REG - Renold PLC - Interim results
20/11/2024 07:00
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RNS Number : 8584M Renold PLC 20 November 2024
Renold plc
("Renold", the "Company" or, together with its subsidiaries, the "Group")
Interim results for the half year ended 30 September 2024
Resilient trading; improved margin; underlying full year expectations
unchanged
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 2024.
Financial summary Half year ended Change
(Constant
currency)(1)
£m 30 September 2024 30 September 2023 Change
Revenue 123.4 125.3 (1.5)% +0.6%
Adjusted operating profit(2) 15.2 15.0 +1.3% +4.0%
Return on sales(2) 12.3% 12.0% +30bps +40bps
Adjusted profit before tax(2) 11.3 11.3 -
Net debt(3) 42.2 28.3
Adjusted earnings per share(2) 4.2p 3.8p +10.5%
Additional statutory measures
Operating profit 13.4 16.2 (17.3)%
Profit before tax 9.5 12.5 (24.0)%
Basic earnings per share 3.3p 4.4p (25.0)%
Financial highlights
· Revenue at £123.4m increased 0.6% at constant exchange rates, although down
1.5% at reported rates due to currency headwinds.
· Chain and TT divisions both reported an increase in revenue, at constant
exchange rates.
· Adjusted operating profit at £15.2m (2023: £15.0m) up 4.0% at constant
exchange rates, and 1.3% at reported exchange rates.
· Further margin expansion; return on sales increased 30bps, (40bps at constant
exchange rates) to 12.3% (2023: 12.0%).
· Net debt at 30 September 2024 £42.2m (31 March 2024: £24.9m), after
acquisition costs to date of £23.3m. Net debt was 1.0x adjusted EBITDA
(2023: 0.7x).
· Adjusted EPS up 10.5% to 4.2p (2023: 3.8p).
· IAS 19 retirement benefit deficit reduced 8.6% to £52.2m (31 March 2024:
£57.1m).
Business highlights
· Acquisition of Mac Chain based in British Columbia, Canada and the Pacific
Northwest of the USA for a total consideration, incl. deferred amounts, of
£23.8m, increasing the Group's access to the North American conveyor and
forestry chain markets. The integration process is progressing well and the
business is performing in line with expectations. The Americas now represent
c. 47% of Group revenue on a pro-forma basis.
· Further progress made to improve productivity, reduce costs and in capital
investment, accelerating the integration of Group-wide supply chains and
increasing operational capabilities.
· H1 order intake up 11.5% compared to prior year, including military contract
win of £10.6m for the Royal Canadian Navy.
· Order book at 30 September 2024 of £80.8m, remains strong compared to
historic levels (30 September 2023: £83.6m).
· Post period end, Renold's manufacturing facility in Valencia was significantly
impacted by the well-publicised flooding in the region and although the
financial impact is still being assessed the net cost to the Group is expected
to be c. £1m.
· Board remains confident of delivering underlying full year results in line
with market expectations(4)
(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.
(4) Company compiled analyst consensus for FY25 is for revenue of £252.5m
with a range of £252.4m to £252.6m and operating profit of £30.4m with a
range of £29.5m to £31.2m.
Robert Purcell, Chief Executive of Renold, said:
"Renold continue to deliver improving results in what have been variable and
generally difficult markets. The Renold business with its diversity of
customers, geography, markets and applications has shown its strength in a
period of considerable economic upheaval. Our STEP2 Strategy is being
consistently executed and is delivering good results.
"In the first half we have made further progress with our inorganic growth
strategy through the acquisition of Mac Chain, another excellent addition to
the Group and one that enhances our market position in a number of sectors and
geographies. Our strong cash generation means that we can accelerate the
cadence of value enhancing bolt-on acquisitions.
"The floods in Valencia were devasting for the local communities and our
factory was directly impacted. Our colleagues are all safe, and efforts are
underway to restore business as usual, and they are doing a fantastic job
despite operating in a very difficult environment. Whilst there will be a
short term operational impact, we are, and will, cope with the challenges.
"Whilst we see no signs of the global economic conditions significantly
improving in the second half, the resilience of the Group gives the Board
confidence in delivering underlying full year results in line with market
expectations(4)."
Reconciliation of reported, constant exchange rate and adjusted results
Revenue Operating profit Earnings per share
H1 H1 H1 H1 H1 H1
2024/25 2023/24 2024/25 2023/24 2024/25 2023/24
£m £m £m £m pence pence
Statutory at actual exchange rates 123.4 125.3 13.4 16.2 3.3 4.4
Adjust for non-recurring items:
Assignment of lease of closed site - - - (2.2)
Acquisition costs - - 1.2 0.5
Amortisation of acquired intangible assets - - 0.6 0.5
Adjusted at actual exchange rates 123.4 125.3 15.2 15.0 4.2 3.8
Exchange impact 2.7 - 0.4 -
Adjusted at constant exchange rates 126.1 125.3 15.6 15.0
Investor Presentation
The Company will conduct a live presentation and Q&A session for investors
on the same day as the release of the interim results, 20 November 2024, at
5:30 pm GMT. 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_zYZhNwhNQ3yc5j-SL4EDYA
(https://us02web.zoom.us/webinar/register/WN_zYZhNwhNQ3yc5j-SL4EDYA)
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 Group 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's performance in the first six months of the year was strong, when
set against continued market weakness seen in Europe and China, a softening of
the US market ahead of the US Presidential elections, and increased foreign
exchange headwinds. Revenues reduced 1.5% to £123.4m (2023: £125.3m). At
constant exchange rates, revenues increased 0.6%.
Group adjusted operating profit increased by 1.3% to £15.2m (2023: £15.0m),
an improvement of 4.0% at constant exchange rates. The TT division materially
improved its operating profit (up 10.9%) as the benefits of prior year
productivity improvements, and the continuing impact of the long-term military
contracts in the Couplings business are reflected in margin expansion of
120bps.
