REG - Renold PLC - Interim Results
16/11/2022 07:01
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RNS Number : 5150G Renold PLC 16 November 2022
Renold plc
Interim results for the half year ended 30 September 2022
("Renold", the "Company" or, together with its subsidiaries, the "Group")
Strong performance, strategic chain acquisition and significant increase in
earnings
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 2022.
Financial summary Half year ended
£m 30 September 2022 Restated(1) Change % Change %
30 September 2021
(Constant
currency)
Revenue 116.3 95.3 +22.0% +14.3%
Adjusted operating profit(2) 9.6 7.2 +33.3% +20.8%
Return on sales(3) 8.3% 7.5% +80bps +50bps
Adjusted profit before tax(3) 7.3 5.2 +40.4%
Net debt(4) 34.0 13.9
Adjusted earnings per share 2.7p 1.9p +42.1%
Additional statutory measures
Operating profit 8.8 8.7 +1.1%
Profit before tax 6.5 6.7 (3.0)%
Basic earnings per share 2.3p 2.6p (11.5)%
Financial highlights
· Revenue up 22.0% (14.3% at constant exchange rates) to £116.3m
driven by strong growth in Chain (2021: £95.3m)
· Adjusted operating profit up 33.3% (20.8% at constant exchange
rates) to £9.6m (2021: £7.2m)
· Return on sales increased by 80bps, (50bps at constant exchange
rates) to 8.3% (2021: 7.5%). Price increases offset input cost and supply
chain challenges
· Net debt as at 30 September 2022 £34.0m (1.2x rolling 12 month
EBITDA), higher primarily due to €20.0m initial cash consideration for the
acquisition of Industrias YUK, S.A.
· Adjusted EPS up 42.1% to 2.7p (2021: 1.9p)
· IAS 19 pension deficit reduced by 29.6% to £61.3m (31 March
2022: £87.1m)
Business highlights
· Strong first half performance as markets continued to recover,
despite cost inflation, economic uncertainty and global supply chain
disruption
· Group order intake in the period £121.3m, up 18.9%, excluding
prior year long term military contract (11.0% at constant exchange rates)
· Order book at 30 September 2022 £99.0m, continues at record high
(30 September 2021: £72.1m)
· Acquisition of Industrias YUK, S.A. ("YUK") for €24m, increases
the Group's access to the Iberian Chain and wider European CVC markets. The
integration process is well progressed and the business is performing ahead of
expectations
· Good progress on capital investment, productivity improvements
and cost reduction programmes, accelerating the integration of Group-wide
supply chain and increasing capabilities
(1) See Note 12 for details of the prior period restatements.
(2) See below for reconciliation of actual rate, constant exchange rate and
adjusted figures.
(3) See Note 11 for definitions of adjusted measures and the differences to
statutory measures.
(4) See Note 8 for a reconciliation of net debt which excludes lease
liabilities.
Robert Purcell, Chief Executive of Renold plc, said:
"The strong trading momentum experienced in the second half of the last
financial year has continued in the first half, with the Group continuing to
successfully manage significant inflation and supply chain disruption,
resulting in growing sales and record orders. Whilst we are mindful that
global markets continue to be uncertain, with ongoing labour and energy cost
inflation and supply chain challenges, the Group's trading momentum continues
to be positive. The Group has record order books and the acquisition of YUK
provides opportunities for synergies and further growth."
Reconciliation of reported, constant exchange rate and adjusted results
Revenue Operating profit Earnings per share
Restated(1) Restated(1)
H1 H1 H1 H1 H1 H1
2022/23 2021/22 2022/23 2021/22 2022/23 2021/22
£m £m £m £m pence pence
Statutory at actual exchange rates 116.3 95.3 8.8 8.7 2.3 2.6
Adjust for non-recurring items:
US PPP loan forgiveness - - - (1.7)
Dilapidation costs for closed sites - - - 0.2
Acquisition costs - - 0.6 -
Amortisation of acquired intangible assets - - 0.2 -
Adjusted at actual exchange rates 116.3 95.3 9.6 7.2 2.7 1.9
Exchange impact (7.4) - (0.9) -
Adjusted at constant exchange rates 108.9 95.3 8.7 7.2
(1) See Note 12 for details of the prior period restatements
Investor Presentation
The Company will conduct a live presentation and Q&A session for investors
at 5:30 pm GMT today, 16 November 2022. The presentation is open to all
existing and potential shareholders. Those wishing to attend should register
via the following link and they will be provided with log in details:
https://us02web.zoom.us/webinar/register/WN_6WUx953NTUmetFUprlFHSA
(https://us02web.zoom.us/webinar/register/WN_6WUx953NTUmetFUprlFHSA)
There will be the opportunity for participants to ask questions at the end of
the presentation. Questions can also be emailed to renold@investor-focus.co.uk
(mailto:renold@investor-focus.co.uk) ahead of the presentation.
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 at: www.renold.com
(http://www.renold.com)
Chief Executive's statement
The Group has continued to successfully manage a period of sustained cost
inflation and supply chain disruption. Materials, energy, labour and
transportation costs have all increased substantially, however, selling price
increases have been implemented, and margins have been robust. The Group
expects to experience further cost pressures through the second half of the
year but we are confident that these will again be managed successfully.
Renold continues to focus efforts on driving and optimising performance
through identified projects, some requiring capital investment, targeting
better operational efficiency, improved design and standardisation of
products, better asset utilisation, more flexible working practices, and
leveraging improved procurement strategies.
The Group performed well in the first half, delivering an increase in revenues
of 22.0% to £116.3m (2021: £95.3m). At constant exchange rates, revenues
increased 14.3%. Order intake continues to run ahead of sales, totalling
£121.3m for the period. Excluding the impact of the £11.0m long term
military contract announced on 13 July 2021, this represents an increase of
18.9% over the prior year equivalent period, or 11.0% at constant exchange
rates.
Order books as at 30 September 2022 of £99.0m again represent a record high
for the Group, and are 37.3% higher than the prior year equivalent; 24.3% at
constant exchange rates.
Adjusted operating profit increased to £9.6m (2021: £7.2m, excluding the
impact of non-recurring items, notably the benefit of US PPP loan forgiveness
of £1.7m and £0.2m of costs relating to closed sites) with return on sales
of 8.3% (2021: 7.5%), driven by productivity enhancements and the benefit of
increased volumes and pricing. Statutory operating profit increased to £8.8m
(2021: £8.7m), with statutory operating profit margin for the period of 7.6%
(2021: 9.1%).
Net debt increased during the period by £20.2m to 34.0m (31 March 2022:
£13.8m) due to the acquisition of Industrias YUK, S.A. and an investment in
inventory.
