Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

November 28, 2023


Company news

Renew Holdings (RNWH, 789p, £624m mkt cap)

Engineering services group supporting UK infrastructure. FY (Sep) results. Rev +13%, £961m; PBT +17%, £58.1m; adj EPS +6.7%, 63.5p; div +5.8%, 18.0p; net cash, £35.7m (FY 22, £20.2m).

Trading: “Entered into new business areas with the strategic acquisitions of Enisca and Rail Electrification. Largest provider of maintenance and renewals services to Network Rail nationally. In Water, we have successfully leveraged our Mechanical, Electrical, Instrumentation, Control and Automation capabilities to win the Welsh Water Major Electrical and Mechanical Framework. In Rail, our subsidiaries have successfully collaborated to open up framework positions that were previously unattainable. In Highways, we continue to deliver a growing work bank on our National Highways Scheme Delivery Frameworks”. Orders +11%, £860m.

Outlook: “We are uniquely positioned to seize both organic and acquisitive growth opportunities with attractive structural growth drivers and well placed to benefit from the Government prioritising maintenance and renewals of existing infrastructure instead of large-scale enhancement projects. There are exciting growth prospects in Water ahead of significantly increased sector expenditure over the next decade and beyond. The post period end acquisition of TIS Cumbria, a leading nuclear manufacturing and fabrication specialist which will strengthen our position in the growing nuclear decommissioning and new build markets. Trading momentum has continued into the new financial year, and we are encouraged by the significant opportunities across the group”.

Marlowe (MRL, 504p, £488m)

Safety and compliance provider to commercial properties. HY (Sep) results. Rev +13%, £251m (organic +6%); adj PBT -9%, £24.1m; stat loss before tax, £8.9m (HY 22, +£1.7m); adj EPS -16%, 18.8p; interim div, 0p (0p); net debt, £193m (£156m).

Trading: EBITDA margins, 17.1% (17.6%). “Major progress on integration programmes across multiple businesses, having deployed £426m into 36 acquisitions since April 2021. Strategy: Strategic review commenced positioning the group to generate shareholder value, prioritising deleveraging in the second half of the year with expected net debt/EBITDA at around 2x by year end. “The outcome of this review may or may not lead to the Board deciding to undertake a managed separation of certain businesses with a view to optimising the group’s organisational and capital structure.

Outlook: “We continue to see good demand across Marlowe’s client base, supported by the non-discretionary nature of our services and software which are driven by regulatory requirements. For the full year, the group expects to deliver mid-single digit organic growth [13 Sep AGM, “high single digit organic growth”] in revenues, supported by additional growth from recent acquisitions, continued double-digit growth in adjusted EBITDA and further strategic and operational progress across our GRC and TIC divisions. Adjusted EPS will continue to be impacted by an increase in borrowing costs associated with higher base rates and an increase in the UK corporation tax rate from 19% to 25%”.

Vp (VP., 625p, £251m)

Construction equipment rental group. HY (Sep) results. Rev +2.4%, £191m; adj PBT +1.9%, £21.9m; stat PBT +11%, £19.9m; adj EPS -5.2%, 40.3p; interim div +4.5%, 11.5p; net debt, £133m (HY 22, £149m).

Trading: “A strong performance, particularly in Infrastructure with continued demand from rail, transmission and water sectors. Greater emphasis on Digital, with innovations including carbon calculators to improve the customer experience. Refreshed leadership, with new CEO in place and CFO joining in January 2024”.

Outlook: “The Board is confident in the group’s ability to deliver sector-leading returns and anticipates a full year performance broadly in line with market expectations Despite the immediate market challenges, particularly in Construction which has been soft and Housebuilding which has been subdued but stable, the Group continues to make progress and leverage opportunities in its specialist markets. Recent HS2 announcements should not impact short term business performance. Lost HS2 opportunities should, in part, be replaced by activity from alternative rail initiatives. Operational excellence remains a priority with continued progress on the group’s Digital roadmap. A strong balance sheet and recently refinanced RCF positions the group well to exploit both organic and M&A opportunities”.

