REG - Renold PLC - Interim Results
15/11/2023 07:00
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RNS Number : 4586T Renold PLC 15 November 2023
Renold plc
Interim results for the half year ended 30 September 2023
("Renold", the "Company" or, together with its subsidiaries, the "Group")
Strategic and operational progress driving record earnings growth
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 2023.
Financial summary Half year ended Change %
(Constant
currency)(1)
£m 30 September 2023 30 September 2022 Change %
Revenue 125.3 116.3 +7.7% +10.7%
Adjusted operating profit(2) 15.0 9.6 +56.3% +59.4%
Return on sales(2) 12.0% 8.3% +370bps +360bps
Adjusted profit before tax(2) 11.3 7.3 +54.8%
Net debt(3) 28.3 34.0
Adjusted earnings per share(2) 3.8p 2.7p +40.7%
Additional statutory measures
Operating profit 16.2 8.8 +84.1%
Profit before tax 12.5 6.5 +92.3%
Basic earnings per share 4.4p 2.3p +91.3%
Financial highlights
· Revenue up 7.7% (10.7% at constant exchange rates) to £125.3m (2022:
£116.3m) driven by strong improvement in Torque Transmission ("TT") activity
levels and continued growth in Chain.
· Adjusted operating profit up 56.3% (59.4% at constant exchange rates) to
£15.0m (2022: £9.6m).
· Return on sales increased by 370bps, (360bps at constant exchange rates) to
12.0% (2022: 8.3%).
· Net debt as at 30 September 2023 of £28.3m (31 March 2023: £29.8m), despite
acquisition of Davidson Chain Pty ("Davidson") for £3.1m in the period and
deferred payment of £1.7m for Industrias YUK S.A. ("YUK"). Net debt
represented 0.7x rolling 12 months adjusted EBITDA.
· Adjusted EPS up 40.7% to 3.8p (2022: 2.7p).
· IAS 19 pension deficit reduced by 15.3% to £52.7m (31 March 2023: £62.2m).
Business highlights
· Good progress on productivity improvements, cost reduction programmes and
capital investment projects, accelerating the integration of Group-wide supply
chain and increasing operational capabilities.
· Strong first half sales performance, despite normalisation in order intake to
£109.7m when compared to the prior H1 record order intake of £124.1m.
· Order book at 30 September 2023 of £83.6m, compared to prior year's record
high (30 September 2022: £99.0m) as the duration of the order book shortened
following normalisation of supply chains this year.
· Acquisition of Davidson for AU$6.0m, increasing the Group's access to the
Australian conveyor and adapted transmission chain markets. The integration
process is progressing well and the business is performing in line with
expectations.
· £2.2m exceptional profit from the assignment of a lease for a closed legacy
site, resulting in a £0.7m per annum reduction in ongoing leased property
costs.
(1) See below for reconciliation of actual rate, constant exchange rate and
adjusted figures.
(2) See Note 12 for definitions of adjusted measures and the differences to
statutory measures.
(3) See Note 8 for a reconciliation of net debt which excludes lease
liabilities.
Robert Purcell, Chief Executive of Renold, said:
"I'm pleased to report continued progress which builds on the momentum the
Group has enjoyed in recent periods, delivering a record half year result.
Sales, margins, profits and cash generation have all progressed well. Global
markets continue to be uncertain and we remain vigilant for changes in
patterns of demand beyond the current order book shortening. We are delighted
with the purchase of Davidson in Australia, which further builds our inorganic
growth strategy and we remain well positioned to continue developing through
acquisition. There remains uncertainty over the implication of global economic
pressures in the medium term, however the Board is increasingly confident in
delivering a result for the current year ahead of previous market
expectations."
Reconciliation of reported, constant exchange rate and adjusted results
Revenue Operating profit Earnings per share
H1 H1 H1 H1 H1 H1
2023/24 2022/23 2023/24 2022/23 2023/24 2022/23
£m £m £m £m pence pence
Statutory at actual exchange rates 125.3 116.3 16.2 8.8 4.4 2.3
Adjust for non-recurring items:
Assignment of lease of closed site - - (2.2) -
Acquisition and reorganisation costs - - 0.5 0.6
Amortisation of acquired intangible assets - - 0.5 0.2
Adjusted at actual exchange rates 125.3 116.3 15.0 9.6 3.8 2.7
Exchange impact 3.4 - 0.3 -
Adjusted at constant exchange rates 128.7 116.3 15.3 9.6
Investor Presentation
The Company will conduct a live presentation and Q&A session for investors
at 5:30 pm GMT today, 15 November 2023. 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_DwsvKoYLQumb8x1YZg-klw
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 Cavendish Capital Markets Limited
Mike Bell Ed Frisby (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)
Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014),
as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018) ("MAR") prior to its release as part of this announcement and is
disclosed in accordance with the Company's obligations under Article 17 of
those Regulations.
Chief Executive's statement
The Group's performance in the first six months of the year continued to be
strong, delivering an increase in revenues of 7.7% to £125.3m (2022:
£116.3m). At constant exchange rates, revenues increased 10.7%. The TT
division, which saw revenue increase by 25.2%, has had an especially positive
start to the year, as the benefit of the long-term military contracts within
Couplings, along with increased capacity investments in Westfield, our North
American TT operation, has allowed the business to capitalise on the current
strong North American market.
Group adjusted operating profit increased by 56.3% to £15.0m (2022: £9.6m)
as the benefits of increased sales and prior year productivity improvements
translated into better financial results. Return on sales increased by 370bps,
to 12.0% (2022: 8.3%), a record high for the Group, driven by increasing
levels of productivity investments and projects, benefits of increased sales
volumes both organic and through acquisition, passing on cost inflation and
acquisition integration synergies. Statutory operating profit increased to
£16.2m (2022: £8.8m), as an exceptional profit of £2.2m was recorded on the
assignment of the lease of the closed Bredbury site, offset by costs
associated with the acquisition of Davidson, with the statutory operating
profit margin for the period increasing to 12.9% (2022: 7.6%).
