Final results for the year ended 31 March 2022

RNS Number : 2373S

Renold PLC

13 July 2022

 

Renold plc

Final results for the year ended 31 March 2022

("Renold", the "Company" or, together with its subsidiaries, the "Group")

Significant revenue and earnings rebound…Record order book…Continued net debt reduction

Renold (AIM: RNO), a leading international supplier of industrial chains and related power transmission products, announces its results for the year ended 31 March 2022.

Financial highlights

Adjusted results at constant exchange rates1	2022	Restated4 2021
Revenue at constant exchange rates	£195.2m	£160.8m
Adjusted operating profit at constant exchange rates	£15.3m	£10.9m
Return on sales2 at constant exchange rates	7.8%	6.8%
Adjusted earnings per share	4.3p	2.3p
Net debt3	£13.8m	£18.4m
Results at actual exchange rates
Revenue	£195.2m	£165.3m
Adjusted operating profit	£15.3m	£11.4m
Return on sales2	7.8%	6.9%
Operating profit	£16.2m	£10.7m
Profit before tax	£12.4m	£6.1m
Basic earnings per share from continuing operations	4.7p	2.0p

•	Revenue up 18.1% to £195.2m (21.4% at constant exchange rates)
•	Adjusted operating profit of £15.3m (2021: £11.4m), up 34.2%, with return on sales of 7.8% up 90bps
•	Reported operating profit up by over 50% to £16.2m (2021: £10.7m)
•	Net debt of £13.8m, £4.6m reduction in the year; ratio to adjusted EBITDA 0.6x (31 March 2021: 0.9x)
•	Adjusted EPS up 87% to 4.3p (2021: 2.3p); Basic EPS 4.7p (2021: 2.0p)

Business highlights

•	Multiple businesses across the Group delivered record results
•	Renold's markets rebounded strongly from the Covid-19 pandemic
•	Order intake of £223.9m (2021: £170.0m) up 31.7%
•	Closing order book of £84.1m up 57% vs FY21 at constant exchange rates
•	Significant £11.0m long-term military contract win
•	Successful strategic capital investment; improving efficiency
•	Strong performance despite significant economic uncertainty, cost pressure, material availability and global supply chain disruption
•	Record revenue, order intake and closing order book in Chain Europe and Americas
•	Successful bolt-on acquisition in the Chain division, with payback of less than two years

¹ See below for reconciliation of actual rate, constant exchange rate and adjusted figures

² Adjusted operating profit divided by revenue

³ See Note 17 for a reconciliation of net debt which excludes lease liabilities

⁴ The results for the year ended 31 March 2021 have been restated, see Note 20 for details of the restatement

Robert Purcell, Chief Executive, commented:

"I am pleased with the Group's robust performance through the pandemic which reflected the benefits of the strategic development completed in recent years. Our employees around the world have responded excellently to the challenges we have faced and I thank them for their dedication and commitment to the Group and our customers during this difficult period.

"Throughout the reported period the business performance has been on an improving trend and our order books have continued to grow in the early part of the new financial year. We are cognisant that there remain considerable Covid-19-related challenges in some parts of the world; supply chain issues are still prevalent and inflation is high. However, we have entered the new financial year with good momentum and a belief in the excellent fundamentals of the Renold business upon which we are building."

Meeting for analysts and institutional investors

A virtual meeting for institutional investors and analysts will be held today at 9.30am BST. If you wish to attend this meeting please contact [e-mail] or call Tim Metcalfe of IFC Advisory Limited (020 3934 6632) before 9.00am to be provided with access details.

Retail Investor presentation and Q&A session

Renold management will be hosting an online presentation and Q&A session at 5.30pm BST today, 13 July 2022. This session is open to all existing and prospective shareholders. Those who wish to attend should register via the following link and they will be provided with access details:

https://us02web.zoom.us/webinar/register/WN_z8p8HGEmQmywDFO-ub0MpA

Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be submitted to: [e-mail].

Reconciliation of reported and adjusted results

	Revenue		Operating profit		Earnings per share
	2022 £m	2021 £m	2022 £m	(Restated)1 2021 £m	2022 pence	(Restated)1 2021 pence
Statutory reported	195.2	165.3	16.2	10.7	4.6	1.8
Amortisation of acquired intangible assets	-	-	0.1	0.7	0.1	0.3
US PPP Loan forgiveness	-	-	(1.7)	-	(0.8)	-
New lease arrangements on sublet properties	-	-	0.7	-	0.3	-
Adjusted	195.2	165.3	15.3	11.4	4.2	2.1
Exchange impact	-	(4.5)	-	(0.5)	-	-
Adjusted at constant exchange rates	195.2	160.8	15.3	10.9	4.2	2.1

¹ The results for the year ended 31 March 2021 have been restated, see Note 20 for details of the restatement.

ENQUIRIES:

Renold plc	IFC Advisory Limited
Robert Purcell, Chief Executive	Tim Metcalfe
Jim Haughey, Group Finance Director	Graham Herring
	[e-mail]
0161 498 4500	020 3934 6630

Nominated Adviser and Joint Broker	Joint Broker
Peel Hunt LLP	F innCap Limited
Mike Bell	Ed Frisby / Tim Harper (Corporate Finance)
Ed Allsopp	Andrew Burdis / Harriet Ward (ECM)
020 7418 8900	020 7220 0500

Cautionary statement regarding forward-looking statements

Some of the information in this document may contain projections or other forward-looking statements regarding future events or the future financial performance of Renold plc and its subsidiaries (the Group). 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 and distributors. The Company has a reputation for quality that is recognised worldwide. Its products are used in a wide variety of industries including manufacturing, transportation, energy, metals and mining.

Further information about Renold can be found on our website at: www.renold.com

Chair's statement

I am pleased to be contributing to the Annual Report for the first time as the Renold Chair, having taken up the position at the end of last year's Annual General Meeting. It is encouraging to see that the Group made good progress in FY22, as our markets recovered strongly from the effects of the Covid-19 pandemic, along with significant commercial and operational benefits accruing from the execution of our strategy. Due to the diligence of the executive team, our employees around the world, and the Board, the business has demonstrated that it has the resilience to weather the current economic turmoil. This is true, in terms of financial performance but also true for the flexibility and adaptability of our people across the world, who have delivered an outstanding result for the Group in what remains, with the Russian invasion of Ukraine and ongoing Covid disruptions, a very difficult global environment.

Our markets and trading performance

Over the year, Group revenue from continuing operations increased by 18.1% to £195.2m (2021: £165.3m), and adjusted operating profit improved by 34.2% to £15.3m (2021: £11.4m) excluding amortisation of acquired intangibles of £0.1m and non-recurring credits of £1.0m. Non-recurring items relate to gains from renegotiated lease arrangements offset by charges due to early exits from sublet properties no longer used by the Group, and US PPP Covid loan relief. Operating profit increased to £16.2m (2021: £10.7m)

Return on sales improved by 90bps to 7.8% (2021: 6.9%), as the Group demonstrated its ability to successfully implement price increases ahead of raw material and energy cost increases, together with the benefits of cost reduction and efficiency programmes.

Encouragingly, Group order intake at £223.9m was 31.7% ahead of the equivalent prior year period, and 25.3% ahead excluding the previously announced £11.0m long-term military contract. The order book at 31 March 2022 of £84.1m was a record for the Group and 57.0% ahead of the prior year figure.

The year saw strong cash generation, as a continued focus on cash management resulted in a £4.6m reduction of net debt to £13.8m (31 March 2021: £18.4m).

Strategic Developments

During the year, Renold made good progress in continuing to deliver strategic change across the Group.

The continuing review of capabilities across the Group has identified opportunities for the upgrade and development of existing manufacturing processes in India and China to create higher specification, higher quality products. This review of our manufacturing footprint and processes will facilitate standardisation across more product lines which, in turn, will enable us to benefit more completely from our geographic footprint and economies of scale. Furthermore, flexibility between manufacturing locations, which in light of increasing customer supply chain diversification demands, and a changing tariff environment, will add to our value proposition.

The completion of the major strategic restructuring initiatives, together with the lower level of net bank debt, puts the Group in a strong position to capitalise on accretive bolt-on acquisitions that augment our existing market position. This will allow us to accelerate our growth in revenue, including for our existing products into adjacent sectors, allow entry into under-represented applications and geographies, and most importantly, allow us to benefit from significant production synergies from acquired businesses.

Sustainability

During the year, the Group took the first steps along the path to developing a long-term sustainability strategy, including our energy and carbon dioxide emission proposals, whereby Renold will make sustainability one of its guiding principles. Over a period of time, our new leader for sustainability will help the Board to develop policies and strategies in this area, aimed at reducing the Group's environmental impact, C0₂ emissions and enhancing social development, whilst improving Group operating results.

The Board

My predecessor, Mark Harper, stepped down as Chair of the Board at the end of the 2021 AGM. On behalf of the Board and the whole Group , I would like to thank Mark for his guidance and leadership during his time as Chair. He left the Group in a far stronger position than when he joined. At the same time Andrew Magson took over the responsibilities of Audit Committee Chair, while Tim Cooper, the Chair of the Remuneration Committee, took on the responsibilities of Senior Independent Director.

The Chair of the Board is primarily responsible for the composition of the Board and for ensuring high standards of governance. As Chair, I will continue to place great importance on the breadth of relevant experience, diversity, and complementary skills amongst the Group's Directors and on the continued development of the strategy for the Renold business. With this in mind, we welcomed Vicki Potter to the Board as a Non-Executive Director in May 2022. Vicki has broad operational and HR experience in multinational engineering and manufacturing companies. She is currently the Chief Human Resources Officer and Customer Services Director for Oxford Instruments plc, a global FTSE 250 technology and manufacturing business. Following a year in which the benefits of our succession planning are evident, the Board will be continuing to ensure that effective succession plans are in place.

Dividend

The Board fully recognises the importance of dividends as part of the overall value creation proposition for shareholders. However, the Board has carefully reviewed its capital allocation priorities, and believes that both organic and inorganic investment opportunities available to the Group,  will deliver higher levels of shareholder return over the medium term than the payment of dividends. The Board will continue to review this approach over the coming periods. As such, the Board is not recommending the payment of a dividend on the ordinary shares of the Company for the year ended 31 March 2022.

Summary

The Group has performed well in the face of unprecedented economic and social turmoil and the disruption these events have caused to global supply chains. Supply chain disruption and continuing cost inflation will undoubtedly be key challenges in the new financial year, but the strong financial performance this year, combined with the end of our strategic restructuring programme, has generated the freedom to exploit future organic and acquisition-related growth opportunities. I would like to thank all our employees around the world for their diligence and commitment in supporting the delivery of strong results for the Group.

DAVID LANDLESS

CHAIR

13 July 2022

Chief executive's review

The Group's markets recovered strongly during the year, as activity levels continued to rebound in the aftermath of the Covid-19 pandemic. Group order intake during the year was £223.9m, an increase of 31.7% on a reported basis and 35.5% at constant exchange rates, over the prior year. Excluding the recently announced £11.0m long-term military contract, order intake for the period increased by 25.3% or 28.9% at constant exchange rates. Encouragingly, the second half order intake at £110.9m was 8.7% ahead of the underlying first half performance. The resultant year end order book of £84.1m, represents a further record high for the Group (31 March 2021: £53.6m).

Conversion of orders into sales was also encouraging, with Group revenue for the year of £195.2m, an increase of 18.1% on a reported basis and 21.4% at constant exchange rates, over the prior year. Group activity continued to ramp up over the second half year, with turnover at constant currency of £99.8m, some 4.8% ahead of the first half. Final quarter revenues at £52.9m broke the psychologically important £50m barrier for the Group.

Year ended 31 March 2022	External revenue £m	Operating profit £m	Return on sales %
Reported	195.2	16.2
US PPP loan forgiveness	-	(1.7)
New lease arrangements on sublet properties	-	0.7
Amortisation of acquired intangibles	-	0.1
Adjusted	195.2	15.3	7.8

The strong revenue growth contributed to significantly improved trading during the year, together with a number of non-recurring items, shown in the table above, namely the forgiveness of £1.7m of loans received under the US Government's Paycheck Protection Program, together with non-recurring charges regarding sublet properties relating to closed sites, which are less than previously anticipated, due to the recent short-notice cancellation of the lease by our long-term tenant. Excluding these non-recurring items and the amortisation of acquired intangibles of £0.1m, adjusted operating profit from continuing operations increased to £15.3m (2021: £11.4m), reflecting the commercial and operational improvements made to the business. The corresponding return on sales rose to 7.8% (2021: 6.9%). The incremental operating profit gearing ¹ was a creditable 13%, despite the impact of the widely reported industry headwinds, including on the supply chain, raw material availability and inflation. Operating profit increased to £16.2m (2021: £10.7m).

The Group continued to benefit from the impact of the significant efforts undertaken in the current and previous years to lower the fixed cost base, increasing flexibility and operational leverage. The Group has successfully managed a period of significant supply chain disruption to materials and transportation, both in terms of availability, lead times and increased input costs. Whilst price increases have been successfully passed through to customers, through selling price increases, the Group expects further pressure on materials, labour, energy and transportation to continue into the new financial year.

Renold continues to drive increased performance through specific projects aimed at better levels of operational efficiency and productivity, through improved design and standardisation of products, better utilisation of machinery and people, including more flexible working practices, and leveraging the benefits of improved procurement strategies. The Group's capital investments returned to more normal levels following a period of lower spend in the prior year as a result of the pandemic. The Group's operational capabilities are steadily improving as consistent investments come to fruition.

The strong focus on cash management continued, and delivered a further reduction in net debt of £4.6m during the year, to £13.8m (31 March 2021: £18.4m). The resulting net debt to EBITDA ratio of 0.6x (2021: 0.9x) affords significant headroom against the Group's banking covenants and, in turn, provides greater flexibility and funding capabilities to transact quickly on investment decisions to drive growth and efficiencies.

Activity in the Chain division continued the strong recovery seen over the last 18 months, with order intake for H2 22 some c.60% higher at constant exchange rates than that seen during the pandemic. Output has similarly been ramped up with turnover seen in the last six months c.36% higher at constant exchange rates than at the low point of the pandemic. In a similar vein the adjusted profitability of the Chain business has increased by 43.2%, when again compared to the pandemic year and return on sales for the year at 11.9% (2021: 10.5% at constant rates) continues to show progress.

The TT division is generally a longer lead time, later cycle business. Order intake dipped to its lowest point during the pandemic in H2 21, when an order intake of £17.4m was recorded. Since this time, excluding the £11.0m long-term military contract, order intake has steadily recovered, with the H2 22 figure 37.2% ahead of the pandemic low point, at constant exchange rates. Similarly, turnover has improved, with sales in H2 22 6.2% up on the prior year equivalent figure.
During FY21, the TT division received £0.8m of non-recurring, pandemic support from the US Government; excluding the impact of this support, the return on sales for the division was 10.1% (2021: 10.7%).

Volatile operating environment - impact on operations and Renold's response

The Group is facing an extremely volatile operating environment, the like of which I have not seen in my career, created primarily by both the ongoing effects of the Covid-19 pandemic, and the war between Russia and Ukraine.

At the start of the financial year, our operations in India were substantially closed for a six-week period as lockdown restrictions came into force, while at the end of the year Covid related disruption to our Chinese facilities, located in the wider Shanghai region, delayed inventory shipments to other companies in the Group. Our European, Australasian and US operations have continued to experience significant rates of Covid-related absenteeism, which has negatively impacted costs, productivity and service levels from our factories. The Group continues to enforce our Covid protocols and health measures to try to protect all our staff and to mitigate the impacts.

As was mentioned in our half year trading statement, we continue to experience extended shipment times and increased freight costs throughout the world. Container freight services are unreliable and expensive, shortages of trucks and drivers have been evident in many geographies and the war in Ukraine has removed the option of train transport from China to Europe. This has led to an upward pressure on inventory levels, as the Group attempts to maintain customer service levels through the use of buffer stocks, and increased goods in transit between facilities.

Whilst recognising the human tragedy unfolding during the war between Russia and Ukraine, ceasing trading relationships with sanctioned regions  has little direct impact on the Group; sales to Russia and Ukraine during FY22 were low at c.0.5% of Group turnover. The wider impact on both material cost and energy prices is more significant, and during the second half year, the Group saw unprecedented increases in material costs, energy and other input costs. In response to this, Renold successfully implemented sales price increases ahead of these inflationary impacts. A significant amount of Group production comes from our German factories, and we are actively working on contingency plans and actions to deal with the impact of any disruption to German energy supplies that Russian action may bring about.

