Half Yearly Report

RNS Number : 0987S

Renold PLC

15 November 2011

 



Renold plc

("Renold" or the "Group")

Interim results for the half year ended 30 September 2011

Renold, a leading international supplier of industrial chains and related power transmission products, today announces its interim results for the half year ended 30 September 2011.

Financial Summary	Half year ended 30 September
	2011 £m		2010 £m
Revenue	105.5		92.9
Operating profit before exceptional items	6.3		3.1
Operating profit	5.9		2.9
Profit before tax	3.7		0.4
Other information
Basic and diluted earnings per share	1.3p		0.1p
Adjusted1 earnings per share	1.8p		0.7p

[1] Throughout these interim results "adjusted" means after eliminating the effects of exceptional items, non-cash IAS 19 pensions charge, and any associated tax thereon.

Highlights

·      Operating profit before exceptional items more than doubled to £6.3m (H1 2010: £3.1m)

·      Adjusted EPS increased by over 150% to 1.8p (H1 2010: 0.7p)

·      Underlying²sales growth of 13%

·      Double digit sales growth in both Chain and Torque Transmission divisions

·      Underlying order intake still outstripping revenue growth

·      Order coverage for next quarter above historical levels

·      Average working capital ratio 1.9% better than prior year

2 "Underlying" means after eliminating the effects of foreign exchange translation.

Prospects

Matthew Peacock, Chairman of Renold plc, said:

"I am pleased to report another set of improved results with strong revenue and profit growth in the first half continuing the positive trend set in the last financial year. Order books remain strong and the outlook for second half sales growth continues despite the well-publicised macro-economic uncertainty in many of the world's economies.  The Group is taking proactive measures to accelerate planned cost reduction initiatives in order to protect this year's result should a downturn occur."

15 November 2011

ENQUIRIES:

Renold plc	Tel: [phone]
Robert Davies, Group Chief Executive
Brian Tenner, Group Finance Director
Singer Capital Markets (Broker)	Tel: [phone]
Shaun Dobson
James Maxwell
College Hill (Public Relations)	Tel: [phone]
Mark Garraway Helen Tarbet

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 well deserved reputation for quality that is recognised worldwide. Its products are used in a wide variety of industries including manufacturing, transportation, energy, steel and mining.

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

Chairman's Statement

I am pleased to report an improved set of interim results, which are in line with the Board's expectations. Underlying sales increased 13%, with growth delivered in all major regions and markets. This is a continuation of the double digit growth rate noted in the full year results announced in May 2011. These incremental revenues deliver strong conversion to operating profit as the Group continues to benefit from actions taken by management over recent years to reduce costs and resize the manufacturing footprint. A strong order book and further planned cost reduction activities provide the Group with a strong platform to continue to grow the profitability of the business.

Group Results

Renold delivered a strong set of results for the first half of 2011/12 with orders, sales and operating profit all significantly up on 2010/11. Order intake was 7% higher than the comparable period last year and has exceeded sales in the current period with the result that the underlying order book has grown 3% since the start of the year.  Underlying sales increased by 13%due to strong growth in all geographies in both the Chain and Torque Transmission divisions which reported increases of 13% and 12% respectively.

Operating profit before exceptional items has more than doubled to £6.3m compared with £3.1m in the first half of 2010/11. Incremental revenue has therefore been converted to additional profit at an underlying rate of 27% highlighting the significant positive impact of operational gearing.

Underlying cash flow in the period was an out flow of £8.5m (2010: underlying out flow of £6.3m) largely driven by working capital requirements and the timing of pension payments (in the prior year the £2.4m UK pension deficit payment was made in the second half whereas in the current year £1.2m was paid in the first half).  The working capital requirements are best understood in the context of underlying rolling 12 month sales as at 30 September 2011 being approximately £40m higher than at the same point in the prior year.  At the same time, the period end ratio of working capital to rolling 12 month sales has improved by 4.7% to 23.4% at equivalent exchange rates.

Net debt has increased by £5.4m from 30 September 2010 principally due to the increased sales and resultant working capital requirements noted above. The Group is currently documenting a credit committee approved extension of its principal banking facilities to June 2013.

