REG - Renold PLC - Interim Results
10/11/2021 07:00
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RNS Number : 8612R Renold PLC 10 November 2021
Renold plc
Interim results for the half year ended 30 September 2021
("Renold", the "Company" or, together with its subsidiaries, the "Group")
Significant revenue growth…Record orderbook…Strong cash generation
Renold (AIM: RNO), a leading international supplier of industrial chains and
related power transmission products, announces its interim results for the six
month period ended 30 September 2021.
Financial highlights
Half year ended
30 September 30 September Increase / (decrease)
2021 2020
£m £m %
Adjusted results at constant exchange rates(1)
Revenue at constant exchange rates 95.3 78.1 22%
Adjusted operating profit at constant exchange rates 8.2 5.5 49%
Return on sales(2) at constant exchange rates 8.6% 7.0%
Adjusted earnings per share 2.3p 1.1p 109%
Net debt(3) 13.9 26.4 (47%)
Results at actual exchange rates
Revenue 95.3 81.5 17%
Adjusted operating profit 8.2 5.8 41%
Return on sales(2) 8.6% 7.1%
Operating profit 8.2 5.3 55%
Profit before tax 6.2 2.8 121%
Basic earnings per share 2.3p 0.9p 156%
· Revenue up 17% to £95.3m (22% at constant exchange rates).
· Adjusted operating profit up 41% (49% at constant exchange rates)
to £8.2m (2020: £5.8m).
· Excluding one-off items adjusted operating profit of £7.0m(4)
up 21% and return on sales of 7.4% up 30bps.
· Net debt £13.9m, £4.5m reduction in the period; ratio to
adjusted EBITDA 0.6x (31 March 2021: 0.9x).
· Adjusted EPS 2.3p (2020: 1.1p); Excluding one-off items Adjusted
EPS 2.0p
Business highlights
· The Group's markets recovered strongly during the first half, as
activity levels rebounded from Covid impact, returning to 96% of pre-pandemic
level.
· Strong cash generation, with continuing focus on working capital and
cost control, but allowing for inventory increases due to lengthened supply
chains and a gradual restoration of capital expenditure.
· Group order intake in the period £113.0m, up 48.8% YoY as
reported (54.9% at constant exchange rates).
· Orderbook at 30 September 2021, £72.1m, is a record high for the
Group (30 September 2020: £46.5m).
· Completed bolt-on acquisition of the conveyor chain business of
Brooks Ltd, which is performing ahead of expectations.
(1) See below for reconciliation of actual rate, constant exchange rate and
adjusted figures
(2) Adjusted operating profit divided by revenue
(3) See Note 9 for a reconciliation of net debt which excludes lease
liabilities
(4) Non-recurring items include £1.7m of US Payroll Protection Program (PPP)
loan forgiveness offset by £0.5m of dilapidation charges relating to closed
sites
Robert Purcell, Chief Executive of Renold plc, said:
"The strong trading momentum experienced in the fourth quarter of the last
financial year has continued into the first half, resulting in growth of both
revenues and profitability. Despite the widely reported global supply chain
and inflationary pressures that remain present, particularly with respect to
materials, transport and energy costs, Renold continues to benefit from
geographic, customer and market sector diversity. With a record order book at
the period end, coupled with the strategic initiatives previously implemented,
we approach the second half with confidence, but cognisant of the very
volatile and inflationary world we operate in."
Reconciliation of reported, constant exchange rate and adjusted results
Revenue Operating profit Earnings per share
H1 H1 H1 H1 H1 H1
2021/22 2020/21 2021/22 2020/21 2021/22 2020/21
£m £m £m £m pence pence
Reported at actual exchange rates 95.3 81.5 8.2 5.3 2.3 0.9
Amortisation of acquired intangible assets - - - 0.5 - 0.2
Adjusted 95.3 81.5 8.2 5.8 2.3 1.1
Exchange impact - (3.4) - (0.3) - -
Adjusted at constant exchange rates 95.3 78.1 8.2 5.5 2.3 1.1
ENQUIRIES:
Renold plc IFC Advisory Limited
Robert Purcell, Chief Executive Tim Metcalfe
Jim Haughey, Group Finance Director Graham Herring
renold@investor-focus.co.uk (mailto:renold@investor-focus.co.uk)
0161 498 4500 020 3934 6630
Nominated Adviser and Joint Broker Joint Broker
Peel Hunt LLP FinnCap Limited
Mike Bell Ed Frisby / Tim Harper (Corporate Finance)
Ed Allsopp Andrew Burdis / Harriet Ward (ECM)
020 7418 8900 020 7220 0500
Cautionary statement regarding forward-looking statements
Some of the information in this document may contain projections or other
forward-looking statements regarding future events or the future financial
performance of Renold plc and its subsidiaries. You can identify
forward-looking statements by terms such as "expect", "believe", "anticipate",
"estimate", "intend", "will", "could", "may" or "might", the negative of such
terms or other similar expressions. Renold plc (the Company) wishes to caution
you that these statements are only predictions and that actual events or
results may differ materially. The Company does not intend to update these
statements to reflect events and circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events. Many factors could cause
the actual results to differ materially from those contained in projections or
forward-looking statements of the Group, including among others, general
economic conditions, the competitive environment as well as many other risks
specifically related to the Group and its operations. Past performance of the
Group cannot be relied on as a guide to future performance.
NOTES FOR EDITORS
Renold is a global leader in the manufacture of industrial chains and also
manufactures a range of torque transmission products which are sold throughout
the world to a broad range of original equipment manufacturers, distributors
and end-users. The Company has a reputation for quality that is recognised
worldwide. Its products are used in a wide variety of industries including
manufacturing, transportation, energy, metals and mining.
Further information about Renold can be found on their website at:
www.renold.com (http://www.renold.com)
Chief Executive's Statement
The Group's markets recovered strongly during the first half, as activity
levels continued to rebound in the aftermath of the Covid-19 pandemic. Group
order intake during the period was £113.0m, an increase of 48.8% on a
reported basis and 54.9% at constant exchange rates, over the comparative
prior year period. Excluding the recently announced £11.0m long term military
contract, order intake for the period increased by 34.2% or 39.7% at constant
exchange rates. The resultant order book of £72.1m, represents a record high
for the Group (30 September 2020: £46.5m).
Conversion of orders into sales was also encouraging, with Group revenue for
the period of £95.3m, an increase of 16.9% on a reported basis and 22.0% at
constant exchange rates, over the comparative prior year period.
Adjusted operating profit increased to £8.2m (2020: £5.8m) with an adjusted
operating profit margin of 8.6% (2020: 7.1%). Operating profit increased to
£8.2m (2020: £5.3m), with operating profit margins increasing from 6.5% to
8.6%.
Half year ended 30 September 2021 External revenue Adjusted operating profit Return on sales
£m £m %
Reported 95.3 8.2 8.6
US PPP Loan forgiveness - (1.7) -
Costs relating to closed sites - 0.5 -
Reported excluding non-recurring items 95.3 7.0 7.4
During the period the Group benefitted from the forgiveness of £1.7m of loans
received under the US Government's Payroll Protection Program, offsetting
this, the Group also incurred £0.5m of non-recurring costs relating to closed
sites, including repair and maintenance expenditure. Excluding these one-off
items adjusted operating profit from continuing operations increased to £7.0m
(2020: £5.8m), with corresponding operating profit margins rising to 7.4%
(2020: 7.0%) despite the impact of the widely reported industry headwinds,
including the impact experienced on the supply chain, raw material
availability and inflation.