M&A
On 3 August 2022 the Group acquired Industrias YUK, S.A. ("YUK") based in
Valencia, Spain, a manufacturer and distributor of high quality conveyor chain
("CVC") and ancillary products.
The acquisition will allow Renold to leverage YUK's strong CVC market position
in Spain and Portugal to expand sales of the Group's existing range of premium
European transmission chain ("TRC") products, and enable sales of YUK products
throughout Renold's extensive European sales network. Opportunities exist for
significant manufacturing synergies between YUK and Renold's current
international operations.
During the period in which Renold has owned YUK, which includes the August
holiday period, YUK has traded ahead of our initial expectations. Since
acquisition YUK recorded sales of £2.2m, operating profit of £0.2m, and an
initial return on sales of 9.1%.
The initial cash consideration was €20.0 million, with two deferred cash
payments of €2.0 million each, payable 12 months and 24 months from the date
of acquisition.
There remains an active pipeline of acquisition opportunities which the Group
continues to review as part of its growth strategy. The Board adopts a
disciplined approach to M&A focussed on complementary, earnings enhancing
acquisitions to supplement organic growth, whilst maintaining a conservative
level of leverage.
Business and financial review
Adjusted operating profit Return on sales
Revenue
Restated(1) Restated(1)
Six month period 2022/23 2021/22 2022/23 2021/22 2022/23 2022/21
£m
£m £m £m % %
Chain 89.2 76.6 11.7 9.2 13.1 12.0
Torque Transmission 21.5 20.6 1.4 1.8 6.5 8.7
Head office costs/ (1.8) (1.9) (4.4) (3.8) - -
Inter segment sales elimination
Total Adjusted at constant rates 108.9 95.3 8.7 7.2 8.0 7.5
Impact of foreign exchange 7.4 - 0.9 -
Total Adjusted at actual rates 116.3 95.3 9.6 7.2 8.3 7.5
Adjusting items:
US PPP loan forgiveness - - - 1.7
Dilapidation costs for closed sites - - - (0.2)
Amortisation of acquired intangibles - - (0.2) -
Acquisition costs - - (0.6) -
Statutory 116.3 95.3 8.8 8.7 7.6 9.1
(1) See Note 12 for details of the prior period restatements
Chain
The Chain division's revenue at constant exchange rates increased by 16.4%
(£12.6m) to £89.2m.
Revenue increased across all regions:
· Europe increased turnover 8.6% at constant currency rates. Demand
was robust driven by strong OEM and end user activity. The integration of the
YUK business is proceeding as planned with the Group already starting to
substitute externally sourced products, sell increased CVC product throughout
Europe, and increase TRC sales in Spain.
· The Americas increased constant currency revenues by 19.2%,
driven by the need to recover costs through pricing, new aftermarket business
in transmission chain and strong demand for capital equipment in the food
processing, ethanol and mining industries.
· Australasian revenues increased by 27.6% at constant exchange
rates, as the business continued to benefit from execution of its growth
strategy, targeting the move in Australia to more domestically manufactured
goods, continuing strong demand from the Australian mining sector and notable
increases in activity in both Indonesia and Malaysia. A new machining centre
was installed in the Melbourne factory and progress was made in the
development of chains for the cement and coal industries.
· India achieved first half constant currency revenue growth of
13.9% as activity levels recovered. An expansion of the domestic dealer
network and an increase in the number of local warehouses is underway, to
enhance geographic coverage and service.
· Revenue in China was up 15.4% (at constant exchange rates) as a
result of higher demand from Europe and the USA. Significant progress
continues to be made in enhancing the performance of the factory in Jintan. As
a result of a programme of standardisation and improvement projects, including
the commissioning of new equipment, the factory is increasingly able to
manufacture higher specification products.
Divisional adjusted operating profit at constant exchange rates was £11.7m,
£2.5m higher than the prior year. Return on sales increased by 110bps to
13.1% (2021: 12.0%).
Order intake at constant exchange rates increased by 12.4% to £93.7m,
resulting in a book to bill (ratio of orders to sales) for the first half of
the year of 105.0% (2021: 108.7%).
Torque Transmission
Divisional revenues at constant exchange rates of £21.5m were £0.9m higher
than in the prior year. This was due to increased demand for couplings in
Australia and further recovery in North America, along with increased activity
in the Gears business.
However, timing of the long-term military contracts resulted in some temporary
reduction in revenue. Additionally, a number of key customers with long term
supply arrangements in Eastern Europe were impacted by the war in Ukraine.
Divisional operating profit at constant currency reduced by £0.4m to £1.4m
due to the timing of the military contract, and a weaker product mix between
higher margin spare parts and lower margin OEM business.
Momentum in this division is expected to improve in the second half of the
year, underpinned by an increase of 27.1% in order intake compared to the
prior year (at constant exchange rates), excluding the benefit of the latest
military contract.
Cash flow and net debt
Restated(1)
Half year to 30 September 2022/23 2021/22
£m £m
Adjusted operating profit 9.6 7.2
Add back: Depreciation and amortisation 4.9 4.7
Share-based payments 0.5 0.5
Adjusted EBITDA 15.0 12.4
Movement in working capital (7.6) -
Net capital expenditure (2.2) (1.3)
Operating cash flow 5.2 11.1
Income taxes (1.3) (1.3)
Pensions cash costs (3.1) (2.4)
Repayment of principal under lease liabilities (1.2) (1.4)
Financing costs paid (1.3) (0.8)
Consideration paid for acquisition(2) (17.8) (0.3)
Own shares purchased - (1.8)
US PPP loan forgiveness - 1.7
Other movements (0.7) (0.3)
Change in net debt (20.2) 4.5
Closing net debt (34.0) (13.9)
(1) See Note 12 for details of the prior period restatements
(2) Includes £0.1m deferred consideration in relation to the acquisition of
the conveyor chain business of Brooks Ltd in the prior year and £0.6m of
acquisition costs for Industrias YUK, S.A.
Net Debt increased during the period by £20.2m to £34.0m, largely due to the
acquisition of Industrias YUK, S.A. for cash consideration of €20.0m in the
period, along with associated costs of £0.6m.
Working capital increased during the period. Inflation has increased inventory
value, though this was partly offset by a corresponding increase in creditors.
In addition, stocks of raw materials and finished goods have been temporarily
increased in Germany in case energy supplies are disrupted this winter. A
focus on customer terms and collections has seen debtor days improve, which
largely offsets the effect of increased selling prices on receivables.
Further inflationary pressures on materials, together with a continuation of
extended shipment times in supplying product between operating sites, will
result in the increased levels of inventory being maintained in the second
half year. This coupled with higher input prices will result in modest further
increases in working capital.