At the end of the financial year all major sites around the Group were open, but a surge of Covid cases within the wider Shanghai region and continued high levels of infection in parts of Europe and the US mean that the risk of further lockdowns, temporary site closures and disruption cannot be eliminated. Disruption to supply chains is causing long lead times for materials and significant inflationary pressure so the Group has had no option but to implement a series of price increases across the business aimed at fully recovering input cost inflation.

Looking forward, Renold is well positioned to benefit further when the broader operating environment returns to something we may recognise as more normal.

Chain performance review

Turnover rebounded during the year, with total Chain turnover increasing 22.5% year-on-year to £159.2m; 26.1% at constant exchange rates. The final quarter of the year saw a further step-up in activity, with Q4 turnover some 27% higher than the prior year comparator, and 12% ahead of the next highest quarterly figure. The increased revenues resulted in return on sales improving by 140 basis points, to 11.9% (2021: 10.5% at constant exchange rates). The operational gearing¹ on the increased activity at constant exchange rates was a creditable 17%, as the impact of increased volumes and significant operational efficiency gains fell through to the bottom line. Operating profit was £20.5m (2021: £12.9m), £7.6m higher than the prior year level.

	2022 £m	2021 £m
External revenue	158.2	128.9
Inter-segment revenue	1.0	1.1
Total revenue	159.2	130.0
Foreign exchange	-	(3.8)
Revenue at constant exchange rates	159.2	126.2
Operating profit	20.5	12.9
US PPP loan forgiveness	(1.7)	-
Amortisation of acquired intangibles	0.1	0.7
Foreign exchange	-	(0.4)
Adjusted operating profit at constant exchange rates	18.9	13.2

¹ Operational gearing is defined as the year-on-year change in adjusted operating profit, divided by the year-on-year change in revenue.

Order intake in the Chain division increased by 30.4% year on year, as economies worldwide recovered from the impact of Covid related lockdowns and we were able to restart more normal commercial activity. Throughout the year, constant currency quarterly order intake figures have remained consistently high, remaining around the £40m level, with the exception of quarter four which saw a further upward step change, as the impact of price increases and the recovery of the US OEM market was reflected in the figures. Closing order books for the division finished the year at £53.9m.

Chain Europe, which is our largest Chain business, saw a sharp recovery in constant exchange rate revenues, which increased 36.0% over the prior year. Revenue strengthened significantly from the outset of the year, a trend which continued throughout each subsequent quarter. The increased activity, together with the benefit of price increases and renewed commercial initiatives, resulted in a substantial increase in underlying adjusted constant currency operating profit. During the year, the business successfully integrated the Brooks conveyor chain acquisition into our UK business, and completed the introduction of ISO9001, ISO14001 and ISO45001 certifications at all of our European manufacturing facilities. From a commercial perspective, Chain Europe launched the Renold Webshop, which enables UK-based customers to make online purchases of industrial, motorcycle and track cycle chains, while also launching the new Renold 3D Configurator software which enables customers to download specification, 3D step files and also raise quotations directly on our systems.

In the Americas, the market recovery seen following the US presidential elections and the lessening impact of Covid, was also marked. Order intake at £69m was at record levels, surpassing the previous high of c.£65m, with March 2022 representing a new record high for monthly order intake, while turnover, at £63m was 29.2% higher than the prior year comparator, using constant currency rates. Sales to OEM customers, especially in the forklift truck market, recovered strongly in the second half, while new business opportunities, especially in the ethanol, grain handling and forestry markets were also won during the year. Production capabilities continue to be enhanced with the introduction of an automated robotic assembly line. Underlying constant currency operating profit increased to a new record high.

Australasia was the region least impacted at the outset of the pandemic and financial year 2021 recorded constant currency revenue growth of 4.6%. This financial year saw additional improvements in constant currency revenues, which increased by a further 4.7% across the region. Australia itself had a good year with revenue at constant exchange rates up 7.3%, which followed last year's 12.8% growth rate, with increased activity seen in the mining sector. We see continuing evidence of customers changing buying patterns to source more domestically produced goods as a result of on-going supply chain disruption of imported products, while we are also seeing the benefits of our product-enhancing engineering capabilities. We continue to invest in the production capabilities of our Melbourne factory. New Zealand also recovered strongly in the year, showing a 24.4% constant currency growth rate. Malaysia and Indonesia encountered more difficult trading conditions, particularly due to Covid restrictions and therefore saw reductions in activity in excess of 10%. The highlight of the region was Thailand where activity grew 63.3%, albeit from a low base. We are continuing to expand our sales into more industries in SE Asia, supported by a strong dealer network in Indonesia.

Domestic revenues in India recovered sharply in the year with constant exchange rate revenues 44.8% higher, despite the business being faced with a further government enforced shutdown, which subdued activity in the first half of the year. This was followed by a significant recovery in demand, which was partially satisfied through the manufacture and import of product from the Renold facility in China, which offset short-term material supply issues caused by the inability of domestic steel production to recover sufficiently quickly. This was a great example of two Renold businesses working together to satisfy customer requirements. We have opened the first of a series of regional distribution warehouses in India to offer our customers better and much quicker service.

Constant currency revenues in China, grew by 45.8% during the year, driven primarily by the significant recovery of intra group demand from Europe, the US, and now India. Efforts and investments are underway to continue to improve the quality and specification of products manufactured in China to make them equivalent to those manufactured in Europe. During the year, our Chinese team i nitiated a project to upgrade certain component manufacturing processes to use what we would consider to be state-of-the-art technology, while making significant investment in automated assembly lines to facilitate high volume sales growth in both domestic and overseas markets.

The Chain division continues to develop and evolve through investment in equipment, processes, engineering and sales and this provides us with a good base from which to benefit from the expected opportunities in this market.

Torque Transmission performance review

Divisional revenues of £40.4m were £1.3m higher than in the prior year due to a recovery in demand in our Couplings and Gears businesses. The Couplings business saw the planned increase in activity on the contract to supply large Hi-Tec couplings for the Royal Navy, while the Gears business saw a broad recovery in activity following the pandemic. In July 2021, the Group announced it had secured an £11.0m long-term supply agreement for the second phase of the military contract which is expected to deliver revenues over approximately the next eight years.

Divisional adjusted operating profit at constant exchange rates reduced by £0.8m to £4.1m due to the non-recurrence of the non-recurring benefit of US Government Covid support of £0.8m seen in the last financial year. Return on sales excluding the non-recurring prior year US PPP loan forgiveness was 10.1% (2021: 10.7%) and operating profit was £4.1m (2020: £5.0m).

Momentum in this division, which has a later trading cycle, and generally larger orders than our Chain business, continues to be positive .

	2022 £m	2021 £m
External revenue	37.0	36.4
Inter-segment revenue	3.4	2.7
Total revenue	40.4	39.1
Foreign exchange	-	(0.7)
Revenue at constant exchange rates	40.4	38.4
Operating profit	4.1	5.0
Foreign exchange	-	(0.1)
Adjusted operating profit at constant exchange rates	4.1	4.9

Order intake for the year increased 48.1% to £55.4m (2021: £37.4m), 51.7% at constant exchange rates, as the recovery from the Covid-19 pandemic spread through the global economy. Excluding the impact of the £11.0m long term military contract, order intake increased 21.6% at constant exchange rates. Recovery in order intake progressed steadily throughout the year, so that by the fourth quarter of the year, the division had experienced its fifth sequential increase in order intake, with the £12.5m recorded being some 60% higher than the low point seen through the pandemic.

The Couplings business, both the UK and Spanish units, saw a marked increase in turnover year-on-year being up 44.6% and 38.7% respectively. As planned, turnover in the marine business, which manages the long-term military contracts increased year-on-year by £0.5m, as delivery of the first phase of the contract was completed. Targeted marketing campaigns have proved successful with an increased interest from customers in the RBI rubber in compression product which offers users a number of clear advantages over other products available in the market, whilst on-going work to further enhance customer service has resulted in a number of interesting opportunities being identified.

The Chinese TT business grew steadily, showing a year-on-year increase of 4.3%, while supply chain issues in the Australian business resulted in turnover in the year being down 15%; however early indications suggest this shortfall should be largely recovered within the first few months of the new financial year. Activity in the US TT business remained subdued throughout most of the year, with turnover reducing 8.6%. Operational disruption, caused by direct labour shortages and supply chain constraints, held back activity. Order intake in the second half of the year improved markedly, as fresh impetus was brought to the business through the strengthening of the commercial team, and the introduction of Group standard business systems.

The Gears business continued to make good progress in order intake, turnover and margin improvements despite facing significant material and energy cost increases. Notable sales in the year included escalator gear units for the Budapest metro. Demand from the OEM sector, particularly for larger projects in the US and UK, which are our key geographic markets, showed further signs of improvement during the year.

As the Torque Transmission division operates on a slightly later sales cycle than the Chain division, we expect full recovery from the Covid-19 pandemic to become evident during the new financial year.

Strategic Plan - STEP2

As the world slowly emerges from the Covid-19 pandemic, I am delighted that we are launching the next phase of the Renold strategy: STEP2. This is an evolution of the current strategy, STEP 2020, and is built on the foundations that have been created. Whilst there are common threads and similar themes, the major thrust of STEP2 is achieved through both organic and acquisitive growth.

We will continue to modernise and drive efficiency and productivity in the business but also look to grow our revenues, margins and cashflows through both organic and acquisitive growth. We will continue to invest in service, products and operations.

Sustainability

Last year we announced that we would be making sustainability a guiding principle for Renold. Since then, we have taken some significant steps forward. In addition to our statement of intent in relation to sustainability, we have developed, agreed and widely embedded within the business a model of what sustainability means to us. Our Sustainability Steering Group has initiated and progressed a number of Group level projects focusing on areas identified as likely to have the most significant impact, including energy usage, carbon dioxide emissions, packaging and our products' impact on customer sustainability. We have also galvanised our regional businesses across the world to develop their own sustainability project roadmaps, seeking to make our efforts relevant for the highly diverse regions within which we operate and to more fully engage our staff in sustainability activity.

In the coming year, we will intensify our focus on our Group projects, bringing them to fruition and where appropriate, initiating new ones. At a regional level we will continue to build on the considerable momentum we have gained, delivering ever more local success. More information on our progress and plans can be found in the sustainability section of the Annual Report.

Progress

Renold was consistently enhancing its operational capabilities through upgrading equipment and processes across the world before the pandemic. As we have become more confident in our ability to cope with all aspects of Covid-19 we have again started to push forward with our plans. Capital expenditure returned to £5.1m in the period, a considerable increase on the prior year and we expect it to rise again in the new year. We have made good progress in difficult circumstances, as supply chain issues have affected our equipment suppliers as much as ourselves.

We have a very clear vision of how our new Chinese factory fits into our global supply chain and our expectations for growth in the Chinese market itself. We are constantly upgrading capabilities in the new facility and we will be offering higher specification Chinese-made product into the domestic market as well as across the world.

In our Indian business, efforts continue to fully integrate the business into the Group supply chain. Investments in production capabilities, including improvements in the product quality and uniformity, are underway. India offers a very attractive market in its own right and an interesting and effective alternative to our Chinese Chain manufacturing site. India provides the Group with an alternative supply base as customers' supply chains flex, driven by an awakening of concern about tariffs and the concentration of supply from a single region.

These projects highlight an intentional trend within our capital allocation decisions for the Group. With the large infrastructure projects complete, capital allocation decisions are now less frequently limited purely by a site's domestic requirements but are focused on customer service, upgrading product specification capabilities and optimising profitability for the Group. For the Chain division especially, this allows us to access economies of scale and offer a truly global service with increasing relevance to large OEM customers. Renold is increasingly an integrated international supplier and less a series of regional businesses.

Having created a stronger operational platform for the Group and with the significant strengthening of our financial position, we have increased our focus on how we can accelerate performance through value-enhancing acquisitions, which will allow us to both benefit from increased geographical and product coverage, but also leverage synergies from increasing the throughput of our existing facilities. As a result, we have developed a pipeline of acquisition opportunities which we believe have the ability to meet our strict financial and operational criteria. These acquisitions will allow us to expand our product and service offering as well as our customer base, further expand our already diverse product portfolio into adjacent market sectors and allow us to capitalise on our ability to provide customers with extremely high specification products with real benefit for their own business performance.

The Board is observing disciplined criteria when prosecuting the new acquisition strategy, ensuring that potential targets will enhance the Group's wider strategy and the earnings of the Group. Additionally, the Board is mindful of retaining a conservative capital structure, especially in light of the current economic backdrop, and will ensure that the long-term net debt to EBITDA ratio is maintained at an acceptable level.

The strategic progress made by the Group over recent years has been significant. Investments in both our production capabilities and our IT environment have resulted in significant benefits, with:

•	improvements in productivity and operational efficiency as evidenced by growing sales per employee;
•	greater insight into the performance and opportunities in the business due to better and more complete data;
•	improvements in the specification and quality of products we are able to make across our multiple manufacturing sites; and
•	greater flexibility in the cost base as we start to reduce the correlation between revenue and direct labour.

Following the ongoing recovery of our markets, the financial benefits of these improvements will come to the fore. The significant investment in infrastructure and cost of change is largely at an end. As markets further improve, cash generated from trading will no longer be required to support investment in substantial change programmes creating more flexibility in capital allocation decisions.

In the medium term, and despite the uncertainty caused by the war in Ukraine, market demand should continue to improve as the world recovers from the impact of the Covid-19 pandemic. The benefits of the strategic programme already delivered have left Renold well positioned to capitalise on this recovery in the years ahead.

Macroeconomic landscape and business positioning

With so many geopolitical and Covid-19 issues resulting in ongoing short- and medium-term uncertainty, it is necessary to look at the underlying fundamentals of the Group and the markets we serve to understand why Renold will continue to develop. Many of these intrinsic values have remained consistent over time but are continually being enhanced and increased. They include:

•	Valued and recognised brand with well-respected engineering expertise
	The Renold brand has been built up over our 150-year history and is trusted by customers to deliver exceptional products due to our world-class engineering and product knowledge.
•	Global market position and unique geographical manufacturing capability
	The global market position of Renold has existed for many years but following significant strategic investments in the Chain division, the geographic manufacturing footprint and capabilities we have are unique, permitting us to service customer demand with increasing levels of flexibility - a critical factor in a rapidly changing market environment.
•	Relatively low cost, but business critical products
	Chain and Torque Transmission products are fundamental elements of the systems into which they are incorporated. Our products are often a small proportion of the cost of the entire system, but critical to its operation.
•	Broad base of customers and end-user markets
	Renold products are used in an extremely diverse range of end applications, sectors, markets and geographies resulting in a huge spread of customers and industries served. Markets and applications will change and vary in the ever-altering environment we operate in but, with its wide spread of products, geographies, applications and customers, Renold is well positioned.
•	High specification products delivering environmental benefits for our customers
	Renold products have always been high specification, premium products which deliver exceptional benefits to customers. Whether through greater efficiency leading to lower power usage, longer life providing lower lifetime usage of materials and energy in their manufacture and logistics, or lower lubrication requirements, Renold products are well placed for an increasingly environmentally aware marketplace. Our products are capable of helping our customers meet their sustainability objectives whilst saving them money.

Outlook

I am pleased with the Group's robust performance through the pandemic which reflected the benefits of the strategic development completed over prior years. Our employees around the world have responded excellently to the challenges we have faced and I thank them for their dedication and commitment to the Group and our customers during this difficult period.

Throughout the reported period the business performance has been on an improving trend and our order books have continued to grow in the early part of the new financial year. We are cognisant that there remain considerable Covid-19-related challenges in some parts of the world; supply chain issues are still prevalent and inflation is high. However, we have entered the new financial year with good momentum and a belief in the excellent fundamentals of the Renold business upon which we are building.

Robert Purcell

Chief Executive

13 July 2022

Finance Director's review

Renold delivered a strong performance during the year, as the Group's markets rebounded from the impact of the Covid-19 pandemic. The business produced an adjusted operating margin of 7.8% (2021: 6.9%), and achieved a significant reduction in net debt of £4.6m to £13.8m (31 March 2021: £18.4m).

Orders, revenue AND OPERATING PROFIT

	2022			2021 (Restated1)
Reconciliation of reported to adjusted results	Order intake	Revenue	Operating profit	Order intake	Revenue	Operating profit
	£m	£m	£m	£m	£m	£m
Reported	223.9	195.2	16.2	170.0	165.3	10.7
US PPP loan forgiveness	-	-	(1.7)	-	-	-
New lease arrangements on sublet properties			0.7	-	-	-
Amortisation of acquired intangible assets	-	-	0.1	-	-	0.7
Adjusted	223.9	195.2	15.3	170.0	165.3	11.4
Impact of foreign exchange	-	-	-	(4.8)	(4.5)	(0.5)
Adjusted at constant exchange rates	223.9	195.2	15.3	165.2	160.8	10.9

¹   The results for the year ended 31 March 2021 have been restated, see Note 20 for details of the restatement

Group order intake for the year increased 31.7% to £223.9m (2021: £170.0m), or 35.5% at constant exchange rates, as the impact of the recovery from the Covid-19 pandemic was reflected through the wider economy.

