Renew Holdings’ decision to shift focus paying off

The Leeds-based group’s order book is growing as the engineer shifts its focus towards regulated areas such as nuclear, rail and water and away from construction.

The group said results for the six months to March 31 will show further growth in its engineering services division, which covers infrastructure, energy and environment.

Of these, the strongest performers are rail, which sits in the infrastructure business, and nuclear work at Sellafield, which comes under energy.

Net debt has reduced to under £4m from £6.75m this time last year.

Renew said it expects to meet full year expectations.

Analysts at Numis have pencilled in pre-tax profits of £10.4m in 2013, up from £10.0m in 2012.

Renew’s order book had grown to £340m by the end of December from £289m a year earlier.

Its engineering services order book had grown by a quarter to £245m from £197m.

Engineering now makes up about two thirds of its revenues and Renew is targeting a 70/30 split by the end of 2014.

Renew said key contracts include being one of three firms to win a four-year framework deal at Sellafield nuclear processing plant in Cumbria worth a potential £280m. Work is due to begin later this month.

The company derives 15 per cent of its revenues from Sellafield.

The group’s Amco subsidiary has won orders worth £29m, including £13m for bridges, tunnels and viaducts.

It has also won a second deal with Northumbrian Water for trunk mains cleaning.

Renew is looking to boost either its water or energy businesses with bolt-on acquisitions that will help it reach its £500m turnover target by 2014.

The group’s markets have high barriers to entry and much of its work is contract renewals, offering good visibility for future revenues.

Renew’s business comes from its clients’ operating budgets rather than their discretionary budgets, which means the work has to be undertaken even when the economy slumps.