Renewi shot higher on Thursday after the FTSE 250 waste-to-product company reported a doubling of full-year pre-tax profit and said its full-year performance was slightly ahead of upgraded expectations thanks in part to a solid performance from its commercial division.
In the year to the end of March, reported underlying pre-tax profit doubled to £51.5m, with revenue up 9% to £1.6bn and underlying earnings before interest and taxes 30% higher at £69.1m.
The company said cost synergies were ahead of its 12m target at 15m and it's on track to deliver expected synergies of 40m in 2019/20.
The commercial division enjoyed a particularly strong performance during the year, with underlying EBIT up 39% at constant currency to £64.6m and revenues up 5% at £1.02bn. Underlying EBIT in the Netherlands increased 67% to £38.8m, while Belgium saw its underlying EBIT grow 7% to £25.8m.
Renewi said growth was driven by a combination of improving inbound waste volumes and positive pricing, strong operational gearing and initial synergies, offsetting a reduction in wood income and in paper and plastic recyclate income during the second half.
The particularly strong growth rate in the Netherlands reflects the stronger market recovery in that country and the opportunity for greater margin recovery.
Revenues at the hazardous waste division edged up 3% at constant currency to £203m, but underlying EBIT fell 20% to £17.4m, with margins down 250 basis points to 8.6%. Renewi said intake of contaminated soil remained strong, as was throughput of contaminated water and packed chemical wastes. However, with limited outlets for the treated soil, it temporarily reduced soil throughput to around 50% of capacity with a corresponding impact on Dutch soil treatment facility ATM's profitability, particularly in the second half.
Chief executive officer Peter Dilnot said: "Our commercial division, which accounts for around 65% of group revenue, delivered a strong performance in improving markets, offsetting headwinds in the hazardous and municipal divisions, and demonstrating the scale, breadth and resilience of our expanded portfolio.
"The board expects continued good progress in 2018/19, in line with its expectations, as we deliver our projected synergies of 30m for the current year. With underlying market growth, an increasing pipeline of opportunities through innovation and strategic expansion, Renewi is well positioned to deliver long term growth and attractive returns."
RBC Capital Markets, which rates the stock at 'sector perform', said: "Overall, given the recent difficulties Renewi has had, we see this as a reassuring set of results, which we expect the market will take well. If the firm can solve the ATM issue, which it sounds confident on, then the horizon looks less uncertain."
At 0955 BST, the shares
were up 6.7% to 76.42p.