Group return on sales increased by 30bps, to 12.3% (2023: 12.0%), continuing
the progress seen in previous years, and demonstrating the Group's ability to
pass through cost inflation and improve productivity.
Statutory operating profit reduced to £13.4m (2023: £16.2m), as the
exceptional profit in the prior year of £2.2m related to the assignment of
the lease of the closed Bredbury site was a one-off, while acquisition costs
increased to £1.2m. The statutory operating profit margin for the period was
10.9% (2023: 12.9%).
Net debt increased during the period to £42.2m (31 March 2024: £24.9m)
following the acquisition of Mac Chain for an initial net cash consideration
of £21.2m in September 2024. The Group made the final payment on the YUK
acquisition of £1.7m, and also re-introduced a dividend of £1.0m, which was
paid in the period. Excluding the impact of the above payments, underlying
cash generation was some £6.6m, and would have resulted in a half year net
debt position of £18.3m.
Order intake for the period was £122.3m, an increase of 11.5% (2023:
£109.7m), or a 14.3% increase at constant exchange rates. Mac Chain
contributed £1.2m to order intake in the period. The order book as at 30
September 2024 of £80.8m remains higher than historic levels, and represents
a constant currency increase of 0.6% over the previous financial year.
Global markets continue to be uncertain, with activity levels in both mainland
Europe and China recovering more slowly than initially anticipated. However,
material and labour cost inflation is now reducing.
Overall, trading and profitability for the first half of the financial year
was in line with the Board's expectations. The good trading performance in the
period, coupled with the strong order book, underpins management's confidence
in the outturn for the full financial year.
After the period end, our Chain manufacturing facility in Valencia was
directly hit by the recent severe flooding in the region. Most importantly,
the local team are all safe, but they, their families and communities have
been, and continue to go through, a very difficult period. Fortunately, the
Valencia logistics centre, which accounts for approximately 70% of our Spanish
business, was completely unaffected. Our business continuity plans have worked
well and we do not expect any medium term material impact. The Group is
insured for asset and business interruption and we expect a full recovery of
our costs, minus a deductible, although there will be some short term cash
impact.
Acquisitions
On 9 September 2024, the Group acquired the trade and net assets of Mac Chain
Company Ltd (U.S.) and the entire issued share capital of Mac Chain Company
Limited (Canada) (together, "Mac Chain") for a total cash consideration of
£23.8m.
With operations in the Pacific Northwest of the USA, British Columbia, and
Quebec, Canada, Mac Chain is a manufacturer and distributor of high quality
conveyor chain ("CVC") and ancillary products, with a significant presence in
the forestry and broader industrial markets. The acquisition substantially
increases the Group's access to the Western US and Canadian CVC markets,
particularly forestry, which we have identified as a significant opportunity.
With Renold's existing US and Canadian operational footprint, the acquisition
presents significant opportunities for synergies upon integration.
The Mac Chain 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, expanding Renold's existing Chain
business in North America by c.33%.
The Board is pleased with the performance of Mac Chain, which was in line with
expectations in the weeks since completion of the acquisition and remains
excited by the opportunities beginning to emerge.
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. Acquisitions are expected to be
earnings accretive within the first year, whilst leverage is maintained at
conservative levels.
Business and financial review
Adjusted operating profit Return on sales
Revenue
Six month period 2024/25 2023/24 2024/25 2023/24 2024/25 2023/24
£m
£m £m £m % %
Chain 99.4 98.9 15.9 15.8 16.0 16.0
Torque Transmission 29.6 28.8 5.1 4.6 17.2 16.0
Head office costs/ (2.9) (2.4) (5.4) (5.4) - -
Inter segment sales elimination
Total Adjusted at constant rates 126.1 125.3 15.6 15.0 12.4 12.0
Impact of foreign exchange (2.7) - (0.4) - (0.1) -
Total Adjusted at actual rates 123.4 125.3 15.2 15.0 12.3 12.0
Adjusting items:
Assignment of lease of closed site - - - 2.2
Amortisation of acquired intangible assets - - (0.6) (0.5)
Acquisition costs - - (1.2) (0.5)
Statutory 123.4 125.3 13.4 16.2 10.9 12.9
Chain
The Chain division's revenue at reported exchange rates reduced by 1.8% to
£97.1m. Revenue at constant exchange rates increased by 0.5% to £99.4m. Mac
Chain contributed revenue of £1.2m in the three weeks of ownership in the
half year. Adjusted operating profit for the Chain division of £15.5m reduced
by 1.9% at reported exchange rates, and at constant exchange rates adjusted
operating profit increased by 0.6%. Return on sales for the Chain division was
flat at 16.0% (2023: 16.0%). Due to the proximity to the half year end and the
need to ensure the necessary valuations are completed, no profit (which is
expected not to be material) has been included for Mac Chain in the period.
Chain Performance
Six month period 2024/25 2023/24 2024/25 ROS % 2023/24 ROS %
£m £m
External revenue 96.7 98.4
Inter-segment revenue 0.4 0.5
Total revenue 97.1 98.9
Foreign exchange 2.3 -
Revenue at constant exchange rates 99.4 98.9
Operating profit 14.9 17.5 15.3 17.7
Assignment of lease of closed site - (2.2)
Amortisation of acquired intangible assets 0.6 0.5
Adjusted operating profit 15.5 15.8 16.0 16.0
Foreign exchange 0.4 -
Adjusted operating profit at constant exchange rates 15.9 15.8 16.0 16.0
Revenue movements by region were as follows:
· In Europe revenue reduced by 4.1% (1.8% reduction at constant exchange rates).
Softness in the German market continued during the period, while sales in
Switzerland were also subdued. However, sales in the UK increased by 4.6%,
while sales in France increased by 17.7%. The integration of the YUK business
continued as planned, as CVC chain and transmission chain ("TRC") sales in
Spain increased by 18.1% while product manufactured by YUK in Spain, and sold
throughout Europe, also increased.