Net debt reduced during the period by £1.5m to £28.3m (31 March 2023:
£29.8m) despite the Group acquiring the trade and assets of Davidson for
£3.1m, making a deferred consideration payment for the YUK acquisition of
£1.7m, and bringing forward a UK pension scheme payment of £2.6m that was
originally scheduled for the second half of the year. The accelerated pension
payment will enable efficiencies in the evolution of the scheme's investment
portfolio.
Order intake for the period was £109.7m, a decrease of 11.6% (2022:
£124.1m), or a 9.0% decrease at constant exchange rates. YUK contributed
£6.9m to order intake in the period. The order book as at 30 September 2023
of £83.6m remains higher than historic levels. However, there has been a
normalisation of order intake following an improvement in global supply
chains, with improvements to delivery times, allowing customers to reduce
forward order placement as certainty of lead times increase. The order book at
30 September 2023 of £83.6m represents a constant currency decrease of 11.1%
over the record high position at the end of the previous financial year.
The Group has continued to successfully manage a period of sustained cost
inflation and changes to the supply chain, pursued efficiency gains and
projects and passed on cost adjustments both up and down. The Group expects to
experience further cost pressures through the second half of the year but the
Board is confident that these will continue to be managed successfully.
Renold continues to focus efforts on driving and optimising performance
through identified projects, some of which require capital investment,
targeting better operational efficiency, improved design and standardisation
of products, better asset utilisation, more flexible working practices, and
leveraging improved procurement strategies.
Acquisitions
On 1 September 2023, the Group acquired the trading assets of Davidson, based
in Melbourne, Australia, for a cash consideration of AU$6.0 million, enlarging
the already established Australian Chain business by 26%. The Davidson
acquisition demonstrates further strategic momentum, supplementing organic
growth through high quality bolt-on acquisitions which can expand our
geographic presence, grow our product offering and strengthen our market
position in key end markets.
The Board is pleased with the performance of Davidson in the period since
completion of the acquisition and remains excited by the opportunities
beginning to emerge. Davidson has traded in line with the Board's expectations
made at the time of the 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 its acquisition strategy, with investments focussed on
complementary industrial chain businesses, to supplement organic growth.
Acquisitions are expected to be earnings accretive whilst leverage is
maintained at conservative levels.
Business and financial review
Adjusted operating profit Return on sales
Revenue
Six month period 2023/24 2022/23 2023/24 2022/23 2023/24 2022/23
£m
£m £m £m % %
Chain 101.5 95.1 16.0 12.5 15.8 13.1
Torque Transmission 29.8 23.0 4.7 1.5 15.8 6.5
Head office costs/ (2.6) (1.8) (5.4) (4.4) - -
Inter segment sales elimination
Total Adjusted at constant rates 128.7 116.3 15.3 9.6 11.9 8.3
Impact of foreign exchange (3.4) - (0.3) - 0.1
Total Adjusted at actual rates 125.3 116.3 15.0 9.6 12.0 8.3
Adjusting items:
Assignment of lease of closed site - - 2.2 -
Amortisation of acquired intangible assets - - (0.5) (0.2)
Acquisition and reorganisation costs - - (0.5) (0.6)
Statutory 125.3 116.3 16.2 8.8 12.9 7.6
Chain
The Chain division's revenue at constant exchange rates increased by 6.7% to
£101.5m, and stayed above the psychologically important £100m milestone.
Chain Performance
2023/24 2022/23 2023/24 ROS % 2022/23 ROS %
£m £m
External revenue 98.4 94.7
Inter-segment revenue 0.5 0.4
Total revenue 98.9 95.1
Foreign exchange 2.6 -
Revenue at constant exchange rates 101.5 95.1
Operating profit 17.0 12.3 17.2 12.9
Assignment of lease of closed site (2.2) -
Amortisation of acquired intangible assets 0.5 -
Acquisition and reorganisation costs 0.5 0.2
Adjusted operating profit 15.8 12.5 16.0 13.1
Foreign exchange 0.2 -
Adjusted operating profit at constant exchange rates 16.0 12.5 15.8 13.1
Revenue increased across all regions:
· Europe increased external revenue by 7.6% at constant currency rates.
Excluding the impact of the YUK acquisition external revenue fell by 5.8%, as
the impact of the Ukraine war, and cost inflation, was felt through the
broader European economy. The integration of the YUK business has proceeded as
planned with £7.2m of additional external revenue recorded, as the Group saw
the benefits of substituting externally sourced products, increasing conveyor
chain ("CVC") product sales (manufactured by YUK in Spain) throughout Europe,
and increasing transmission chain ("TRC") sales in Spain.
· The Americas increased constant currency revenues by 6.9%, with sales of
Engineering chain remaining buoyant, and demand for transmission chain and
leaf chain (used in Forklift trucks) remaining strong. New opportunities with
distributors and strong demand was seen from end users especially for capital
equipment in the food processing, ethanol and mining industries.
· Australasian revenues increased by 6.7% at constant exchange rates, as the
business continued to benefit from execution of its growth strategy, sales
increased by double digit growth rates in New Zealand, and Malaysia, with
Thailand also growing strongly. Sales to Indonesia were adversely impacted by
continued import restrictions imposed by the Indonesian government, whilst
Australia also saw the impact of a slowdown in activity.
· External revenues in India fell in the first half of the year as the impact of
slow agricultural sales were experienced, and there was an increase in
competition from other local manufacturers. Capacity was utilised in
supporting Group sales, especially increased demand within the US market, for
larger sized Engineering chain products. Additional investment to support
productivity and capacity improvements in India, have recently been initiated,
and activities aimed at the expansion of the domestic dealer network and an
increase in the number of local warehouses is underway, to enhance geographic
coverage and service.