Net capital expenditure was £2.2m representing an increase over the prior
half year, but remained below historic levels as delays in the shipment of
capital equipment continue. Strategic investments in production capabilities,
including improved heat treatment and a roll-out of a standardised IT system
continued and are expected to gather pace during the second half of the year.
Corporation tax payments on account (£1.3m) were at normal levels.
Cash financing costs increased in the half year, due both to the additional
borrowing resulting from the YUK acquisition, and the increase in interest
rates over the period. Further increases in interest rates are expected within
the second half of the year.
Pensions
The Group has a number of closed defined benefit pension schemes (accounted
for in accordance with IAS 19 'Employee Benefits'). During the pandemic, the
Group negotiated a £2.8m one-off deferment in contributions with the UK
pension scheme trustees. Contributions have now returned to normal levels, but
in addition, the first of five annual deferred payments of c.£0.6m was made.
As a result of arrangements agreed with the UK pension scheme trustees and
approved by the Pension Regulator, pension cash costs are known and stable,
though increasing by RPI capped at 5%.
The Group's IAS 19 deficit decreased from £100.3m at 30 September 2021 to
£61.3m at 30 September 2022.
At 30 September 2022 At 31 March 2022
UK schemes Overseas Total UK schemes Overseas Total
schemes schemes
£m £m £m £m £m £m
IAS 19 retirement benefit obligations (41.2) (20.1) (61.3) (64.1) (23.0) (87.1)
Net deferred tax asset 2.3 2.4 4.7 7.8 3.2 11.0
Retirement benefit obligations net of deferred tax asset (38.9) (17.7) (56.6) (56.3) (19.8) (76.1)
The yield on corporate bonds increased sharply during the period. Consequently
the discount rates used for the UK scheme rose from 2.75% to 5.45%, and
resulted in a net reduction in UK pension liabilities of £22.9m. The long
term expectation for CPI inflation remained broadly stable at 3.20% (3.25%
prior year). Asset returns fell sharply during the period as both the value of
gilts and equities fell. The scheme has insurance assets linked directly to
the benefits of certain scheme members. As the liability to these members
reduces, for example with an increase in discount rate, so does the value of
the corresponding insurance asset.
Pension liabilities in non-UK schemes reduced by £2.9m to £20.1m, due in the
main to an increase in discount rates.
The net financing expense (a non-cash item) was £1.0m (2021: £0.9m).
Dividend
In line with recent policy based on enhancing Group performance through
focussed investment in new equipment and earnings enhancing acquisitions 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.
Summary
Demand in the first half was strong, 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 challenging global market and supply chain conditions are continuing,
with significant inflationary trends being experienced, particularly with
respect to materials, transport and energy costs. The Group is working to
mitigate these headwinds as far as possible and it 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 that is well positioned for the coming period.
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 macro-economic uncertainty, together with the impact of the war in
Ukraine and the ongoing impact of Covid-19, alongside the continued
improvement in the half year trading performance of the Group have been
considered as part of the adoption of the going concern basis. The Group
continues to closely monitor operating costs, and capital expenditure and
other cash demands are being managed carefully.
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, 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 Directors have reviewed the principal risks and uncertainties of the
Group. The Directors consider that the principal risks and uncertainties of
the Group published in the Annual Report for the year ended 31 March 2022
remain appropriate. The risks and associated mitigation processes can be found
on pages 48-55 of the 2022 Annual Report, which is available at
www.renold.com.
The risks referred to and which could have a material impact on the Group's
performance for the remainder of the current financial year relate to:
· Macroeconomic and geopolitical volatility, including potential
energy supply disruption in Germany;
· Strategy execution;
· Corporate transactions / business development;
· Health and safety in the workplace;
· Security and effective deployment and utilisation of IT systems;
· Prolonged loss of a major manufacturing site;
· People and change;
· Liquidity, foreign exchange and banking arrangements;
· Pension deficit; and
Legal, financial and regulatory compliance.
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 2022. 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
16 November
2022 16
November 2022
Condensed consolidated income statement
for the six months ended 30 September 2022
Note First half 2022/23 (unaudited) Restated(2)
£m First half 2021/22 Full year 2021/22
(unaudited) (audited)
£m £m
Revenue 3 116.3 95.3 195.2
Operating costs (107.5) (86.6) (179.0)
Operating profit 8.8 8.7 16.2
Net financing costs 4 (2.3) (2.0) (3.8)
Profit before tax 6.5 6.7 12.4
Taxation 5 (1.7) (1.1) (2.2)
Profit for the period 4.8 5.6 10.2
Earnings per share 6
Basic 2.3p 2.6p 4.7p
Diluted 2.1p 2.4p 4.4p
Basic adjusted(1) earnings per share 2.7p 1.9p 4.3p
Diluted adjusted earnings per share 2.4p 1.8p 4.0p
(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 11
to the financial statements.
(2) See Note 12 for details of the prior period restatements.
All results are from continuing operations
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2022
First half 2022/23 (unaudited) Restated(1)
£m First half 2021/22 Full year 2021/22
(unaudited) (audited)
£m £m
Profit for the period 4.8 5.6 10.2
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations 9.3 1.1 3.2
Loss on hedges of the net investment in foreign operations (1.2) (0.1) (0.3)
Cash flow hedges:
Fair value loss arising on cash flow hedges during the period (1.4) (0.3) (0.5)
Less: Cumulative gain arising on cash flow hedges reclassified 0.7 0.1 0.1
to profit and loss
Income tax relating to items that may be reclassified subsequently to profit 0.2
or loss
0.1 0.1
7.6 0.9 2.6
Items not to be reclassified to the income statement in subsequent periods:
Re-measurement gains on retirement benefit obligations 24.7 1.0 12.3
Tax on re-measurement gains on retirement benefit obligations - excluding (6.4) (2.1) (3.1)
impact of statutory rate change
Effect of changes in statutory tax rate on deferred tax assets - 4.0 2.3
18.3 2.9 11.5
Other comprehensive income for the period, net of tax 25.9 3.8 14.1
Total comprehensive income for the period, net of tax 30.7 9.4 24.3
(1) See Note 12 for details of the prior period restatements.