The Group's funded retirement benefit obligations increased from £31.0m (£23.1m net of deferred tax) at 31 March 2011 to £40.0m (£29.9m net of deferred tax) at 30 September 2011. This was caused primarily by the ongoing market volatility which has seen a fall in equity asset values partially offset by increases in the values of gilts and corporate bonds. The discount rate applied to the UK pension liabilities is set by reference to the market yields on corporate bonds and has fallen from 5.6% to 5.2% over the period. A fall in the long term outlook for inflation from 2.75% to 2.35% has partly offset the adverse movement noted above.

Unfunded retirement benefit obligations, which relate almost entirely to the 'Pay as you go' scheme in Germany, were unchanged at £20.5m.  During the period the latest triennial review was concluded with the trustees of the Renold Group Pension Scheme ('RGPS') and the Renold Supplementary Pension Scheme ('RSPS') and the results were as disclosed in the 31 March 2011 Annual Report, that is, the annual deficit repair payments were unchanged at £2.4m per annum and the outstanding PPF levy of £3.1m was paid by the schemes and is to be reimbursed over a five year period. The Group continues to actively manage the liabilities and assets of the schemes to reduce risk and the underlying structural deficit.

Business Review

 

Renold Chain

Renold Chain manufactures chain for all market segments, from ultra light to heavy duty industrial, and is a leading player in the USA, Europe, Australia and India. It is the Group's largest business segment, generating 76% of Group revenue. Underlying sales have increased by 13% and the underlying order intake is 6% higher than at the same point last year.

Sales growth was strong with all major regions seeing double digit growth rates. This has been due to the continued recovery in end user markets as well as the gains Renold has made in market share. Order intake has exceeded sales in the period and as a result the closing underlying order book is 2% higher than at the start of the year.

The prior year's restructuring activities in France and the USA combined with increased sales continue to significantly improve profitability. Operating margins doubled, generating an operating profit before exceptional items of £4.8m compared to an underlying profit of £2.1m in 2010/11.

The Group has announced a restructuring of the back office functions of Chain Europe to begin in the second half of the current financial year and is in discussions with work force representatives throughout Europe.  This project will provide additional security for the current full year results against the global macro-economic uncertainty and will be of further additional benefit as it completes in the following two years.

Torque Transmission

The Torque Transmission division manufactures and supplies gears and gearboxes, couplings, materials handling equipment and other engineered products. It has also seen double digit sales growth with a 12% increase in underlying sales during the period. The division continues to enjoy growth across its market sectors with the combined focus markets of quarrying and mining, power generation and metals seeing double digit growth. The mass transit sector is below prior year revenues due to the timing of awards of large infrastructure projects in the USA. The underlying order intake is 9% ahead of last year and also exceeded sales in the period resulting in the closing underlying order book being 5% higher than at the start of the year.

The revenue gains generated a 19% increase in operating profit to £3.8m before exceptional items (2010: underlying profit of £3.2m). Operating margins also improved from 13.9% to 14.7%. This increase was achieved whilst investing in the cost base to support future growth in the key focus markets.

Dividend

Whilst the business continues to focus on cash generation and reducing its indebtedness, the Board has recommended that no interim dividend be paid. The directors will consider future dividend policy in the light of results from the business going forward.

Risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group, as well as their mitigating controls, remain those detailed in the Annual Report for the year ended 31 March 2011. These include macro-economic risks, including the economic, political and business risks associated with international operations such as global recession, as well as various risks relating to Group treasury activities. In addition, key operational risks are raw material and other input cost prices and product liability claims. The on-going implementation of a Group wide ERP system is a further non-recurring risk that is currently under management.

The Group's results have particular exposure to the movements in steel prices and the US Dollar/GB Pound/Euro exchange rate. Both risks are managed through diverse sourcing of supply and the forward hedging of net currency cash flows.

 

The valuation of retirement benefit obligations can be significantly impacted by changes to the market based yields on corporate bonds and inflation prospects. However, it should be noted that the cash flows to support the pension schemes are more stable and subject to long term funding plans which are reviewed every three years.

Outlook

 

The Group's strengthening order book and robust first half result instil confidence in further improved revenues and profitability for the full year. Order coverage for the next quarter has recovered to pre-recessionary levels.  Absolute levels of underlying rolling 12 month sales remain approximately 15% below the pre-recessionary levels.