Group revenue from continuing operations increased by £29.9m (18.1%) to £195.2m. Revenue at constant exchange rates increased by £34.4m (21.4%). Activity steadily increased throughout the year as manufacturing facilities ramped up production in response to the increased order intake levels. The activity in quarter four was some 30% higher than at the low point of the pandemic. Both Divisions saw an increase in turnover, with the Chain Division recording an increase at constant exchange rates of 26.2%, while the Torque Transmission Division, which is a larger order and longer cycle business, increased by 5.3%.

The Group generated an adjusted operating profit for the year of £15.3m (2021: £11.4m), excluding the benefit of adjusting items as detailed below. Operating profit for the year was £16.2m (2021: £10.7m). Operating profit margin, calculated on a statutory basis, was 8.3% (2021: 6.5%) and return on sales increased by 90 bps during the year to 7.8% (2021: 6.9%).

Adjusting items

Adjusting items for the year ended 31 March 2022 comprise acquisition-related intangible asset amortisation costs of £0.1m (2021: £0.7m), a £1.7m gain from the forgiveness of US Covid-related loans, and a £0.7m charge from new lease arrangements at previously closed sites, including adjustments relating to the sublease of the closed Bredbury facility, and the termination of a lease at a site in Rainham in Essex. No restructuring charges were incurred in the year ended 31 March 2022 (2021: £nil).

PRIOR YEAR ADJUSTMENTS

This year we have completed a thorough review of past accounting practices. As a consequence, prior period adjustments have been recorded in the accounts relating to the recognition of a dilapidation provision for leased properties across the Group, for the accounting changes and hence policy relating to the accounting for software as a service contracts and in relation to deferred taxation on the UK pension deficit. Details of the adjustments are contained with Note 20 of this announcement, with further details disclosed in the Accounting Policies and Note 27 of the Annual Report and Accounts.

The prior year adjustments processed during the year resulted in the distributable reserves of Renold plc, company only, being in a deficit position of £2.3m at 31 March 2020. Accordingly there was a minor irregularity concerning the technical compliance of the Companies Act 2006 in respect of historical preference dividends paid. The reserves deficit at 31 March 2020 has since been rectified by receipt of dividends from subsidiary companies and the £45m capital reorganisation completed during the current year. The Board will pass the appropriate resolutions at the next Annual General Meeting.

Foreign exchange rates

Foreign exchange rates have remained volatile, with a 1% strengthening of Sterling against the Euro being more than offset by a 4% weakening of Sterling against the US Dollar between March 2021 and March 2022.

Phasing of movements over the current and prior year mean the weighted average exchange rate used to translate the Euro and US Dollar varies to the movement in the closing rates. The weighted average exchange rates were 1.36 for the US Dollar and 1.17 for the Euro for the year ended 31 March 2022 (2021: 1.31 and 1.12 respectively).

FX Rates (% of Group sales)	31 Mar 21 FX rate	31 Mar 22 FX rate	31 Mar 22 Var %	2021 Average FX rate	2022 Average FX rate	2022 Var %
GBP/Euro (27%)	1.17	1.18	1%	1.12	1.17	4%
GBP/US$ (37%)	1.38	1.32	-4%	1.31	1.36	4%
GBP/C$ (5%)	1.73	1.64	-5%	1.73	1.71	-1%
GBP/A$ (5%)	1.81	1.75	-3%	1.82	1.84	1%

If the year-end exchange rates had applied throughout the year, there would be an estimated increase of £4.0m to revenue and £0.3m to operating profit.

FinancE costs

Total finance costs in the year were £3.8m (2021: £4.6m).

Total loan finance costs include external interest on bank loans and overdrafts of £1.1m (2021: £1.6m), amortisation of arrangement fees and costs of refinancing, including the additional costs from the refinancing completed in March 2019, and the transition of banking arrangements from Libor to Sonia during the current year, of £0.3m (2021: £0.2m) and £0.5m (2021: £0.5m) of interest expense on lease liabilities. The reduction in interest payable on external bank loans and overdrafts was driven by the significant repayments of borrowings made during the years ended 31 March 2021 and 31 March 2022.

The net IAS 19 finance charge (which is a non-cash item) was £1.8m (2021: £2.2m).

Finance costs also include £0.1m (2021: £0.1m) resulting from the unwinding of discounts on the deferred build costs of the Chinese factory, classified as non-current trade and other payables.

Profit before tax

Profit before tax was £12.4m (2021: £6.1m), primarily due to increased operating profit, including the non-recurring items noted above, and reduction in finance costs.

Taxation

The tax charge in the year of £2.2m (2021: £1.5m) is made up of current tax of £2.0m (2021: £2.2m) and deferred tax of £0.2m (2021: £0.7m credit). The decrease in the current tax charge for the year is attributable to the full utilisation in the prior year of historical tax losses in jurisdictions for which the statutory tax rate is greater than the prevailing UK headline rate, being more than offset by a release in the provision for open tax matters yet to be agreed with tax authorities, reflecting a reduction in the best estimate of amounts expected to be paid in settling these inquiries. For further details see Note 4.

The effective tax rate for the year was 18% (2021¹: 25%), benefitting from the non-recurring items described above, which are non-taxable. Excluding these items, the effective tax rate on adjusted earnings was 19% (2021¹: 22%).

EARNINGS PER SHARE

Profit after tax of £10.2m was achieved for the financial year ended 31 March 2022 (2021: £4.6m). Adjusted earnings per share was 4.3p (2021: 2.3p), which excludes the benefit of one-off items in the year noted above, and charges related to the amortisation of acquired intangible assets. Basic earnings per share was 4.7p compared to 2.0p for the year ended 31 March 2021.

	2022	2021 (restated)1
	£m	£m
Adjusted profit after taxation	9.3	5.3
Effect of adjusting items, after tax:
- US PPP loan forgiveness	1.7	-
- New lease arrangements on sublet properties	(0.7)	-
- Amortisation of acquired intangible assets	(0.1)	(0.7)
Profit after taxation	10.2	4.6
Basic adjusted earnings per share	4.3	2.3p
Basic earnings per share	4.7	2.0p

¹ The results for the year ended 31 March 2021 have been restated, see Note 20 for details of the restatement.

Balance sheet

Net assets at 31 March 2022 were £5.8 m (31 March 2021 (restated): net liabilities £14.7m). A net profit of £10.2m was delivered for the year, which together with the impact of the valuation of the Group's pension liabilities and the retranslation of overseas operations resulted in an increase in net assets of £20.5m.

The pension deficit, on an IAS 19 basis, decreased to £87.1m (31 March 2021: £102.4m). The net liability for pension benefit obligations was £76.1m (2021: £90.4m) after allowing for a net deferred tax asset of £11.0m (31 March 2021: £12.0m). At the last triennial pension valuation the technical provisions deficit of the UK scheme, which is how the trustees and regulator view the scheme, was only £9.1m. This compares to the IAS 19 deficit for the UK pension fund of £64.1m. The difference represents the valuation of the capital asset reserve (CAR), currently £49.1m, being the discounted value of guaranteed future cash contributions to the scheme for a fixed period of 25 years commencing in 2013.

Overseas schemes now account for £23.0m (26%) of the net pension deficits and £22.4m of this is in respect of the German scheme, which is unfunded, with payments made as pensions fall due.

During the year, and as part of its long-term financial planning, the Company reorganised its balance sheet and reserves through the cancellation of the entire amount of its share premium account and capital redemption reserve. The share premium account and capital redemption reserve are non-distributable reserves and accordingly, the purposes for which they can be used are restricted. The reduction of capital creates sufficient distributable reserves to provide the Board with greater flexibility with regard to how it manages its capital resources. An order of the High Court confirming the capital reduction became effective on 27 May 2021, increasing distributable reserves by £45.5m and, if applied to the Group consolidated balance sheet at 31 March 2021, the capital reduction would decrease the consolidated retained earnings deficit from £78.2m to £32.7m.

CASH FLOW AND NET DEBT

	FY22	Restated1 FY21
	£m	£m
Adjusted operating profit	15.3	11.4
Add back depreciation and amortisation	9.4	9.9
Adjusted EBITDA 2	24.7	21.3
Movement in working capital	(0.2)	6.5
Net capital expenditure	(5.1)	(2.9)
Operating cash flow 2	19.4	24.9
Income taxes	(1.7)	0.7
Pensions cash costs	(4.8)	(2.1)
Restructuring spend	-	(0.2)
Repayment of principal under lease liabilities	(4.2)	(3.2)
Finance costs paid	(1.8)	(2.2)
Consideration paid for acquisition	(0.5)	-
Own shares purchased	(4.9)	-
US PPP loan forgiveness	1.7	-
Other movements/share-based payments	1.4	0.3
Change in net debt	4.6	18.2
Closing net debt 2	13.8	18.4
1 The results for the year ended 31 March 2021 have been restated, see accounting policies and Note 20 for details of the restatement.
2 Adjusted EBITDA and operating cash flow are alternative performance measures as defined in Note 19.

This year saw a further reduction in net debt, the improvement of £4.6m leading to a closing position of £13.8m (31 March 2021: £18.4m). Net debt at 31 March 2022 comprised cash and cash equivalents of £10.5m (31 March 2021: £19.9m) and borrowings of £24.3m (31 March 2021: £38.3m). This reduction was especially pleasing bearing in mind that the Group took the opportunity to purchase £4.9m of shares during the year to satisfy the requirements of the share based payments.

Within the working capital movement, inventory levels increased by £9.5m, as the Group replenished stock levels to ensure good customer service despite supply chain difficulties. Receivables also increased by £4.5m, in line with the higher turnover levels, while careful working capital management in general offset these increases.

Net capital expenditure at £5.1m was expanded during the second half of the financial year, as equipment, delayed due to transportation issues, was finally delivered into our operating facilities. The Group sees investments, especially those in support of our strategy, aimed at improving heat treatment facilities, broader manufacturing capabilities, and product assembly automation, gathering pace in the coming year. Additionally, the installation of the standardised Group IT system will gather momentum as travel restrictions brought about by the pandemic continue to ease.

During the year the Group acquired the conveyor chain business of Brooks Ltd in Manchester, UK, for a total consideration of £0.7m, of which £0.5m was paid in the year, with a further £0.2m deferred and expected to be paid in the next financial year.

Pension cash costs of £4.8m were higher than the prior year equivalent of £2.1m. The increase in contributions is a result of the agreement reached with the UK Pension Trustee in April 2020, whereby £2.8m of FY21 contributions, due to be paid to the UK scheme, were deferred in light of the potential impact of the Covid-19 pandemic. The deferred contributions are being repaid over the five-year period which commenced on 1 April 2022.

Corporation tax cash paid was £1.7m (2021: £0.7m received), which returned to normal levels, while the net inflow seen in the prior year was driven by a recovery of £1.3m of prior year payments on account.

Net cash flow from operating activities decreased to £19.3m (2021: £26.7m).

Debt facility and capital structure

The Group's committed multi-currency revolving credit facility (MRCF) totals £61.5m, with a £20.5m accordion facility providing a route to additional funding if required, although this element is not committed. The facility matures in March 2024. During the year the Group facilities transitioned from Libor to Sonia as the basis to set the interest rate payable.

At 31 March 2022, the Group had unused credit facilities totalling £40.1m and cash balances of £10.5m. Total Group credit facilities amounted to £64.2m, all of which were committed.

The Group has operated well within the pandemic-related revised and original covenant levels throughout the year ended 31 March 2022 (see further detail in the going concern section below) and expects to continue to operate comfortably within covenant limits going forward.

The net debt/adjusted EBITDA ratio as at 31 March 2022 was 0.6x (covenant: up to 2.5x; 31 March 2021: 0.9x), calculated in accordance with the banking agreement. The adjusted EBITDA/interest cover as at 31 March 2022 was 19.6x (covenant: greater than 4.0x; 2021: 10.9x), again calculated in accordance with the banking agreement.

Going concern

The 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.

Further information in relation to the Group's business activities, together with the factors likely to affect its future development, performance and financial position, liquidity, cash balances and borrowing facilities is set out in the Chair's statement, the Chief Executive's review, the Finance Director's review and in the section on principal risks and uncertainties. Additional details of the Group's cash balances and borrowings and facility are included in Notes 13, 14 and 17.

The key covenants attached to the Group's multi-currency revolving credit facility relate to leverage (net debt to EBITDA, maximum 2.5x) and interest cover (minimum 4.0x), which are measured on a pre-IFRS 16 basis. The Group regularly monitors its financial position to ensure that it remains within the terms of its banking covenants. Following the strong cash performance in the prior year, the Group has achieved a further reduction in net debt during the current financial year of £4.6m to £13.8m (31 March 2021: £18.4m), notwithstanding cash out flows for share purchases (£4.9m) and lease exit payments (£1.1m). The Group has accordingly remained within the borrowing covenant levels throughout the year ended 31 March 2022 .

Given the current level of macroeconomic uncertainty stemming from Covid-19, inflation, the global supply chain crisis and geopolitical risks, and being also mindful of the risks discussed in the section on principal risks and uncertainties, the Group has performed financial modelling of future cash flows. The Board has reviewed the cash flow forecasts which cover a period of 12 months from the approval of the 2022 Annual Report, and which reflect forecast changes in revenue across the Group's business units. A reverse stress test has been performed on the forecasts to determine the extent of a downturn which would result in a breach of covenants. Revenue would have to reduce by approximately 30% over the period under review for the Group to be likely to breach the leverage covenant under the terms of its borrowing facility. The reverse stress test does not take into account further mitigating actions which the Group would implement in the event of a severe and extended revenue decline, such as reducing discretionary spend and capital expenditure. This assessment indicates that the Group can operate within the level of its current facilities, as set out above, without the need to obtain any new facilities for a period of not less than 12 months from the date of this report.

Following this assessment, the Board of Directors are satisfied that the Group has sufficient resources to continue in operation for a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in relation to this conclusion and preparing the consolidated financial statements. There are no key sensitivities identified in relation to this conclusion.

Treasury and financial instruments

The Group's treasury policy, approved by the Board, is to manage its funding requirements and treasury risks without undertaking any speculative risks. Treasury and financing matters are assessed further in the section on principal risks and uncertainties.

To manage foreign currency exchange impact on the translation of net investments, certain US Dollar denominated borrowings taken out in the UK to finance US acquisitions are designated as a hedge of the net investment in US subsidiaries. At 31 March 2022 this hedge was fully effective. The carrying value of these borrowings at 31 March 2022 was £6.8m (31 March 2021: £6.5m).

At 31 March 2022, the Group had 2% (31 March 2021: 1%) of its gross debt at fixed interest rates. Cash deposits are placed short-term with banks where security and liquidity are the primary objectives. The Group has no significant concentrations of credit risk, with sales made to a wide spread of customers, industries and geographies. Policies are in place to ensure that credit risk on individual customers is kept to a minimum.

Pension assets and liabilities

The Group has a mix of UK (84% of gross liabilities) and overseas (16% of gross liabilities) defined benefit pension obligations as shown below.

	2022			2021
	Assets £m	Liabilities £m	Deficit £m	Assets £m	Liabilities £m	Deficit £m
UK scheme	134.4	(198.5)	(64.1)	136.3	(213.8)	(77.5)
Overseas schemes	15.4	(38.4)	(23.0)	14.9	(39.8)	(24.9)
	149.8	(236.9)	(87.1)	151.2	(253.6)	(102.4)
Deferred tax asset			11.0			12.0
Net deficit			(76.1)			(90.4)

The Group's retirement benefit obligations decreased from £102.4m (£90.4m net of deferred tax) at 31 March 2021 to £87.1m (£76.1m net of deferred tax) at 31 March 2022. The largest element of the decrease relates to the UK scheme where the deficit decreased from £77.5m to £64.1m primarily due to an increase in AA corporate bond yields, which decreases the present value of gross liabilities under IAS 19. This was partially offset by the impact of an increase in the UK inflation assumption . For the purposes of determining scheme pension payments, inflation is capped for the UK and the US schemes. The deficit of the overseas schemes decreased by £1.9m to £23.0m reflecting changes in assumptions for discount and inflation rates. All defined benefit schemes, with the exception of one scheme for blue-collar workers in the US, are closed for future accrual.