Condensed consolidated balance sheet
as at 30 September 2022
Note 30 September 2022 Restated(1) 31 March
(unaudited) 30 September 2021 2022
£m (unaudited) (audited)
£m £m
Assets
Non-current assets
Goodwill 30.0 22.2 22.7
Other intangible fixed assets 10.3 5.3 5.1
Property, plant and equipment 57.3 47.0 49.3
Right-of-use assets 17.6 10.8 8.0
Deferred tax assets 13.3 17.7 15.4
128.5 103.0 100.5
Current assets
Inventories 70.8 44.7 48.4
Trade and other receivables 43.5 37.8 35.7
Current tax 0.1 0.1 -
Derivative financial assets 0.1 - -
Cash and cash equivalents 8 15.7 11.5 10.5
130.2 94.1 94.6
Total assets 258.7 197.1 195.1
Liabilities
Current liabilities
Borrowings 8 (2.9) (0.1) (1.0)
Trade and other payables (63.7) (45.5) (48.5)
Lease liabilities (2.6) (2.2) (2.8)
Current tax (3.2) (2.9) (2.8)
Derivative financial liabilities (1.5) (0.3) (0.5)
Provisions - (0.2) (0.2)
(73.9) (51.2) (55.8)
Net current assets 56.3 42.9 38.8
Non-current liabilities
Borrowings 8 (46.3) (24.8) (22.8)
Preference stock 8 (0.5) (0.5) (0.5)
Trade and other payables (6.8) (5.7) (4.7)
Lease liabilities (18.8) (13.3) (9.2)
Deferred tax liabilities (10.1) (4.2) (5.4)
Retirement benefit obligations 7 (61.3) (100.3) (87.1)
Provisions (4.0) (3.7) (3.8)
(147.8) (152.5) (133.5)
Total liabilities (221.7) (203.7) (189.3)
Net assets/(liabilities) 37.0 (6.6) 5.8
Equity
Issued share capital 9 11.3 11.3 11.3
Currency translation reserve 18.1 7.9 9.8
Other reserves (6.1) (2.1) (5.4)
Retained earnings/(deficit) 13.7 (23.7) (9.9)
Total shareholders' funds/(deficit) 37.0 (6.6) 5.8
(1) See Note 12 for details of the prior period restatements.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2022
Share capital Share premium account Restated(1) Currency translation reserve Capital redemption reserve Other reserves Restated(1)
(Note 9) £m Retained earnings /(deficit) £m £m £m Total shareholders' funds/(deficit)
£m £m £m
At 1 April 2021 11.3 30.1 (78.2) 6.8 15.4 (0.1) (14.7)
Profit for the year - - 10.2 - - - 10.2
Other comprehensive income/(expense) - - 11.5 3.0 - (0.4) 14.1
Total comprehensive income/(expense) for the year - - 21.7 3.0 - (0.4) 24.3
Own shares purchased - - - - - (4.9) (4.9)
Capital reorganisation - (30.1) 45.5 - (15.4) - -
Share-based payments - - 1.1 - - - 1.1
At 31 March 2022 11.3 - (9.9) 9.8 - (5.4) 5.8
Profit for the period - - 4.8 - - - 4.8
Other comprehensive income/(expense) - - 18.3 8.3 - (0.7) 25.9
Total comprehensive income/(expense) for the period - - 23.1 8.3 - (0.7) 30.7
Share-based payments - - 0.5 - - - 0.5
At 30 September 2022 11.3 - 13.7 18.1 - (6.1) 37.0
At 1 April 2021 11.3 30.1 (78.2) 6.8 15.4 (0.1) (14.7)
Profit for the period - - 5.6 - - - 5.6
Other comprehensive income/(expense) - - 2.9 1.1 - (0.2) 3.8
Total comprehensive income/(expense) for the period - - 8.5 1.1 - (0.2) 9.4
Own shares purchased - - - - - (1.8) (1.8)
Capital reorganisation - (30.1) 45.5 - (15.4) - -
Share-based payments - - 0.5 - - - 0.5
At 30 September 2021 (Restated)(1) 11.3 - (23.7) 7.9 - (2.1) (6.6)
(1) See Note 12 for details of the prior period restatements.
Included in retained earnings is £2.4m (31 March 2022: £1.9m) relating to a
share option reserve.
The other reserves are stated after deducting £4.9m (31 March 2022: £4.9m)
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.
At 30 September 2022 the Renold Employee Benefit Trust held 18,422,509 (31
March 2022: 18,422,509) ordinary shares of 5p each and, following
recommendations by the employer, are provisionally allocated to satisfy awards
under employee incentive schemes. At 30 September 2022 the market value of
these shares was £4.2m (31 March 2022: £3.7m).
Condensed consolidated statement of cash flows
for the six months ended 30 September 2022
First half First half Full year 2021/22
2022/23 2021/22 (audited)
(unaudited) (unaudited) £m
£m £m
Cash flows from operating activities
Cash generated by operations (Note 8) 3.7 10.1 21.0
Income taxes paid (1.3) (1.3) (1.7)
Net cash flows from operating activities 2.4 8.8 19.3
Cash flows from investing activities
Proceeds from property disposals 0.3 0.1 0.2
Purchase of property, plant and equipment (1.9) (0.8) (4.1)
Purchase of intangible assets (0.6) (0.6) (1.2)
Consideration paid for acquisitions (17.2) (0.3) (0.5)
Net cash flows from investing activities (19.4) (1.6) (5.6)
Cash flows from financing activities
Repayment of principal under lease liabilities (1.2) (1.4) (4.2)
Financing costs paid (1.1) (0.8) (1.5)
Own shares purchased - (1.8) (4.9)
Proceeds from borrowings 23.3 - 4.7
Repayment of borrowings (1.2) (9.2) (16.0)
Net cash flows from financing activities 19.8 (13.2) (21.9)
Net increase/(decrease) in cash and cash equivalents 2.8 (6.0) (8.2)
Net cash and cash equivalents at beginning of period 9.5 17.3 17.3
Effects of exchange rate changes 0.5 (0.1) 0.4
Net cash and cash equivalents at end of period 12.8 11.2 9.5
Notes to the interim condensed consolidated financial statements
1. Corporate information
The interim condensed consolidated financial statements for the six months
ended 30 September 2022 were approved by the Board on 16 November 2022. 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 2022
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 2022 have been prepared in accordance with the UK adopted
International Accounting Standard 34, 'Interim financial reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial
Conduct Authority (FCA).
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements for the year ended 31
March 2022, which were prepared in accordance with UK-adopted international
accounting standards and with the requirements of the Companies Act 2006 as
applicable to companies reporting under these standards.
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 2022, 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 revised accounting standards adopted by the Group
During the period, the International Accounting Standards Board and
International Financial Reporting Interpretations Committee have issued the
following standards, amendments and interpretations, which are considered
relevant to the Group. Their adoption has not had any significant impact on
the amounts or disclosures reported in these financial
statements.
· Amendments to IAS 16 (Property, Plant and Equipment - Proceeds
before Intended Use)
· Annual Improvements to IFRS 2018-2020
· Conceptual Framework (Amendments to References to the Conceptual
Framework in IFRS Standards)
· Amendments to IAS 37 (Onerous contracts - Cost of fulfilling a
contract)
New and revised accounting standards and interpretations which were in issue
but were not yet effective and have not been adopted early by the
Group
The IASB published a number of amendments to IFRSs, new standards and
interpretations which are not yet effective, and of which some have been
endorsed for use in the EU. An impact assessment has been performed for each
of these, with no significant financial impact being identified for the
consolidated financial statements of the Group and the separate financial
statements of Renold plc. The amendments, new standards and interpretations
will be adopted in accordance with their effective dates.
· Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance
Contracts' (Amendments to IFRS 4)
· Amendments to IAS 1 (Classification of Liabilities as Current or
Non-Current)
· IFRS 17 'Insurance Contracts'
· Amendments to IAS 1 and IFRS Practice Statement 2 (Disclosure of
accounting policies)
· Amendments to IAS 12 (Deferred Tax related to Assets and
Liabilities arising from a single transaction)
· Amendments to IAS 8 (Definition of Accounting
Estimates)
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
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
2022, namely:
· Taxation
· Retirement benefit obligations
· Right-of-use assets
· 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 2022.
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 2022 were as follows:
Chain(2) Torque Head office costs(1) and eliminations Consolidated
£m
£m Transmission £m
£m
Period ended 30 September 2022
Revenue
External customer - transferred at a point in time 94.7 21.0 - 115.7
External customer - transferred over time - 0.6 - 0.6
Inter-segment 0.4 1.4 (1.8) -
Total revenue 95.1 23.0 (1.8) 116.3
Operating profit/(loss) 12.3 1.5 (5.0) 8.8
Financing costs (2.3)
Profit before tax 6.5
Taxation (1.7)
Profit after tax 4.8
Other disclosures
Working capital 49.7 10.4 (9.5) 50.6
Capital expenditure 0.9 1.6 0.5 3.0
Total depreciation and amortisation 3.3 0.8 1.0 5.1
(1) The head office operating loss includes non-recurring costs of £0.6m
relating to the acquisition of the YUK business.
(2) Chain operating profit includes costs of £0.2m relating to amortisation
of acquired intangibles.
The segment results for the period ended 30 September 2021 were as follows:
Restated(1) Torque Restated(1) Restated(1) Consolidated
Chain Transmission Head office costs and eliminations £m
£m
Period ended 30 September 2021 £m £m
Revenue
External customer- transferred at a point in time 76.2 18.3 - 94.5
External customer - transferred over time - 0.8 - 0.8
Inter-segment 0.4 1.5 (1.9) -
Total revenue 76.6 20.6 (1.9) 95.3
Operating profit/(loss) 10.9 1.8 (4.0) 8.7
Net financing costs (2.0)
Profit before tax 6.7
Taxation (1.1)
Profit after tax 5.6
Other disclosures
Working capital 32.5 8.0 (3.5) 37.0
Capital expenditure 0.5 0.4 0.4 1.3
Total depreciation and amortisation 2.9 0.9 0.9 4.7
(1) See Note 12 for details of the prior period restatements.
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 11 to the interim condensed
consolidated financial statements. Constant exchange rate results are current
period results retranslated using prior year exchange rates. A reconciliation
is provided below and in Note
11.
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
Period ended 30 September 2022 £m
Revenue
External customer- transferred at a point in time 94.7 21.0 - 115.7
External customer - transferred over time - 0.6 - 0.6
Inter-segment 0.4 1.4 (1.8) -
Foreign exchange retranslation (5.9) (1.5) - (7.4)
Total revenue at constant exchange rates 89.2 21.5 (1.8) 108.9
Operating profit/(loss) 12.3 1.5 (5.0) 8.8
Foreign exchange retranslation (0.8) (0.1) - (0.9)
Operating profit/(loss) at constant exchange rates 11.5 1.4 (5.0) 7.9
The segment results for the year ended 31 March 2022 were as follows:
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
£m
Year ended 31 March 2022
Revenue
External customer - transferred at a point in time 158.2 35.6 - 193.8
External customer - transferred over time - 1.4 - 1.4
Inter-segment 1.0 3.4 (4.4) -
Total revenue 159.2 40.4 (4.4) 195.2
Operating profit/(loss) 20.5 4.1 (8.4) 16.2
Net financing costs (3.8)
Profit before tax 12.4
Taxation (2.2)
Profit after tax 10.2
Other disclosures
Working capital 30.0 9.0 (3.4) 35.6
Capital expenditure 3.4 2.0 0.9 6.3
Total depreciation and amortisation 6.2 1.9 1.4 9.5
4. Net financing costs
First half Full year
2022/23 2021/22 2021/22
£m £m £m
Financing costs:
Interest payable on bank loans and overdrafts (0.9) (0.6) (1.1)
Interest expense on lease liabilities (0.2) (0.2) (0.5)
Amortised financing costs (0.2) (0.2) (0.3)
Loan financing costs (1.3) (1.0) (1.9)
Net IAS 19 financing costs (1.0) (0.9) (1.8)
Discount unwind on non-current trade and other payables - (0.1) (0.1)
Net financing costs (2.3) (2.0) (3.8)
5. Taxation
First half Full year
2022/23 Restated(1) 2021/22
£m 2021/22 £m
£m
Current tax:
- UK - - 0.1
- Overseas (1.5) (1.5) (2.1)
- Adjustments in respect of prior periods 0.3 - -
Current income tax charge (1.2) (1.5) (2.0)
Deferred tax:
- UK - (0.2) (0.1)
- Overseas (0.5) (0.1) (0.1)
- Effects of changes in corporate tax rates - 0.6 0.5
- Adjustments in respect of prior periods - 0.1 (0.5)
Total deferred tax charge (0.5) 0.4 (0.2)
Total income tax expense (1.7) (1.1) (2.2)
(1) See Note 12 for details of the prior period restatements.
Factors affecting current and future tax
charges
The decrease in the current tax charge for the period is attributable to the
recognition of a receivable for the carry back of tax losses against prior
year taxable profits.
The UK tax rate change from 19% to 25% was substantively enacted in the prior
year, resulting in a credit to the income statement on remeasurement of the
opening deferred tax asset balance in the prior period.
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.
6. 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
2022/23 Restated(1) 2021/22
2021/22
Earnings Per share amount Earnings Per share amount Earnings Per share amount
£m (pence) £m (pence) £m (pence)
Basic EPS - Profit attributed to ordinary shareholders 4.8 2.3p 5.6 2.6p 10.2 4.7p
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets 0.2 0.1p - - 0.1 0.1p
Acquisition costs 0.6 0.3p - - - -
US PPP loan forgiveness - - (1.7) (0.8p) (1.7) (0.8p)
Dilapidations on closed sites - - 0.2 0.1p - -
New lease arrangements on sublet properties - - - - 0.7 0.3p
Adjusted EPS 5.6 2.7p 4.1 1.9p 9.3 4.3p
(1) See Note 12 for details of the prior period restatements.
