Renew eyes bolt-on engineering acquisitions

Aaron Morby 11 years ago

A shift to engineering services work helped Renew more than double operating profits to £4.7m on an 18% rise in turnover to £184m in the first six months of the year.

Brian May, chief executive, said the firm was committed to growing its engineering services operations and was on the look out for possible acquisitions.

He said: “The group’s growth strategy is to increase revenue in engineering services and concentrate activities on the renewal, refurbishment and maintenance of operational assets in markets with strong regulatory drivers which provide good visibility of sustainable earnings.

“We continue to explore opportunities to increase the skills and expertise of the group in engineering services through acquisitions with attractive and sustainable margins.”

Engineering services now accounts for 60% of group turnover and 80% of profits after the loss-making building division operations were shut down in the North of England last year.

The improved performance, with major contract wins at Sellafield, where the firm is the largest mechanical and electrical contractor on site, saw margins rise from 1.4% to 2.5%.

Renew boasts 75 framework agreements, 62 of them in engineering services, covering a variety of energy clients, Northumbria Water and Network Rail.

Engineering Services revenue was £106.5m (2011: £71.3m), an increase of 49%. Operating profit increased by 88% to £4.5m (2011: £2.4m) driving operating margin to 4.2%.

The most recent wins include:
·     The Sellafield Retrievals and Decommissioning framework provides multidisciplinary support to decommissioning operations.

·     The Bulk Sludge Retrieval framework is associated with the high hazard reduction programme with revenue expected to be around £26m over 4 years.

·     The Site Wide Asset Care contract is a 4 year agreement under which we provide a broad range of mechanical and electrical support services.

·     The National Nuclear Laboratory 3 year framework for ME&I site services at Sellafield was confirmed earlier this year and work has now commenced.

The firm said its building business in the south remained strong after picking up work with Peabody, Notting Hill Home Ownership and London & Quadrant.

Specialist building revenue was £76.8m (2011: £83.1m) with an operating profit of £1.0m (2011: £0.9m) at an improved margin of 1.3% (2011: 1.1%).

Renew remains the largest mechanical and electrical contractor at Sellafield, where over 50% of the Nuclear Decommissioning Authority’s annual budget of £3bn is deployed. Demand has increased in a number of areas at the site where work is delivered principally through 7 framework agreements including the Multi Discipline Site Wide framework, the Decommissioning framework and a number of service and spares support agreements.

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