The Group continued to benefit from the impact of the significant efforts
undertaken in the current and previous years to lower the fixed cost base,
increasing flexibility and operational leverage. The Group has successfully
managed a period of significant supply chain disruption to materials and
transportation, both in terms of availability, lead times and increased
prices, and whilst price increases have been passed through to customers, the
Group expects further pressure on materials, energy and transportation to
continue into the second half of the year.
Renold continues to make every effort to increase performance through specific
projects aimed at better operational efficiency, through improved design and
standardisation of products, better utilisation of machinery and workforce,
including more flexible working practices, and leveraging the benefits of
improved procurement strategies.
The Group reduced net debt by £4.5m during the period, to £13.9m (31 March
2021: £18.4m).
Acquisition
On 8 April 2021 Renold completed the acquisition of the conveyor chain
business of Brooks Ltd ("Brooks") in Manchester, UK, for a total consideration
of £0.7m, including £0.4m of deferred consideration. The business has been
fully integrated into the Renold UK Service centre in Manchester. At the time
of the acquisition, for the full year Brooks was expected to contribute
incremental sales and Group operating profit of c.£1.0m and c.£0.2m
respectively. Pleasingly, Brooks is performing ahead of these expectations.
Business and Financial Review
Revenue Adjusted operating profit at constant exchange rates Adjusted operating margin at constant exchange rates
at constant exchange rates
Six month period 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21
£m
£m £m £m % %
Chain 76.6 60.7 9.0 5.5 11.7 9.1
Torque Transmission 20.6 19.8 1.8 2.4 8.7 12.1
Head office costs/ (1.9) (2.4) (3.8) (2.4) - -
Intra group sales elimination
Total excluding non-recurring items 95.3 78.1 7.0 5.5 7.4 7.0
Non-recurring items(1) - - 1.2 - - -
Total 95.3 78.1 8.2 5.5 8.6 7.0
(1) Non-recurring items have been added back to the underlying business
segments, these include to £1.7m of PPP loan forgiveness in the Chain
division and £0.5m of dilapidation charges on closed sites in Head office
costs.
Chain
The Chain division's revenue at constant exchange rates increased by 26.2%
(£15.9m) to £76.6m.
Revenue recovered strongly in most regions:
· Europe, recorded a 41.1% increase driven by strong domestic demand
and being our main production centre also benefited from increased demand in
other geographies, especially from the US.
· The Americas, increased by 30.9%, with strong demand from the US
OEM markets, especially for fork lift truck chain.
· Australasia's revenue was broadly unchanged, as the business
benefitted greatly last year from the Australian markets move to more
domestically produced manufactured goods, which largely offset the impact of
Covid.
· India recovered strongly, and despite being subject to a pandemic
related lock down in the current half year, recorded 64.2% revenue growth over
the prior year comparator.
· Domestic sales revenue in China increased by 22.5%, albeit from a
low base, while strong demand from Europe, the US and notably India, resulted
in an overall increase in revenue of 36.9%. Significant progress continues to
be made in improving the performance of the new factory in Jintan.
Divisional adjusted operating profit before non-recurring items was £9.0m,
£3.5m higher than the prior year at constant exchange rates. The adjusted
operating profit margin before non-recurring items was 11.7% (2020: 9.1%).
Including the impact of non-recurring items, adjusted operating profit and
margins were £10.7m and 13.9% respectively.
Order intake at constant exchange rates increased by 49.8% to £83.3m,
resulting in book to bill (ratio of orders to sales) for the first half of the
year of 108.8% (2020: 91.7%).
Torque Transmission
Divisional revenues of £20.6m were £0.8m higher than in the prior first half
year mainly due to increasing activity on the contract to supply couplings for
the Royal Navy. The Group announced it had secured an £11m order for the
second phase of this contract in July.
Divisional profit reduced by £0.6m to £1.8m mainly because of the one-off
benefit of UK government Covid support of £0.7m in the first half of last
financial year. Excluding this, divisional operating profit advanced by £0.1m
relative to the first half of last year, reflecting the higher revenues.
Momentum in this division, which has a later trading cycle than our Chain
business, continues to be positive.
Cash Flow and Net Debt
Half year to 30 September 2021/22 2020/21
£m £m
Adjusted operating profit(1) 8.2 5.3
Add back depreciation and amortisation 4.9 5.7
Adjusted EBITDA 13.1 11.0
Movement in working capital 0.5 3.7
Net capital expenditure (1.3) (1.0)
Operating cash flow 12.3 13.7
Income taxes (1.3) 1.0
Pensions cash costs (2.4) (1.1)
Restructuring spend - -
Repayment of principal under lease liabilities (1.4) (1.7)
Financing costs paid (1.0) (1.8)
Consideration paid for acquisition (0.3) -
Employee Benefit Trust share purchases (1.8) -
Other movements/share-based payments 0.4 0.1
Change in net debt(1) 4.5 10.2
Closing net debt(1) (13.9) (26.4)
(1)Adjusted operating profit and the change in net debt in the period ended 30
September 2021 include the US PPP loan forgiveness of £1.7m.
Cash generation in the first half was strong, with net debt reducing by £4.5m
from the position at 31 March 2021, to £13.9m.
A continued and disciplined focus on working capital saw a £6.3m increase in
inventory driven by lengthening supply chains and material cost increases,
being offset by a significant increase in payables. Receivables also
increased, but at a rate in line with the recovery of turnover. Further
inflationary pressures on materials, together with a significant lengthening
of the time to supply product between operating sites, will continue to result
in increased levels of inventory in the second half year. This coupled with
higher input prices will result in a modest increase in working capital.
Net capital expenditure at £1.3m remains well below pre-pandemic levels as
supply chain issues have increased lead times for machinery purchases. The
spend on improving production capabilities in prior years means that lower
levels of maintenance capex will not impact operational performance. However,
the delay does postpone the significant operational benefits expected from
planned projects. Strategic investments in improved heat treatment, other
production capabilities and the standardised IT system for the Group continue
and are expected to gather pace during the second half of the year.
Corporation tax payments on account increased to more normal levels, with a
total £1.3m tax paid in the first half of the year. Significant efforts were
made last year to review payments on account, which led to a recovery of
£1.3m and resulted in a net tax cash inflow of £1.0m in the prior half year.
The Group acquired the conveyor chain business of Brooks Ltd in Manchester,
UK, during the period, for a total consideration of £0.7m, with £0.3m paid
on completion and £0.4m deferred.
Cash financing costs reduced from £1.8m in the prior half year to £1.0m this
half year, due to the significant reduction in the average net debt.
During the period the Group acquired shares in the employee benefit trust,
totalling £1.8m. This will ensure no dilution when when share awards vest.