· Americas revenue reduced by 2.5% at reported exchange rates, but increased by
0.9% at constant exchange rates. Sales of both engineering chain and leaf
chain (used in fork lift trucks) remained strong. New opportunities with
distributors, especially in the warehouse and distribution markets, will
generate additional future sales.
· Australasian revenues increased by 18.8%, or 20.4% at constant exchange rates.
The business continued to benefit from its strategy to target South East Asia,
with strong growth recorded in each of the Malaysian, Indonesian and Thai
markets.
· Revenues in India recovered strongly with constant currency revenues up 17.0%.
Increased competition from Chinese competitors abated, while sales to the
agricultural markets recovered. Intra Group supply, especially to the USA, was
strong, particularly for larger CVC Chain. The capital investment programme in
India aimed at increasing the quality of production to Western standards
continued. To enhance market coverage we continued to expand our domestic
dealer network and the number of local warehouses.
· Revenues in China were down 6.7% (at constant exchange rates) as the impact of
a weak Chinese economy was reflected in domestic demand. Offsetting this,
intra Group volume to Europe recovered. The transfer of YUK's externally
purchased product to Jintan continued. A similar external to internal product
shift will be undertaken at Mac Chain, with some benefit expected in H2.
Order intake at constant exchange rates increased by 4.8% to £92.6m.
Torque Transmission ("TT")
TT Performance
Six month period 2024/25 2023/24 2024/25 ROS % 2023/24 ROS %
£m £m
External revenue 26.7 26.9
Inter-segment revenue 2.5 1.9
Total revenue 29.2 28.8
Foreign exchange 0.4 -
Revenue at constant exchange rates 29.6 28.8
Operating profit (and adjusted operating profit) 5.1 4.6 17.5 16.0
Foreign exchange - -
Adjusted operating profit at constant exchange rates 5.1 4.6 17.2 16.0
TT divisional revenues, at constant exchange rates, of £29.6m were £0.8m
(2.8%) higher than in the prior year. Continued growth in the US, Chinese and
French markets, offset a slow down in activity in the Spanish and Gears
business. The long-term military contracts continued in line with the
production schedule, which led to an increase in profitability during the half
year. Additionally, the division benefited from an increase in capacity due to
capital investments in automated machines, and efficiency improvements driven
by greater visibility as additional sites use M3, the Group standard ERP
system.
As a result of increased sales activity, selling price rises and improved
output, as well as a normalisation in product mix, divisional operating profit
at constant exchange rates increased by £0.5m to £5.1m. Return on sales
increased in the period by 150bps to 17.5% (2023: 16.0%).
The division benefitted from the receipt of a significant order (£10.6m) for
the Royal Canadian Navy in the half year. Excluding this order, order intake
at constant exchange rates increased by 3.6%. The closing order book for the
division of £43.0m should ensure that momentum will continue into the second
half.
Cash flow and net debt
Half year to 30 September 2024/25 2023/24
£m £m
Adjusted operating profit 15.2 15.0
Add back: Depreciation and amortisation 5.0 4.9
Share-based payments 0.8 0.7
Adjusted EBITDA 21.0 20.6
Movement in working capital 0.2 (1.4)
Net capital expenditure (5.1) (2.1)
Operating cash flow 16.1 17.1
Income taxes (2.9) (1.3)
Retirement benefit cash costs (3.1) (6.0)
Repayment of lease principal (1.3) (1.4)
Financing costs paid (2.7) (2.2)
Acquisition consideration(1) (23.3) (4.9)
Dividends paid (1.0) -
Other 0.9 0.2
Change in net debt (17.3) 1.5
Closing net debt (42.2) (28.3)
(1) Includes £21.2m net consideration for the Mac Chain acquisition, together
with £1.7m deferred consideration in relation to the acquisition of
Industrias YUK S.A in FY23 and £0.4m of acquisition costs for Mac Chain.
Net Debt at £42.2m increased by £17.3m in the period (31 March 2024:
£24.9m).
Working capital remained broadly flat during the half year, while net capital
expenditure of £5.1m increased over the prior year, as investments in
production capabilities, especially in our Indian, US and TT divisions
continue apace, including expansion of press capabilities, improved heat
treatment and continuing roll-out of the Group's standard ERP system.
Corporation tax payments on account of £2.9m were £1.6m higher than in the
prior year. Following full utilisation of US tax loses, tax payments on
account commenced during the half year.
Financing cash costs increased relative to the first half of last year
reflecting the increase in market interest rates. The Group re-introduced a
dividend, paying £1.0m in the period.
Retirement benefit cash costs were in line with expectations.
Post period end, on 29 October 2024, the Valencia region was hit by severe
flooding. The Group's Valencia CVC manufacturing facility (approximately 30%
of the Group's Spanish business) saw extensive flooding, but the nearby
Valencia TRC distribution centre (approximately 70% of the Group's Spanish
business) was unaffected. The Group is fully insured, including business
interruption, and the insurance claim will cover all financial impacts on the
Group, with the final amount still to be quantified. After paying the
insurance deductible and certain other costs, the estimated net cost to the
Group is expected to ultimately be approximately £1.0m. There will, however,
be a short term financial impact on the Group. Against the still to be
quantified, but currently estimated at £10.5m, insurance recovery expected in
FY26 will be an exceptional write off of inventory and factory equipment,
estimated at £4.2m, and an exceptional trading impact of £1.5m, split over
the current financial year and FY26.
Retirement benefits
The Group has a number of closed defined retirement benefit arrangements. Cash
payments to the UK pension scheme in the current financial year are expected
to be £5.7m of which £3.0m was paid in the first half year. The cash cost of
pensions in payment in Germany are expected to be £1.2m in FY25. This cash
cost will remain at this level in the medium term.
The Group's IAS 19 deficit decreased from £52.7m at 30 September 2023 to
£52.2m at 30 September 2024.