UK funded scheme

The deficit of the UK scheme decreased in the year to £64.1m (31 March 2021: £77.5m) reflecting a number of changes in assumptions and factors.

The decrease in gross liabilities of £15.3m arose primarily from a combination of an increase in the rate used to discount the scheme's liabilities (discount rate of 2.75% compared with 2.0% in the prior year) and an offsetting increase in the inflation assumption (CPI of 3.25% compared with 2.7% in the prior year). Partially offsetting the reduction in liabilities was a small decrease in the value of the scheme's assets.

The latest triennial actuarial valuation of the UK scheme, with an effective date of 5 April 2019, was agreed in March 2020 and identified a deficit of £9.1m. This is significantly lower than the IAS 19 deficit, largely as the actuarial valuation places a value on the Group's guaranteed future cash payments to the scheme under the central asset reserve structure established in June 2013. It is expected that the actuarial valuation deficit of £9.1m can be recovered through asset outperformance, above the prudent levels assumed in the valuation, over the remaining life of the scheme. As a result, there are no changes to the long-term contribution arrangements.

Contributions in the year ended 31 March 2022 were £3.3m (2021: £0.6m). The increase in contributions compared to the prior year follows the agreement reached with the Trustee in April 2020 such that £2.8m of the prior year contributions due to the UK scheme were deferred in light of the potential impact of the Covid-19 pandemic. The deferred contributions are being repaid over the five-year period which commenced on 1 April 2022 with expected contributions for the year ending 31 March 2023 of £4.1m (including the deferred contributions). The underlying level of contributions to the UK scheme increased annually by RPI plus 1.5% (capped at 5%).

The next triennial valuation date will be as at 5 April 2022.

Overseas schemes

The largest element of the overseas schemes is the German unfunded scheme, with a total liability and deficit of £22.4m (31 March 2021: £22.9m). Other overseas funded schemes comprise a number of smaller arrangements around the world, with a combined deficit of £0.6m (31 March 2021: £2.0m). The combined deficits of all the overseas schemes decreased by £1.9m. These changes were most significantly a reduction in the liability of the funded US schemes due to an increase in the discount rate used to value the scheme's liabilities. During April 2022, the Board's decision to close the New Zealand defined benefit pension scheme was enacted by the scheme trustees, and it will be wound down over the coming months.

For overseas pension schemes, the Company contributions in the year were £1.4m (2021: £1.5m).

JIM HAUGHEY

GROUP Finance Director

13 July 2022

Principal Risks and Uncertainties

Risk is inherent in our business activities. We take steps at both a Group and subsidiary level to understand and evaluate potential risks and uncertainties which could have a material impact on our performance in order to mitigate them. Accordingly, a risk aware environment is promoted and encouraged throughout the Group. Details of the principal risks and uncertainties are summarised below and set out in more detail in the Annual Report.

In addition to the principal risks and uncertainties below, the risk review process highlights emerging risks as well as those which have the potential to be a principal risk in the future and therefore need to be more closely monitored. The wider effect of climate change is one of these risks. Continued environmental activism around climate change has started to influence some consumers to reduce their carbon footprints, and there is the potential that this could start to impact some of the sectors we operate in. The risks associated with climate change are not considered principal risks at this time, particularly as Renold supports customers in achieving their own sustainability goals through the development and supply of high specification, durable, environmentally responsible products which ultimately minimise the impact on the environment. We will, however, continue to monitor this evolving situation.

1 Macroeconomic and political volatility
DETAILED RISK Material changes in prevailing macroeconomic or geopolitical conditions could have a detrimental impact on business performance. We operate in 17 countries and sell to customers in over 100 and therefore, we are necessarily exposed to economic and geopolitical risks in these territories. Link to strategic objectives [B G]	POTENTIAL IMPACT Potential touch-points include: • Commodity prices which have a negative impact on demand in the whole supply chain. • Changes to tariffs and import duties which can distort customer buying decisions. • Foreign exchange volatility can impact customer buying patterns, leading to lower demand or the need to rapidly switch supply chains.
MITIGATION AND CONTROL • Our diversified geographic footprint inherently exposes us to more countries where risks arise but conversely provides some degree of resilience and flexibility. • Actions to lower the Group's overall break-even point also serve to reduce the impact of any global economic slowdown. • A focus on 'predict and respond', e.g. sales forecasting and raw material price monitoring, leading to operational change such as sales price increases or cost reductions. • We have a good level of liquidity, with access to sufficient multi-currency debt facilities. The FY22 risk trend is impacted by continued political risk and the high-cost inflation experienced on raw material, freight and energy prices. We are mindful of the situation in Eastern Europe, and whilst we are not heavily exposed to this geographic area, we are aware of the wider global impact this may have as the situation unfolds. The uncertainty outlined above is partly offset by growth in the global economy during FY22, following stabilisation of the Covid-19 pandemic, though this may not continue. We have also implemented significant management actions in order to mitigate the additional risks highlighted. Nonetheless, the likelihood of the risk crystalising has increased.

2 Strategy execution
DETAILED RISK The Group's ongoing strategy requires the co-ordinated delivery of a number of complex projects. Link to strategic objectives [B C D E F G]	POTENTIAL IMPACT While these projects are designed to deliver targeted benefits, they have the potential to negatively impact the Group's operations if not appropriately managed.
MITIGATION AND CONTROL • The Strategic Plan has been developed to deliver a sustained improvement in performance and to make that performance more stable and less exposed to revenue volatility. • The Board reviews progress against the different strategic projects in each of its meetings. This is based on a regularly updated report from the CEO, which groups the individual projects into themes linked directly to our Strategic Objectives. • Major projects are all managed in accordance with best practice project management techniques with at least one member of the Executive team on the relevant Steering Committees. The FY22 risk trend remains stable, largely due to the already lower risk rating as a result of limited ongoing major infrastructure changes. To support the execution of the Groups strategic objectives, activity in the year incorporates an increased focus on sustainability and supply chain rationalisation, which includes the determination of optimal product production locations and optimising business processes.

3 Corporate transactions/business development
DETAILED RISK Part of the Group's strategy is to grow through selective acquisitions. Performance of acquired businesses may not reach expectations, impacting Group profitability and cash flows. Similarly, poorly managed asset sales may result in under-achievement of value. Link to strategic objectives [B E G]	POTENTIAL IMPACT • Any corporate transaction involves risks at various stages of the project life cycle. • During the acquisitions phase, value can be lost through over-paying, missing key issues in due diligence or potential value leakage through poor contract negotiation. Value can also be lost through a poorly planned or executed integration phase. Finally, failure to deliver anticipated benefits during the 'business as usual' phase can also lead to a loss of value. • A poorly managed asset sale or corporate disposal may realise a lower value.
MITIGATION AND CONTROL • Monitoring of specific acquisition targets: Business acquisition process incorporating concept evaluation, business case, indicative offer/heads of terms, due diligence (covering a range of criteria), integration planning and execution and post integration appraisal which in turn feeds back to the business acquisition process. • Use of third-party specialists to address risks specific to each corporate transaction. • Formation of top-down cross-functional project teams and plans. These specifically address any issues or risks identified during the planning and due diligence processes. • Deployment of detailed benefits realisation plans. The FY22 risk trend is unchanged.

4 Health and safety in the workplace
DETAILED RISK The risk of death or serious injury to employees or third parties associated with Renold's worldwide operations. We are proud of the progress we have made in recent years, but recognise that we have more to do. Link to strategic objectives [A F G]	POTENTIAL IMPACT Accidents caused by a lack of robust safety procedures could result in life-changing impacts for employees, visitors or contractors. This will always be unacceptable. In addition, accidents could result in civil or criminal liability for both the Group and the Directors and officers of the Group and Group companies, leading to financial loss or reputational damage.
MITIGATION AND CONTROL • Group policies and a Group-wide management system known as the Framework, to set control expectations, with a support training programme for all managers. • The Group operates a rolling programme of health and safety audits to assess compliance against the Framework. These audits have continued, despite travel restrictions imposed during the year, through the utilisation of alternative working methods. • Continual hazard assessments to ensure awareness of risks. • Live tracking of accident rates and root cause analysis via our Group reporting system, plus monthly Board reporting focused on a range of KPIs. • Specific initiatives include the BAT (Be safe; Act safe; Think safe) safety approach and the Annual Health and Safety Awards Scheme to recognise success. • Proactive identification and management of emerging risks, for example the additional measures which continue to be implemented, on a proportionate basis, across all operating locations in order to mitigate the increase in risk presented by Covid-19. The FY22 risk trend is unchanged. No matter what mitigating actions are undertaken, there remains a risk of death or serious injury. We therefore continue to assess the risk as the highest possible impact, but through the mitigation actions seek to reduce the likelihood. Significantly improving our health and safety performance continues to be our number one strategic objective.

5 Security and effective deployment and utilisation of information technology systems
DETAILED RISK We seek to leverage the use of IT to achieve competitive advantage. The Group continues to implement a global ERP system to replace numerous legacy systems which inherently brings with it the risks associated with a large-scale change programme. The threat from cyber attacks, and therefore security of our IT systems, is constantly evolving. The frequency of attacks is increasing, and the nature of such attacks are becoming more sophisticated. The risk to our Group, our supply chains and our customers is ever present. Link to strategic objectives [C D E]	POTENTIAL IMPACT • Interruption or failure of IT systems (including the impact of a cyber attack) would negatively impact or prevent some business activities from occurring. If the interruption was long lasting, significant damage could be done to the business. • It is essential that we are able to rely on the data derived from our business system to feed routine but fundamental business performance monitoring. • An unsuccessful implementation of the global ERP system has the potential to materially impact that site's, and possibly the Group's, performance.
MITIGATION AND CONTROL • Short-term stabilisation of existing hardware and legacy software platforms. • Governance and control arrangements operating over the Group's ERP implementation programme. • New ERP systems are successfully implemented at three locations. • Use of specialist external consultants and recruitment of experienced personnel. • Phased implementation rather than 'big bang', along with project assurance and 'lessons learned' reviews to continuously improve the quality of successive rollouts. • Steering Committee in operation with cascading project management disciplines. • A range of preventative and detective controls to manage the risk of a cyber attack, including technical solutions in addition to  employee training programmes. • Regular system maintenance and upgrades, including patching, to ensure known vulnerabilities are protected. The overall risk for FY22 has increased. Whilst we have successfully removed one of our legacy ERP systems during the year, we recognise that there is increasing cyber threat, particularly to manufacturing organisations. This is coupled with reduced availability of insurance cover to mitigate such risk. As cyber attacks evolve and become more sophisticated, we have continued to invest in additional capability and controls designed to defend against such threats and there is a continued focus on managing and reducing the impact of any potential attack. Nonetheless, we recognise that the frequency and severity of attacks is increasing and therefore have increased our overall assessment of the risk.

6 Prolonged loss of a major manufacturing site
DETAILED RISK A catastrophic loss of the use of all or a significant portion of a strategic production facility. The prolonged loss of certain larger plants has the ability to impact the viability of the Group. This could result from an accident, a strike by employees, a significant disease outbreak, major disruption to supply chains, fire, severe weather or other cause outside of management control. Link to strategic objectives [A E G]	POTENTIAL IMPACT • In the short or long term, a related risk event could adversely affect the Group's ability to meet the demands of its customers. • Specifically, this could entail significant repair costs or costs of alternative supply. A significant proportion of the Group's revenue is on relatively short lead times and a break in our supply chain could result in loss of revenue. All of this translates into lower sales and profits and reduced cash flow.
MITIGATION AND CONTROL • Preventative maintenance programmes and new investments to reduce risk of interruption of manufacturing. • A Group Fire Safety Policy mandating preventative, detective and containment controls. • Alternative manufacturing capacity exists for a growing portion of the Group's product range, with this manufacturing capability spread across geographic territories. • Inventory maintained to absorb and flatten out shorter-term raw material supply and production volatility risks. • Comprehensive insurance policies to mitigate the impact of a number of these risks, albeit subject to carve out of cover for specific risks (e.g. SARS and related disease outbreak) and claim limits. • Amendments to operational processes, whenever and wherever required, to mitigate emerging risks and country-specific requirements. • Property damage and business interruption insurance. The risk trend for FY22 is unchanged, largely as a result of already being classified at maximum risk levels. Renold has no direct operations in Russia or Ukraine, however, a significant amount of Group production comes from our German factories and we are therefore actively working on contingency plans in the event that German energy supplies are disrupted as a result of the war in Ukraine. The Covid-19 pandemic continued to crystallise this risk at certain locations during the year, however, the severity and frequency of instances continue to reduce. We believe that the risk of prolonged loss of a major manufacturing site due to the Covid-19 pandemic is now low, however, changes to our operating procedures and other health and safety actions have, and will, continue to be implemented in a proportionate manner in order to respond to the pandemic. Moreover, we have continued to enhance the manufacturing capabilities at a number of our manufacturing locations through investment in equipment and additional training during the year, with the aim of reducing reliance on single geographical locations.

7 People and change
DETAILED RISK The Group's operations are dependent upon the ability to attract and retain the right people with an appropriate range of skills and experience. Succession planning and the ability to swiftly replace staff retiring or leaving is also critical. Link to strategic objective [A D F]	POTENTIAL IMPACT · Failure to retain, attract or motivate the required calibre of employees will negatively impact business performance. · The delivery of the Strategic Plan and our strategic goals may also be delayed.
MITIGATION AND CONTROL • Competitive reward programmes, focused training and development, and a talent retention programme. • Ongoing reviews of succession plans based on business needs. • Performance management and personal development programmes introduced alongside training initiatives. • Management team strengthened with new capability from external hires and internal promotions. • The Renold Values, launched in 2015, continue to be embedded and are linked to recruitment processes for new employees. The FY22 risk trend increasing. Whilst we continue to attract and retain high calibre individuals, we have witnessed a shift in attitude and reduced availability in the employment market, which is partly thought to be as a result of the Covid-19 pandemic and Brexit. This shift has been represented by an increasing appetite of individuals to make career changes, leading to a progressively more competitive employment market, and our own employees increasingly opting to take early retirement.

8 Liquidity, foreign exchange and banking arrangements
DETAILED RISK A lack of sufficient liquidity and flexibility in banking arrangements could inhibit the Group's ability to invest for the future or, in extremes, restrict day-to-day operations. Link to strategic objectives [D E G]	POTENTIAL IMPACT • Potentially cause under-investment and sub-optimal short-term decision making. • Limiting investment could prevent efficiency savings and reduce competitiveness. • In an extreme situation, the Group's ability to operate as a going concern could also be jeopardised.
MITIGATION AND CONTROL • The Group's primary banking facility expires in March 2024 and is fully available given current levels of profitability. Positive discussions have commenced with our relationship banks regarding the routine renewal of our committed debt facilities in 2024. • The facility includes additional drawdown capability, accessible as long as financial covenants are complied with.  • Rolling foreign exchange forward contracts covering committed future cash flows. The FY22 risk trend is unchanged. The Group remained, with good headroom, within banking covenants throughout the year and retains a strong cash position.

9 Pensions deficit
DETAILED RISK The principal pensions risk is that short-term cash funding requirements of legacy pension schemes diverts much needed investment away from the Group's operations. Secondly, the size of the reported balance sheet deficit can operate as a disincentive to potential investors or other stakeholders limiting the Group's ability to raise financing on capital markets. Link to strategic objectives [G]	POTENTIAL IMPACT • Given the Group's cash needs to invest in the business, the pace of performance improvement could be slowed if cash has to be diverted to the pension schemes. • The balance sheet pension deficit could act as a disincentive to potential investors and could reduce the Group's ability to raise new equity or debt financing, limiting the strategic options open to the Group.
MITIGATION AND CONTROL • We maintain a good relationship with pension trustees. • Specialist professional advice is obtained to help us manage the associated liabilities and risks. • The major UK pension cash flows (over 50% of all defined benefit pension cash costs) are stable, known and defined under the 25-year asset-backed funding scheme put in place during 2013. A further 25% of the annual cash flows are pensions in payment in Germany in a mature scheme that has passed its peak funding requirement. The FY22 risk trend is unchanged as underlying factors have not significantly changed from the prior year.