Pensions
The Group has a number of closed defined benefit pension schemes (accounted
for in accordance with IAS 19R 'Employee benefits'). During the pandemic, the
Group negotiated a £2.8m one-off reduction in annual contribution levels with
the UK pension scheme trustees. Accordingly, contribution levels returned to
normal levels during the period. The future repayment of the deferred
contributions will commence on 1 April 2022, at approximately £0.6m per
annum, for a period of five years, until April 2027.
Cash pension costs are sustainable, having remained consistent at
approximately £5.5m for several years. The Group's IAS 19R retirement benefit
obligation decreased from £102.4m at 31 March 2021 to £100.3m at 30
September 2021.
At 30 September 2021 At 31 March 2021
UK Schemes Overseas Total UK Schemes Overseas Total
Schemes Schemes
£m £m £m £m £m £m
Total retirement benefit obligations (75.6) (24.7) (100.3) (77.5) (24.9) (102.4)
Net deferred tax asset 18.9 3.6 22.5 14.7 3.7 18.4
Retirement benefit obligations net of deferred tax asset (56.7) (21.1) (77.8) (62.8) (21.2) (84.0)
The ongoing subdued levels of corporate bond yields, which determine discount
rates, have resulted in the continuing high levels of the deficits in the key
UK and German schemes. In the UK, discount rates remained stable at 2.0% (31
March 2021: 2.0%) while the increase in the CPI inflation assumption,
increasing to 2.9% (31 March 2021: 2.7%), has the effect of increasing the
present value of future liabilities by £5.2m. Strong asset returns helped to
mitigate the impact of the change in the financial assumptions, with the net
UK deficit decreasing by £1.9m to £75.6m.
Pension liabilities in non-UK schemes reduced by £0.2m to £24.7m.
The net financing expense (a non-cash item) was £0.9m (2020: £1.0m).
Dividend
In light of the widely reported economic headwinds, including the impact on
its supply chain, raw material availability, inflation and continuing
investment in equipment and revenue expenditure to improve the performance of
the business, the Board has decided not to declare an interim dividend. The
dividend policy will remain under review as margin and cash flow performance
continues to develop.
Going Concern
The interim condensed consolidated financial statements have been prepared on
a going concern basis. In determining the appropriate basis of preparation of
the financial statements, the Directors are required to consider whether the
Group can continue in operational existence for the foreseeable future.
The ongoing uncertainty as to the future impact on the Group of the Covid-19
pandemic, alongside the resilient half year trading performance of the Group,
have been considered as part of the adoption of the going concern basis.
During the first half of the year, manufacturing facilities in Western Europe,
the USA, China and Australia remained open. Facilities in China and Malaysia
were shut down for a period of time due to national restrictions, but had
fully reopened prior to September 2021, and have remained open since. Across
the Group, public health measures advised by governments are being followed.
The Group continues to closely monitor operating costs, and capital
expenditure and other cash demands are being managed effectively.
As part of its assessment, the Board has considered downside scenarios that
reflect the current uncertainty in the global economy, including significant
material and energy supply issues, and transport delays, and continuing
inflationary pressures.
The Directors believe that the Group is well placed to manage its business
risks and, after making enquiries including a review of forecasts and
predictions, taking account of reasonably possible changes in trading
performances and considering the existing banking facilities, including the
available liquidity and covenant structure, have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
12 months following the date of approval of the interim financial statements.
Accordingly, they continue to adopt the going concern basis in preparing the
consolidated financial statements.
Risks and Uncertainties
The principal risks and uncertainties affecting the business activities of the
Group, as well as the risk mitigating controls put in place, remain those
detailed on pages 40-46 of the 2020/21 Annual Report and Accounts. These
include macro-economic and political uncertainty risks as well as various
risks relating to Group treasury activities. Key operational risks are raw
material prices, energy and other input cost prices.
During the period, risks relating to macro-economic factors and political
uncertainty have continued, especially with regard to the impact of the global
Covid-19 pandemic. The sustained effect of uncertainty has the potential to
reduce demand in end-markets for the Group's products. Renold benefits from
its geographic, customer and sector diversity which helps to mitigate the
impact of localised issues, but cannot fully mitigate the effects of
widespread reductions in demand.
The valuation of retirement benefit obligations can be significantly impacted
by changes to the yields on corporate bonds and inflation prospects. The
schemes' investment strategies provide a partial hedge against these risks,
and other de-risking strategies are employed where sensible. However, it
should be noted that the actual cash flows to support the pension scheme are
quite stable and subject to long term funding plans which are reviewed every
three years. The next triennial valuation will have an effective date of 5
April 2022.
Summary
Overall, activity in the first half was strong and in line with expectations,
showing a good recovery as the worst effects of the pandemic receded. Whilst
this performance is expected to continue, supported by the record order book
at the period end, the widely reported global supply chain issues are
continuing to cause margin pressure, with significant inflationary trends
being experienced, particularly with respect to materials, transport and
energy costs. The Company is working to mitigate these headwinds as far as
possible and the Group enjoys significant geographic, customer and sector
diversity. With the Group benefiting from the strategic initiatives previously
implemented, we are well placed for the future, with a robust business well
positioned as markets continue to recover from the effects of the pandemic.
Responsibility statement
The Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting;
· the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events and their
impact during the first six months of the financial year and description of
principal risks and uncertainties for the remaining six months of the
financial year); and
· the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
The Directors of Renold plc are listed in the Annual Report for the year ended
31 March 2021. A list of current Directors is maintained on the Group website
at www.renold.com.