30 September 2024 31 March 2024
Retirement benefit UK Germany Other Total UK Germany Other Total
£m £m £m £m £m £m £m £m
IAS 19 liability (35.1) (17.2) 0.1 (52.2) (39.7) (17.5) 0.1 (57.1)
Net deferred tax asset 0.6 2.7 - 3.3 - 3.0 - 3.0
Net of tax liability (34.5) (14.5) 0.1 (48.9) (39.7) (14.5) 0.1 (54.1)
The yield on corporate bonds increased during the period. Consequently, the
discount rates used for the UK scheme rose from 5.0% to 5.25%, and resulted in
a net reduction in UK pension liabilities of £4.6m. The long term expectation
for CPI inflation remained broadly stable at 3.15% (3.25% at March 2024).
Pre-tax liabilities in Germany reduced by £0.3m to £17.2m, also due in the
main to an increase in discount rates.
The net IAS 19 financing expense (a non-cash item) was £1.2m (2023: £1.4m).
Borrowing Facilities
The Group refinanced its borrowing facilities in May 2023. The facilities
consist of a £85.0m multi-currency revolving credit facility and a £20.0m
accordion option, which will provide the Group access to additional funding in
support of its acquisition programme. The principal facility covenant, being
Net Debt / Adjusted EBITDA remains at 3.0x.
Dividend
The Board fully recognises the importance of dividends as part of the overall
value creation proposition for shareholders. The Board has carefully reviewed
its capital allocation priorities, and believes that significant organic and
inorganic investment opportunities remain available to the Group. The Group
has delivered continued and sustainable progress in terms of profitability and
free cash flow generation in recent years. Consequently, for the year ended 31
March 2024, the Board re-introduced the payment of a final Dividend of 0.5p
per share, which was payable to shareholders on the register as at 9 August
2024. At that time, the Group indicated its intention to continue with an
annual final dividend, but that it would not declare an interim dividend.
Summary
We continue to deliver improving results in what have been variable but
generally difficult markets. The Renold business with its diversity of
customers, geography, markets and applications has shown its strength in a
period of considerable economic upheaval. Our STEP2 Strategy is being
consistently executed and is delivering good results.
The first half of FY25 saw the further delivery of our inorganic growth plans
with the acquisition of Mac Chain, another excellent addition to the Group and
one that enhances our market position in a number of sectors and geographies.
Our growing operational cash generation means that we can continue the cadence
of acquisitions which in turn enhance our sales, profit and margin growth.
Whilst global economic conditions remain uncertain, we remain confident of
delivering full year results in line with market expectations.
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 wars in Ukraine and the Middle East alongside the
continued improvement in the half year trading performance of the Group and
the impact of the recent flooding of our facility in Valencia, 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 2024
remain appropriate. The risks and associated mitigation processes can be found
on pages 48-55 of the 2024 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;
· 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, including disruption caused by
extreme weather events e.g. flooding;
· People and change;
· Liquidity, foreign exchange and banking arrangements;
· Pensions 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 2024. 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
20 November 2024 20 November 2024
Condensed consolidated income statement
for the six months ended 30 September 2024
Note First half 2024/25 (unaudited) First half 2023/24 Full year 2023/24
£m (unaudited) (audited)
£m £m
Revenue 3 123.4 125.3 241.4
Operating costs (110.0) (109.1) (210.9)
Operating profit 3 13.4 16.2 30.5
Finance costs 4 (3.9) (3.7) (7.6)
Profit before tax 9.5 12.5 22.9
Taxation 5 (3.0) (3.4) (5.8)
Profit for the period 6.5 9.1 17.1
Earnings per share 6
Basic earnings per share 3.3p 4.4p 8.3p
Diluted earnings per share 2.9p 3.8p 7.3p
Basic adjusted earnings per share(1) 4.2p 3.8p 7.8p
Diluted adjusted earnings per share(1) 3.6p 3.3p 6.9p
(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.
All results are from continuing operations.
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2024
First half 2024/25 (unaudited) First half 2023/24 Full year 2023/24
£m (unaudited) (audited)
£m £m
Profit for the period 6.5 9.1 17.1
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations (4.7) (0.3) (4.0)
Gain on hedges of the net investment in foreign operations 0.6 0.2 0.5
Cash flow hedges:
Gain/(loss) arising on cash flow hedges during the period 0.1 (0.3) (0.3)
Cumulative gain/(loss) arising on cash flow hedges reclassified 0.3 (0.4) (0.2)
to profit and loss
Income tax relating to items that may be reclassified subsequently to profit - 0.1
or loss
0.1
(3.7) (0.7) (3.9)
Items not to be reclassified to the income statement in subsequent periods:
Remeasurement gains on retirement benefit obligations 2.5 4.7 1.4
Tax on remeasurement gains on retirement benefit obligations (0.7) (1.1) (0.4)
1.8 3.6 1.0
Other comprehensive (loss)/income for the period, net of tax (1.9) 2.9 (2.9)
Total comprehensive income for the period, net of tax 4.6 12.0 14.2
Condensed consolidated balance sheet
as at 30 September 2024
Note 30 September 2024 30 September 2023 31 March
(unaudited) (unaudited) 2024
£m £m (audited)
£m
Assets
Non-current assets
Goodwill 34.7 30.1 29.3
Intangible assets 18.0 11.9 11.5
Property, plant and equipment 56.7 54.4 56.1
Right-of-use assets 19.6 15.7 15.1
Deferred tax assets 10.8 9.7 7.7
139.8 121.8 119.7
Current assets
Inventories 67.4 65.2 60.6
Trade and other receivables 44.1 41.3 39.8
Current tax 0.4 0.6 0.1
Derivative financial assets 0.2 - -