· External revenues in China were up 50.1% (at constant exchange rates) as
efforts aimed at growing domestic Chinese sales continue to bear fruit, the
sales increase going someway to offset the softening in demand seen as a
result of slower intra group demand from Europe. The transfer of externally
purchased product volumes from the YUK acquisition to the Jintan factory
continued with an increase in sales seen to the YUK business during the
period. Significant progress has once again been made in enhancing the
performance of the factory in Jintan, through a programme of standardisation
and improvement projects, including the commissioning of new equipment, so the
factory is increasingly able to manufacture higher specification products.
Divisional adjusted operating profit at constant exchange rates was £16.0m,
£3.5m higher than the prior year. Return on sales increased by 270bps to
15.8% (2022: 13.1%).
Order intake at constant exchange rates decreased by 11.2% to £91.2m,
resulting in a book to bill (ratio of orders to sales) for the first half of
the year of 90.3% (2022: 105.0%).
Torque Transmission ("TT")
TT Performance
2023/24 2022/23 2023/24 ROS % 2022/23 ROS %
£m £m
External revenue 26.9 21.6
Inter-segment revenue 1.9 1.4
Total revenue 28.8 23.0
Foreign exchange 1.0 -
Revenue at constant exchange rates 29.8 23.0
Operating profit (and adjusted operating profit) 4.6 1.5 16.0 6.5
Foreign exchange 0.1 -
Adjusted operating profit at constant exchange rates 4.7 1.5 15.8 6.5
Divisional revenues at constant exchange rates of £29.8m were £6.8m (30%)
higher than in the prior year, which continued the trend seen in the second
half of the last financial year. This was due to increased demand for Military
Couplings in the Cardiff business, and a further strengthening in demand in
North America. Additionally, the division benefited from a significant
increase in capacity primarily driven by capital investments in automated
machines, and efficiency improvements driven by greater visibility following
the implementation of M3.
As a result of the increased sales activity, selling price rises and improved
operational output, as well as a normalisation in product mix, divisional
operating profit at constant currency increased by £3.2m to £4.7m.
Return on sales increased in the period to 16.0% (2022: 6.5%). This is now
beyond pre COVID pandemic level rates of return.
The closing order book for the division of £34.1m should ensure that momentum
will continue into the second half of the year at similar rates, however,
second half comparators are significantly stronger than those in H1.
Cash flow and net debt
Half year to 30 September 2023/24 2022/23
£m £m
Adjusted operating profit 15.0 9.6
Add back: Depreciation and amortisation 4.9 4.9
Share-based payments 0.7 0.5
Adjusted EBITDA 20.6 15.0
Movement in working capital (1.4) (7.6)
Net capital expenditure (2.1) (2.2)
Operating cash flow 17.1 5.2
Income taxes (1.3) (1.3)
Pensions cash costs (6.0) (3.1)
Repayment of principal under lease liabilities (1.4) (1.2)
Financing costs paid (2.2) (1.3)
Consideration paid for acquisitions(1) (4.9) (17.8)
Other movements 0.2 (0.7)
Change in net debt 1.5 (20.2)
Closing net debt (28.3) (34.0)
(1) Includes £1.7m deferred consideration in relation to the acquisition of
Industrias YUK S.A in the prior year and £0.2m of acquisition costs for
Davidson Chain Pty.
Net Debt reduced from the prior financial year end by £1.5m in the period to
£28.3m. Cash collections were strong, especially in North America, where
receipts from significant orders shipped at the end of the last financial year
were collected in the period. Offsetting this inflow, the Group paid £3.1m in
cash consideration for the Davidson acquisition, and made the initial deferred
payment of £1.7m for the YUK acquisition, along with associated acquisition
and reorganisation costs of £0.5m.
Working capital increased during the period, with the Group increasing
inventory levels especially in North America where demand continues to be
strong, particularly in the Engineered chain segment.
Net capital expenditure of £2.1m remained broadly in line with prior years.
Strategic investments in production capabilities, especially in our Chinese
and Indian facilities continue apace, including expansion of press
capabilities, improved heat treatment and continuing the roll-out of the
group's standard business systems.
Corporation tax payments on account of £1.3m were at similar levels to the
first half of last year.
Interest cash costs increased relative to the first half of last year
reflecting the increase in market interest rates over the intervening period.
Pensions
The Group has a number of closed defined benefit pension schemes (accounted
for in accordance with IAS 19 'Employee Benefits'). During the Covid-19
pandemic, the Group negotiated a £2.8m one-off deferral of contributions with
the UK pension scheme trustees. Contributions have now returned to normal
levels, with the second of five annual deferred payments of c.£0.6m being
made. Additionally, the Group had a longstanding agreement with the UK scheme
to pay an additional £1.0m of annual cash contributions, to the extent that
the Group's adjusted operating profit exceeds £16.0m; the additional cash
contributions commenced in the half year. The Group took the opportunity to
bring forward £2.6m of contributions to the UK pension scheme from the second
half of the year, in order to increase efficiency in the evolution of the
investment portfolio. Excluding these amounts, underlying pension
contributions reduced following the closure of the New Zealand pension scheme
in FY23, and a reduction in administration costs. The cash contributions into
the UK Scheme are known and stable, though increasing with RPI capped at 5%.
In FY24 this cost is expected to be £5.3m. In addition there are
administration and actuarial costs, including the PPF levy, which may vary.
The cost of pensions in payment in Germany (there is no scheme or fund) are
expected to be £1.2m in FY24. This amount will rise with inflation but the
total will fall gradually over time.
The Group's IAS 19 deficit decreased from £61.3m at 30 September 2022 to
£52.7m at 30 September 2023.