10 Legal, financial and regulatory compliance
DETAILED RISK The risk of censure, fine or business prohibition as a result of any part of the Group failing to comply with regulatory or legal obligations. Risks related to regulatory and legislative changes include the inability of the Group to comply with current, changing or new requirements. Many of the Group's business activities are subject to increasing regulation and enforcement by relevant authorities. Link to strategic objectives [G]	POTENTIAL IMPACT Failure by the Group or its representatives to abide by applicable laws and regulations could result in: • Administrative, civil or criminal liability. • Significant fines and penalties. • Suspension of the Group from trading. • Reputational damage.
MITIGATION AND CONTROL • Communication and management of a clear compliance culture. • Risk assessments and ongoing compliance reviews at least annually at all major locations. • Published up-to-date policies and procedures with clear guidance and training issued to all employees. • Monitoring of compliance with nominated accountable managers in each business unit. • Financial control assurance and legal compliance is additionally obtained through internal audit and a control self-assessment process. Self-certification from every operating region, that internal controls have been complied with and that legal compliance has been maintained, is reviewed on at least an annual basis. All units and functions in the Group are subject to internal audit on a regular risk-based cycle. Any non-compliance reported is reviewed by the Audit Committee. The FY22 risk trend is unchanged.

Consolidated Income Statement

for the year ended 31 March 2022

	Note	2022 £m	Restated1 2021 £m
Revenue	1	195.2	165.3
Operating costs	2	(179.0)	(154.6)
Operating profit		16.2	10.7
Finance costs	3	(3.8)	(4.6)
Profit before tax		12.4	6.1
Taxation	4	(2.2)	(1.5)
Profit for the financial year		10.2	4.6
Earnings per share	5
Basic earnings per share		4.7p	2.0p
Diluted earnings per share		4.4p	2.0p
Basic adjusted earnings per share		4.3p	2.3p
Diluted adjusted earnings per share		4.0p	2.3p

¹ See Accounting policies and Note 20 for details of prior period restatements 

All results are from continuing operations.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2022

	2022	Restated1 2021
	£m	£m
Profit for the financial year	10.2	4.6
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations	3.2	(5.8)
(Loss)/gain on hedges of the net investment in foreign operations	(0.3)	0.7
Cash flow hedges:
Loss arising on cash flow hedges during the period	(0.5)	(0.1)
Less: Cumulative gain arising on cash flow hedges reclassified to profit and loss	0.1	0.3
Income tax relating to items that may be reclassified subsequently to profit or loss	0.1	-
	2.6	(4.9)
Items not to be reclassified to the income statement in subsequent periods:
Remeasurement gains/(losses) on retirement benefit obligations	12.3	(5.6)
Tax on remeasurement gains/losses on retirement benefit obligations - excluding impact of statutory rate change	(3.1)	0.7
Effect of changes in statutory tax rate on deferred tax assets	2.3	-
	11.5	(4.9)
Other comprehensive income/(expense) for the year, net of tax	14.1	(9.8)
Total comprehensive income/(expense) for the year, net of tax	24.3	(5.2)

¹ See Accounting policies and Note 20 for details of prior period restatements 

Consolidated Balance Sheet

as at 31 March 2022

			2022	Restated1 2021	Restated1 2020
	Note		£m	£m	£m
ASSETS
Non-current assets
Goodwill	7		22.7	21.7	24.0
Other intangible assets	8		5.1	4.9	6.5
Property, plant and equipment	9		49.3	48.1	53.6
Right-of-use assets	10		8.0	10.7	11.9
Deferred tax assets			15.4	15.2	14.3
			100.5	100.6	110.3
Current assets
Inventories	11		48.4	37.7	46.1
Trade and other receivables	12		35.7	30.3	35.8
Current tax			-	0.2	1.5
Cash and cash equivalents	13		10.5	19.9	15.6
			94.6	88.1	99.0
TOTAL ASSETS			195.1	188.7	209.3
LIABILITIES
Current liabilities
Borrowings	14		(1.0)	(2.3)	(0.3)
Trade and other payables	15		(48.5)	(31.5)	(37.6)
Lease liabilities	10		(2.8)	(2.5)	(3.0)
Current tax			(2.8)	(2.3)	(1.0)
Derivative financial instruments			(0.5)	(0.1)	(0.3)
Provisions	16		(0.2)	(1.4)	(0.7)
			(55.8)	(40.1)	(42.9)
NET CURRENT ASSETS			38.8	48.0	56.1
Non-current liabilities
Borrowings	14		(22.8)	(35.5)	(51.4)
Preference stock	14		(0.5)	(0.5)	(0.5)
Trade and other payables	15		(4.7)	(5.4)	(5.3)
Lease liabilities	10		(9.2)	(12.9)	(14.1)
Deferred tax liabilities			(5.4)	(4.1)	(4.6)
Retirement benefit obligations			(87.1)	(102.4)	(97.6)
Provisions			(3.8)	(2.5)	(2.4)
			(133.5)	(163.3)	(175.9)
TOTAL LIABILITIES			(189.3)	(203.4)	(218.8)
NET ASSETS (LIABILITIES)			5.8	(14.7)	(9.5)
EQUITY
Issued share capital			11.3	11.3	11.3
Share premium account			-	30.1	30.1
Capital redemption reserve			-	15.4	15.4
Currency translation reserve			9.8	6.8	11.9
Other reserves			(5.4)	(0.1)	(0.3)
Retained earnings			(9.9)	(78.2)	(77.9)
TOTAL SHAREHOLDERS' FUNDS (DEFICIT)		5.8		(14.7)		(9.5)

¹ See Accounting policies and Note 20 for details of the prior period restatements

Approved by the Board on 13 July 2022 and signed on its behalf by:

Robert Purcell  Jim Haughey

CHIEF EXECUTIVE  FINANCE DIRECTOR

Consolidated Statement of Changes in Equity

for the year ended 31 March 2022

	Share capital	Share premium account	Restated1 Retained earnings	Currency translation reserve	Capital redemption reserve	Other reserves	Total shareholders' funds
	£m	£m	£m	£m	£m	£m	£m
At 31 March 2020	11.3	30.1	(68.8)	11.9	15.4	(0.3)	(0.4)
Prior year adjustments (Note 20)	-	-	(7.6)	-	-	-	-
Change in accounting policy (see Accounting Policies and Note 20)	-	-	(1.5)	-	-	-	-
At 31 March 2020 (Restated)	11.3	30.1	(77.9)	11.9	15.4	(0.3)	(9.5)
Profit for the year (Restated)	-	-	4.6	-	-	-	4.6
Other comprehensive income	-	-	(4.9)	(5.1)	-	0.2	(9.8)
Total comprehensive income for the year (Restated)	-	-	(0.3)	(5.1)	-	0.2	(5.2)
At 31 March 2021 (Restated)	11.3	30.1	(78.2)	6.8	15.4	(0.1)	(14.7)
Profit for the year	-	-	10.2	-	-	-	10.2
Other comprehensive income/ (expense)	-	-	11.5	3.0	-	(0.4)	14.1
Total comprehensive income/ (expense) for the year	-	-	21.7	3.0	-	(0.4)	24.3
Own shares purchased	-	-	-	-	-	(4.9)	(4.9)
Capital reorganisation	-	(30.1)	45.5	-	(15.4)	-	-
Share based payments	-	-	1.1	-	-	-	1.1
At 31 March 2022	11.3	-	(9.9)	9.8	-	(5.4)	5.8

¹ See Accounting policies and Note 20 for details of the prior period restatements

Included in retained earnings is £1.9m (31 March 2021: £0.8m) relating to a share option reserve .   

The other reserves are stated after deducting £4.9m (31 March 2021: £0.035m) relating to shares held in the Renold plc Employee Benefit Trust. The Renold Employee Benefit Trust holds Renold plc shares and satisfies awards made under various employee incentive schemes when issuance of new shares is not appropriate.

At 31 March 2022 18,422,509 (31 March 2021: 199,790) ordinary shares of 5p each were held by the Renold Employee Benefit Trust and, following recommendations by the employer, are provisionally allocated to satisfy awards under employee incentive schemes. The market value of these shares at 31 March 2022 was £3.7m (31 March 2021: £0.035m).

Consolidated Statement of Cash Flows

for the year ended 31 March 2022

	2022	2021
	£m	£m
Cash flows from operating activities (Note 17)
Cash generated from operations	21.0	26.0
Income taxes (paid)/received	(1.7)	0.7
Net cash flow from operating activities	19.3	26.7
Cash flows from investing activities
Proceeds from property disposals	0.2	0.2
Purchase of property, plant and equipment	(4.1)	(2.3)
Purchase of intangible assets	(1.2)	(0.8)
Consideration paid for acquisition	(0.5)	-
Net cash flow from investing activities	(5.6)	(2.9)
Cash flows from financing activities
Repayment of principal under lease liabilities	(4.2)	(3.2)
Finance costs paid	(1.5)	(2.0)
Own shares purchased	(4.9)	-
Proceeds from borrowings	4.7	2.8
Repayment of borrowings	(16.0)	(19.9)
Net cash flow from financing activities	(21.9)	(22.3)
Net (decrease)/increase in cash and cash equivalents	(8.2)	1.5
Net cash and cash equivalents at beginning of year	17.3	15.1
Effects of exchange rate changes	0.4	0.7
Net cash and cash equivalents at end of year (Note 13)	9.5	17.3

Accounting Policies

Basis of preparation

The financial information for the year ended 31 March 2022 and the year ended 31 March 2021 does not constitute the Company's statutory accounts for those years but is derived from those accounts. Statutory accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 March 2022 have been authorised for issue and signed by the Board of Directors at the time of this announcement. They are expected to be published on or before 30 July 2022 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Going concern

The 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.

Further information in relation to the Group's business activities, together with the factors likely to affect its future development, performance and financial position, liquidity, cash balances and borrowing facilities is set out in the Strategic Report section of the Annual Report. In addition, the financial statements within the Annual Report include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposure to foreign exchange, credit and interest rate risk. Information relating to post balance sheet events is disclosed in Note 18.

The key covenants attached to the Group's multi-currency revolving credit facility relate to leverage (net debt to EBITDA, maximum 2.5x) and interest cover (minimum 4.0x), which are measured on a pre-IFRS 16 basis. The Group regularly monitors its financial position to ensure that it remains within the terms of its banking covenants. Following the strong cash performance in the prior year, the Group has achieved a further reduction in net debt during the current financial year of £4.6m to £13.8m (31 March 2021: £18.4m), notwithstanding significant cash out flows for share purchases (£4.9m) and lease exit payments (£1.1m). The Group has accordingly remained within the borrowing covenant levels throughout the year ended 31 March 2022 .

Given the current level of macroeconomic uncertainty stemming from Covid-19, inflation, the global supply chain crisis and geopolitical risks, and being also mindful of the risk matrix disclosed in the section on principal risks and uncertainties, the Group has performed financial modelling of future cash flows. The Board has reviewed the cash flow forecasts, which cover a period of 12 months from the approval of the 2022 Annual Report, and which reflect forecasted changes in revenue across the Group's business units. A reverse stress test has been performed on the forecasts to determine the extent of downturn which would result in a breach of covenants. Revenue would have to reduce by 30% over the period under review for the Group to breach the leverage covenant under the terms of its borrowing facility. The reverse stress test does not take into account further mitigating actions which the Group would implement in the event of a severe and extended revenue decline, such as reducing discretionary spend and capital expenditure. This assessment indicates that the Group can operate within the level of its current facilities, as set out above, without the need to obtain any new facilities for a period of not less than 12 months from the date of this report.

Following this assessment, the Board of Directors are satisfied that the Group has sufficient resources to continue in operation for a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in relation to this conclusion and preparing the Consolidated Financial Statements. There are no key sensitivities identified in relation to this conclusion.

Change in accounting policy - Software as a service ('SaaS') arrangements  

The Group has changed its accounting policy related to the capitalisation of certain software costs, this change follows the IFRIC interpretation Committee's agenda decision published in April 2021, which clarifies the accounting treatment of the costs of configuring or customising software under Software as a service arrangements.

The Group's accounting policy has historically been to capitalise costs directly attributable to the configuration and customisation of SaaS arrangements as assets in the Balance Sheet. Following the adoption of the above IFRIC agenda guidance, any SaaS arrangements were identified and assessed to determine if the Group has control of the software and associated configured or customised elements. For those arrangements where the Group does not have control of the developed software, the Group has derecognised the asset.

Change in accounting policy - Software as a service ('SaaS') arrangements (continued)

The change in accounting policy led to adjustments in the 31 March 2021 and 31 March 2020 balance sheets amounting to a £1.2m reduction in intangible assets (2020: £1.5m reduction). This change also led to adjustments in the income statement for the year ended 31 March 2021 amounting to a £0.3m decrease in amortisation of intangibles.

Accordingly, the prior period Balance Sheets at 31 March 2021 and 31 March 2020 have been restated in accordance with IAS 8, and, in accordance with IAS 1 (revised), a Balance Sheet at 31 March 2020 is also presented, together with related notes. The tables in Note 20 show the impact of the change in accounting policy on the previously reported financial results.

Notes to the Consolidated Financial Statements

1.  Segmental information

For management purposes, the Group is organised into two operating segments according to the nature of their products and services and these are considered by the Directors to be the reportable operating segments of Renold plc as shown below:

• The Chain segment manufactures and sells power transmission and conveyor chain and also includes sales of torque transmission products through Chain National Sales Companies (NSCs); and

• The Torque Transmission segment manufactures and sells torque transmission products, such as gearboxes and couplings.

No operating segments have been aggregated to form the above reportable segments.

The Chief Operating Decision Maker (CODM) for the purposes of IFRS 8 'Operating Segments' is considered to be the Board of Directors of Renold plc. Management monitor the results of the separate reportable operating segments based on operating profit and loss which is measured consistently with operating profit and loss in the consolidated financial statements. The same segmental basis applies to decisions about resource allocation. Disclosure has not been included in respect of the operating assets of each segment as they are not reported to the CODM on a regular basis. However, Group 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.

	Chain 2	Torque Transmission	Head office costs and eliminations		Consolidated
Year ended 31 March 2022	£m	£m	£m		£m
Revenue
External customer - transferred at a point in time	158.2	35.6	-		193.8
External customer - transferred over time	-	1.4	-		1.4
Inter-segment1	1.0	3.4	(4.4)		-
Total revenue	159.2	40.4	(4.4)		195.2
Operating profit/(loss)	20.5	4.1	(8.4)		16.2
Finance costs					(3.8)
Profit before tax					12.4
Taxation					(2.2)
Profit after tax					10.2
Other disclosures
Working capital3	30.0	9.0	(3.4)		35.6
Capital expenditure4	3.4	2.0	0.9		6.3
Total depreciation and amortisation	6.2	1.9	1.4	9.5

1.  Segmental information (continued)

		Restated5 Chain2	Torque Transmission	Restated5 Head office costs and eliminations	Restated5 Consolidated
Year ended 31 March 2021		£m	£m	£m	£m
Revenue
External customer - transferred at a point in time		128.9	35.5	-	165.3
External customer - transferred over time		-	0.9	-	0.9
Inter-segment1		1.1	2.7	(3.8)	-
Total revenue		130.0	39.1	(3.8)	165.3
Operating profit/(loss) (Restated)		12.9	5.0	(7.2)	10.7
Finance costs					(4.6)
Profit before tax (Restated)					6.1
Taxation					(1.5)
Profit after tax (Restated)					4.6
Other disclosures
Working capital3		29.5	7.8	(0.8)	36.5
Capital expenditure4		1.7	0.7	0.6	3.0
Total depreciation and amortisation		6.9	1.9	1.8	10.6
1	Inter-segment revenues are eliminated on consolidation.
2	Included in Chain external sales is £4.2m (2021: £3.6m) of Torque Transmission product sold through the Chain NSCs, usually in countries where Torque Transmission does not have its own presence.
3	The measure of segment assets reviewed by the CODM is total working capital, defined as inventories and trade and other receivables, less trade and other payables. Working capital is also measured as a ratio of rolling annual sales.
4	Capital expenditure consists of additions to property, plant and equipment and intangible assets.
5	The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatement.

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 19. Current year adjusting items include a £1.7m gain (2021: £nil) relating to US PPP loan forgiveness (Chain segment), £0.7m of non-recurring loss (2021: £nil) relating to new lease arrangements on sublet properties (Head office costs and eliminations segment) and £0.1m (2021: £0.7m) of amortisation of acquired intangibles (Chain segment).

Constant exchange rate results are retranslated to current year exchange rates and therefore only prior year comparatives would be deemed an alternative performance measure. A reconciliation is provided below and in Note 19.

	Restated1 Chain	Torque Transmission	Restated1 Head office costs and eliminations	Restated1 Consolidated
Year ended 31 March 2021	£m	£m	£m	£m
Revenue
External customer - transferred at a point in time	128.9	35.5	-	165.3
External customer - transferred over time	-	0.9	-	0.9
Inter-segment	1.1	2.7	(3.8)	-
Foreign exchange retranslation	(3.8)	(0.7)	-	(4.5)
Total revenue at constant exchange rates	126.2	38.4	(3.8)	160.8
Operating profit/(loss) (Restated)	12.9	5.0	(7.2)	10.7
Foreign exchange retranslation	(0.4)	(0.1)	-	(0.5)
Operating profit/(loss) at constant exchange rates (Restated)	12.5	4.9	(7.2)	10.2

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.   