 

The Group benefits from a diverse product portfolio, a global, multi-sector mix of customers and a significant exposure to developing markets. As a result we expect the positive sales trends established in the first half to continue despite the well-publicised macro-economic uncertainty in many of the world's economies.

 

The Group is also taking proactive measures to accelerate planned cost reduction initiatives in order to protect the full year result against unforeseen reductions in revenue growth.

Statement of directors' responsibilities

The directors confirm that to the best of their knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;

·      the interim management report includes a fair review of the information required by:

(a)      DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of interim financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)      DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

The directors of Renold plc are listed in the Annual Report for the year ended 31 March 2011. A list of current directors is maintained on the Group website at www.renold.com.

By order of the Board

 

 

 

 

 

Robert Davies                                     Brian Tenner

Chief Executive                                       Finance Director

15 November 2011                                 15 November 2011

RENOLD PLC

Condensed Consolidated Income Statement

for the six months ended 30 September 2011

			First half				Full year
	Note		2011/12 (unaudited) £m		2010/11 (unaudited) £m		2010/11 (audited) £m
Revenue	3		105.5		92.9		191.0
Operating costs			(99.5)		(90.0)		(186.7)
Share of post tax loss of associate undertaking			(0.1)		-		-
Operating profit			5.9		2.9		4.3
Operating profit before exceptional items			6.3		3.1		7.0
Exceptional items	4		(0.4)		(0.2)		(2.7)
Operating profit			5.9		2.9		4.3
Financial costs			(1.2)		(0.8)		(2.1)
Financial revenue			-		-		0.1
Net IAS 19 financing costs			(1.0)		(1.7)		(3.6)
Net financing costs	5		(2.2)		(2.5)		(5.6)
Profit/(loss) before tax			3.7		0.4		(1.3)
Taxation	6		(0.9)		(0.2)		0.4
Profit/(loss) for the financial period			2.8		0.2		(0.9)
Attributable to:
Equity holders of the parent			2.7		0.3		(0.9)
Non-controlling interests			0.1		(0.1)		-
			2.8		0.2		(0.9)
Earnings/(loss) per share	7
Basic earnings/(loss) per share			1.3p		0.1p		(0.4)p
Diluted earnings/(loss) per share			1.3p		0.1p		(0.4)p
Adjusted earnings per share			1.8p		0.7p		2.0p
Diluted adjusted earnings per share			1.8p		0.7p		2.0p

RENOLD PLC

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2011

	First half				Full year
	2011/12 (unaudited) £m		2010/11 (unaudited) £m		2010/11 (audited) £m
Profit/(loss) for the period	2.8		0.2		(0.9)
Other comprehensive income/(expense):
Losses on cash flow hedges to the income statement	-		-		0.1
Net gains on cash flow hedges taken to equity	0.1		0.2		-
Foreign exchange translation differences	(0.8)		(0.2)		(0.1)
Foreign exchange differences on loans forming part of the net investment in foreign operations	0.2		(0.7)		(1.0)
Actuarial (losses)/gains on retirement benefit obligations	(10.7)		(12.2)		20.3
Actuarial gains on pension fund surplus	-		-		0.1
Tax on components of other comprehensive income	2.3		2.8		(7.0)
Other comprehensive (expense)/income for the period	(8.9)		(10.1)		12.4
Total comprehensive (expense)/income for the period	(6.1)		(9.9)		11.5
Attributable to:
Equity holders of the parent	(6.2)		(9.8)		11.5
Non-controlling interests	0.1		(0.1)		-
Total comprehensive (expense)/income for the period	(6.1)		(9.9)		11.5

RENOLD PLC

Condensed Consolidated Statement of Financial Position

as at 30 September 2011 (unaudited)