At 30 September 2023 At 31 March 2023
UK schemes Overseas Total UK schemes Overseas Total
schemes schemes
£m £m £m £m £m £m
IAS 19 retirement benefit obligations (36.6) (16.1) (52.7) (44.2) (18.0) (62.2)
Net deferred tax asset 1.6 1.4 3.0 3.3 1.8 5.1
Retirement benefit obligations net of deferred tax asset (35.0) (14.7) (49.7) (40.9) (16.2) (57.1)
The yield on corporate bonds increased further during the period. Consequently
the discount rates used for the UK scheme rose from 4.85% to 5.70%, and
resulted in a net reduction in UK pension liabilities of £7.6m, and overseas
pension liabilities of £1.9m. The long term expectation for CPI inflation
remained broadly stable at 3.35% (3.30% at September 2022). Asset values were
impacted as both the value of gilts and equities fell during the period. 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 overseas schemes reduced by £1.9m to £16.1m, again
due in the main to an increase in discount rates.
The net pension financing expense (a non-cash item) was £1.4m (2022: £1.0m).
Borrowing Facilities
The Group refinanced its borrowing facilities in May 2023. The new facilities
consist of a £85.0m multi-currency revolving credit facility and a £20.0m
accordion option which will provide the Company access to additional funding
in support of its acquisition programme. The principal facility term, being
the Net Debt / Adjusted EBITDA covenant, was also improved from the previous
level of 2.5 times Adjusted EBITDA to 3.0 times Adjusted EBITDA, with other
key terms remaining unchanged.
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 ordinary dividend. The dividend
policy will remain under review as margin and cash flow performance continues
to develop.
Summary
Sales in the first half remained strong. Margins rose markedly as better
volumes, good cost management, complementary acquisitions and strong execution
of productivity and efficiency programmes, aided by a consistent and coherent
strategy all came together. The robust Renold business with a strengthening
balance sheet and growing cash generation is positioned well for tackling
whatever global economic headwinds may transpire in the upcoming 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, and inflationary environment, together
with the impact of the war in Ukraine 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 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 2023
remain appropriate. The risks and associated mitigation processes can be found
on pages 50-57 of the 2023 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 continuing uncertainty
over energy supply inflation and disruption, together with a weakening in the
broader European economy;
· Strategy execution;
· Product liability;
· 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 2023. 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
15 November 2023 15 November 2023
Condensed consolidated income statement
for the six months ended 30 September 2023
Note First half 2023/24 (unaudited) First half 2022/23 Full year 2022/23
£m (unaudited) (audited)
£m £m
Revenue 3 125.3 116.3 247.1
Operating costs (109.1) (107.5) (224.2)
Operating profit 3 16.2 8.8 22.9
Finance costs 4 (3.7) (2.3) (5.6)
Profit before tax 12.5 6.5 17.3
Taxation 5 (3.4) (1.7) (5.5)
Profit for the period 9.1 4.8 11.8
Earnings per share 6
Basic earnings per share 4.4p 2.3p 5.7p
Diluted earnings per share 3.8p 2.1p 5.1p
Basic adjusted earnings per share(1) 3.8p 2.7p 6.5p
Diluted adjusted earnings per share(1) 3.3p 2.4p 5.9p
(1) Adjusted: In addition to statutory reporting, the Group reports certain
financial metrics on an adjusted basis. Definitions of adjusted measures and
reconciliations to statutory metrics are provided in Note 12 to the financial
statements.
All results are from continuing operations.
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2023
First half 2023/24 (unaudited) First half 2022/23 Full year 2022/23
£m (unaudited) (audited)
£m £m
Profit for the period 9.1 4.8 11.8
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations (0.3) 9.3 2.7
Gain/(loss) on hedges of the net investment in foreign operations 0.2 (1.2) (0.8)
Cash flow hedges:
(Loss)/gain arising on cash flow hedges during the period (0.3) (1.4) 0.3
Cumulative (loss)/gain arising on cash flow hedges reclassified (0.4) 0.7 0.6
to profit and loss
Income tax relating to items that may be reclassified subsequently to profit 0.1
or loss
0.2 (0.2)
(0.7) 7.6 2.6
Items not to be reclassified to the income statement in subsequent periods:
Remeasurement gains/(losses) on retirement benefit obligations 4.7 24.7 22.2
Tax on remeasurement gains on retirement benefit obligations (1.1) (6.4) (5.8)
3.6 18.3 16.4
Other comprehensive income for the period, net of tax 2.9 25.9 19.0
Total comprehensive income for the period, net of tax 12.0 30.7 30.8
Condensed consolidated balance sheet
as at 30 September 2023
Note 30 September 2023 Restated(1) 31 March
(unaudited) 30 September 2022 2023
£m (unaudited) (audited)
£m £m
Assets
Non-current assets
Goodwill 30.1 30.0 28.2
Intangible assets 11.9 10.3 10.9
Property, plant and equipment 54.4 57.3 56.8
Right-of-use assets 15.7 17.6 16.5
Deferred tax assets 9.7 15.8 11.8
121.8 131.0 124.2
Current assets
Inventories 65.2 70.8 61.8
Trade and other receivables 41.3 43.5 43.5
Current tax 0.6 0.1 0.6
Derivative financial assets - 0.1 0.3
Cash and cash equivalents 8 19.5 15.7 19.3
126.6 130.2 125.5
Total assets 248.4 261.2 249.7
Liabilities
Current liabilities
Borrowings 8 (3.5) (2.9) (47.3)
Trade and other payables (56.2) (63.7) (57.2)
Lease liabilities (2.1) (2.6) (2.7)
Current tax (9.4) (4.5) (6.6)
Derivative financial liabilities (0.3) (1.5) -
Provisions (0.8) - (0.9)
(72.3) (75.2) (114.7)
Net current assets 54.3 55.0 10.8
Non-current liabilities
Borrowings 8 (43.8) (46.3) (1.3)
Preference stock 8 (0.5) (0.5) (0.5)