First half Full year
2022/23 2021/22 2021/22
Thousands Thousands Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share 206,995 219,458 214,795
Effect of dilutive potential ordinary shares: 23,737 14,195 16,909
Shares subject to performance conditions
For the purpose of calculating diluted earnings per share 230,732 233,653 231,704
First half Full year
2022/23 2021/22 2021/22
(pence) (pence) (pence)
Diluted EPS 2.1p 2.4p 4.4p
Diluted adjusted EPS 2.4p 1.8p 4.0p
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.
7. Retirement benefit obligations
The Group's retirement benefit obligations are summarised as follows:
At 30 Restated(1) At 31
September 2022 At 30 March
£m September 2021 2022
£m £m
Funded plan obligations (160.7) (233.5) (214.4)
Funded plan assets 118.8 156.1 149.8
Net funded plan obligations (41.9) (77.4) (64.6)
Unfunded obligations (19.4) (22.9) (22.5)
Total retirement benefit obligations (61.3) (100.3) (87.1)
Analysed as follows:
Non-current liabilities: Retirement benefit obligations (61.3) (100.3) (87.1)
Net deferred tax asset 4.1 14.3 11.0
Retirement benefit obligation net of deferred tax (57.2) (86.0) (76.1)
(1) See Note 12 for details of the prior period restatements.
The decrease in the Group's net pre-tax deficit from £87.1m at 31 March 2022
to £61.3m at 30 September 2022 primarily reflects changes in the underlying
assumptions, such as the discount rate, plus employer contributions made in
the period.
8. Additional cash flow information
Reconciliation of operating profit to net cash flows from operations:
First half Full year
2022/23 Restated(1) 2021/22
£m 2021/22 £m
£m
Cash generated from operations:
Operating profit 8.8 8.7 16.2
Depreciation of property, plant and equipment - owned assets 2.9 2.7 5.3
Depreciation of property, plant and equipment - right-of-use-assets 1.2 1.4 2.6
Amortisation of intangible assets 1.0 0.6 1.6
Loss on disposals of plant and equipment - - (0.9)
Impairment of right-of-use-asset - - 1.7
US PPP loan forgiveness - (1.7) (1.7)
Equity share plans 0.5 0.5 1.1
Increase in inventories (10.9) (6.3) (9.5)
Increase in receivables (0.9) (7.1) (4.5)
Increase in payables 4.2 13.6 13.7
Increase in provisions - - 0.1
Cash contribution to pension schemes (3.1) (2.4) (4.8)
Pension current service cost (non-cash) - 0.1 0.1
Cash generated from operations 3.7 10.1 21.0
(1) See Note 12 for details of the prior period restatements.
Reconciliation of net change in cash and cash equivalents to movement in net
debt:
First half Full year
2022/23 2021/22 2021/22
£m £m £m
Increase/(decrease) in cash and cash equivalents 2.8 (6.0) (8.2)
Change in net debt resulting from cash flows
- Proceeds from borrowings (23.3) - (4.7)
- Repayment of borrowings 1.2 9.2 16.0
US PPP loan forgiveness - 1.7 1.7
Foreign currency translation differences (0.7) (0.2) 0.1
Non-cash movement on capitalised finance costs (0.2) (0.2) (0.3)
Change in net debt during the period (20.2) 4.5 4.6
Net debt at start of period (13.8) (18.4) (18.4)
Net debt at end of period (34.0) (13.9) (13.8)
Net debt comprises:
At 30 September At 30 September
2022 2021 At 31 March
£m £m 2022
£m
Cash and cash equivalents 15.7 11.5 10.5
Total debt (49.7) (25.4) (24.3)
Net debt (34.0) (13.9) (13.8)
At 30 September At 30 September
2022 2021 At 31 March
2022
Net cash and cash equivalents £m £m £m
Cash and cash equivalents 15.7 11.5 10.5
Less: Overdrafts (2.9) (0.3) (1.0)
Net cash and cash equivalents 12.8 11.2 9.5
At 30 September 2022 At 30 September
2021 At 31 March
2022
Total debt £m £m £m
Borrowings:
Overdrafts (2.9) (0.3) (1.0)
Capitalised costs - 0.2 -
Current borrowings (2.9) (0.1) (1.0)
Bank Loans (46.3) (25.0) (22.8)
Capitalised costs - 0.2 -
Non-current borrowings (46.3) (24.8) (22.8)
Total borrowings (49.2) (24.9) (23.8)
Preference stock (0.5) (0.5) (0.5)
Total debt (49.7) (25.4) (24.3)
9. Called up share capital
At 30 At 30 At 31
September 2022 September 2021 March
£m £m 2022
£m
Ordinary shares of 5p each - issued and fully paid 11.3 11.3 11.3
At 30 September 2022, the issued ordinary share capital comprised 225,417,740
ordinary shares of 5p each (30 September 2021: 225,417,740 shares).
10. Acquisition of businesses
During the period the Group completed the acquisition of 100% of the ordinary
share capital of Industrias YUK, S.A. for the total consideration of €24m,
of which €20m was paid on the date of the acquisition and the remaining
€4m is deferred. Of the deferred consideration, €2m will be paid on 3
August 2023 and €2m on 3 August 2024. YUK is a Valencia-based, manufacturer
and distributor of high quality conveyor chain ("CVC") and ancillary
products.
The transaction has been accounted for as a business combination under IFRS 3
and is summarised below:
Provisional as at 30 September 2022
£m
Fair value of net assets acquired:
Other intangible assets 5.4
Property, plant and equipment 5.3
Right-of-use-assets 9.5
Inventories 7.4
Trade and other receivables 4.4
Deferred tax asset 0.2
Trade and other payables (5.7)
Lease liabilities (9.5)
Net identifiable assets and liabilities 17.0
Goodwill 3.5
Total consideration 20.5
Consideration
Cash paid 17.1
Deferred consideration 3.4
Total consideration 20.5
Acquisition related costs amounted to £0.6m and have been included in the
condensed consolidated income statement.
The gross contractual value of the trade and other receivables was £4.4m. The
best estimate at the acquisition date of the contractual cash flows not
expected to be collected was
£nil.
Deferred consideration of €4m is payable within 2 years.
The goodwill arising on acquisition is expected to be deductible for tax
purposes and is attributable to:
• the anticipated profitability of the distribution of the Group's services
in new markets; and
• the synergies that can be achieved in the business combination including
management, processes and maximising site capacities.
The business was acquired on 3 August 2022 and contributed £2.2m revenue and
£0.2m headline operating profit for the period between the date of
acquisition and the balance sheet date.
