' expectations were unrealistic," said Mr May. "We're seeing better-quality opportunities that we're now looking at."

He said potential deals are in engineering sectors including environmental, energy, transport and infrastructure, and may add new skills, expand its geographic reach, or both. Finance director John Samuel added: "We would certainly be happy to use a sizeable proportion of our cash and if the acquisition was right we would look at taking on some relatively short-term debt."

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Specialist engineering now makes up 44 per cent of the group's revenue, compared with about 15 per cent four years ago. Renew has targeted this sector because of its regulation-driven revenues and higher margins.

Mr Samuel said while its proportion of specialist engineering has been lifted by acquisitions, it also includes organic growth of 73 per cent. The division grew turnover by 11 per cent during the year to 127.4m, with operating profits before exceptionals climbing four per cent to 4.2m.

The group's engineering work includes support and decommissioning at Sellafield nuclear plant, where it is the largest mechanical and electrical engineering contractor.

Its projects range from flood prevention for Northumbrian water to land remediation on former gas works for National Grid.

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Renew's construction arm works on projects ranging from social housing to millionaires' mansions in London. It saw revenues slump by a fifth to 163.1m. Operating profits before exceptionals dropped 28 per cent to 1.8m.

Analyst Michael Parkinson at house brokers Brewin Dolphin upgraded his profits forecasts for 2011 and 2012 by six per cent each and said Renew's market valuation "does not reflect fundamentals".

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