By order of the Board
Robert
Purcell
Jim Haughey
Chief
Executive
Group Finance Director
10 November
2021 10
November 2021
Condensed Consolidated Income Statement
for the six months ended 30 September 2021
Note First half 2021/22 (unaudited) First half 2020/21 Full year 2020/21
£m (unaudited) (audited)
£m £m
Revenue 3 95.3 81.5 165.3
Operating costs before adjusting items (87.1) (75.7) (154.1)
Adjusted(1) operating profit 8.2 5.8 11.2
Adjusting items
Amortisation of acquired intangible assets 4 - (0.5) (0.7)
Operating profit 8.2 5.3 10.5
Net financing costs 5 (2.0) (2.5) (4.6)
Profit before tax 6.2 2.8 5.9
Taxation 6 (1.2) (0.8) (2.1)
Profit for the period 5.0 2.0 3.8
Attributable to:
Owners of the parent 5.0 2.0 3.8
Earnings per share from continuing operations 7
Basic 2.3p 0.9p 1.7p
Diluted 2.1p 0.9p 1.6p
Basic adjusted earnings per share 2.3p 1.1p 2.0p
Diluted adjusted earnings per share 2.1p 1.1p 1.9p
(1)Adjusted: In addition to statutory reporting, the Group reports certain
financial metrics on an adjusted basis. Definitions of adjusted measures, and
information about the differences to statutory metrics are provided in Note 15
to the financial statements.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2021
First half 2021/22 (unaudited) First half 2020/21 Full year 2020/21
£m (unaudited) (audited)
£m £m
Profit for the period 5.0 2.0 3.8
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations 1.1 0.3 (5.8)
Gain/(loss) on hedges of the net investment in foreign operations (0.1) 0.2 0.7
Cash flow hedges:
Fair value gain/(loss) arising on cash flow hedges during the period (0.3) 0.1 (0.1)
Less: Cumulative gain arising on cash flow hedges reclassified 0.1 0.3 0.3
to profit and loss
Income tax relating to items that may be reclassified subsequently to profit 0.1
or loss
(0.3) -
0.9 0.6 (4.9)
Items not to be reclassified to the income statement in subsequent periods:
Re-measurement gains/(losses) on retirement benefit obligations 1.0 (17.1) (5.6)
Tax on re-measurement losses/(gains) on retirement benefit obligations - (0.2) 3.4 1.0
excluding impact of statutory rate change
Effect of changes in statutory tax rate on deferred tax assets 4.0 - -
4.8 (13.7) (4.6)
Other comprehensive income/(expense) for the period, net of tax 5.7
(13.1) (9.5)
Total comprehensive income/(expense) for the period, net of tax 10.7
(11.1) (5.7)
Attributable to:
Owners of the parent 10.7 (11.1) (5.7)
Condensed Consolidated Statement of Financial Position
as at 30 September 2021
Note 30 September 2021 30 September 2020 31 March
(unaudited) (unaudited) 2021
£m £m (audited)
£m
Assets
Non-current assets
Goodwill 22.2 23.5 21.7
Other intangible fixed assets 6.3 7.3 6.1
Property, plant and equipment 46.7 52.0 47.8
Right-of-use assets 10.8 11.4 10.1
Deferred tax assets 25.3 24.2 21.0
111.3 118.4 106.7
Current assets
Inventories 44.7 41.8 37.7
Trade and other receivables 37.8 31.5 30.3
Current tax 0.1 0.1 0.2
Derivative financial instruments - 0.1 -
Cash and cash equivalents 9 11.5 19.6 19.9
94.1 93.1 88.1
Total assets 205.4 211.5 194.8
Liabilities
Current liabilities
Borrowings 9 (0.1) (0.1) (2.3)
Trade and other payables (45.5) (32.5) (31.5)
Lease liabilities (2.2) (3.4) (2.5)
Current tax (2.9) (1.6) (2.3)
Derivative financial instruments (0.3) - (0.1)
Provisions (0.2) (0.7) (1.4)
(51.2) (38.3) (40.1)
Net current assets 42.9 54.8 48.0
Non-current liabilities
Borrowings 9 (24.8) (45.4) (35.5)
Preference stock 9 (0.5) (0.5) (0.5)
Trade and other payables (5.7) (5.2) (5.4)
Lease liabilities (13.3) (13.3) (12.9)
Deferred tax liabilities (4.2) (4.7) (4.1)
Retirement benefit obligations 8 (100.3) (115.6) (102.4)
Provisions (2.1) - -
(148.8) (184.7) (160.8)
Total liabilities (201.9) (223.0) (200.9)
Net assets/(liabilities) 3.3 (11.5) (6.1)
Equity
Issued share capital 10 11.3 11.3 11.3
Share premium - 30.1 30.1
Capital reserve - 15.4 15.4
Currency translation reserve 7.9 12.1 6.8
Other reserves (2.1) 0.1 (0.1)
Retained earnings (13.8) (80.5) (69.6)
Total shareholders' surplus/(deficit) 3.3 (11.5) (6.1)
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 September 2021
First half First half Full year 2020/21
2021/22 2020/21 (audited)
(unaudited) (unaudited) £m
£m £m
Cash flows from operating activities
Cash generated by operations (Note 9) 10.1 13.7 26.0
Income taxes refunded/(paid) (1.3) 1.0 0.7
Net cash flows from operating activities 8.8 14.7 26.7
Cash flows from investing activities
Proceeds from property disposals 0.1 0.2 0.2
Purchase of property, plant and equipment (0.8) (1.0) (2.3)
Purchase of intangible assets (0.6) (0.2) (0.8)
Consideration paid for acquisition (0.3) - -
Net cash flows from investing activities (1.6) (1.0) (2.9)
Cash flows from financing activities
Repayment of principal under lease liabilities (1.4) (1.7) (3.2)
Financing costs paid (0.8) (1.8) (2.0)
Own shares purchased (1.8) - -
Proceeds from borrowings - 2.8 2.8
Repayment of borrowings (9.2) (9.0) (19.9)
Net cash flows from financing activities (13.2) (9.7) (22.3)
Net (decrease)/increase in cash and cash equivalents (6.0) 4.0 1.5
Net cash and cash equivalents at beginning of period 17.3 15.1 15.1
Effects of exchange rate changes (0.1) - 0.7
Net cash and cash equivalents at end of period 11.2 19.1 17.3
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 September 2021
Share capital Share premium account Retained earnings Currency translation reserve Capital redemption reserve Other reserves Total equity
£m £m £m £m £m £m £m
At 1 April 2020 11.3 30.1 (68.8) 11.9 15.4 (0.3) (0.4)
Profit for the year - - 3.8 - - - 3.8
Other comprehensive income/(expense) - - (4.6) (5.1) - 0.2 (9.5)
Total comprehensive income/(expense) for the year - - (0.8) (5.1) - 0.2 (5.7)
Share-based payments - - - - - - -
At 31 March 2021 11.3 30.1 (69.6) 6.8 15.4 (0.1) (6.1)
Profit for the period - - 5.0 - - - 5.0
Other comprehensive income/(expense) - - 4.8 1.1 - (0.2) 5.7
Total comprehensive income/(expense) for the period - - 9.8 1.1 - (0.2) 10.7
Own shares purchased - - - - - (1.8) (1.8)
Capital reorganisation (Note 11) - (30.1) 45.5 - (15.4) - -
Share-based payments - - 0.5 - - - 0.5
At 30 September 2021 11.3 - (13.8) 7.9 - (2.1) 3.3
At 1 April 2020 11.3 30.1 (68.8) 11.9 15.4 (0.3) (0.4)
Profit for the period - - 2.0 - - - 2.0
Other comprehensive income/(expense) - - (13.7) 0.2 - 0.4 (13.1)
Total comprehensive income/(expense) for the period - - (11.7) 0.2 - 0.4 (11.1)
Share-based payments - - - - - - -
At 30 September 2020 11.3 30.1 (80.5) 12.1 15.4 0.1 (11.5)
Included in retained earnings is £1.3m (31 March 2021: £0.8m) relating to a
share option reserve.
The other reserves are stated after deducting £1.8m (31 March 2021: £0.035m)
relating to shares held in the Renold plc Employee Benefit Trust. The Renold
Employee Benefit Trust holds Renold plc shares and satisfies awards made under
various employee incentive schemes when issuance of new shares is not
appropriate.
At 30 September 2021 the Renold Employee Benefit Trust held 7,622,509 (31
March 2021: 199,790) ordinary shares of 5p each and, following recommendations
by the employer, are provisionally allocated to satisfy awards under employee
incentive schemes. At 30 September 2021 the market value of these shares was
£1.9m (31 March 2021: £0.035m).
Notes to the Interim Condensed Consolidated Financial Statements
1. Corporate information
The interim condensed consolidated financial statements for the six months to
30 September 2021 were approved by the Board on 10 November 2021. These
statements have not been audited or reviewed by the Group's auditor pursuant
to the Auditing Practices Board guidance on the Review of Interim Financial
Information.
Renold plc is a limited liability company, incorporated and registered under
the laws of England and Wales, whose shares are publicly traded. The principal
activities of the Company and its subsidiaries are described in Note 3.