Cash and cash equivalents 8 20.7 19.5 17.8
132.8 126.6 118.3
Total assets 272.6 248.4 238.0
Liabilities
Current liabilities
Borrowings 8 (3.0) (3.5) (3.8)
Trade and other payables (58.7) (56.2) (53.7)
Lease liabilities (2.7) (2.1) (2.3)
Current tax (10.9) (9.4) (8.6)
Derivative financial liabilities (0.1) (0.3) (0.3)
Provisions (1.2) (0.8) (1.6)
(76.6) (72.3) (70.3)
Net current assets 56.2 54.3 48.0
Non-current liabilities
Borrowings 8 (59.4) (43.8) (38.4)
Preference stock 8 (0.5) (0.5) (0.5)
Trade and other payables - (2.5) -
Lease liabilities (17.1) (13.5) (12.8)
Deferred tax liabilities (7.2) (6.5) (3.7)
Retirement benefit obligations 7 (52.2) (52.7) (57.1)
Provisions (5.0) (4.8) (5.0)
(141.4) (124.3) (117.5)
Total liabilities (218.0) (196.6) (187.8)
Net assets 54.6 51.8 50.2
Equity
Issued share capital 9 11.3 11.3 11.3
Currency translation reserve 4.0 11.5 8.0
Other reserves (8.0) (5.2) (8.8)
Retained earnings 47.3 34.2 39.7
Total shareholders' funds 54.6 51.8 50.2
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2024
Share capital Retained earnings Currency translation reserve Other reserves Total shareholders' funds
(Note 9) £m £m £m £m
£m
At 1 April 2023 11.3 20.8 11.5 (4.5) 39.1
Profit for the year - 17.1 - - 17.1
Other comprehensive income/(loss) - 1.0 (3.5) (0.4) (2.9)
Total comprehensive income/(loss) for the year - 18.1 (3.5) (0.4) 14.2
Own shares purchased - - - (4.5) (4.5)
Settlement of share schemes - (0.6) - 0.6 -
Share-based payments - 1.4 - - 1.4
At 31 March 2024 11.3 39.7 8.0 (8.8) 50.2
Profit for the period - 6.5 - - 6.5
Other comprehensive income/(loss) - 1.7 (4.0) 0.4 (1.9)
Total comprehensive income/(loss) for the period - 8.2 (4.0) 0.4 4.6
Settlement of share schemes - (0.4) - 0.4 -
Share-based payments - 0.8 - - 0.8
Dividends paid during the period - (1.0) - - (1.0)
At 30 September 2024 11.3 47.3 4.0 (8.0) 54.6
At 1 April 2023 11.3 20.8 11.5 (4.5) 39.1
Profit for the period - 9.1 - - 9.1
Other comprehensive income/(loss) - 3.6 - (0.7) 2.9
Total comprehensive income/(loss) 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
( )
Included in retained earnings is £4.5m (31 March 2024: £3.9m) 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 2024 the Renold Employee Benefit Trust held 26,456,611 (31
March 2024: 27,583,116) ordinary shares of 5p each and, following
recommendations by the employer, are provisionally allocated to satisfy awards
under employee incentive schemes. At 30 September 2024 the market value of
these shares was £14.1m (31 March 2024: £10.3m).
Condensed consolidated statement of cash flows
for the six months ended 30 September 2024
First half First half Full year 2023/24
2024/25 2023/24 (audited)
(unaudited) (unaudited) £m
£m £m
Cash flows from operating activities
Cash generated by operations (Note 8) 17.7 13.0 36.0
Income taxes paid (2.9) (1.3) (3.8)
Net cash flow from operating activities 14.8 11.7 32.2
Cash flows from investing activities
Proceeds from property disposals - - 0.1
Cash outflow on disposal of right-of-use assets (0.1) (0.3) (0.6)
Purchase of property, plant and equipment (4.2) (1.2) (8.3)
Purchase of intangible assets (0.8) (0.6) (1.3)
Consideration paid for acquisitions net of cash acquired (22.9) (4.7) (4.7)
Net cash flow used in investing activities (28.0) (6.8) (14.8)
Cash flows from financing activities
Repayment of principal under lease liabilities (1.3) (1.4) (2.5)
Finance costs paid (3.6) (3.1) (4.5)
Dividends paid (1.0) - -
Own shares purchased - - (4.5)
Proceeds from borrowings 35.2 47.9 58.8
Repayment of borrowings (12.7) (48.4) (67.4)
Net cash flow from/(used in) financing activities 16.6 (5.0) (20.1)
Net increase/(decrease) in cash and cash equivalents 3.4 (0.1) (2.7)
Net cash and cash equivalents at beginning of period 14.1 17.5 17.5
Effects of exchange rate changes 0.2 - (0.7)
Net cash and cash equivalents at end of period 17.7 17.4 14.1
Notes to the interim condensed consolidated financial statements
1. Corporate information
The interim condensed consolidated financial statements for the six months
ended 30 September 2024 were approved by the Board on 20 November 2024. 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 2024
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 2024 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 2024, 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 2024, 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.
· IAS 7 Statement of cash flows and IFRS 7 Financial instrument
Disclosures
· 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
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.
· Amendment to IAS 21 The Effects of Changes in Foreign Exchange
Rates
· Amendments to IFRS 9 Financial Instruments
· IFRS 18 Presentation and Disclosure in Financial Statements
· IFRS 19 Subsidiaries without Public Accountability: 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 2024, namely:
· Taxation
· Retirement benefit obligations
· Customer claims
· Inventory valuation
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 2024.
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 2024 were as follows:
Chain(1) Torque Head office costs and eliminations(1) Consolidated
£m
£m Transmission £m
£m
Period ended 30 September 2024
Revenue
External customer - transferred at a point in time 96.7 23.1 - 119.8
External customer - transferred over time - 3.6 - 3.6
Inter-segment 0.4 2.5 (2.9) -
Total revenue 97.1 29.2 (2.9) 123.4
Operating profit/(loss) 14.9 5.1 (6.6) 13.4
Finance costs (3.9)
Profit before tax 9.5
Taxation (3.0)
Profit after tax 6.5
Other disclosures
Working capital 49.5 10.4 (7.1) 52.8
Capital expenditure 3.6 0.5 0.5 4.6
Total depreciation and amortisation 3.8 0.8 1.0 5.6
(1) Chain operating profit includes non-recurring costs of £0.6m relating to
amortisation of acquired intangible assets. Head office operating loss
includes non-recurring costs of £1.2m relating to the acquisition costs of
the Mac Chain business.