If the acquisition had been completed on the first day of the financial
period, the acquisition would have contributed £8.4m to Group revenue, £1.2m
to Group operating profit and £1.9m adjusted operating profit (after adding
back £0.1m for amortisation of acquired intangibles and £0.6m acquisition
costs).
11. 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). Amortisation of
acquired intangibles, restructuring costs, discontinued operations and
material one-off items or remeasurements are added back / (deducted) as
adjusting items as management seek to present a measure of performance which
is not impacted by material non-recurring items or items considered
non-operational. 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 current year results using prior year 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
• return on sales at constant exchange rates G
• EBITDA H EBITDA is a widely utilised measure of profitability, adjusting to remove
non-cash depreciation, amortisation charges and share-based payment charge
• adjusted EBITDA H
• operating cash flow H
• net debt I Net debt, leverage and gearing are used to assess the level of borrowings
within the Group and are widely used in capital markets analysis
• 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
• average working capital ratio M Working capital as a ratio of rolling 12 month revenue is used to measure cash
performance and balance sheet strength
APMs are defined and reconciled to the IFRS statutory measures as follows:
(A) Adjusted operating profit
Period ended 30 September 2022
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 12.3 1.5 (5.0) 8.8
Add back/(deduct):
Amortisation of acquired intangible assets 0.2 - - 0.2
Acquisition costs - - 0.6 0.6
Adjusted operating profit 12.5 1.5 (4.4) 9.6
Period ended 30 September 2021 (Restated(1))
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 10.9 1.8 (4.0) 8.7
Add back/(deduct):
US PPP loan forgiveness (1.7) - - (1.7)
Dilapidation costs for closed sites - - 0.2 0.2
Adjusted operating profit 9.2 1.8 (3.8) 7.2
(1) See Note 12 for details of the prior period restatements.
Year ended 31 March 2022
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 20.5 4.1 (8.4) 16.2
Add back/(deduct):
Amortisation of acquired intangible assets 0.1 - - 0.1
US PPP loan forgiveness (1.7) - - (1.7)
New lease arrangements on sublet properties - - 0.7 0.7
Adjusted operating profit 18.9 4.1 (7.7) 15.3
(B) Adjusted profit before taxation
First half Full year
2022/23 Restated(1) 2021/22
2021/22
£m £m £m
Profit before taxation 6.5 6.7 12.4
Add back/(deduct):
Amortisation of acquired intangible assets 0.2 - 0.1
US PPP loan forgiveness - (1.7) (1.7)
Acquisition costs 0.6 - -
Dilapidation costs for closed sites - 0.2 -
Property related costs - - 0.7
Adjusted profit before taxation 7.3 5.2 11.5
(1) See Note 12 for details of the prior period restatements.
(C) Adjusted earnings per share
Adjusted EPS is reconciled to statutory EPS in Note 6.
(D) Return on sales and operating profit gearing
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2022 £m £m £m £m
Adjusted operating profit 12.5 1.5 (4.4) 9.6
Total revenue (including inter-segment sales) 95.1 23.0 (1.8) 116.3
Return on sales % 13.1% 6.5% n/a 8.3%
Restated(1) Torque Transmission Restated(1) Restated(1)
Chain Head office costs and eliminations Consolidated
Period ended 30 September 2021 £m £m £m £m
Adjusted operating profit 9.2 1.8 (3.8) 7.2
Total revenue (including inter-segment sales) 76.6 20.6 (1.9) 95.3
Return on sales % 12.0% 8.7% n/a 7.5%
(1) See Note 12 for details of the prior period restatements.
Chain Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2022 £m £m £m £m
Adjusted operating profit 18.9 4.1 (7.7) 15.3
Total revenue (including inter-segment sales) 159.2 40.4 (4.4) 195.2
Return on sales % 11.9% 10.1% n/a 7.8%
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2022 £m £m £m £m
Year-on-year change in adjusted operating profit 3.3 (0.3) (0.6) 2.4
Year-on-year change in total revenue (including inter-segment sales) 18.5 2.4 0.1 21.0
Adjusted operating profit gearing % 18% -13% n/a 11%
(E),(F) & (G) Revenue, adjusted operating profit and adjusted return on
sales at constant exchange rates
Chain Torque Head office costs and eliminations Consolidated
Transmission
Six months ended 30 September 2022 £m £m £m £m
External revenue - transferred at a point in time 94.7 21.0 - 115.7
External revenue - transferred over time - 0.6 0.6
Inter-segment 0.4 1.4 (1.8) -
Foreign exchange retranslation (5.9) (1.5) - (7.4)
Revenue at constant exchange rates 89.2 21.5 (1.8) 108.9
Adjusted operating profit 12.5 1.5 (4.4) 9.6
Foreign exchange retranslation (0.8) (0.1) - (0.9)
Adjusted operating profit at constant exchange rates 11.7 1.4 (4.4) 8.7
Return on sales at constant exchange rates % 13.1% 6.5% n/a 8.0%
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation, depreciation
and amortisation) and operating cashflow
First half Full year
2022/23 Restated(1) 2021/22
2021/22
£m £m £m
Operating profit 8.8 8.7 16.2
Depreciation and amortisation 5.1 4.7 9.5
Share-based payments 0.5 0.5 1.1
EBITDA(2) 14.4 13.9 26.8
Add back/(deduct):
US PPP loan forgiveness - (1.7) (1.7)
Acquisition costs 0.6 - -
Dilapidation costs for closed properties - 0.2 -
Property related costs - - 0.7
Adjusted EBITDA(2) 15.0 12.4 25.8
Inventories (10.9) (6.3) (9.5)
Trade and other receivables (0.9) (7.1) (4.5)
Trade and other payables 4.2 13.6 13.7
Provisions - (0.2) 0.1
Movement in working capital (7.6) - (0.2)
Purchase of property, plant and equipment (1.9) (0.8) (4.1)
Purchase of intangible assets (0.6) (0.6) (1.2)
Proceeds from property disposals 0.3 0.1 0.2
Net capital expenditure (2.2) (1.3) (5.1)
Operating cash flow 5.2 11.1 20.5
(1) See Note 12 for details of the prior period restatements.
(2) The calculation of EBITDA, adjusted EBITDA and operating cash flow
includes the add back for the non-cash share-based payment charge of £0.5m
for the period ended 30 September 2022 (2021: £0.5m).
(I) Net debt
Net debt is reconciled to the statutory balance sheet in Note 8.