	Note	30 September 2011 (unaudited) £m		30 September 2010 (unaudited) £m		31 March 2011 (audited) £m
Assets Non-current assets
Goodwill		22.8		22.7		22.4
Other intangible fixed assets		5.3		2.5		4.1
Property, plant and equipment		47.6		48.9		48.9
Investment property		2.0		2.0		2.1
Investment in associate undertaking		0.2		-		-
Other non-current assets		0.4		0.4		0.4
Deferred tax assets		18.6		25.6		16.9
		96.9		102.1		94.8
Current assets
Inventories		47.9		45.6		44.1
Trade and other receivables		37.8		33.3		32.8
Retirement benefit surplus	8	1.5		1.5		1.7
Cash and cash equivalents	11	4.2		4.5		7.4
		91.4		84.9		86.0
Total assets		188.3		187.0		180.8
Liabilities
Current liabilities
Borrowings	11	(32.7)		(16.2)		(13.6)
Trade and other payables		(38.9)		(34.0)		(39.6)
Current tax		(1.0)		(0.6)		(0.9)
Derivative financial instruments		(0.1)		-		(0.2)
Provisions		(1.2)		(0.4)		(1.2)
		(73.9)		(51.2)		(55.5)
Net current assets		17.5		33.7		30.5
Non-current liabilities
Borrowings	11	-		(11.4)		(13.3)
Provisions		-		(0.5)		-
Preference stock	11	(0.5)		(0.5)		(0.5)
Trade and other payables		(0.5)		(0.1)		(0.6)
Deferred tax liabilities		(0.7)		(0.8)		(0.8)
Retirement benefit obligations	8	(62.0)		(87.1)		(53.2)
		(63.7)		(100.4)		(68.4)
Total liabilities		(137.6)		(151.6)		(123.9)
Net assets		50.7		35.4		56.9
Equity
Issued share capital		26.4		26.4		26.4
Share premium		29.4		29.4		29.4
Currency translation reserve		5.3		6.1		5.9
Other reserves		1.5		1.1		1.4
Retained earnings		(14.1)		(29.6)		(8.3)
Attributable to equity holders of the parent		48.5		33.4		54.8
Non-controlling interests		2.2		2.0		2.1
Total shareholders' equity		50.7		35.4		56.9

 

RENOLD PLC

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 September 2011 (unaudited)

	First half				Full year
	2011/12 (unaudited) £m		2010/11 (unaudited) £m		2010/11 (audited) £m
Cash flows from operating activities (Note 9)
Cash (absorbed)/generated by operations	(4.1)		(2.2)		6.6
Income taxes paid	-		-		(0.1)
Net cash flows from operating activities	(4.1)		(2.2)		6.5
Cash flows from investing activities
Investment in subsidiary and associate undertakings	(0.3)		(0.7)		(0.7)
Purchase of property, plant and equipment	(1.6)		(1.8)		(3.6)
Purchase of intangible assets	(1.3)		(1.1)		(3.0)
Proceeds from non-controlling interests capital injection	-		0.3		0.3
Net cash flows from investing activities	(3.2)		(3.3)		(7.0)
Cash flows from financing activities
Financing costs paid	(1.2)		(0.8)		(2.0)
Proceeds from borrowings	2.6		4.0		9.5
Repayment of borrowings	(2.6)		(3.2)		(7.9)
Payment of finance lease obligations	-		-		(0.1)
Net cash flows from financing activities	(1.2)		-		(0.5)
Net decrease in cash and cash equivalents	(8.5)		(5.5)		(1.0)
Net cash and cash equivalents at beginning of period	4.9		5.9		5.9
Effects of exchange rate changes	(0.2)		-		-
Net cash and cash equivalents at end of period	(3.8)		0.4		4.9
Cash and cash equivalents	4.2		4.5		7.4
Overdrafts (included in borrowings - Note 11)	(8.0)		(4.1)		(2.5)
Net cash and cash equivalents at end of period	(3.8)		0.4		4.9

RENOLD PLC

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 September 2011 (unaudited)