1.  Segmental information (continued)

Geographical analysis of external sales by destination, non-current asset location and average employee numbers

The UK is the home country of the parent company, Renold plc. The principal operating territories, the proportions of Group external revenue generated in each (customer location), external revenues, non-current assets (asset location) and average employee numbers in each are as follows:

	Revenue ratio		External revenues		Non-current assets (excluding deferred tax)		Average employee numbers
	2022	2021	2022	2021	2022	Restated1 2021	2022	2021
	%	%	£m	£m	£m	£m
United Kingdom	8.4	7.4	16.4	12.3	13.9	16.5	282	288
Rest of Europe	31.2	30.6	60.9	50.6	17.2	17.9	499	504
Americas	39.1	39.9	76.4	65.8	30.5	28.7	279	271
Australasia	10.5	11.7	20.6	19.4	4.8	4.3	133	127
China	4.9	4.9	9.5	8.1	14.3	13.5	259	229
India	4.2	3.5	8.2	5.8	4.4	4.5	362	297
Other countries	1.7	2.0	3.2	3.3	-	-	-	-
	100.0	100.0	195.2	165.3	85.1	85.4	1,814	1,716

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements .   

All revenue relates to the sale of goods and services. No individual customer, or group of customers, represents more than 10% of Group revenue (2021: None).

Non-current assets consist of goodwill, other intangible assets, property, plant and equipment and investment property. Other non-current assets and deferred tax assets are not included above.

2.  Operating costs

Operating profit is stated after charging/(crediting):

	2022		Restated1 2021
	£m	£m	£m	£m
Change in finished goods and work in progress		(8.2)		6.0
Raw materials and consumables		73.6		54.4
Other external charges		32.5		25.9
Employee costs
Gross wages and salaries	60.0		53.4
Social security costs	7.3		5.4
Pension costs
- defined benefit	0.1		0.4
- defined contribution	1.1		1.0
Share-based incentive plans (including related social security costs)	1.3		0.1
		69.8		60.3
Depreciation of property, plant and equipment
- owned assets		5.3		5.5
- right-of-use assets		2.6		2.8
Amortisation of intangible assets		1.5		1.6
Amortisation of acquired intangible assets		0.1		0.7
Short-term leases and leases of low-value assets - plant and machinery		0.1		0.1
Income from sub-leasing right-of-use assets		(0.2)		(0.6)
Loss on disposal of property, plant and equipment		-		0.1
Research and development expenditure		0.6		0.5
Auditor's remuneration		0.8		0.7
Impairment losses and gains (including reversals of impairment losses) on financial assets
- impairment of right-of-use asset		1.7		-
- trade receivables impairment		0.2		-
Net foreign exchange losses		0.7		0.1
Pension administration costs		0.7		0.5
Government assistance support received		(1.7)		(4.0)
Non-recurring profit on disposal of right-of-use asset and associated lease liability		(1.1)		-
Total operating costs		179.0		154.6

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements .   

3.  Finance costs

	2022	2021
	£m	£m
Finance costs:
Interest payable on bank loans and overdrafts*	(1.1)	(1.6)
Interest expense on lease liabilities*	(0.5)	(0.5)
Amortised financing costs*	(0.3)	(0.2)
Loan finance costs	(1.9)	(2.3)
Net IAS 19 finance costs	(1.8)	(2.2)
Discount unwind on non-current trade and other payables	(0.1)	(0.1)
Finance costs	(3.8)	(4.6)

* Amounts arising on financial liabilities measured at amortised cost.

4.  Taxation

Analysis of tax charge in the year

	2022	2021
	£m	£m
United Kingdom
UK corporation tax at 19% (2021: 19%)	(0.1)	-
Overseas taxes
Corporation taxes	1.9	0.6
Movement in uncertain tax positions	(0.3)	1.3
Adjustments in respect of prior periods	0.3	(0.1)
Withholding taxes	0.2	0.4
Current income tax charge	2.0	2.2
Deferred tax
UK - origination and reversal of temporary differences	0.1	(0.8)
Overseas - origination and reversal of temporary differences	0.1	0.1
Effect of changes in corporate tax rates	(0.5)	-
Adjustments in respect of prior periods	0.5	-
Total deferred tax charge/(credit)	0.2	(0.7)
Tax charge on profit on ordinary activities	2.2	1.5

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements .

	2022	2021
	£m	£m
Tax on items taken to other comprehensive income
Deferred tax on changes in net pension deficits	3.1	(0.7)
Effect of changes in statutory tax rate on deferred tax assets	(2.3)	-
Tax on fair value of derivatives direct to reserves	(0.1)	-
Tax charge/(credit) in the statement of other comprehensive income	0.7	(0.7)

Factors affecting the Group tax charge for the year

The increase in the current tax charge for the year is primarily attributable to the full utilisation of historical tax losses in jurisdictions for which the headline statutory tax rate is higher than the prevailing UK tax rate. This in turn resulted in an increase in cash tax paid during the year. On 24 May 2021, the Finance Bill 2021 was considered substantively enacted thereby triggering a restatement of UK deferred tax balances from the 19% rate to 25%. This resulted in a deferred tax credit which was partially offset by a charge for the current year movement in the deferred tax balance. A portion of the restatement of the UK deferred tax balance has also been recognised in the statement of changes in equity. The deferred tax charge also includes a prior year adjustment relating to the recognition of deferred tax on US state tax balances. At 31 March 2022, the provision for open tax matters totalled £1.9m (31 March 2021: £2.3m).

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.

4. Taxation (continued)

The actual tax on the Group's profit before tax differs from the theoretical amount using the UK corporation tax rate as follows:

	2022	Restated1 2021
	£m	£m
Profit on ordinary activities before tax	12.4	6.1
Theoretical tax charge at 19% (2021: 19%)	2.4	1.2
Effects of:
Non-taxable income	(1.2)	(1.1)
Non-deductible expenditure	0.3	0.1
Other taxable income	0.8	0.1
Other deductible	-	(1.0)
Movement in uncertain tax positions	(0.4)	1.3
Overseas tax rate differences	0.9	0.4
Effect of changes in corporate tax rates	(0.3)	-
Adjustments in respect of prior periods	0.5	-
Movement in unrecognised deferred tax	(1.0)	0.1
Withholding taxes	0.2	0.4
Total tax charge	2.2	1.5

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements .

Effective tax rate

The effective tax rate of 18% (2021: 25%) is higher than the UK tax rate of 19% (2021: 19%) due to the following factors:

· Losses in jurisdictions where, due to uncertain future profitability, deferred tax assets are not recognised;

· Permanent differences including items that are non-assessable from a tax perspective such as US Paycheck Protection Program debt forgiveness income which is tax exempt; 

· The impact of substantively enacted tax rate increases on existing recognised deferred tax asset balances; 

· Prior year adjustments arising as tax submissions are finalised and agreed in specific jurisdictions. 

· A release of provisions held in respect of open tax matters as these are agreed with revenue authorities. 

Tax payments

Cash tax paid in the year was £1.7m (2021: £0.7m received). The net inflow in the prior year was driven by a review of payments on account across the Group, with revised payment profiles leading to a recovery of £1.3m of contributions from earlier periods.

5.  Earnings per share

Earnings per share (EPS) is calculated by reference to the earnings for the year and the weighted average number of shares in issue during the year as follows:

	2022			2021 (Restated)1
	Earnings	Shares	Per share amount	Earnings	Shares	Per share amount
	£m	(thousands)	(pence)	£m	(thousands)	(pence)
Basic EPS - Profit attributed to ordinary shareholders	10.2	214,795	4.7	4.6	225,418	2.0
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets	0.1		0.1	0.7		0.3
US PPP Loan forgiveness	(1.7)		(0.8)	-		-
New lease arrangements on sublet properties	0.7		0.3	-		-
Adjusted EPS	9.3	214,795	4.3	5.3	225,418	2.3

¹ See Accounting policies section and Note 20 for details of prior period restatements.  

Inclusion of the dilutive securities, comprising 16,908,941 (2021: 7,292,980) additional shares due to share options, in the calculation of basic and adjusted EPS changes the amounts shown above to 4.4p and 4.0p respectively (2021 (Restated)): basic EPS 2.0p, adjusted EPS 2.3p).

The adjusted EPS numbers have been provided in order 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.

6.  Dividends

No ordinary dividend payments were paid or proposed in either the current or prior year.

7.  Goodwill

	2022	2021
	£m	£m
Cost
At 1 April	25.1	27.6
Exchange adjustment	1.1	(2.5)
At 31 March	26.2	25.1
Accumulated amortisation and impairment
At 1 April	3.4	3.6
Exchange adjustment	0.1	(0.2)
At 31 March	3.5	3.4
Carrying amount	22.7	21.7

Impairment testing

The Group performed its annual impairment test of goodwill at 31 March 2022 which compares the current book value to the recoverable amount from the continued use or sale of the related business.

The recoverable amount of each Cash Generating Unit (CGU) has been determined on a value-in-use basis, calculated as the net present value of cash flows derived from detailed financial plans. All business units in the Group have submitted a budget for the financial year ending 31 March 2023 and strategic plan forecasts for the two financial years ending 31 March 2025. The budget and strategic forecasts, which are subject to detailed review and challenge, were approved by the Board. The Group prepares cash flow forecasts based on these projections for the first three years, with years four and five extrapolated based on known future events, recently observable trends and management expectations. A terminal value calculation is used to estimate the cash flows after year five. Sensitivity analysis has been performed including a zero revenue growth scenario (with current year revenue modelled for all future periods of the forecast) and a reverse stress test, to determine the extent of downturn which would result in a potential impairment. Revenue would have to reduce by 28% in the first year of the period under review (worse than the decline seen during the Covid pandemic), followed by 3% p.a. growth thereafter, for the first CGU containing goodwill to require potential impairment. Under the reverse stress test the first CGU with headroom that eliminated was India. The forecasts used for the impairment review are consistent with those used in the Going Concern review.

During the current year management have completed an exercise to enhance the allocation of business units to CGUs. This identified that previous impairment testing had been performed at a level which did not eliminate largely all of the inter-group trading between the Group's business units. Accordingly, the Group has improved its CGU allocation to amalgamate the Chain Europe and Chain China business units into a 'Europe & China' CGU. Furthermore, management have reviewed previous impairment testing exercises and note that the changes to defined CGUs would not result in any impairment had it been applied consistently in prior periods.

The Chain Europe and Chain China business units have been combined into a single CGU to eliminate the dependency arising from the significant level of inter-group sales made by the Chinese manufacturing facility to European Chain operations.

The key assumptions used in the value-in-use calculations are:

• Sales: Forecast sales are built up with reference to expected sales prices and volumes from individual markets and product categories based on past performance, projections of developments in key markets and management's judgement;

• Margins: Forecast margins reflect historical performance and management's experience of each CGUs profitability at the forecast level of sales including the impact of all completed restructuring projects. The projections do not include the impact of future restructuring projects to which the Group is not yet committed;

• Discount rate: Pre-tax discount rates have been calculated based on the Group's weighted average cost of capital and risks specific to the CGU being tested; and

• Long-term growth rates: As required by IAS 36, cash flows beyond the period of projections are extrapolated using long-term growth rates published by the Organisation for Economic Co-operation and Development for the territory in which the CGU is based. The discount rates applied to the cash flows of each of the CGUs are based on the risk-free rate for long-term bonds issued by the government in the respective market. This is then adjusted to reflect both the increased risk of investing in equities and the systematic risk of the specific CGU (using an average of the betas of comparable companies). These rates do not reflect the long-term assumptions used by the Group for investment planning.

7. Goodwill (continued)

The Directors do not consider that any reasonably possible changes to the key assumptions would reduce the recoverable amount to its carrying value for any CGU. No impairment charge has been recognised in the current or prior period for any CGU.   

	Long-term growth rate		Discount rate  (pre-tax)		Carrying value
	2022	2021	2022	2021	2022	2021
	%	%	%	%	£m	£m
Americas (Jeffrey Chain, USA)	1.7	1.9	16.2	12.1	20.0	19.0
Australia (Ace Chains, Australia)	2.6	2.6	12.0	12.3	0.5	0.5
India (Renold Chain, India)	6.2	7.4	20.8	19.6	1.7	1.7
Europe & China (Renold Tooth Chain, Germany)	1.1	1.3	15.5	15.7	0.5	0.5
					22.7	21.7

8.  Intangibles

	Customer order book	Customer lists	Technical know-how	Restated1 Computer software	Restated1 Total
	£m	£m	£m	£m	£m
Cost
At 1 April 2020	0.3	4.4	0.2	20.8	25.7
Prior period restatement	-	-	-	(1.7)	(1.7)
At 1 April 2020 (Restated)	0.3	4.4	0.2	19.1	24.0
Exchange adjustment	-	(0.2)	-	(0.2)	(0.4)
Additions	-	-	-	0.8	0.8
At 31 March 2021 (Restated)	0.3	4.2	0.2	19.7	24.4
Exchange adjustment	-	-	-	(0.1)	(0.1)
Additions	-	-	-	1.2	1.2
Disposals	-	-	-	(0.9)	(0.9)
Acquisition of subsidiary	-	0.4	-	-	0.4
At 31 March 2022	0.3	4.6	0.2	19.9	25.0
Accumulated amortisation and impairment
At 1 April 2020	0.3	3.7	0.2	13.5	17.7
Prior period restatement	-	-	-	(0.2)	(0.2)
At 1 April 2020 (Restated)	0.3	3.7	0.2	13.3	17.5
Exchange adjustment	-	(0.2)	-	(0.1)	(0.3)
Amortisation charge	-	0.7	-	1.6	2.3
At 31 March 2021 (Restated)	0.3	4.2	0.2	14.8	19.5
Exchange adjustment	-	(0.1)	-	(0.2)	(0.3)
Amortisation charge	-	0.1	-	1.5	1.6
Disposals	-	-	-	(0.9)	(0.9)
At 31 March 2022	0.3	4.2	0.2	15.2	19.9
Net book amount
At 31 March 2022	-	0.4	-	4.7	5.1
At 31 March 2021 (Restated)	-	-	-	4.9	4.9

¹ Software intangible assets have been restated for the impact of the Group's change in accounting policy for Software as a service ('SaaS') arrangements. See Accounting Policies for further details. 

The gross customer list cost predominately relates to the acquisition of the Tooth Chain (Germany) business, acquired in January 2016, which brought significant benefit to the Group in terms of new customers, relationships and technical 'know-how'. The Tooth Chain acquired intangible assets are now fully amortised although during the current year amounts have been recognised in relation to the Brooks (UK) acquisition (see Note 21 for further details).

The customer list acquired with the Brooks business has been valued under IFRS 3 using estimates of useful lives and discounted cash flows of expected income. The value is being amortised as follows: 

• Customer lists and technical know-how are amortised over five years as the benefits crystallise over a long period.

No brand names have been acquired in the current year acquisition or previous acquisitions.

9.  Property, plant and equipment

	Land and buildings	Restated1 Plant and equipment	Restated1 Total
	£m	£m	£m
Cost
At 1 April 2020	24.7	124.0	148.7
Prior period restatement	-	0.3	0.3
At 1 April 2020 (Restated)	24.7	124.3	149.0
Exchange adjustment	(0.9)	(5.3)	(6.2)
Additions	(0.1)	2.3	2.2
Disposals	-	(2.2)	(2.2)
At 31 March 2021 (Restated)	23.7	119.1	142.8
Exchange adjustment	1.1	1.9	3.0
Additions	0.3	4.8	5.1
Disposals	-	(2.3)	(2.3)
Acquisition of subsidiary	-	0.1	0.1
At 31 March 2022	25.1	123.6	148.7
Accumulated depreciation and impairment
At 1 April 2020	7.1	88.3	95.4
Exchange adjustment	(0.3)	(4.0)	(4.3)
Charge for the year	0.5	5.0	5.5
Disposals	-	(1.9)	(1.9)
At 31 March 2021	7.3	87.4	94.7
Exchange adjustment	0.2	1.3	1.5
Charge for the year	0.6	4.7	5.3
Disposals	-	(2.1)	(2.1)
At 31 March 2022	8.1	91.3	99.4
Net book amount
At 31 March 2022	17.0	32.3	49.3
At 31 March 2021 (Restated)	16.4	31.7	48.1

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.

Property, plant and equipment pledged as security for liabilities amounted to £32.2m (2021: £36.6m).