Kinovo (KINO, 50p, £31m)

Property services provider, formerly Bilby, specialising in compliance and sustainability. HY (Sep) results. Rev +2%, £30.3m; u-lying PBT +25%, £2.63m; stat PBT +55%, £2.58m; adj EPS, +10%, 3.17p; interim div, 0p (HY 22, 0p); net cash, £1.0m (net debt, £0.06m).

Trading: “A favourable mix of works, operational efficiencies and lower non-underlying costs delivered increased gross margin”. Three-year visible revenues increased to £157m (£146m) with 95% of revenues recurring. Regulation attributable revenues increased to 61% of group total (54%), due to legislation drivers, delivering growth of 15% in Regulation revenues. Regeneration attributable revenues increase to 26% of total revenues (25%) with growth of 8%. Renewables down to £3.9m (£6.3m) but is expected to reverse in H2. Electrical services leads the group’s performance, accounting for 47% of total revenues and delivering 20% growth. DCB (Kent) discontinued; “as previously announced, project amendments and additional remedial costs have together resulted in an additional pre-tax provision of £0.46m as at the half year. However, these estimates may change as we move towards completion of the projects”.

Outlook: “The second half has started well, with revenues expected to pick up further in the second half, albeit at more normalised margins, as part of the group’s traditional heavier second half weighting. The Group is trading in line with the Board’s expectations for the full year and is well positioned to continue its growth trajectory”.

Brickability Group (BRCK, 50p, £150m)

Construction materials distributor. HY results. HY (Sep) results. Rev -7.9%, £325m (-14.4% LFL); adj PBT -2.7%, £21.8m; stat PBT +8.8%, £16.0m; adj EPS -12%, 5.30p; interim div +5.9%, 1.07p; net debt £30.9m (HY 22, £27.4m).

Trading: “A resilient performance across the group in the first half, despite macroeconomic and geopolitical backdrop. A particularly strong performance in the Contracting and Distribution divisions, highlighting the benefit of the group’s diversification strategy”. The proportion of brick revenues now reduced to c.50% of total revenues following the strategic focus on diversification.

Outlook: “As previously announced on 11 October, the Board expects that forecast reductions in newbuild volumes will have a corresponding impact upon the performance of the group’s existing businesses throughout the second half of the current financial year. The acquisition pipeline continues to be exciting, and targeted growth against our robust acquisition criteria will continue. The increased interim dividend reflects the performance of the business in the half year and the Board’s confidence in the longer-term outlook”. YE net debt

Safestore Holdings (SAFE, 777p, £1,693m)

UK-focused self-storage group, with stores in Paris, Barcelona and Netherlands. Q4 trading (1 Aug – 31 Oct) update.

Guidance: “For 2023, we anticipate that the business will deliver adjusted diluted EPS in line with the guidance given in our third quarter trading statement [to the lower end of then current 47.3p – 50.0p range]”.

Trading: YTD rev +5.5%, £224m (+1.7% LFL). Closing occupancy, 79.6% (YTD 22, 82.8%); average storage rate +5.6%, £31.57.

Outlook: “We believe that the Covid period acted as an accelerator of growth for the self-storage industry. Whilst demand stabilised during the year at a level that is below 2022, we are still seeing enquiry levels that are ahead of the pre-Covid period. Looking beyond any potential short-term volatility, there remains a significant under-supply of high quality self-storage capacity across the UK and Europe which provides a structural growth driver for the industry. We have substantial growth to deliver both from filling the 1.8m square feet of fully invested, currently unlet space, and from the new sites in our pipeline, across major cities in the UK and continental Europe. Safestore has a proven track record, and the returns we deliver are significantly ahead of our cost of debt, so we look to the future with confidence”.

OnTheMarket (OTMP, 108p, £87m)

Agent-backed residential property portal. Independent proxy advisor Glass Lewis joins ISS in recommending shareholders vote for the acquisition of OnTheMarket PLC by CoStar UK.

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.

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