£11m land sale moves Renew Holdings to debt-free position

Renew Holdings
Renew Holdings
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ENGINEER Renew Holdings said it is now in a strong position to make further acquisitions after announcing that it will see a £1.3m exceptional net gain in its annual results following the sale of 71 acres of land.

The Leeds-based group said that the cash will be used to pay off borrowings used to finance its recent £8m acquisition of Lewis Civil Engineering, based near Cardiff, which is to boost its presence in the water industry.

Renew’s sale of the land near Rugby for £11m moves the group to a debt-free position.

Analysts at Numis said: “Coming so soon after the acquisition of Lewis Civil Engineering, this clearly puts the group in a strong position to continue to self-fund acquisitive potential alongside its attractive organic growth profile.”

CFO John Samuel told the Yorkshire Post: “In terms of growth, what we’re looking to do is broaden and penetrate further into our clients which gives us an organic growth... and then on top of that where appropriate find acquisitions that have got all the same characteristics of the businesses we currently own and where we can bring some additional value to those businesses.”

He added: “We are definitely on the lookout to find other suitable businesses to add to the group.”

The deal to buy Lewis marked Renew’s first since it bought Amco in February 2011.

Mr Samuel said that the sectors in which Renew is involved, the maintenance and renewal of the UK’s infrastructure, are stable and predictable sectors, but do not inherently have “stellar growth prospects” due to the nature of their spend profiles, hence its acquisitive approach.

Yesterday, the group announced that three exceptional items would impact its results for the year ending September 30, 2013, resulting in an exceptional net gain before tax of £1.3m.

These items include the land sale near Rugby, as well as the write-down of land assets held in the United States by £5.2m to £2.7m and a provision of £2.9m relating to the previous closure of certain regional building businesses against costs due mainly to the insolvency of certain subcontractors.

Renew announced in March 2011 that it was withdrawing from the non-specialist building markets it had regionally, mainly in the North East and North West of England.

The sale of agricultural land near Rugby resulted in an exceptional profit of £9.4m, said the group.

“It has been a complex deal, it has taken a long time but obviously it has delivered significant return,” said Mr Samuel.

Meanwhile, Renew said that detailed planning and zoning agreements relating to the group’s property assets in the United States have expired.

Outline permissions remain in place, but Renew said that forthcoming changes to state and county regulations will require new applications to be made so it decided to write down their value, taking into account current market conditions.

“Years and years and years ago the group had a substantial development business in Maryland, near Baltimore, and we have a sort of residual few pieces of land left which we have over the last few years been trying to get the equivalent of planning permission in order to realise that land,” said Mr Samuel.

“With the economic climate in the States and indeed the world being what is has been for the last few years the requirement for development land and the desire for it has been lower. Add to that, what we’ve had is some legal changes where both Maryland state and relevant counties over in the US have made various changes to planning which means the density we can get on these sites has been reduced, in particular on one site where we’ve lost over 40 residential plots.”

Renew, which employs around 2,500 people, said that current trading is in line with market expectations.

The group is working towards a goal of reaching a turnover of £0.5bn. Mr Samuel said yesterday that Renew is now “one or two (acquisition) deals away from getting to that position”.

Renew’s share price closed up 10p, a rise of 8.40 per cent, at 129p last night.