Renew Holdings

Bolstered by the recent acquisition of Amco specialist engineering and construction concern Renew Holdings (RNWH) has reported a better than expected set of results for the six months to March.

The AIM-quoted venture reported pre-tax profits of £2.3m on turnover of £155.5m, also maintaining an interim dividend of 1p. The results included revenues from Amco, the specialist engineering outfit it acquired this February in a deal worth £19.8m. Due to costs related to the acquisition cash fell from £10.5m to £4.7m.

The company reported that sales from the resilient specialist engineering sector accounted for 46% of group revenue. Its energy operations, part of the specialist engineering division also reported a steady stream of recurring revenue from its nuclear projects with Renew holding contracts to work at power stations including Sellafield.

Speaking to Growth Company Investor CEO Brian May opined that the group 'concentrates on non-discretionary areas of spending' noting that two areas of particular strength were the energy sector and its rail contracts, which he argued were benefiting from the rise in passenger numbers that is requiring greater spending in rail infrastructure.

Analysts at Arbuthnot expect pre-tax profits of £7.3m on revenue of £349.8m for the year to September 2011. In 2012 profits are forecast to grow to £9.4m on sales flat at £349.8m. EPS of 9.2p and 11.6p are pencilled in for 2011 and 2012, respectively. A dividend per share of 3p is forecast for 2011,2012 and 2013, a yield of 4.5% on the current price.

Growth Company Investor recommended shares in Renew this March at 65p and they have climbed 14% since, to 74p. Trading at eight times 2011 earnings, offering a respectable yield and with an order book in sectors largely shielded from cutbacks the shares continue to represent good value. We therefore reiterate our long-term buy rating.