Future capital expenditure

At 31 March 2022 capital expenditure contracted for but not provided for in these accounts amounted to £2.4m (2021: £3.3m).

10. Leasing and right-of-use assets

Right-of-use assets

	Restated1 Land and buildings	Plant and equipment	Restated1 Total
	£m	£m	£m
Cost
At 1 April 2020	10.2	3.4	13.6
Prior period restatement	0.6	-	0.6
At 1 April 2020 (Restated)	10.8	3.4	14.2
Exchange adjustment	(0.1)	-	(0.1)
Additions	1.4	0.2	1.6
Disposals	(0.3)	(0.3)	(0.6)
At 31 March 2021 (Restated)	11.8	3.3	15.1
Exchange adjustment	0.2	-	0.2
Additions	1.7	0.6	2.3
Disposals	(1.1)	(1.9)	(3.0)
At 31 March 2022	12.6	2.0	14.6
Accumulated depreciation and impairment
At 1 April 2020	1.2	1.1	2.3
Exchange adjustment	-	(0.1)	(0.1)
Charge for the year	1.7	1.1	2.8
Disposals	(0.3)	(0.3)	(0.6)
At 31 March 2021	2.6	1.8	4.4
Exchange adjustment	-	0.1	0.1
Charge for the year	1.6	1.0	2.6
Disposals	(0.5)	(1.7)	(2.2)
Impairment	1.7	-	1.7
At 31 March 2022	5.4	1.2	6.6
Net book amount
At 31 March 2022	7.2	0.8	8.0
At 31 March 2021	9.2	1.5	10.7

During the year management identified that an onerous lease provision of £2.7m, which had been recorded as a reduction to the opening carrying value of the Bredbury right-of-use property on adoption if IFRS 16, had been incorrectly classified. An adjustment has been made to restate the opening cost of the Bredbury right-of-use asset by reclassifying £0.6m of this provision to dilapidations provisions with a £2.1m onerous lease provision remaining netted against the opening cost at 1 April 2021.

The head lease on the Bredbury property expires in May 2030 at a rental cost of £0.8m per annum. A significant proportion of this site has previously been sublet and, as described in Note 18, during the current year the Group signed a sub-lease for the remaining nine years of the head lease (which expires in May 2030), with the existing tenant. This initially resulted in the Group disposing of the Bredbury right-of-use asst and recording a finance lease receivable. However, subsequent to 31 March 2022, the tenant vacated the site and it became evident that the tenant was experiencing financial difficulties. Accordingly, and following forfeiture of the new sub-lease, the Group has re-instated the Bredbury right-of-use asset, less a current year impairment charge of £1.7m. The impairment reflects the uncertainty regarding the future income stream from the site. A range of possible outcomes have been modelled for the continued subletting of the property, ranging from an increase in the right-of-use asset of £0.7m to a further reduction in the right-of-use asset of up to £1.6m (the net book value of the property at 31 March 2022).

Additionally in the current year, the Group has exited a lease arrangement for a previously closed site at a property in Rainham, UK, with the corresponding right-of-use asset disposal recorded in the year.

10. Leasing and right-of-use assets (continued)

Lease liabilities

	2022	2021
	£m	£m
Maturity analysis - contractual undiscounted cash flows
Less than one year	3.0	2.8
One to two years	2.5	1.5
Two to five years	4.9	5.5
More than five years	3.2	8.9
Total undiscounted lease liabilities at 31 March	13.6	18.7
Less: Interest allocated to future periods	(1.6)	(3.3)
Lease liabilities included in the Consolidated Balance Sheet	12.0	15.4
Current	2.8	2.5
Non-current	9.2	12.9

Amounts recognised in profit or loss

	2022	2021
	£m	£m
Interest on lease liabilities	(0.5)	(0.5)
Variable lease payments not included in the measurement of lease liabilities	-	-
Non-recurring profit on disposal of right-of-use asset and associated lease liability	1.1	-
Income from sub-leasing right-of-use assets	0.2	0.6
Expenses relating to short-term leases and leases of low-value assets	(0.1)	(0.1)

Amounts recognised in the Consolidated Statement of Cash Flows

	2022	2021
	£m	£m
Repayment of principal under lease liabilities	4.2	3.2
Repayment of interest on lease liabilities	0.5	0.5
Cash outflows in relation to short-term leases and leases of low-value assets	0.1	0.1
Total cash outflows for leases	4.8	3.8

11. Inventories

	2022	2021
	£m	£m
Raw materials	6.9	5.4
Work in progress	5.5	4.0
Finished products and production tooling	36.0	28.3
	48.4	37.7

Inventories pledged as security for liabilities amounted to £36.9m (2021: £28.1m).

The Group expensed £75.0m (2021: £54.8m) of inventories during the period. In the year to 31 March 2022, £3.0m (2021: £3.1m) was charged for the write-down of inventory and £0.4m (2021: £0.1m) was released from inventory provisions no longer required.

12. Trade and other receivables

	2022	2021
	£m	£m
Trade receivables1	31.6	27.1
Less: Loss allowance	(0.5)	(0.4)
Trade receivables: net	31.1	26.7
Other receivables1	2.8	2.5
Prepayments	1.8	1.1
	35.7	30.3

1.  Financial assets carried at amortised cost.

The Group has no significant concentration of credit risk but does have a concentration of translational and transactional foreign exchange risk in both US Dollars and Euros; however, the Group hedges against these risks. The carrying amount of trade and other receivables approximates their fair value.

Trade receivables are non-interest bearing and are generally on 30-90 days terms. The average credit period on sales of goods is 60 days (2021: 62 days).

The following table details the risk profile of trade receivables based on the Group's provision matrix. As the Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further analysed:

	Trade receivables - days past due
At 31 March 2022	Not past due	<30 days	30-60 days	60-90 days	>90 days	Total
Trade receivables: gross	27.1	3.2	0.4	0.2	0.7	31.6
Expected credit loss rate, %	0.1%	2.0%	-	16.2%	47.6%	1.5%
Estimated gross carrying amount at default, £m	-	0.2	-	-	0.3
Lifetime expected credit loss, £m						0.5

	Trade receivables - days past due
At 31 March 2021	Not past due	<30 days	30-60 days	60-90 days	>90 days	Total
Trade receivables: gross	21.9	3.2	0.4	0.5	1.1	27.1
Expected credit loss rate, %	0.2%	0.1%	0.0%	0.2%	28.7%	1.3%
Estimated gross carrying amount at default, £m	0.1	-	-	-	0.3
Lifetime expected credit loss, £m						0.4

The following table shows the movement in the lifetime expected credit losses; there has been no change in the estimation techniques or significant assumptions made during the current reporting period:

	2022	2021
Loss allowance	£m	£m
At 1 April	0.4	0.5
Net remeasurement of loss allowance	0.1	-
Amounts written off as uncollectable	-	(0.1)
At 31 March	0.5	0.4

13. Cash and cash equivalents

In the Group cash flow statement, net cash and cash equivalents are shown after deducting bank overdrafts as follows:

	2022	2021
	£m	£m
Cash and cash equivalents	10.5	19.9
Less: Overdrafts (Note 14)	(1.0)	(2.6)
Net cash and cash equivalents	9.5	17.3

14. Borrowings

	2022	2021
	£m	£m
Amounts falling due within one year:
Overdrafts (Note 13)	1.0	2.6
Capitalised costs1	-	(0.3)
Current borrowings	1.0	2.3
Amounts falling due after more than one year:
Bank loans	22.8	35.7
Capitalised costs1	-	(0.2)
Non-current borrowings	22.8	35.5
Preference stock1	0.5	0.5
	23.3	36.0
Total borrowings	24.3	38.3

¹ During the current year the presentation of capitalised costs has been amended to correctly record capitalised finance costs net of non-current borrowings. The prior year balance sheet has not been represented on the basis of materiality.

All financial liabilities above are carried at amortised cost.

Core banking facilities

On 29 March 2019 the Group renewed its £61.5m Multi-Currency Revolving Facility banking facilities with HSBC UK, Allied Irish Bank (GB), and Citibank. The facility matures in March 2024 and is fully committed and available until maturity.

At the year end, the undrawn core banking facility was £37.8m (2021: £27.7m). The Group also benefits from a UK overdraft and a number of overseas facilities totalling £2.7m (2021: £5.5m) with availability at year end of £2.3m. The Group pays interest at SONIA (or LIBOR prior to 20 December 2021) plus a variable margin in respect of the core banking facility. The average rate of interest paid in the year was SONIA (20 December 2021 onwards) or LIBOR (prior to 20 December 2021) plus 1.60% for Sterling, Euro and US Dollar denominated facilities (2021: LIBOR plus 1.85% for Sterling, Euro and US Dollar denominated facilities).

The core banking facility is subject to two covenants, which are tested semi-annually: net debt to EBITDA (leverage, maximum ratio 2.5 times) and EBITDA to net finance charges (interest cover, minimum ratio 4.0 times). 

Secured borrowings

Included in Group borrowings are secured borrowings of £24.1m (2021: £38.3m). Security is provided by fixed and floating charges over assets (including certain property, plant and equipment and inventory) primarily in the UK, USA, Germany and Australia. Certain Group companies have provided cross-guarantees in respect of these borrowings. 

Preference stock

At 31 March 2022, there were 580,482 units of preference stock in issue (2021: 580,482). 

All payments of dividends on the preference stock have been paid on the due dates. The preference stock has the following rights:

i. a fixed cumulative preferential dividend at the rate of 6% per annum payable half yearly on 1 January and 1 July in each year;

ii. rank both with regard to dividend (including any arrears on the commencement of a winding up) and return of capital in priority to all other stock or shares in the Company, but with no further right to participate in profits or assets;

iii. no right to attend or vote, either in person or by proxy, at any general meeting of the Company or to have notice of any such meeting, unless the dividend on the preference stock is in arrears for six calendar months; and

iv. no redemption entitlement and no fixed repayment date.

There is no significant difference between the carrying value of financial liabilities and their equivalent fair value.

15. Trade and other payables

	2022		2021
	Current	Non-current	Current	Non-current
	£m	£m	£m	£m
Trade payables1	23.4	-	13.2	-
Other tax and social security1	2.2	-	1.9	-
Other payables1	3.6	4.7	1.4	5.4
Accruals	19.3	-	15.0	-
	48.5	4.7	31.5	5.4

1.  Financial liabilities carried at amortised cost.

Trade payables are non-interest bearing and are normally settled within 60-day terms. The Group does have a concentration of translational foreign exchange risk in both US Dollars and Euros; however, the Group hedges against this risk. The non-current other payable is the deferred element of the construction costs for the new Chinese factory in Jintan.

The Group did not operate supplier financing or reverse factoring programmes during the current or prior financial year.

The Directors consider that the carrying amount of trade payables approximates to their fair value.

16. Provisions

	Restated1 Dilapidations	Business Restructuring	Restated1 Total provisions
	£m	£m	£m
At 1 April 2021	-	1.4	1.4
Prior year restatement	2.5	-	2.5
At 1 April 2021 (Restated)	2.5	1.4	3.9
Arising during the year	0.3	0.1	0.4
Utilised in the year	-	(0.1)	(0.1)
Released during the year	-	(0.2)	(0.2)
At 31 March 2022	2.8	1.2	4.0

	2022	Restated1 2021
Allocated as:	£m	£m
Current provisions (Restated)	0.2	1.4
Non-current provisions (Restated)	3.8	2.5
	4.0	3.9

¹ See Accounting policies and Note 20 for details of prior period restatements.

Business restructuring

At the year ended 31 March 2022, a provision continues to be recognised in relation to site environmental costs in France. Substantially all of the provision is recorded as non-current.

Dilapidations

Provisions are recognised in relation to contractual obligations to reinstate leasehold properties to the state of repair specified in the property lease. The provision includes costs, as required within the lease, to rectify or reinstate modifications to the property and to remediate general wear and tear incurred to the balance sheet date. The provision to rectify or reinstate modifications is recognised on inception, with a corresponding fixed asset that is depreciated in line with the underlying asset. The provision to rectify general wear and tear is recognised as it is incurred over the life of the lease.

The provision is assessed based on the expected cost at the balance sheet date, using recent cost estimates from suitably qualified property professionals. These estimates are adjusted to reflect the impact of inflation between the date of assessment and the expected timing of the payments, and are then discounted back to present value. A range of inflation and discount rates have been used in order to best reflect the circumstances of the lease to which the dilapidation obligation relates. The inflation rate applied ranges from 2.9% to 4.5% and the discount rate ranges from 1.6% to 5.0%. These rates are most notably impacted by the country of lease and length of lease.

The majority of the dilapidation provision relates to cash outflows which are expected to take place at the end of each respective lease term; none of which are expected to end within the next 12 months. The associated outflows are estimated to arise over a period of up to 22 years from the balance sheet date. As a result, with the exception of £0.2m which is to be spent on specific work in the next 12 months, substantially all of the provision is classed as non-current (£1.4m).

17. Additional cash flow information

Reconciliation of operating profit to net cash flows from operations:

	2022	2021
	£m	£m
Cash generated from operations:
Operating profit from continuing and discontinued operations	16.2	10.5
Depreciation of property, plant and equipment - owned assets	5.3	5.5
Depreciation of property, plant and equipment - right-of-use assets	2.6	2.8
Amortisation of intangible assets	1.6	2.6
(Profit)/Loss on disposals of plant and equipment	(0.9)	0.1
Impairment of right-of-use asset	1.7	-
US PPP loan forgiveness	(1.7)	-
Equity share plans	1.1	-
(Increase)/decrease in inventories	(9.5)	6.3
(Increase)/decrease in receivables	(4.5)	4.2
Increase/(decrease) in payables	13.7	(5.0)
Increase in provisions	0.1	0.7
Cash contribution to pension schemes	(4.8)	(2.1)
Pension current service cost (non-cash)	0.1	0.1
Pension past service credit (non-cash)	-	0.3
Cash generated from operations	21.0	26.0

Reconciliation of net change in cash and cash equivalents to movement in net debt:

	2022	2021
	£m	£m
Increase/(decrease) in cash and cash equivalents (Consolidated Statement of Cash Flows)	(8.2)	1.5
Change in net debt resulting from cash flows
- Proceeds from borrowings	(4.7)	(2.8)
- Repayment of borrowings	16.0	19.9
US PPP loan forgiveness	1.7
Foreign currency translation differences	0.1	(0.2)
Non-cash movement on capitalised finance costs	(0.3)	(0.2)
Change in net debt during the period	4.6	18.2
Net debt at start of year	(18.4)	(36.6)
Net debt at end of year	(13.8)	(18.4)
Net debt comprises:
Cash and cash equivalents (Note 13)	10.5	19.9
Total borrowings (Note 14)	(24.3)	(38.3)
	(13.8)	(18.4)

17. Additional cash flow information (continued )

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's consolidated cash flow statement as cash flows from financing activities.

	Opening balance	Accrued interest	Financing cash flows	New leases	Lease disposal	US PPP loan forgiveness	Non-cash changes1	Closing balance
2022	£m	£m	£m			£m	£m	£m
Bank loans (Note 14)	35.7	1.1	(12.2)	-	-	(1.7)	0.2	23.1
Capitalised costs (Note 14)	(0.5)	-	(0.1)	-	-	-	0.6	-
Preference stock (Note 14)	0.5	-	-	-	-	-	-	0.5
Lease liabilities (Note 10)	15.4	0.5	(4.7)	2.3	(1.7)	(1.7)	0.2	12.0
Total liabilities from financing activities	51.1	1.6	(17.0)	2.3	(1.7)	(1.7)	0.7	35.3
Overdrafts (Note 14)	2.6							1.0
Less: Lease liabilities (Note 10)	(15.4)							(12.0)
Total borrowings (note 14)	38.3							24.3
Add: Cash and cash equivalents (Note 13)	(19.9)							(10.5)
Net debt	18.4							13.8

¹ Non-cash changes include the amortisation of capitalised finance costs and foreign exchange translation.  

	Opening balance	Accrued interest	Financing cash flows	New leases	Non-cash changes1	Closing balance
2021	£m	£m	£m	£m	£m	£m
Bank loans (Note 14)	51.9	1.6	(18.6)	-	0.8	35.7
Capitalised costs (Note 14)	(0.7)	-	-	-	0.2	(0.5)
Preference stock (Note 14)	0.5	-	-	-	-	0.5
Lease liabilities (Note 10)	17.1	0.4	(3.7)	1.6	-	15.4
Total liabilities from financing activities	68.8	2.0	(22.3)	1.6	1.0	51.1
Overdrafts (Note 14)	0.5					2.6
Less: Lease liabilities (Note 10)	(17.1)					(15.4)
Total borrowings (Note 14)	52.2					38.3
Add: Cash and cash equivalents (Note 13)	(15.6)					(19.9)
Net debt	36.6					18.4

¹ Non-cash changes includes the amortisation of capitalised finance costs and foreign exchange translation.