The segment results for the period ended 30 September 2023 were as follows:
Torque Head office costs and eliminations(1) Consolidated
£m
Chain(1) Transmission £m
Period ended 30 September 2023 £m £m
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) 17.5 4.6 (5.9) 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
amortisation of acquired intangible assets and £2.2m of profit on assignment
of lease of close site. Head office operating loss includes non-recurring
costs of £0.5m relating to the acquisition costs of the Davidson business.
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 2024 £m
Total revenue 97.1 29.2 (2.9) 123.4
Foreign exchange retranslation 2.3 0.4 - 2.7
Total revenue at constant exchange rates 99.4 29.6 (2.9) 126.1
Operating profit/(loss) 14.9 5.1 (6.6) 13.4
Foreign exchange retranslation 0.4 - - 0.4
Operating profit/(loss) at constant exchange rates 15.3 5.1 (6.6) 13.8
The segment results for the year ended 31 March 2024 were as follows:
Chain Torque Head office costs and eliminations Consolidated
£m
£m Transmission £m
£m
Year ended 31 March 2024
Revenue
External customer - transferred at a point in time 191.9 45.3 - 237.2
External customer - transferred over time - 4.2 - 4.2
Inter-segment 0.9 4.0 (4.9) -
Total revenue 192.8 53.5 (4.9) 241.4
Operating profit/(loss) 32.8 8.4 (10.7) 30.5
Finance costs (7.6)
Profit before tax 22.9
Taxation (5.8)
Profit after tax 17.1
Other disclosures
Working capital 43.4 11.0 (7.7) 46.7
Capital expenditure 5.3 2.4 1.3 9.0
Total depreciation and amortisation 7.1 1.7 2.0 10.8
4. Finance costs
First half Full year
2024/25 2023/24 2023/24
£m £m £m
Finance costs:
Interest payable on bank loans and overdrafts 2.1 1.8 3.7
Interest expense on lease liabilities 0.4 0.4 0.8
Amortised financing costs 0.2 0.1 0.3
Loan finance costs 2.7 2.3 4.8
Net IAS 19 finance costs 1.2 1.4 2.7
Discount unwind on non-current trade and other payables - - 0.1
Finance costs 3.9 3.7 7.6
5. Taxation
Analysis of tax charge in the year
First half Full year
2024/25 2023/24 2023/24
£m £m £m
Current tax:
- UK 0.2 - 0.8
- Overseas 4.5 1.3 4.7
- Adjustments in respect of prior periods - 1.8 1.0
Current income tax charge 4.7 3.1 6.5
Deferred tax:
- UK (0.7) 0.9 1.3
- Overseas (1.0) (0.6) 1.1
- Adjustments in respect of prior periods - - (0.7)
- Movement in unprovided deferred tax balances - - (2.4)
Total deferred tax (credit)/charge (1.7) 0.3 (0.7)
Tax charge on profit on ordinary activities 3.0 3.4 5.8
Factors affecting current and future tax
charges
The increase in the current tax charge compared to the prior half year is
attributable to increased taxable profits in jurisdictions where the headline
statutory tax rate is higher than the prevailing UK tax rate. The deferred tax
credit relates to one-off credits due to increased deferred tax asset
recognition in the 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
2024/25 2023/24 2023/24
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 6.5 3.3 9.1 4.4 17.1 8.3
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets 0.6 0.3 0.5 0.2 1.0 0.5
Acquisition costs 1.2 0.6 0.5 0.2 0.5 0.2
- Deferred tax triggered on acquisition - - - - (1.0) (0.5)
Assignment of lease and cost of closed sites - - (2.2) (1.0) (2.3) (1.1)
- Tax on assignment of lease and cost of closed site - - - - 0.8 0.4
Adjusted EPS 8.3 4.2 7.9 3.8 16.1 7.8
First half Full year
2024/25 2023/24 2023/24
Thousands Thousands Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share 198,445 208,980 206,908
Effect of dilutive potential ordinary shares: 29,194 28,546 27,489
Shares subject to performance conditions
For the purpose of calculating diluted earnings per share 227,639 237,526 234,397
First half Full year
2024/25 2023/24 2023/24
(pence) (pence) (pence)
Diluted EPS 2.9 3.8 7.3
Diluted adjusted EPS 3.6 3.3 6.9
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.
The weighted average number of shares used for the purpose of calculating
basic earnings per share is significantly below the Company's issued share
capital of 225,417,740 due to the shares held by the Renold Employee Benefit
Trust, which are excluded from this calculation under IFRS. The Trust has
increased its holding of Renold shares over the last year.