These interim condensed consolidated financial statements do not constitute
statutory accounts of the Group within the meaning of Section 434 of the
Companies Act 2006. The statutory accounts for the year ended 31 March 2021
have been filed with the Registrar of Companies. The auditor's report on those
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498(2) or Section 498(3) of the
Companies Act 2006.
2. Accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the six months
ended 30 September 2021 have been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Services Authority and with IAS 34
'Interim Financial Reporting' as adopted by the European Union. It does not
include all of the information and disclosures required in the annual
consolidated financial statements and should be read in conjunction with the
Group's annual consolidated financial statements for the year ended 31 March
2021.
The accounting policies, presentation and methods of computation applied by
the Group in these interim condensed consolidated financial statements are the
same as those applied in the Group's latest audited annual consolidated
financial statements for the year ended 31 March 2021, except as noted
below.
The excess of the consideration transferred, the amount of any non-controlling
interest and the acquisition date fair value of any previously held equity
interest in the acquired entity as compared with the Group's share of the
identifiable net assets are recognised as goodwill. Where the Group's share of
identifiable net assets acquired exceeds the total consideration transferred,
a gain from a bargain purchase is recognised immediately in the income
statement after the fair values initially determined have been
reassessed.
New and amended standards adopted by the Group
The same accounting policies, presentation and methods of computation are
followed in the condensed set of financial statements as applied in the
Group's latest annual audited financial statements.
As a result of the Covid-19 pandemic, the Group has utilised £nil (31 March
2021: £4.0m; 30 September 2020: £2.3m) of government assistance across its
units in the form of employee support schemes. In line with IAS 20, this
income was recognised in the income statement at the date at which the
conditions attached to receipt of such assistance have been met, in the period
it becomes receivable.
New standards and interpretations not yet effective and not adopted
At the date of publishing these interim condensed consolidated financial
statements, a number of new and revised standards and interpretations have
been issued by the International Accounting Standards Board (IASB). The
relevant standards which are deemed to apply to Renold are documented
below.
During April 2021 a finalised decision by the IFRS Interpretations Committee
regarding configuration and customisation costs in Cloud Computing
Arrangements (Software as a Service, 'SaaS') under IAS 38 was made. This new
announcement offers clarification of the treatment of how a customer should
account for the costs of configuring or customising the supplier's application
software in a SaaS arrangement that is determined to be a service contract.
The Group intends to perform an assessment by year end to determine which
costs should continue to be capitalised, and those which should be expensed.
Going concern
The condensed consolidated financial statements have been prepared on a going
concern basis. In determining the appropriate basis of preparation of the
condensed consolidated financial statements, the Directors are required to
consider whether the Group can continue in operational existence for the
foreseeable future. The business and financial review included in these
Interim results provides a summary of the Group's financial position, cash
flows, liquidity position and borrowings.
The current and plausible future impact of Covid-19 on the Group's activities
and performance, in addition to other factors and risks, has been considered
by the Board of Directors in preparing its going concern assessment. The Group
has modelled potential severe but plausible impacts on revenues, profits and
cash flows in its assessment. In preparing its assessment, the Directors have
considered the actual impact that Covid-19 has had on the business since the
beginning of the outbreak and the related decline in revenues.
The key covenants attached to the Group's multi-currency revolving credit
facility relate to leverage (net debt to EBITDA) and interest cover, which are
measured on a pre-IFRS 16 basis. The maximum leverage ratio permitted under
the covenants is 2.5x and the minimum interest cover ratio permitted is 4.0x.
In the severe but plausible downside scenario modelled, the Group continues to
maintain sufficient liquidity and meets its gearing and interest cover
covenants under the facility with substantial headroom.
In addition to the above scenarios, management has performed reverse stress
testing over the model to determine the extent of downturn which would result
in a breach of covenants. Assuming similar levels of cash conversion as seen
in recent months, a monthly revenue decline compared with the year ended 31
March 2019, well in excess of the maximum decline experienced in any month
over the last 18 months would need to persist throughout the going concern
period for a covenant breach to occur, which is considered very unlikely. This
stress test also does not incorporate additional mitigating actions or cash
preservation responses, which the Group would implement in the event of a
severe and extended revenue decline.
Following this assessment, the Directors have formed a judgement, at the time
of approving the condensed consolidated financial statements, that there are
no material uncertainties that cast doubt on the Group's going concern status
and that it is a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least the next 12 months. For this
reason, the Directors continue to adopt the going concern basis in preparing
the condensed consolidated financial statements.
Significant accounting judgements, estimates and assumptions
In the course of preparing these interim condensed consolidated financial
statements, no judgements have been made in the process of applying the
Group's accounting policies that have had a significant effect on the amounts
recognised in the financial statements, other than those involving estimation
uncertainty. The key sources of estimation uncertainty are those which applied
in the annual consolidated financial statements for the year ended 31 March
2021, namely:
• taxation
• retirement benefit obligations
• right-of-use assets
Prior to the adoption of IFRS 16 'Leases', the Group had previously assessed
operating lease arrangements at the Bredbury (UK) facility as onerous, with an
onerous lease provision recorded in the Group's balance sheet accordingly. On
adoption of IFRS 16 the onerous lease provision, £2.7m on transition date for
this site, was reclassified as a reduction to the opening value of the
associated right-of-use asset. During the six months ended 30 September 2021,
£0.6m of the original onerous lease provision has been reclassified from the
right-of-use asset to provisions, representing the element of the £2.7m
brought forward onerous lease provision relating to expected remediation costs
at the site. At the end of the current reporting period, the resulting value
of the Bredbury right-of-use asset is based on assumptions upon future sub-let
income streams and the discount rate used.
• inventory valuation
• impairment of non-financial assets
Financial risk management
The Group's financial risk management objectives and policies are consistent
with those disclosed in the consolidated financial statements for the year
ended 31 March 2021.
3. Segmental information
For management purposes, the Group is organised into two operating segments
according to the nature of their products and services and these are
considered by the Directors to be the reportable operating segments of Renold
plc as shown below:
· The Chain segment manufactures and sells power transmission and
conveyor chain and also includes sales of torque transmission products through
Chain National Sales Companies (NSCs); and
· The Torque Transmission segment manufactures and sells torque
transmission products, such as gearboxes and couplings.
No operating segments have been aggregated to form the above reportable
segments.
The Chief Operating Decision Maker (CODM) for the purposes of IFRS 8
'Operating Segments' is considered to be the Board of Directors of Renold plc.
Management monitor the results of the separate reportable operating segments
based on operating profit and loss which is measured consistently with
operating profit and loss in the consolidated financial statements. The same
segmental basis applies to decisions about resource allocation. Disclosure has
not been included in respect of the operating assets of each segment as they
are not reported to the CODM on a regular basis. However, Group net financing
costs, retirement benefit obligations and income taxes are managed on a Group
basis and therefore are not allocated to operating segments. Transfer prices
between operating segments are on an arm's length basis in a manner similar to
transactions with third parties.