18. Post balance sheet events

On 10 November 2021 the Group signed a new sub-lease for the remaining nine years of the Bredbury site lease, with the existing tenant of five years standing. At 31 March 2022 it had become evident that the existing tenant was experiencing financial difficulties, resulting in an amount of rent outstanding at the balance sheet date. Subsequent to the year end, the tenant vacated the site and, accordingly, the recoverability of the lease receivable required further assessment. The Group initially recorded an impairment charge relating the lease receivable then, following forfeiture of the lease, re-instated a right-of-use asset for the leased property in line with professional advice received from the Group's surveyor. Refer to Note 10 for further details of the amounts recorded in relation to the Bredbury right-of-use asset.

There were no other significant post balance sheet events to report.

19. Alternative performance measures

In order to provide users of the accounts with a clear and consistent presentation of the performance of the Group's ongoing trading activity, the Group uses various alternative performance measures (APMs), including presenting 'Adjusted' measures separately from statutory items on the face of the consolidated income statement. Amortisation of acquired intangibles, restructuring costs, discontinued operations and material one-off items or remeasurements are included in a separate row 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 comparative to current 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
• adjusted return on sales at constant exchange rates	G
• EBITDA	H H	EBITDA is a widely utilised measure of profitability, adjusting to remove non-cash depreciation and amortisation charges
• adjusted EBITDA	H
• operating cash flow	H
• net debt	I	Net debt, leverage and gearing are used to assess the level of borrowings within the Group and are widely used in capital markets analysis
• leverage ratio	J
• gearing ratio	K
• legacy pension cash costs	L	The cost of legacy pensions is used by the Group as a measure of the cash cost of servicing legacy pension schemes
• average working capital ratio	M	Working capital as a ratio of rolling 12 month revenue is used to measure cash performance and balance sheet strength

APMs are defined and reconciled to the IFRS statutory measure as follows:

(A) Adjusted operating profit

	Year ended 31 March 2022
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Operating profit	20.5	4.1	(8.4)	16.2
Add back/(deduct):
Amortisation of acquired intangible assets	0.1	-	-	0.1
US PPP Loan forgiveness	(1.7)	-	-	(1.7)
New lease arrangements on sublet properties	-	-	0.7	0.7
Adjusted operating profit	18.9	4.1	(7.7)	15.3

	Year ended 31 March 2021 (Restated)1
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Operating profit	12.9	5.0	(7.2)	10.7
Add back/(deduct):
Amortisation of acquired intangible assets	0.7	-	-	0.7
Adjusted operating profit	13.6	5.0	(7.2)	11.4

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.

19. Alternative performance measures (continued)

(B) Adjusted profit before taxation

	2022	Restated1 2021
	£m	£m
Profit before taxation	12.4	6.1
Add back/(deduct):
Amortisation of acquired intangible assets	0.1	0.7
US PPP loan forgiveness	(1.7)	-
New lease arrangements on sublet properties	0.7	-
Adjusted profit before taxation	11.5	6.8

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.

(C) Adjusted earnings per share

Adjusted EPS is reconciled to statutory EPS in Note 5.

(D) Return on sales and operating profit gearing

	Year ended 31 March 2022
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Adjusted operating profit	18.9	4.1	(7.7)	15.3
Total revenue (including inter-segment sales)	159.2	40.4	(4.4)	195.2
Return on sales %	11.9%	10.1%	-	7.8%

	Year ended 31 March 2021 (Restated)1
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Adjusted operating profit	13.6	5.0	(7.2)	11.4
Total revenue (including inter-segment sales)	130.0	39.1	(3.8)	165.3
Return on sales %	10.5%	12.8%	-	6.9%

	Year ended 31 March 2022
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Adjusted operating profit - 2022	18.9	4.1	(7.7)	15.3
Adjusted operating profit - 2021	13.6	5.0	(7.2)	11.4
Year-on-year change in adjusted operating profit (a)	5.3	(0.9)	(0.5)	3.9
Total revenue (including inter-segment sales) - 2022	159.2	40.4	(4.4)	195.2
Total revenue (including inter-segment sales) - 2021	130.0	39.1	(3.8)	165.3
Year-on-year change in total revenue (b)	29.2	1.3	(0.6)	29.9
Adjusted operating profit gearing % ((a)/(b))	18%	-69%	n/a	13%

19. Alternative performance measures (continued)

	Year ended 31 March 20211
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Adjusted operating profit - 2021	13.6	5.0	(7.2)	11.4
Adjusted operating profit - 2020	13.8	5.3	(5.7)	13.4
Year-on-year change in adjusted operating profit (a)	(0.2)	(0.3)	(1.5)	(2.0)
Total revenue (including inter-segment sales) - 2021	130.0	39.1	(3.8)	165.3
Total revenue (including inter-segment sales) - 2020	149.0	46.1	(5.7)	189.4
Year-on-year change in total revenue (b)	(19.0)	(7.0)	1.9	(24.1)
Adjusted operating profit gearing % ((a)/(b))	1%	4%	n/a	8%

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.

(E), (F) & (G) Revenue, adjusted operating profit and adjusted operating profit margin at constant exchange rates

	Year ended 31 March 2021 (Restated)1
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
External customer - transferred at a point in time	128.9	35.5	-	164.4
External customer - transferred over time	-	0.9	-	0.9
Inter-segment	1.1	2.7	(3.8)	-
Foreign exchange retranslation	(3.8)	(0.7)	-	(4.5)
Revenue at constant exchange rates	126.2	38.4	(3.8)	160.8
Adjusted operating profit	13.6	5.0	(7.2)	11.4
Foreign exchange retranslation	(0.4)	(0.1)	-	(0.5)
Adjusted operating profit at constant exchange rates	13.2	4.9	(7.2)	10.9
Return on sales at constant exchange rates %	10.5%	12.8%	-	6.8%

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.

  (H) EBITDA, adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) and operating cash flow

	2022	Restated1 2021
	£m	£m
Statutory operating profit from continuing operations	16.2	10.7
Depreciation and amortisation - owned assets	9.5	10.6
EBITDA	25.7	21.3
Deduct:
US PPP Loan forgiveness	(1.7)	-
New lease arrangements on sublet properties	0.7	-
Adjusted EBITDA	24.7	21.3
Inventories (see Note 17)	(9.5)	6.3
Trade and other receivables (see Note 17)	(4.5)	4.2
Trade and other payables (see Note 17)	13.7	(5.0)
Provisions (see Note 16)	0.1	0.8
Add back: Restructuring cash spend	-	0.2
Movement in working capital	(0.2)	6.5
Purchase of property, plant and equipment (Consolidated Statement of Cash Flows)	(4.1)	(2.3)
Purchase of intangible assets (Consolidated Statement of Cash Flows)	(1.2)	(0.8)
Proceeds from property disposals	0.2	0.2
Net capital expenditure	(5.1)	(2.9)
Operating cash flow	19.4	24.9

¹ The results for the year ended 31 March 2021 have been restated. Refer to Note 20 and Accounting Policies for details of the restatements.

19. Alternative performance measures (continued)

(I) Net debt

Net debt is reconciled to the statutory balance sheet in Note 17.

(J) Leverage ratio

	2022	2021
	£m	£m
Net debt (see Note 17)	13.8	18.4
Adjusted EBITDA	24.7	21.3
Leverage ratio	0.6x	0.9x

(K) Gearing ratio

	2022		2021
	£m	£m	£m	£m
Net debt (see Note 17)		13.8		18.4
Equity attributable to equity holders of the parent	5.8		(14.7)
Net debt (see Note 17)	13.8		18.4
Total capital plus net debt		19.6		3.7
Gearing ratio %		70%		497%

(L) Legacy pension cash costs

	2022	2021
	£m	£m
Cash contributions to pension schemes	3.7	0.8
Pension payments in respect of unfunded schemes	1.1	1.3
Scheme administration costs	0.7	0.5
	5.5	2.6

(M) Average working capital ratio

	2022	2021	2020
	£m	£m	£m
Inventories	48.4	37.7	46.1
Trade and other receivables	35.7	30.3	35.8
Trade and other payables	(48.5)	(31.5)	(37.6)
Total working capital	35.6	36.5	44.3
Average working capital1 (a)	36.1	40.4
Revenue (b)	195.2	165.3
Average working capital ratio ((a)/(b))	18%	24%

¹ Calculated as a simple average of the opening and closing balance sheet working capital.

20. Prior period adjustments

The Group has changed its accounting policy related to the capitalisation of certain software costs, this change follows the IFRIC interpretation Committee's agenda decision published in April 2021, which clarifies the accounting treatment of the costs of configuring or customising software under Software as a service arrangements. Previously capitalised SaaS costs have now been written off at the point they were originally incurred, and the related subsequent amortisation of these costs in the prior year has now been reversed and added back to profit. See Accounting policies for further details.

In addition, prior period adjustments have been recorded relating to the following:

- Dilapidations provision - The prior period adjustment records an increased dilapidations provision for certain leased properties across the Group. The adjustment arose following changes to sublease arrangements on previously closed sites which prompted a global review of dilapidations across the Group's property portfolio. The adjustment includes the reclassification of £0.6m of dilapidations provision that had been incorrectly netted against the opening right-of-use asset cost on adoption of IFRS 16 (see Note 10 for further details of the reclassification). Dilapidation provisions have been increased; with property, plant and equipment increased to the extent the group has incurred capital cost to modify lease properties alongside a corresponding obligation to remove the modification and restore the property on surrender of the lease. The adjustment to the income statement reflects the extent to which dilapidations increased in the prior financial year.

- Deferred taxation - The prior period adjustment reduces the value of the deferred tax asset (DTA) recognised in respect of UK pensions (reduction of £6.4m at 31 March 2021) and increases the value of deferred tax recognised in respect of UK losses (increase of £0.6m at 31 March 2021). The adjustment to the pensions DTA arose in respect of a deemed contribution of £40m that was made to the UK pension scheme in 2014. The contribution formed part of the Group's 25-year asset-backed partnership structure (the Scottish Limited Partnership, 'SLP'). At the inception of the partnership structure the £40m contribution was recorded as an allowable deduction in the tax computations of the Group's UK subsidiaries. This upfront tax deduction reduces the future tax deductions that are available over the remainder of the 25-year agreement. The gross pension DTA has historically been assumed to equal the IAS 19 deficit for the UK scheme, multiplied by the future expected tax rate, however, due to the upfront deduction taken at the inception of the scheme the UK pension DTA has been reduced to cap the implied future available deductions at each balance sheet date.

The reduction in the UK pensions DTA has resulted in the recognition of a DTA for UK losses. Previously no forecast UK taxable profits were available for loss recognition due to the assumption that taxable profits would be more than offset by pension deductions. Due to the cap on allowable pension deductions, in the forecast period used to assess taxable profits available for loss recognition, headroom now remains and accordingly a DTA has been recognised at 31 March 2021.

The impact, on a line item basis for those affected, on the Consolidated Statement of Comprehensive Income for the year ended 31 March 2021, the Consolidated Balance Sheet as at 31 March 2020 and as 31 March 2021 is as follows:

Consolidated Statement of Comprehensive Income for the year ended 31 March 2021	As previously reported	Dilapidations provision	Deferred taxation	Change in accounting policy	2021 Statutory (restated)
	£m	£m	£m	£m	£m
Revenue	165.3	-	-	-	165.3
Operating costs	(154.8)	(0.1)	-	0.3	(154.6)
Operating profit	10.5	(0.1)	-	0.3	10.7
Profit before tax	5.9	(0.1)	-	0.3	6.1
Taxation	(2.1)	-	0.6	-	(1.5)
Profit/(loss) for the financial year	3.8	(0.1)	0.6	0.3	4.6
Tax on remeasurement gains/losses on retirement benefit obligations	1.0	-	(0.3)	-	0.7
Other comprehensive income/(expense) for the year, net of tax	(9.5)	-	(0.3)	-	(9.8)
Total comprehensive income/(expense) for the year, net of tax	(5.7)	(0.1)	0.3	0.3	(5.2)
Earnings/(loss) per share
Basic earnings/(loss) per share	1.7p	-	0.2p	0.1p	2.0p
Diluted earnings/(loss) per share	1.6p	-	0.2p	0.2p	2.0p

¹ For further details on the change in accounting policy restatement refer to Accounting policies.

20. Prior period adjustments (continued)

	2021
Consolidated Balance sheet as at 31 March	As previously reported	Dilapidations provision	Deferred taxation	Change in accounting policy1	2021 Statutory (restated)
	£m	£m	£m	£m	£m
ASSETS
Non-current assets
Property, plant and equipment	47.8	0.3	-	-	48.1
Right-of-use-assets	10.1	0.6	-	-	10.7
Other non-current assets	27.8	-	-	(1.2)	26.6
Deferred tax assets	21.0	-	(5.8)	-	15.2
	106.7	0.9	(5.8)	(1.2)	100.6
TOTAL ASSETS	194.8	0.9	(5.8)	(1.2)	188.7
LIABILITIES
Non-current liabilities
Provisions	-	(2.5)	-	-	(2.5)
Other non-current liabilities	(160.8)	-	-	-	(160.8)
	(160.8)	(2.5)	-	-	(163.3)
TOTAL LIABILITIES	(200.9)	(2.5)	-	-	(203.4)
NET LIABILITIES	(6.1)	(1.6)	(5.8)	(1.2)	(14.7)
EQUITY
Other equity items	63.5	-		-	63.5
Retained earnings	(69.6)	(1.6)	(5.8)	(1.2)	(78.2)
TOTAL SHAREHOLDERS' EQUITY	(6.1)	(1.6)	(5.8)	(1.2)	(14.7)

¹ For further details on the change in accounting policy restatement refer to Accounting policies.

	2020
Consolidated Balance sheet as at 31 March	As previously reported	Dilapidations provision	Deferred taxation	Change in accounting policy1	2021 Statutory (restated)
	£m	£m	£m	£m	£m
ASSETS
Non-current assets
Property, plant and equipment	53.3	0.3	-	-	53.6
Right-of-use-assets	11.3	0.6	-	-	11.9
Other non-current assets	32.0	-	-	(1.5)	30.5
Deferred tax assets	20.4	-	(6.1)	-	14.3
	117.0	0.9	(6.1)	(1.5)	110.3
TOTAL ASSETS	216.0	0.9	(6.1)	(1.5)	209.3
LIABILITIES
Non-current liabilities
Provisions	-	(2.4)	-	-	(2.4)
Other non-current liabilities	(173.5)	-	-	-	(173.5)
	(173.5)	(2.4)	-	-	(175.9)
TOTAL LIABILITIES	(216.4)	(2.4)	-	-	(218.8)
NET LIABILITIES	(0.4)	(1.5)	(6.1)	(1.5)	(9.5)
EQUITY
Other equity items	68.4	-	-	-	68.4
Retained earnings	(68.8)	(1.5)	(6.1)	(1.5)	(77.9)
TOTAL SHAREHOLDERS' EQUITY	(0.4)	(1.5)	(6.1)	(1.5)	(9.5)

¹ For further details on the change in accounting policy restatement refer to Accounting policies

21. Business Combinations

On the 8 April 2021 Renold completed the acquisition of the conveyor chain business of Brooks Ltd in Manchester, UK, for a total consideration of £0.7m, including £0.4m of deferred consideration. The business has been integrated into the Renold UK Service centre in Manchester.

The amounts recognised in respect of identifiable assets and liabilities relating to the acquisition are as follows: 

	Recognised values on acquisition
	£m
Fair value of net assets acquired
Intangible assets	0.4
Property, plant and equipment	0.1
Inventory	0.2
Net identifiable assets and liabilities	0.7
Goodwill	-
Total consideration	0.7
Consideration
Cash paid	0.3
Deferred consideration	0.4
Total consideration	0.7

¹ Under IFRS 3 'Business Combinations' customer relationships attained as part of the acquisition have been identified as assets separate from goodwill with a value of £0.4m.

Deferred consideration of £0.2m was paid during the year with £0.2m remaining unpaid at 31 March 2022. Total acquisition cash consideration paid during the year was £0.5m. The carrying value of property, plant and equipment and inventory approximates their fair value. Acquisition-related costs (reported in operating profit) amounted to £0.1m.

The acquired business contributed £1.0m revenue and £0.3m to the Group's operating profit for the period between the date of acquisition and the balance sheet date.     

 

END

 

 

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