(J) Leverage ratio
At 30 At 30 At 31
September 2022 September 2021 March
£m £m 2022
£m
Net debt (see Note 8) 34.0 13.9 13.8
H2 2020/21 Adjusted EBITDA - 10.4 -
H1 2021/22 Adjusted EBITDA - 12.4 12.4
H2 2021/22 Adjusted EBITDA 13.4 - 13.4
H1 2022/23 Adjusted EBITDA 15.0 - -
12 months rolling adjusted EBITDA 28.4 22.8 25.8
Leverage ratio 1.2 times 0.6 times 0.5 times
(K) Gearing ratio
At 30 Restated(1) At 31
September 2022 At 30 March
£m September 2021 2022
£m £m
Net debt (see Note 8) 34.0 13.9 13.8
Equity attributable to equity holders of the parent 37.0 (6.6) 5.8
Net debt (see Note 8) 34.0 13.9 13.8
Total capital plus net debt 71.0 7.3 19.6
Gearing ratio % 48% 190% 70%
(1) See Note 12 for details of the prior period restatement.
(L) Legacy pension cash costs
First half Full year
2022/23 2021/22 2021/22
£m £m £m
Cash contributions to pension schemes 2.5 1.8 3.7
Pension payments in respect of unfunded schemes 0.6 0.6 1.1
Scheme administration costs 0.4 0.3 0.7
3.5 2.7 5.5
(M) Average working capital ratio
First half Full year
2022/23 2021/22 2021/22
£m £m £m
Inventories 70.8 44.7 48.4
Trade and other receivables 43.5 37.8 35.7
Trade and other payables (63.7) (45.5) (48.5)
Total working capital 50.6 37.0 35.6
Average working capital(1) (a) 43.8 38.9 36.1
12 months rolling revenue (b) 216.2 179.1 195.2
Average working capital ratio ((a)/(b)) 20% 22% 18%
(1) Calculated as a simple average of the previous 12 months' working capital.
12. Prior period adjustments
The Group has changed its accounting policy related to the capitalisation of
certain software costs, this change follows the IFRIC Interpretation
Committee's agenda decision published in April 2021, which clarifies the
accounting treatment of the costs of configuring or customising software under
software as a service (SaaS) arrangements. Previously capitalised SaaS costs
have now been written off at the point they were originally incurred, and the
related subsequent amortisation of these costs in the prior year has now been
reversed and added back to
profit.
In addition, prior period adjustments have been recorded relating to the
following:
- Dilapidations provision - The prior period adjustment records an increased
dilapidations provision for certain leased properties across the Group. The
adjustment arose following changes to sublease arrangements on previously
closed sites which prompted a global review of dilapidations across the
Group's property portfolio. The adjustment includes the reclassification of
£0.6m of dilapidations provision that had been incorrectly netted against the
opening right-of-use asset cost on adoption of IFRS 16. Dilapidation
provisions have been increased; with property, plant and equipment increased
to the extent the group has incurred capital cost to modify lease properties
alongside a corresponding obligation to remove the modification and restore
the property on surrender of the lease. The adjustment to the income statement
reflects the extent to which dilapidations were charged in the period to 30
September 2021, but related to obligations which arose in previous financial
periods.
- Deferred taxation - The prior period adjustment reduces the value of the
deferred tax asset (DTA) recognised in respect of UK pensions (reduction of
£8.4m at 30 September 2021) and increases the value of deferred tax
recognised in respect of UK losses (increase of £0.8m at 30 September 2021).
The adjustment to the pensions DTA arose in respect of a deemed contribution
of £40m that was made to the UK pension scheme in 2014. The contribution
formed part of the Group's 25-year asset-backed partnership structure (the
Scottish Limited Partnership, 'SLP'). At the inception of the partnership
structure the £40m contribution was recorded as an allowable deduction in the
tax computations of the Group's UK subsidiaries. This upfront tax deduction
reduces the future tax deductions that are available over the remainder of the
25-year agreement. The gross pension DTA has historically been assumed to
equal the IAS 19 deficit for the UK scheme, multiplied by the future expected
tax rate, however, due to the upfront deduction taken at the inception of the
scheme the UK pension DTA has been reduced to cap the implied future available
deductions at each balance sheet date. The reduction in the UK pensions DTA
resulted in the recognition of a DTA for UK losses. Previously no forecast UK
taxable profits were available for loss recognition due to the assumption that
the annual deductions expected on the pension contributions would be
significantly higher than those now calculated as part of this review.
Consequently, due to the lower level of allowable pension deductions expected
each year in the forecast period used to assess taxable profits available for
loss recognition, headroom now remains and accordingly a DTA for losses has
been recognised at 30 September 2021.
The impact, on a line item basis for those affected, on the Condensed
consolidated statement of comprehensive income for the period ended 30
September 2021 and the Condensed consolidated balance sheet as at 30 September
2021 is as follows:
Condensed consolidated statement of comprehensive income for the period ended As previously reported Dilapidations provision Deferred taxation Change in accounting policy First half 2021/22 (restated)
30 September 2021
£m £m £m £m £m
Revenue 95.3 - - - 95.3
Operating costs (87.1) 0.3 - 0.2 (86.6)
Operating profit 8.2 0.3 - 0.2 8.7
Profit before tax 6.2 0.3 - 0.2 6.7
Taxation (1.2) - 0.1 - (1.1)
Profit for the financial year 5.0 0.3 0.1 0.2 5.6
Tax on remeasurement gains/losses on retirement benefit obligations (0.2) - (1.9) - (2.1)
Other comprehensive income/(expense) for the year, net of tax 5.7 - (1.9) - 3.8
Total comprehensive income/(expense) for the year, net of tax 10.7 0.3 (1.8) 0.2 9.4
Earnings per share
Basic earnings per share 2.3p 0.2p - 0.1p 2.6p
Diluted earnings per share 2.1p 0.2p - 0.1p 2.4p
Condensed consolidated balance sheet As previously reported Dilapidations provision Deferred taxation Change in accounting policy 30 September 2021 (restated)
as at 30 September 2021
£m £m £m £m £m
ASSETS
Non-current assets
Property, plant and equipment 46.7 0.3 - - 47.0
Other intangible fixed assets 6.3 - - (1.0) 5.3
Deferred tax assets 25.3 - (7.6) - 17.7
Other non-current assets 33.0 - - - 33.0
111.3 0.3 (7.6) (1.0) 103.0
TOTAL ASSETS 205.4 0.3 (7.6) (1.0) 197.1
LIABILITIES
Non-current liabilities
Provisions (2.1) (1.6) - - (3.7)
Other non-current liabilities (148.8) - - - (148.8)
(150.9) (1.6) - - (152.5)
TOTAL LIABILITIES (202.1) (1.6) - - (203.7)
NET LIABILITIES 3.3 (1.3) (7.6) (1.0) (6.6)
EQUITY
Other equity items 17.1 - - - 17.1
Retained earnings (13.8) (1.3) (7.6) (1.0) (23.7)
TOTAL SHAREHOLDERS' EQUITY 3.3 (1.3) (7.6) (1.0) (6.6)
Ends
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