Renewi is a small group specializing in waste recycling, which does most of its business in the Benelux countries, where it has a market share of around 30%. In the late 1990s, when it was still called Shanks, the British company began to feel out of place on its island. It then set its sights on the Belgian and Dutch markets via several acquisitions. The latest and largest, Van Gansewinkel Groep, was finalized in 2016 for 482 million euros. Renewi is the fruit of the merger consummated in 2017 between the two groups, who chose London as their main listing, in a reversal of the usual tax relocations.

A recycler as well as a collector

The group, which employs 6,700 people, achieves steadily growing annual sales, which reached £1.65 billion in the last year ended March. Almost three-quarters of these revenues are generated by the collection and processing of professional waste, the driving force behind the company's business and profits. A second division covers glass processing, electronic products and municipal contracts. Finally, the third division specializes in the treatment and recycling of complex wastes, including contaminated soils, chemicals and ashes.

What sets Renewi apart from conventional waste collectors is its transformative dimension. Almost 64% of the products collected are recycled and reused. Renewi's Management's stated aim is to eventually increase this figure to 75%. This gives the company the label "in tune with the times" and enables it to communicate widely on its contribution to the circular economy.

A diluted British base
Despite its British flag, Renewi generates around 90% of its business and earnings in Belgium and the Netherlands. The UK provides the remaining income, along with France and Portugal, but only marginally. Financially, life has not been smooth sailing since the 2017 merger. The merger was not as straightforward as expected, old household waste collection contracts in the UK were badly tied up, and the soil treatment subsidiary faced a regulatory moratorium in the Netherlands.
 
The accounts were riddled with charges linked to these problems for years. These substantial additional costs, all of which have now been provisioned and are in the process of being settled, nevertheless continue to weigh on the company's finances. The current financial year, which runs until the end of March 2024, will continue to bear the scars. We therefore need to look ahead to the next financial year if we are to return to positive cash flow. And for the year ending March 2026, to return to more normal performance. This upward trajectory is credible, since it is based on a business plan defined by management that seems both prudent and realistic. The main lever for improving financial ratios is the gradual disappearance of past worries.

 
Renewi is not a quiet river
 
The company's financial ratios are fairly typical of its situation. For example, the PER, or earnings multiple, is very low, since the company is at a discount due to its poor performance. It's around 9 times last year's earnings and 6 times those expected in March 2026. Margins are modest, around 7% for the operating margin, but fairly constant, a sign of good pricing power. Net debt is a little high, as cash has been consumed by the problems accumulated in recent years. However, its peak is in the past tense, at least if analysts' projections are reliable. Renewi is therefore a bet on the normalization of a business model based on a powerful underlying trend: the circular economy and the recycling of materials.