The segment results for the period ended 30 September 2021 were as follows:
Chain(2) Torque Head office costs(1) and eliminations Consolidated
£m
£m Transmission £m
£m
Period ended 30 September 2021
Revenue
External customer 76.2 19.1 - 95.3
Inter-segment 0.4 1.5 (1.9) -
Total revenue 76.6 20.6 (1.9) 95.3
Adjusted operating profit/(loss) 10.7 1.8 (4.3) 8.2
Amortisation of acquired intangible assets - - - -
Operating profit/(loss) 10.7 1.8 (4.3) 8.2
Net financing costs (2.0)
Profit before tax 6.2
Taxation (1.2)
Profit after tax 5.0
Other disclosures
Working capital 32.5 8.0 (3.5) 37.0
Capital expenditure 0.5 0.4 0.4 1.3
Depreciation and amortisation included in adjusted operating profit/(loss) 3.1 0.9 0.9 4.9
Amortisation of acquired intangibles - - - -
Total depreciation and amortisation 3.1 0.9 0.9 4.9
(1)The head office operating loss includes non-recurring costs of £0.5m
relating to dilapidations charges on closed sites.
(2)Chain operating profit includes non-recurring income of £1.7m relating to
US PPP loan forgiveness.
The segment results for the period ended 30 September 2020 were as follows:
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
Period ended 30 September 2020 £m
Revenue
External Customer 62.5 19.0 - 81.5
Inter-segment 0.8 1.6 (2.4) -
Total revenue 63.3 20.6 (2.4) 81.5
Adjusted operating profit/(loss) 5.7 2.5 (2.4) 5.8
Amortisation of acquired intangible assets (0.5) - - (0.5)
Operating profit/(loss) 5.2 2.5 (2.4) 5.3
Net financing costs (2.5)
Profit before tax 2.8
Taxation (0.8)
Profit after tax 2.0
Other disclosures
Working capital 29.0 9.7 2.1 40.8
Capital expenditure 0.7 0.6 0.3 1.6
Depreciation and amortisation included in adjusted operating profit/(loss) 3.4 0.9 0.9 5.2
Amortisation of acquired intangibles 0.5 - - 0.5
Total depreciation and amortisation 3.9 0.9 0.9 5.7
In addition to statutory reporting, the Group reports certain financial
metrics on an adjusted basis (alternative performance measures, APMs).
Definitions of adjusted measures, and information about the differences to
statutory metrics are provided in Note 15 to the interim condensed
consolidated financial statements. Constant exchange rate results are
retranslated to current year exchange rates and therefore only the prior year
comparatives are an alternative performance measure. A reconciliation is
provided below and in Note
15.
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
Period ended 30 September 2020 £m
Revenue
External revenue 62.5 19.0 - 81.5
Inter-segment 0.8 1.6 (2.4) -
Foreign exchange retranslation (2.6) (0.8) - (3.4)
Total revenue at constant exchange rates 60.7 19.8 (2.4) 78.1
Adjusted operating profit/(loss) at constant exchange rates 5.7 2.5 (2.4) 5.8
Foreign exchange retranslation (0.2) (0.1) - (0.3)
Adjusted operating profit/(loss) at constant exchange rates 5.5 2.4 (2.4) 5.5
The segment results for the year ended 31 March 2021 were as follows:
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
£m
Year ended 31 March 2021
Revenue
External Customer 128.9 36.4 - 165.3
Inter-segment 1.1 2.7 (3.8) -
Total revenue 130.0 39.1 (3.8) 165.3
Adjusted operating profit/(loss) 13.3 5.0 (7.1) 11.2
Amortisation of acquired intangible assets (0.7) - - (0.7)
Operating profit/(loss) 12.6 5.0 (7.1) 10.5
Net financing costs (4.6)
Profit before tax 5.9
Taxation (2.1)
Profit after tax 3.8
Other disclosures
Working capital 29.5 7.8 (0.8) 36.5
Capital expenditure 1.7 0.7 0.6 3.0
Depreciation and amortisation included in adjusted operating profit/(loss) 6.5 1.9 1.8 10.2
Amortisation of acquired intangibles 0.7 - - 0.7
Total depreciation and amortisation 7.2 1.9 1.8 10.9
The prior year results have been restated using this year's exchange rates as
follows:
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
£m
Year ended 31 March 2021
Revenue
External revenue 128.9 36.4 - 165.3
Inter-segment 1.1 2.7 (3.8) -
Foreign exchange retranslation (4.2) (1.0) - (5.2)
Total revenue at constant exchange rates 125.8 38.1 (3.8) 160.1
Adjusted operating profit/(loss) 13.3 5.0 (7.1) 11.2
Foreign exchange retranslation (0.4) (0.1) - (0.5)
Adjusted operating profit/(loss) at constant exchange rates 12.9 4.9 (7.1) 10.7
4. Adjusting items
In addition to statutory reporting, the Group reports certain financial
metrics on an adjusted basis (alternative performance measures, APMs).
Definitions of adjusted measures, and information about the differences to
statutory metrics are provided in Note 15 to the interim condensed
consolidated financial statements.
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Included in operating costs:
Amortisation of acquired intangible assets (Note 8) - 0.5 0.7
Adjusting items in operating profit - 0.5 0.7
Amortisation of acquired intangible
assets
Acquisition related intangible asset amortisation costs of £0.04m (2020:
£0.5m) were recognised in the current period. This is considered to be an
adjusting item on the basis that these charges result from acquisition
accounting and do not relate to current trading activity.
On the 8 April 2021 Renold completed the acquisition of the conveyor chain
business of Brooks Ltd in Manchester, UK, for a total consideration of £0.7m,
including £0.4m of deferred consideration. In the period ended 30 September
2021 the business generated additional sales for the Group of £0.4m and added
£0.2m to Group operating profit. The business has been integrated into the
Renold UK Service centre in Manchester. The Group recognised £0.4m of
acquired intangibles on acquisition of the Brooks business. The acquired
intangibles are being amortised over a period of five
years.
5. Net financing costs
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Financing costs:
Interest payable on bank loans and overdrafts (0.6) (0.9) (1.6)
Interest paid on lease liabilities (0.2) (0.3) (0.5)
Amortised financing costs (0.2) (0.2) (0.2)
Loan financing costs (1.0) (1.4) (2.3)
Net IAS 19R financing costs (0.9) (1.0) (2.2)
Discount unwind on non-current trade and other payables (0.1) (0.1) (0.1)
Net financing costs (2.0) (2.5) (4.6)
6. Taxation
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Current tax:
- UK - - -
- Overseas (1.5) (0.9) (2.2)
Current income tax charge (1.5) (0.9) (2.2)
Deferred tax:
- UK (0.2) - 0.2
- Overseas (0.1) 0.1 (0.1)
- Effects of changes in corporate tax rates 0.6 - -
Total deferred tax charge 0.3 0.1 0.1
Total income tax expense (1.2) (0.8) (2.1)
Factors affecting current and future tax
charges
The increase in overseas current corporate tax is driven by the improved
trading in the first six months of the year. The deferred tax movement relates
solely to pensions with the £0.6m credit arising in respect of the
restatement of UK deferred tax balances at the new 25% substantively enacted
rate (previously tax effected at 19%).
The Group's tax charge in future years will be affected by the profit mix,
effective tax rates in the different countries where the Group operates and
utilisation of tax losses. No deferred tax is recognised on the unremitted
earnings of overseas subsidiaries in accordance with IAS 12.39.