Trade and other payables (2.5) (6.8) (2.5)
Lease liabilities (13.5) (18.8) (17.5)
Deferred tax liabilities (6.5) (10.1) (7.8)
Retirement benefit obligations 7 (52.7) (61.3) (62.2)
Provisions (4.8) (4.0) (4.1)
(124.3) (147.8) (95.9)
Total liabilities (196.6) (223.0) (210.6)
Net assets 51.8 38.2 39.1
Equity
Issued share capital 9 11.3 11.3 11.3
Currency translation reserve 11.5 18.1 11.5
Other reserves (5.2) (6.1) (4.5)
Retained earnings 34.2 14.9 20.8
Total shareholders' funds 51.8 38.2 39.1
(1) See Note 11 for details of the prior period restatements.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2023
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
£m £m £m
At 1 April 2022 11.3 - (8.7) 9.8 - (5.4) 7.0
Profit for the year - - 11.8 - - - 11.8
Other comprehensive income - - 16.4 1.7 - 0.9 19.0
Total comprehensive income for the year - - 28.2 1.7 - 0.9 30.8
Share-based payments - - 1.3 - - - 1.3
At 31 March 2023 11.3 - 20.8 11.5 - (4.5) 39.1
Profit for the period - - 9.1 - - - 9.1
Other comprehensive income/(expense) - - 3.6 - - (0.7) 2.9
Total comprehensive income/(expense) for the period - - 12.7 - - (0.7) 12.0
Share-based payments - - 0.7 - - - 0.7
At 30 September 2023 11.3 - 34.2 11.5 - (5.2) 51.8
At 1 April 2022 11.3 - (8.7) 9.8 - (5.4) 7.0
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 (Restated)(1) 11.3 - 14.9 18.1 - (6.1) 38.2
( )
(1) See Note 11 for details of the prior period restatements.
Included in retained earnings is £3.3m (31 March 2023: £2.7m) relating to a
share option reserve.
The other reserves include Renold shares held by 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 2023 the Renold Employee Benefit Trust held 16,265,023 (31
March 2023: 16,888,938) ordinary shares of 5p each and, following
recommendations by the employer, are provisionally allocated to satisfy awards
under employee incentive schemes. At 30 September 2023 the market value of
these shares was £5.0m (31 March 2023: £4.3m).
Condensed consolidated statement of cash flows
for the six months ended 30 September 2023
First half First half Full year 2022/23
2023/24 2022/23 (audited)
(unaudited) (unaudited) £m
£m £m
Cash flows from operating activities
Cash generated by operations (Note 8) 13.0 3.7 19.4
Income taxes paid (1.3) (1.3) (2.7)
Net cash flows from operating activities 11.7 2.4 16.7
Cash flows from investing activities
Proceeds from property disposals - 0.3 -
Cash outflow on disposal of right-of-use assets (0.3) - -
Purchase of property, plant and equipment (1.2) (1.9) (7.0)
Purchase of intangible assets (0.6) (0.6) (1.4)
Consideration paid for acquisitions (4.7) (14.5) (14.5)
Net cash flows from investing activities (6.8) (16.7) (22.9)
Cash flows from financing activities
Repayment of principal under lease liabilities (1.4) (1.2) (2.9)
Financing costs paid (3.1) (1.1) (3.0)
Proceeds from borrowings 83.5 23.3 28.3
Repayment of borrowings (84.0) (3.9) (8.3)
Net cash flows from financing activities (5.0) 17.1 14.1
Net (decrease)/increase in cash and cash equivalents (0.1) 2.8 7.9
Net cash and cash equivalents at beginning of period 17.5 9.5 9.5
Effects of exchange rate changes - 0.5 0.1
Net cash and cash equivalents at end of period 17.4 12.8 17.5
Notes to the interim condensed consolidated financial statements
1. Corporate information
The interim condensed consolidated financial statements for the six months
ended 30 September 2023 were approved by the Board on 15 November 2023. 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 2023
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 2023 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 2023, 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 2023, 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.
· IFRS 17 'Insurance Contracts'
· Amendments to IAS 1 and IFRS Practice Statement 2 (Disclosure of
accounting policies)
· Amendments to IAS 18 Definition of accounting estimates
· Amendments to IAS 12 (Deferred Tax related to Assets and
Liabilities arising from a single transaction)
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.
· Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
· Amendments to IAS 1 (Classification of Liabilities as Current or
Non-Current)
· Amendments to IAS 1 (Non-current Liabilities with covenants)
· IAS 7 Statement of cash flows and IFRS 7 Financial Instrument
Disclosures
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 mostly those which
applied in the annual consolidated financial statements for the year ended 31
March 2023, namely:
· Taxation
· Retirement benefit obligations
· Right-of-use assets
· Inventory valuation; with the addition of:
· Revenue and profit recognition over time
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 2023.
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
been included in respect of working capital as opposed to operating assets of
each segment as this is the measure reported to the CODM on a regular basis.
However, Group finance 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 2023 were as follows:
Chain(1) Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
£m
Period ended 30 September 2023
Revenue
External customer - transferred at a point in time 98.4 24.1 - 122.5
External customer - transferred over time - 2.8 - 2.8
Inter-segment 0.5 1.9 (2.4) -
Total revenue 98.9 28.8 (2.4) 125.3
Operating profit/(loss) 17.0 4.6 (5.4) 16.2
Finance costs (3.7)
Profit before tax 12.5
Taxation (3.4)
Profit after tax 9.1
Other disclosures
Working capital 47.5 11.2 (8.4) 50.3
Capital expenditure 1.2 0.2 0.6 2.0
Total depreciation and amortisation 3.6 0.8 1.0 5.4
(1) Chain operating profit includes non-recurring costs of £0.5m relating to
the acquisition and reorganisation costs of the Davidson business, £0.5m
relating to amortisation of acquired intangible assets and £2.2m of profit on
assignment of lease of closed site.
