Having reported good progress in the seasonally stronger H1, Renewi’s (LON:RWI) latest update for H2 to date reaffirms management expectations for the year. Importantly, the merger integration programme is very much on track and the next significant phases are underway. A UK Municipal contract review has been flagged, but our estimates are unchanged in all respects ahead of more detailed year-end update commentary. Share price weakness has brought forward valuation attractions, in our view.
Focusing on operational improvements
Overall group trading performance so far in the second half has met management expectations. Similarly, each of the four divisions appears to be demonstrating their usual seasonal characteristics, with operational improvements a key focus. At the same time they have also shown an ability to cope with some adverse market developments (eg soil treatment volume reduction, reduced waste export to China) while also moving forward through the integration programme, commissioning a new Canadian Municipal facility and extending the glass recycling JV (Maltha). The company has given early notification of onerous contract reviews regarding UK Municipal operations. The outcome of this will be known before the year end and the extent of any related exceptional items may or may not be partly offset by lower than expected FY18 integration costs incurred.
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