7. Earnings per share
Earnings per share (EPS) is calculated by reference to the earnings for the
period and the weighted average number of shares in issue during the period as
follows:
First half Full year
2021/22 2020/21 2020/21
Earnings Per share amount Earnings Per share amount Earnings Per share amount
£m (pence) £m (pence) £m (pence)
Basic EPS from continuing and discontinued operations
Profit attributed to ordinary shareholders 5.0 2.3p 2.0 0.9p 3.8 1.7p
Basic EPS from continuing operations 5.0 2.3p 2.0 0.9p 3.8 1.7p
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets - - 0.5 0.2p 0.7 0.3p
Adjusted EPS 5.0 2.3p 2.5 1.1p 4.5 2.0p
First half Full year
2021/22 2020/21 2020/21
Thousands Thousands Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share 219,458 225,418 225,418
Effect of dilutive potential ordinary shares: 14,195 6,210 7,293
Shares subject to performance conditions
For the purpose of calculating diluted earnings per share 233,653 231,628 232,711
First half Full year
2021/22 2020/21 2020/21
(pence) (pence) (pence)
Diluted EPS from continuing and discontinued operations 2.1p 0.9p 1.6p
Diluted EPS from continuing operations 2.1p 0.9p 1.6p
Diluted adjusted EPS 2.1p 1.1p 1.9p
The adjusted EPS numbers have been provided to give a useful indication of
underlying performance by the exclusion of adjusting items. Due to the
existence of unrecognised deferred tax assets there were no associated tax
credits on some of the adjusting items and in these instances adjusting items
are added back in
full.
8. Retirement benefit obligations
The Group's retirement benefit obligations are summarised as follows:
At 30 At 30 At 31
September 2021 September 2020 March
£m £m 2021
£m
Funded plan obligations (233.5) (242.8) (230.5)
Funded plan assets 156.1 153.8 151.2
Net funded plan obligations (77.4) (89.0) (79.3)
Unfunded obligations (22.9) (26.6) (23.1)
Total retirement benefit obligations (100.3) (115.6) (102.4)
Analysed as follows:
Non-current liabilities: Retirement benefit obligations (100.3) (115.6) (102.4)
Net deferred tax asset 22.5 20.9 18.4
Retirement benefit obligation net of deferred tax (77.8) (94.7) (84.0)
The increase in the Group's net pre-tax deficit from £102.4m at 31 March 2021
to £100.3m at 30 September 2021 primarily reflects employer contributions
made in the period.
9. Additional Cashflow Information
Reconciliation of operating profit to net cash flows from operations:
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Cash generated from operations:
Operating profit from continuing and discontinued operations 8.2 5.3 10.5
Depreciation of property, plant and equipment - owned assets 2.7 3.2 5.5
Depreciation of property, plant and equipment - right-of-use-assets 1.4 1.4 2.8
Amortisation of intangible assets 0.8 1.1 2.6
Loss on disposals of plant and equipment - - 0.1
US PPP loan forgiveness (1.7)
Equity share plans 0.5 - -
(Increase)/decrease in inventories (6.3) 4.9 6.3
(Increase)/decrease in receivables (7.1) 4.6 4.2
Increase/(decrease) in payables 13.6 (5.8) (5.0)
Increase in provisions 0.3 - 0.7
Cash contribution to pension schemes (2.4) (1.1) (2.1)
Pension current service cost (non-cash) 0.1 0.1 0.1
Pension past service cost (non-cash) - - 0.3
Cash generated from operations 10.1 13.7 26.0
Reconciliation of net change in cash and cash equivalents to movement in net
debt:
First half Full year
2021/22 2020/21 2020/21
£m £m £m
(Decrease)/increase in cash and cash equivalents (6.0) 4.0 1.5
Change in net debt resulting from cash flows 9.2 6.4 17.1
US PPP loan forgiveness 1.7 - -
Foreign Currency translation differences (0.2) - (0.2)
Non-cash movement on capitalised finance costs (0.2) (0.2) (0.2)
Change in net debt during the period 4.5 10.2 18.2
Net debt at start of period (18.4) (36.6) (36.6)
Net debt at end of period (13.9) (26.4) (18.4)
Net debt comprises:
At 30 September At 30 September
2021 2020 At 31 March
£m £m 2021
£m
Cash and cash equivalents 11.5 19.6 19.9
Total debt (25.4) (46.0) (38.3)
(13.9) (26.4) (18.4)
At 30 September At 30 September
2021 2020 At 31 March
2021
Net cash and cash equivalents £m £m £m
Cash and cash equivalents 11.5 19.6 19.9
Less: Overdrafts (0.3) (0.5) (2.6)
Net cash and cash equivalents 11.2 19.1 17.3
At 30 September 2021 At 30 September
2020 At 31 March
2021
Total debt £m £m £m
Borrowings:
Overdrafts (0.3) (0.5) (2.6)
Capitalised costs 0.2 0.4 0.3
Current borrowings (0.1) (0.1) (2.3)
Bank Loans (25.0) (45.7) (35.7)
Capitalised costs 0.2 0.3 0.2
Non-current borrowings (24.8) (45.4) (35.5)
Total borrowings (24.9) (45.5) (37.8)
Preference stock (0.5) (0.5) (0.5)
Total debt (25.4) (46.0) (38.3)
10. Called up share capital
At 30 At 30 At 31
September 2021 September 2020 March
£m £m 2021
£m
Ordinary shares of 5p each 11.3 11.3 11.3
At 30 September 2021, the issued ordinary share capital comprised 225,417,740
ordinary shares of 5p each (30 September 2020: 225,417,740 shares).
11. Capital reorganisation
As part of its long-term financial planning Renold plc, the Company, has
reorganised its balance sheet and reserves through the cancellation of the
entire amount of its share premium account and capital redemption reserve. The
share premium account and capital redemption reserve were non-distributable
reserves and accordingly, the purposes for which the Company could use these
were extremely restricted. The reduction of capital creates sufficient
distributable reserves to provide the Board with greater flexibility with
regard to how it manages its capital resources. This provided flexibility in
such matters as making payments to the holders of Preference Stock, commencing
a share buy-back programme consistent with the authority granted by
Shareholders at the last annual general meeting, in order to, inter alia, fund
employee share schemes, thereby avoiding dilution for existing Shareholders
or, should the Board determine it appropriate to do so in the future, make
dividend distributions to Shareholders.
The order of the High Court confirming the above capital reorganisation became
effective on 27 May 2021, increasing distributable reserves by
£45.5m.
12. Capital commitments
At 30 September 2021 capital expenditure contracted for but not provided for
in these accounts amounted to £0.3m (30 September 2020: £1.0m).
13. Related party transactions
Transactions between the Company and its wholly owned subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed.