The segment results for the period ended 30 September 2022 were as follows:
Torque Head office costs and eliminations Consolidated
£m
Chain Transmission £m
Period ended 30 September 2022 £m £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) -
Total revenue 95.1 23.0 (1.8) 116.3
Operating profit/(loss) 12.3 1.5 (5.0) 8.8
Finance 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
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 12 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 12.
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
Period ended 30 September 2023 £m
Total revenue 98.9 28.8 (2.4) 125.3
Foreign exchange retranslation 2.6 1.0 (0.2) 3.4
Total revenue at constant exchange rates 101.5 29.8 (2.6) 128.7
Operating profit/(loss) 17.0 4.6 (5.4) 16.2
Foreign exchange retranslation 0.2 0.1 - 0.3
Operating profit/(loss) at constant exchange rates 17.2 4.7 (5.4) 16.5
The segment results for the year ended 31 March 2023 were as follows:
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
£m
Year ended 31 March 2023
Revenue
External customer - transferred at a point in time 201.5 43.4 - 244.9
External customer - transferred over time - 2.2 - 2.2
Inter-segment 0.9 3.2 (4.1) -
Total revenue 202.4 48.8 (4.1) 247.1
Operating profit/(loss) 26.5 5.4 (9.0) 22.9
Finance costs (5.6)
Profit before tax 17.3
Taxation (5.5)
Profit after tax 11.8
Other disclosures
Working capital 44.0 10.9 (6.8) 48.1
Capital expenditure 5.6 2.2 1.2 9.0
Total depreciation and amortisation 6.9 1.6 2.6 11.1
4. Finance costs
First half Full year
2023/24 2022/23 2022/23
£m £m £m
Finance costs:
Interest payable on bank loans and overdrafts 1.8 0.9 2.3
Interest expense on lease liabilities 0.4 0.2 0.7
Amortised financing costs 0.1 0.2 0.3
Loan finance costs 2.3 1.3 3.3
Net IAS 19 finance costs 1.4 1.0 2.1
Discount unwind on non-current trade and other payables - - 0.2
Finance costs 3.7 2.3 5.6
5. Taxation
Analysis of tax charge in the year
First half Full year
2023/24 2022/23 2022/23
£m £m £m
Current tax:
- UK - - (0.1)
- Overseas 1.3 1.5 3.6
- Adjustments in respect of prior periods 1.8 (0.3) 0.7
Current income tax charge 3.1 1.2 4.2
Deferred tax:
- UK 0.9 - 0.2
- Overseas (0.6) 0.5 1.5
- Adjustments in respect of prior periods - - (0.4)
Total deferred tax charge 0.3 0.5 1.3
Tax charge on profit on ordinary activities 3.4 1.7 5.5
Factors affecting current and future tax
charges
The increase in the current tax charge for the period is attributable to
increased taxable profits in jurisdictions for which the corporation tax rate
is higher than the prevailing UK rate, currently 25%. The deferred tax charge
is primarily attributable to the half year unwind of the deferred tax asset
held in respect of the defined benefit pension scheme, partially offset by a
recognition of additional deferred tax in overseas jurisdictions as supported
by forecast taxable profits.
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
2023/24 2022/23 2022/23
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 9.1 4.4 4.8 2.3 11.8 5.7
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets 0.5 0.2 0.2 0.1 0.7 0.3
Acquisition and reorganisation costs 0.5 0.2 0.6 0.3 0.6 0.3
Assignment of lease of closed site (2.2) (1.0) - - - -
Tax adjustments relating to prior year - - - - 0.4 0.2
Adjusted EPS 7.9 3.8 5.6 2.7 13.5 6.5
First half Full year
2023/24 2022/23 2022/23
Thousands Thousands Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share 208,980 206,995 207,242
Effect of dilutive potential ordinary shares: 28,546 23,737 23,003
Shares subject to performance conditions
For the purpose of calculating diluted earnings per share 237,526 230,732 230,245
First half Full year
2023/24 2022/23 2022/23
(pence) (pence) (pence)
Diluted EPS 3.8 2.1 5.1
Diluted adjusted EPS 3.3 2.4 5.9
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 At 31
September 2023 At 30 March
£m September 2022 2023
£m £m
Funded plan obligations (145.3) (160.7) (158.8)
Funded plan assets 109.6 118.8 114.5
Net funded plan obligations (35.7) (41.9) (44.3)
Unfunded obligations (17.0) (19.4) (17.9)
Total retirement benefit obligations (52.7) (61.3) (62.2)
Analysed as:
At 30 At 31
September 2023 At 30 March
£m September 2022 2023
£m £m
Net funded plan obligations:
UK (36.6) (41.2) (44.2)
Other 0.9 (0.7) (0.1)
(35.7) (41.9) (44.3)
Unfunded obligations:
Germany (16.8) (19.3) (17.7)
Other (0.2) (0.1) (0.2)
(17.0) (19.4) (17.9)
The decrease in the Group's net pre-tax deficit from £62.2m at 31 March 2023
to £52.7m at 30 September 2023 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
2023/24 2022/23 2022/23
£m £m £m
Cash generated from operations:
Operating profit 16.2 8.8 22.9
Depreciation of property, plant and equipment - owned assets 3.1 2.9 6.1
Depreciation of property, plant and equipment - right-of-use-assets 1.3 1.2 2.5
Amortisation of intangible assets 1.0 1.0 2.5
Loss on disposals of plant and equipment - - 0.3
Profit on disposal of right-of-use-asset (2.2) - -
Equity share plans 0.7 0.5 1.3
Increase in inventories (3.3) (10.9) (4.5)
Decrease/(increase) in receivables 2.3 (0.9) (2.8)
(Decrease)/increase in payables (0.3) 4.2 (4.2)
Increase in provisions 0.2 - 1.0
Cash contribution to pension schemes (6.0) (3.1) (5.8)
Pension current service cost (non-cash) - - 0.1
Cash generated from operations 13.0 3.7 19.4
