FY18 results confirmed that the merger integration process is being well controlled and on track to deliver the synergy benefits flagged at the outset. Renewi PLC (LON:RWI) is well positioned from a number of perspectives and has a clear path to achieving a good earnings uplift from current levels. Our headline estimates are unchanged and we expect the recent de-rating to reverse, resulting in a positive share price performance.
Positive post-merger progress in the first year
FY18 PBT came in just over £1m better than we had anticipated and was double the prior year level, while earnings (+30% y-o-y) and DPS (unchanged) were in line. Against our expectations, net finance and central costs had more favourable outturns, while Hazardous waste profitability was lower in comparison. Divisionally, Commercial and Monostreams both delivered good y-o-y growth versus their previous year pro forma comparative, and group merger synergies of €15m were achieved in the year, exceeding the original €12m target. Core net debt at the year-end was £439m, more than 10% lower than we had anticipated – partly due to investment and working capital timing effects, we believe – and was equivalent to 2.9x EBITDA generated in the year.
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