7. Retirement benefit obligations
The Group's retirement benefit obligations are summarised as follows:
At 30 At 31
September 2024 At 30 March
£m September 2023 2024
£m £m
Funded plan obligations (136.5) (145.3) (143.0)
Funded plan assets 101.6 109.6 103.4
Net funded plan obligations (34.9) (35.7) (39.6)
Unfunded obligations (17.3) (17.0) (17.5)
Total retirement benefit obligations (52.2) (52.7) (57.1)
Analysed as:
At 30 At 31
September 2024 At 30 March
£m September 2023 2024
£m £m
Net funded plan obligations:
UK (35.1) (36.6) (39.7)
Other 0.2 0.9 0.1
(34.9) (35.7) (39.6)
Unfunded obligations:
Germany (17.2) (16.8) (17.5)
Other (0.1) (0.2) -
(17.3) (17.0) (17.5)
The decrease in the Group's retirement benefit obligations from £57.1m at 31
March 2024 to £52.2m at 30 September 2024 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
2024/25 2023/24 2023/24
£m £m £m
Cash generated from operations:
Operating profit 13.4 16.2 30.5
Depreciation of property, plant and equipment - owned assets 3.0 3.1 6.1
Depreciation of property, plant and equipment - right-of-use-assets 1.4 1.3 2.6
Amortisation of intangible assets 1.2 1.0 2.1
Profit on disposal of right-of-use-asset - (2.2) (2.4)
Equity share plans 0.8 0.7 1.4
Increase in inventories (1.4) (3.3) -
(Increase)/decrease in receivables (1.9) 2.3 2.9
Increase/(decrease) in payables 4.6 (0.3) (2.7)
(Decrease)/increase in provisions (0.3) 0.2 1.5
Cash contribution to pension schemes (3.1) (6.0) (6.0)
Cash generated from operations 17.7 13.0 36.0
Reconciliation of net change in cash and cash equivalents to movement in net
debt:
First half Full year
2024/25 2023/24 2023/24
£m £m £m
Increase/(decrease) in cash and cash equivalents 3.4 (0.1) (2.7)
Change in net debt resulting from cash flows
- Proceeds from borrowings (35.2) (47.9) (58.8)
- Repayment of borrowings 12.7 48.4 67.4
Foreign currency translation differences 0.9 0.2 (0.7)
Non-cash movement on capitalised finance costs 0.9 0.9 (0.3)
Change in net debt during the period (17.3) 1.5 4.9
Net debt at start of period (24.9) (29.8) (29.8)
Net debt at end of period (42.2) (28.3) (24.9)
Net debt comprises:
At 30 September At 30 September
2024 2023 At 31 March
£m £m 2024
£m
Cash and cash equivalents 20.7 19.5 17.8
Total debt (62.9) (47.8) (42.7)
Net debt (42.2) (28.3) (24.9)
At 30 September At 30 September
2024 2023 At 31 March
2024
Net cash and cash equivalents £m £m £m
Cash and cash equivalents 20.7 19.5 17.8
Less: Overdrafts (3.0) (2.1) (3.7)
Net cash and cash equivalents 17.7 17.4 14.1
At 30 September 2024 At 30 September
2023 At 31 March
2024
Total debt £m £m £m
Borrowings:
Overdrafts (3.0) (2.1) 3.7
Bank Loans (0.4) (1.7) 0.4
Capitalised costs 0.4 0.3 (0.3)
Current borrowings (3.0) (3.5) (3.8)
Bank Loans (59.6) (44.4) (38.8)
Capitalised costs 0.2 0.6 0.4
Non-current borrowings (59.4) (43.8) (38.4)
Total borrowings (62.4) (47.3) (42.2)
Preference stock (0.5) (0.5) (0.5)
Total debt (62.9) (47.8) (42.7)
9. Called up share capital
At 30 At 30 At 31
September 2024 September 2023 March
£m £m 2024
£m
Ordinary shares of 5p each - issued and fully paid 11.3 11.3 11.3
At 30 September 2024, the issued ordinary share capital comprised 225,417,740
ordinary shares of 5p each (30 September 2023: 225,417,740 shares).
10. Acquisition of businesses
During the period the Group acquired the trade and net assets of Mac Chain
Company Ltd (U.S.) and the entire issued share capital of Mac Chain Company
Limited (Canada), for a total cash consideration of US$30.9m (£23.8m). Of
which US$28.8m (£22.2m) was paid on the date of the acquisition with the
remaining US$3.1m (£2.4m) being deferred, US$1.57m (£1.2m) to be paid on 9
September 2025 and US$1.57m (£1.2m) on 9 September 2026. With a US$1.1m
(£0.8m) refund due relating to working capital. Mac Chain has operations in
the Pacific Northwest of the USA, British Columbia, and Quebec, and is a
manufacturer and distributor of high quality conveyor chain and ancillary
products, with a significant presence in the forestry and broader industrial
markets.
The transaction has been accounted for as a business combination under IFRS 3
and is summarised below:
Provisional as at 30 September 2024
£m
Fair value of net assets acquired:
Intangible assets 7.4
Property, plant and equipment 1.6
Right-of-use assets 5.5
Inventories 7.3
Trade and other receivables 3.3
Cash and cash equivalents 1.0
Trade and other payables (2.0)
Lease liabilities (5.5)
Deferred tax liabilities (1.8)
Net identifiable assets and liabilities 16.8
Goodwill 7.0
Total consideration 23.8
Consideration
Cash consideration 22.2
Deferred consideration 1.6
Total consideration transferred/to be transferred 23.8
Net cash outflow arising on acquisition:
Cash consideration paid (22.2)
Add: Cash and cash equivalents acquired 1.0
(21.2)
Increase in net debt arising on acquisition:
Net cash outflow arising on acquisition (21.2)
Less: Acquisition costs (0.4)
(21.6)
Acquisition related costs amounted to £1.2m and have been included in the
condensed consolidated income statement. Only £0.4m of this was paid by the
period end.
The gross contractual value of the trade and other receivables was £3.3m. The
best estimate at the acquisition date of the contractual cash flows not
expected to be collected was £nil.
Deferred consideration of £2.4m is payable within two years.
The goodwill arising on acquisition has been allocated to the Americas 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 9 September 2024 and contributed £1.2m 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 £9.0m to Group revenue, £1.0m
to Group operating profit and £2.3m adjusted operating profit (after adding
back £1.2m for acquisition costs and £0.1m for amortisation of acquired
intangibles).
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 year ended 31 March 2023.