Reconciliation of net change in cash and cash equivalents to movement in net
debt:
First half Full year
2023/24 2022/23 2022/23
£m £m £m
(Decrease)/increase in cash and cash equivalents (0.1) 2.8 7.9
Change in net debt resulting from cash flows
- Proceeds from borrowings (83.5) (23.3) (28.3)
- Repayment of borrowings 84.0 1.2 8.3
Foreign currency translation differences 0.2 (0.7) (0.7)
Non-cash movement on capitalised finance costs 0.9 (0.2) (0.3)
Net debt acquired as part of the business combination - - (2.9)
Change in net debt during the period 1.5 (20.2) (16.0)
Net debt at start of period (29.8) (13.8) (13.8)
Net debt at end of period (28.3) (34.0) (29.8)
Net debt comprises:
At 30 September At 30 September
2023 2022 At 31 March
£m £m 2023
£m
Cash and cash equivalents 19.5 15.7 19.3
Total debt (47.8) (49.7) (49.1)
Net debt (28.3) (34.0) (29.8)
At 30 September At 30 September
2023 2022 At 31 March
2023
Net cash and cash equivalents £m £m £m
Cash and cash equivalents 19.5 15.7 19.3
Less: Overdrafts (2.1) (2.9) (1.8)
Net cash and cash equivalents 17.4 12.8 17.5
At 30 September 2023 At 30 September
2022 At 31 March
2023
Total debt £m £m £m
Borrowings:
Overdrafts (2.1) (2.9) (1.8)
Bank Loans (1.7) - (45.5)
Capitalised costs 0.3 - -
Current borrowings (3.5) (2.9) (47.3)
Bank Loans (44.4) (46.3) (1.3)
Capitalised costs 0.6 - -
Non-current borrowings (43.8) (46.3) (1.3)
Total borrowings (47.3) (49.2) (48.6)
Preference stock (0.5) (0.5) (0.5)
Total debt (47.8) (49.7) (49.1)
9. Called up share capital
At 30 At 30 At 31
September 2023 September 2022 March
£m £m 2023
£m
Ordinary shares of 5p each - issued and fully paid 11.3 11.3 11.3
At 30 September 2023, the issued ordinary share capital comprised 225,417,740
ordinary shares of 5p each (30 September 2022: 225,417,740 shares).
10. Acquisition of businesses
During the period the Group completed the acquisition of the trading assets of
Davidson Chain Pty ("Davidson") for the total consideration of AU$6.0m
(£3.1m), of which AU$5.7m (£3.0m) was paid on the date of the acquisition
and the remaining AU$0.3m (£0.1m) being deferred, to be paid in September
2024. Davidson is based in Melbourne, Australia, and is a manufacturer and
distributor of high quality conveyor chain ("CVC").
The transaction has been accounted for as a business combination under IFRS 3
and is summarised below:
Provisional as at 30 September 2023
£m
Fair value of net assets acquired:
Intangible assets 1.4
Property, plant and equipment 0.1
Inventories 0.4
Trade and other receivables 0.3
Trade and other payables (0.4)
Deferred tax liabilities (0.4)
Net identifiable assets and liabilities 1.4
Goodwill 1.7
Total consideration 3.1
Consideration
Cash consideration 3.0
Deferred consideration 0.1
Total consideration transferred/to be transferred 3.1
Net cash outflow arising on acquisition:
Cash consideration paid (3.0)
Add: Cash and cash equivalents acquired -
(3.0)
Increase in net debt arising on acquisition:
Net cash outflow arising on acquisition (3.0)
Less: Acquisition costs (0.2)
(3.2)
Acquisition related costs amounted to £0.2m and have been included in the
condensed consolidated income statement.
The gross contractual value of the trade and other receivables was £0.3m. The
best estimate at the acquisition date of the contractual cash flows not
expected to be collected was £nil.
Deferred consideration of £0.1m is payable within one year.
The goodwill arising on acquisition has been allocated to the Australia CGU
and is expected to be deductible for tax purposes. The goodwill 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 1 September 2023 and contributed £0.2m revenue
and £0.0m adjusted 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 £1.2m to Group revenue, £0.2m
to Group operating profit and £0.4m adjusted operating profit (after adding
back £0.2m for acquisition costs).
During the year deferred consideration of €2.0m (£1.7m) was also paid in
relation to the acquisition of the conveyor chain business of Industrias YUK
S.A. in the prior year.
Total net cash outflow arising on acquisitions:
Davidson Chain Pty (3.0)
Industrias YUK S.A. (1.7)
(4.7)
Total increase in net debt arising on acquisitions:
Davidson Chain Pty (3.2)
Industrias YUK S.A. (1.7)
(4.9)
11. Prior period adjustments
Following a review of complex tax judgements looking back over a number of
years undertaken at the last financial year end, a prior year adjustment of
£1.3m was identified relating to errors in the recognition of deferred tax on
certain intragroup and stock consolidation adjustments. Included in this
amount is the recognition of deferred tax for losses following errors
identified in the profitability forecasts for which increased deferred tax can
be ascribed. The prior year adjustment to deferred tax is offset by an equal
and opposite adjustment to current tax arising in respect of an error
identified in the Group's historic transfer pricing calculation. A final
adjustment has been identified in relation to a deferred tax asset in respect
of interest restriction of £1.2m which should have been recognised
historically to the extent it offsets the deferred tax liability in the
respective tax jurisdiction. The adjustment recognises this deferred tax asset
in the opening balance and opening reserves of the Group.