14. Alternative performance measures
In order to provide users of the accounts with a clear and consistent
presentation of the performance of the Group's ongoing trading activity, the
Group uses various alternative performance measures (APMs), including the
presentation of the income statement with 'Adjusted' measures shown separately
from statutory items. Amortisation of acquired intangibles, restructuring
costs, discontinued operations and material one-off items or remeasurements
are identified separately as management seek to present a measure of
performance which is not impacted by material non-recurring items or items
considered non-operational. See Note 4 for a breakdown and explanation of the
items excluded from adjusted profit. Performance measures for the Group's
ongoing trading activity are described as 'Adjusted' and are used to measure
and monitor performance as management believe these measures enable users of
the financial statements to better assess the trading performance of the
business. In addition, the Group reports sales and profit measures at constant
exchange rates. Constant exchange rate metrics exclude the impact of foreign
exchange translation, by retranslating the comparative to current period
exchange rates.
The APMs used by the Group include:
APM Reference Explanation of APM
• adjusted operating profit A Adjusted measures are used by the Group as a measure of underlying business
performance, adding back items that do not relate to underlying performance
• adjusted profit before taxation B
• adjusted EPS C
• return on sales D
• operating profit gearing D
• revenue at constant exchange rates E Constant exchange rate metrics adjust for constant foreign exchange
translation and are used by the Group to better understand year-on-year
changes in performance
• adjusted operating profit at constant exchange rates F
• adjusted operating profit margin at constant exchange rates G
• EBITDA H EBITDA is a widely utilised measure of profitability, adjusting to remove
non-cash depreciation and amortisation charges
• adjusted EBITDA H
• operating cash flow H
• net debt Net debt, leverage and gearing are used to assess the level of borrowings
within the Group and are widely used in capital markets analysis
I
• leverage ratio J
• gearing ratio K
• legacy pension cash costs L The cost of legacy pensions is used by the Group as a measure of the cash cost
of servicing legacy pension schemes
APMs are defined and reconciled to the IFRS statutory measure as follows:
(A) Adjusted operating profit
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Statutory operating profit from continuing operations 8.2 5.3 10.5
Add back:
Amortisation of acquired intangible assets - 0.5 0.7
Adjusted operating profit 8.2 5.8 11.2
(B) Adjusted profit before taxation
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Statutory profit before taxation from continuing operations 6.2 2.8 5.9
Add back:
Amortisation of acquired intangible assets - 0.5 0.7
Adjusted profit before taxation 6.2 3.3 6.6
(C) Adjusted earnings per share
Adjusted EPS is reconciled to statutory EPS in Note 7.
(D) Return on sales and operating profit gearing
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Adjusted operating profit 8.2 5.8 11.2
Revenue 95.3 81.5 165.3
Return on sales % 8.6% 7.1% 6.8%
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2021 £m £m £m £m
Adjusted operating profit 10.7 1.8 (4.3) 8.2
Total revenue (including inter-segment sales) 76.6 20.6 (1.9) 95.3
Adjusted operating profit margin % 14.0% 8.7% n/a 8.6%
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2020 £m £m £m £m
Adjusted operating profit 5.7 2.5 (2.4) 5.8
Total revenue (including inter-segment sales) 63.3 20.6 (2.4) 81.5
Adjusted operating profit margin % 9.0% 12.1% n/a 7.1%
Chain Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2021 £m £m £m £m
Adjusted operating profit 13.3 5.0 (7.1) 11.2
Total revenue (including inter-segment sales) 130.0 39.1 (3.8) 165.3
Adjusted operating profit margin % 10.2% 12.8% n/a 6.8%
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2021 £m £m £m £m
Year-on-year change in adjusted operating profit 5.0 (0.7) (1.9) 2.4
Year-on-year change in total revenue (including inter-segment sales) 13.3 - 0.5 13.8
Operating profit gearing % 38% -% n/a 17%
(E),(F) & (G) Revenue, adjusted operating profit and adjusted operating
profit margin at constant exchange rates
Chain Torque Head office costs and eliminations Consolidated
Transmission
Six months ended 30 September 2020 £m £m £m £m
External revenue 62.5 19.0 - 81.5
Inter-segment 0.8 1.6 (2.4) -
Foreign exchange retranslation (2.6) (0.8) - (3.4)
Revenue at constant exchange rates 60.7 19.8 (2.4) 78.1
Adjusted operating profit 5.7 2.5 (2.4) 5.8
Foreign exchange retranslation (0.2) (0.1) - (0.3)
Adjusted operating profit at constant exchange rates 5.5 2.4 (2.4) 5.5
Adjusted operating profit margin % 9.1% 12.1% - 7.0%
Chain Torque Head office costs and eliminations Consolidated
Transmission
Year ended 31 March 2021 £m £m £m £m
External revenue 128.9 36.4 - 165.3
Inter-segment 1.1 2.7 (3.8) -
Foreign exchange retranslation (4.2) (1.0) - (5.2)
Revenue at constant exchange rates 125.8 38.1 (3.8) 160.1
Adjusted operating profit 13.3 5.0 (7.1) 11.2
Foreign exchange retranslation (0.4) (0.1) - (0.5)
Adjusted operating profit at constant exchange rates 12.9 4.9 (7.1) 10.7
Adjusted operating profit margin % 10.3% 12.9% - 6.7%
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation, depreciation
and amortisation) and operating cashflow
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Statutory operating profit from continuing operations 8.2 5.3 10.5
Depreciation and amortisation 4.9 5.7 10.9
EBITDA and Adjusted EBITDA 13.1 11.0 21.4
Inventories (Note 9) (6.3) 4.9 6.3
Trade and other receivables (Note 9) (7.1) 4.6 4.2
Trade and other payables (Note 9) 13.6 (5.8) (5.0)
Provisions (Note 9) 0.3 - 0.7
Less: Restructuring cash spend - - 0.2
Movement in working capital 0.5 3.7 6.4
Purchase of property, plant and equipment (0.8) (1.0) (2.3)
Purchase of intangible assets (0.6) (0.2) (0.8)
Proceeds from property disposals 0.1 0.2 0.2
Net capital expenditure (1.6) (1.0) (2.9)
Operating cash flow 12.3 13.7 24.9
(I) Net debt
Net debt is reconciled to the statutory balance sheet in Note 9.
(J) Leverage ratio
At 30 At 30 At 31
September 2021 September 2020 March
£m £m 2021
£m
Net debt (see Note 9) 13.9 26.4 18.4
H2 2019/20 Adjusted EBITDA - 11.1 -
H1 2020/21 Adjusted EBITDA - 11.0 11.0
H2 2020/21 Adjusted EBITDA 10.4 - 10.4
H1 2021/22 Adjusted EBITDA 13.1 - -
12 months rolling adjusted EBITDA 23.5 22.1 23.9
Leverage ratio 0.6 times 1.2 times 0.9 times
(K) Gearing ratio
At 30 At 30 At 31
September 2021 September 2020 March
£m £m 2021
£m
Net debt (see Note 9) 13.9 26.4 18.4
Equity attributable to equity holders of the parent 3.3 (11.5) (6.1)
Net debt (see Note 9) 13.9 26.4 18.4
Total capital plus net debt 17.2 14.9 12.3
Gearing ratio % 81% 177% 150%
(L) Legacy pension cash costs
First half Full year
2021/22 2020/21 2020/21
£m £m £m
Cash contributions to pension schemes 1.8 0.5 0.8
Pension payments in respect of unfunded schemes 0.6 0.6 1.3
Scheme administration costs 0.3 0.4 0.5
2.7 1.5 2.6
Ends
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