Total net cash outflow arising on acquisitions:
Mac Chain (21.2)
Industrias YUK S.A. (1.7)
(22.9)
Total increase in net debt arising on acquisitions:
Mac Chain (21.6)
Industrias YUK S.A. (1.7)
(23.3)
11. Post balance sheet event
Post period end, Renold's manufacturing facility in Valencia was significantly
impacted by the well-publicised flooding in the region. The anticipated
financial impact is being assessed but is expected to be around £10.5m and is
fully insured, aside from a typical deductible. The cost will be charged to
the income statement and then offset by subsequent recognition of insurance
recoveries, which will occur in later years. The net cost to the Group,
primarily from insurance deductibles, is expected to be c. £1m.
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 2024
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 14.9 5.1 (6.6) 13.4
Add back/(deduct):
Amortisation of acquired intangible assets 0.6 - - 0.6
Acquisition costs - - 1.2 1.2
Assignment of lease of closed site - - - -
Adjusted operating profit 15.5 5.1 (5.4) 15.2
Period ended 30 September 2023
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 17.5 4.6 (5.9) 16.2
Add back/(deduct):
Amortisation of acquired intangible assets 0.5 - - 0.5
Acquisition 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
Year ended 31 March 2024
Chain Torque Transmission Head office costs and eliminations Consolidated
£m £m £m £m
Operating profit 32.8 8.4 (10.7) 30.5
Add back/(deduct):
Amortisation of acquired intangible assets 1.0 - - 1.0
Acquisition costs - - 0.5 0.5
Assignment of lease and cost of closed sites (2.3) - - (2.3)
Adjusted operating profit 31.5 8.4 (10.2) 29.7
(B) Adjusted profit before taxation
First half Full year
2024/25 2023/24 2023/24
£m £m £m
Profit before taxation 9.5 12.5 22.9
Add back/(deduct):
Amortisation of acquired intangible assets 0.6 0.5 1.0
Acquisition costs 1.2 0.5 0.5
Assignment of lease of closed site - (2.2) (2.3)
Adjusted profit before taxation 11.3 11.3 22.1
(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 2024 £m £m £m £m
Adjusted operating profit 15.5 5.1 (5.4) 15.2
Total revenue (including inter-segment sales) 97.1 29.2 (2.9) 123.4
Return on sales % 16.0% 17.5% n/a 12.3%
Torque Transmission
Chain 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%
Chain Torque Transmission Head office costs and eliminations Consolidated
Year ended 31 March 2024 £m £m £m £m
Adjusted operating profit 31.5 8.4 (10.2) 29.7
Total revenue (including inter-segment sales) 192.8 53.5 (4.9) 241.4
Return on sales % 16.3% 15.7% n/a 12.3%
Chain Torque Transmission Head office costs and eliminations Consolidated
Period ended 30 September 2024 £m £m £m £m
Year-on-year change in adjusted operating profit (0.3) 0.5 - 0.2
Year-on-year change in total revenue (including inter-segment sales) (1.8) 0.4 (0.5) (1.9)
Adjusted operating profit gearing % 17% 125% 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 2024 £m £m £m £m
Total revenue 97.1 29.2 (2.9) 123.4
Foreign exchange retranslation 2.3 0.4 - 2.7
Revenue at constant exchange rates 99.4 29.6 (2.9) 126.1
Adjusted operating profit 15.5 5.1 (5.4) 15.2
Foreign exchange retranslation 0.4 - - 0.4
Adjusted operating profit at constant exchange rates 15.9 5.1 (5.4) 15.6
Return on sales at constant exchange rates % 16.0% 17.2% n/a 12.4%
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation, depreciation
and amortisation) and operating cashflow
First half Full year
2024/25 2023/24
2023/24
£m £m £m
Operating profit 13.4 16.2 30.5
Depreciation and amortisation 5.6 5.4 10.8
Share-based payments 0.8 0.7 1.4
EBITDA(1) 19.8 22.3 42.7
Add back/(deduct):
Acquisition costs 1.2 0.5 0.5
Assignment of lease of closed site - (2.2) (2.3)
Adjusted EBITDA(1) 21.0 20.6 40.9
Inventories (1.4) (3.3) -
Trade and other receivables (1.9) 2.3 2.9
Trade and other payables 3.8 (0.3) (2.7)
Provisions (0.3) 0.2 1.5
Movement in working capital 0.2 (1.1) 1.7
Purchase of property, plant and equipment (4.2) (1.2) (8.3)
Purchase of intangible assets (0.8) (0.6) (1.3)
Proceeds from property disposals - - 0.1
Cash outflow on disposal of right-of-use assets (0.1) (0.3) (0.6)
Net capital expenditure (5.1) (2.1) (10.1)
Operating cash flow 16.1 17.4 32.5
(1) The calculation of EBITDA, adjusted EBITDA and operating cash flow
includes the add back for the non-cash share-based payment charge of £0.8m
for the period ended 30 September 2024 (2023: £0.7m).
(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 2024 September 2023 March
£m £m 2024
£m
Net debt (see Note 8) 42.2 28.3 24.9
H2 2022/23 Adjusted EBITDA - 21.2 -
H1 2023/24 Adjusted EBITDA - 20.6 20.6
H2 2023/24 Adjusted EBITDA 20.3 - 20.3
H1 2024/25 Adjusted EBITDA 21.0 - -
12 months rolling adjusted EBITDA 41.3 41.8 40.9
Leverage ratio 1.0 times 0.7 times 0.6 times
(K) Gearing ratio
At 30 At 30 At 31
September 2024 September 2023 March
£m £m 2024
£m
Net debt (see Note 8) 42.2 28.3 24.9
Equity attributable to equity holders of the parent 54.6 51.8 50.2
Net debt (see Note 8) 42.2 28.3 24.9
Total capital plus net debt 96.8 80.1 75.1
Gearing ratio % 44% 35% 33%
(L) Legacy pension cash costs
First half Full year
2024/25 2023/24 2023/4
£m £m £m
Cash contributions to pension schemes 2.6 5.4 5.5
Pension payments in respect of unfunded schemes 0.5 0.6 1.1
Scheme administration costs 0.3 0.2 0.5
3.4 6.2 7.1
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