The impact, on a line item basis for those affected, on the Condensed balance
sheet as at 30 September 2022 is as follows:
Condensed consolidated balance sheet as at 30 September 2022 As previously reported Deferred / Current tax recognition
Restated
£m £m £m
Assets
Non-current assets
Deferred tax assets 13.3 2.5 15.8
13.3 2.5 15.8
Total assets 258.7 2.5 261.2
Liabilities
Current liabilities
Current tax (3.2) (1.3) (4.5)
(3.2) (1.3) (4.5)
Total Liabilities (221.7) (1.3) (223.0)
Net assets 37.0 1.2 38.2
Equity
Retained earnings 13.7 1.2 14.9
Total shareholders' funds 37.0 1.2 38.2
12. 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 intangible assets, 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
APMs are defined and reconciled to the IFRS statutory measures as follows:
(A) Adjusted operating profit
Period ended 30 September 2023
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 17.0 4.6 (5.4) 16.2
Add back/(deduct):
Amortisation of acquired intangible assets 0.5 - - 0.5
Acquisition and reorganisation costs 0.5 - - 0.5
Assignment of lease of closed site (2.2) - - (2.2)
Adjusted operating profit 15.8 4.6 (5.4) 15.0
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
Year ended 31 March 2023
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 26.5 5.4 (9.0) 22.9
Add back/(deduct):
Amortisation of acquired intangible assets 0.7 - - 0.7
Acquisition costs - - 0.6 0.6
Adjusted operating profit 27.2 5.4 (8.4) 24.2
(B) Adjusted profit before taxation
First half Full year
2023/24 2022/23 2022/23
£m £m £m
Profit before taxation 12.5 6.5 17.3
Add back/(deduct):
Amortisation of acquired intangible assets 0.5 0.2 0.7
Acquisition and reorganisation costs 0.5 0.6 0.6
Assignment of lease of closed site (2.2) - -
Adjusted profit before taxation 11.3 7.3 18.6
(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 2023 £m £m £m £m
Adjusted operating profit 15.8 4.6 (5.4) 15.0
Total revenue (including inter-segment sales) 98.9 28.8 (2.4) 125.3
Return on sales % 16.0% 16.0% n/a 12.0%
Torque Transmission
Chain 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%
Chain Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2023 £m £m £m £m
Adjusted operating profit 27.2 5.4 (8.4) 24.2
Total revenue (including inter-segment sales) 202.4 48.8 (4.1) 247.1
Return on sales % 13.4% 11.1% n/a 9.8%
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2023 £m £m £m £m
Year-on-year change in adjusted operating profit 3.3 3.1 (1.0) 5.4
Year-on-year change in total revenue (including inter-segment sales) 3.8 5.8 (0.6) 9.0
Adjusted operating profit gearing % 87% 53% n/a 60%
(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 2023 £m £m £m £m
Total revenue 98.9 28.8 (2.4) 125.3
Foreign exchange retranslation 2.6 1.0 (0.2) 3.4
Revenue at constant exchange rates 101.5 29.8 (2.6) 128.7
Adjusted operating profit 15.8 4.6 (5.4) 15.0
Foreign exchange retranslation 0.2 0.1 - 0.3
Adjusted operating profit at constant exchange rates 16.0 4.7 (5.4) 15.3
Return on sales at constant exchange rates % 15.8% 15.8% n/a 11.9%
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation, depreciation
and amortisation) and operating cashflow
First half Full year
2023/24 2022/23
2022/23
£m £m £m
Operating profit 16.2 8.8 22.9
Depreciation and amortisation 5.4 5.1 11.1
Loss on disposal of plant & equipment - - 0.3
Share-based payments 0.7 0.5 1.3
EBITDA(1) 22.3 14.4 35.6
Add back/(deduct):
Acquisition and reorganisation costs 0.5 0.6 0.6
Assignment of lease of closed site (2.2) - -
Adjusted EBITDA(1) 20.6 15.0 36.2
Inventories (3.3) (10.9) (4.5)
Trade and other receivables 2.3 (0.9) (2.8)
Trade and other payables (0.3) 4.2 (4.2)
Provisions 0.2 - 1.0
Movement in working capital (1.1) (7.6) (10.5)
Purchase of property, plant and equipment (1.2) (1.9) (7.0)
Purchase of intangible assets (0.6) (0.6) (1.4)
Proceeds from property disposals - 0.3 -
Cash outflow on disposal of right-of-use assets (0.3) - -
Net capital expenditure (2.1) (2.2) (8.4)
Operating cash flow 17.4 5.2 17.3
(1) The calculation of EBITDA, adjusted EBITDA and operating cash flow
includes the add back for the non-cash share-based payment charge of £0.7m
for the period ended 30 September 2023 (2022: £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 2023 September 2022 March
£m £m 2023
£m
Net debt (see Note 8) 28.3 34.0 29.8
H2 2021/22 Adjusted EBITDA - 13.4 -
H1 2022/23 Adjusted EBITDA - 15.0 15.0
H2 2022/23 Adjusted EBITDA 21.2 - 21.2
H1 2023/24 Adjusted EBITDA 20.6 - -
12 months rolling adjusted EBITDA 41.8 28.4 36.2
Leverage ratio 0.7 times 1.2 times 0.8 times
(K) Gearing ratio
At 30 Restated(1) At 31
September 2023 At 30 March
£m September 2022 2023
£m £m
Net debt (see Note 8) 28.3 34.0 29.8
Equity attributable to equity holders of the parent 51.8 38.2 39.1
Net debt (see Note 8) 28.3 34.0 29.8
Total capital plus net debt 80.1 72.2 68.9
Gearing ratio % 35% 47% 43%
(1) See Note 11 for details of the prior period restatement.
(L) Legacy pension cash costs
First half Full year
2023/24 2022/23 2022/23
£m £m £m
Cash contributions to pension schemes 5.4 2.5 4.6
Pension payments in respect of unfunded schemes 0.6 0.6 1.2
Scheme administration costs 0.2 0.4 0.7
6.2 3.5 6.5
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