	Share capital £m	Share premium account £m	Retained earnings £m	Currency translation reserve £m	Other reserves £m	Attributable to equity holders of parent £m	Non-controlling interests £m	Total equity £m
Balance at  1 April 2010	26.4	29.4	(20.7)	7.0	0.9	43.0	1.8	44.8
Loss for the year	-	-	(0.9)	-	-	(0.9)	-	(0.9)
Other comprehensive income	-	-	13.4	(1.1)	0.1	12.4	-	12.4
Total comprehensive income for the year	-	-	12.5	(1.1)	0.1	11.5	-	11.5
Share warrants	-	-	-	-	0.4	0.4	-	0.4
Share-based payment charge	-	-	(0.1)	-	-	(0.1)	-	(0.1)
Proceeds from non-controlling interests	-	-	-	-	-	-	0.3	0.3
Balance at 31 March 2011	26.4	29.4	(8.3)	5.9	1.4	54.8	2.1	56.9
Profit for the year	-	-	2.7	-	-	2.7	0.1	2.8
Other comprehensive income	-	-	(8.4)	(0.6)	0.1	(8.9)	-	(8.9)
Total comprehensive income for the year	-	-	(5.7)	(0.6)	0.1	(6.2)	0.1	(6.1)
Share-based payment charge	-	-	(0.1)	-	-	(0.1)	-	(0.1)
Balance at 30 September 2011	26.4	29.4	(14.1)	5.3	1.5	48.5	2.2	50.7
Balance at 1 April 2010	26.4	29.4	(20.7)	7.0	0.9	43.0	1.8	44.8
Profit for the year	-	-	0.3	-	-	0.3	(0.1)	0.2
Other comprehensive income	-	-	(9.4)	(0.9)	0.2	(10.1)	-	(10.1)
Total comprehensive income for the year	-	-	(9.1)	(0.9)	0.2	(9.8)	(0.1)	(9.9)
Share-based payment charge	-	-	0.2	-	-	0.2	-	0.2
Proceeds from non-controlling interests	-	-	-	-	-	-	0.3	0.3
Balance at 30 September 2010	26.4	29.4	(29.6)	6.1	1.1	33.4	2.0	35.4

Notes to the Interim Condensed Consolidated Financial Statements

1      Corporate information

The condensed consolidated interim financial statements for the six months to 30 September 2011 were approved by the Board on 14 November 2011. These statements have not been audited or reviewed by the Group's auditor pursuant to the Auditing Practices Board guidance on the Review of Interim Financial Information.

Renold plc is a limited liability company, incorporated and registered under the laws of England and Wales, whose shares are publicly traded.  The principal activities of the Company and its subsidiaries are described in Note 3 and the performance in the half year is set out in the Interim Management Report.

These interim condensed consolidated financial statements do not constitute statutory accounts of the Group within the meaning of Section 434 of the Companies Act 2006.  The statutory accounts for the year ended 31 March 2011 have been filed with the Registrar of Companies.  The auditor's report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

2      Accounting policies

        Basis of preparation

        The interim condensed consolidated financial statements for the six months ended 30 September 2011 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 "Interim Financial Reporting" as adopted by the European Union. It does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2011.

        Except as described below, the accounting policies, presentation and methods of computation applied by the Group in these interim condensed consolidated financial statements are the same as those applied in the Group's latest audited financial statements for the year ended 31 March 2011.

Changes in accounting policy

The following new standards, amendments to standards or interpretations are mandatory for the financial year ending 31 March 2012 and have been implemented in the period. None have had a material impact:

·      IAS 24 "Related Party Disclosures" effective from 1 January 2011;

·      IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" effective from 1 July 2010;

·      Amendments to IFRIC 14 "Prepayments of a Minimum Funding Requirement" effective from 1 January 2011;

·      Amendments to IFRS 7 "Financial Instruments Disclosures" effective from 1 July 2011 (not yet endorsed); and

·      Improvements to IFRS (issued 2010).

The following standards and interpretations have been issued but not adopted as application was not mandatory for the period:

·      Amendments to IAS 1 "Presentation of Items of Other Comprehensive Income" effective from 1 January 2012;

·      Amendments to IAS 12 "Deferred tax: Recovery of Underlying Assets" effective from 1 July 2012;

·      IAS 19 "Employee Benefits (amendment)" effective from 1 January 2013 (not yet endorsed);

·      IAS 27R "Separate Financial Statements" effective from 1 January 2013;

·      IAS 28R "Investments in Associates and Joint Ventures" effective from 1 January 2013;

·      IFRS 9 "Financial Instruments: Classification and Measurement" effective from 1 January 2013;

·      IFRS 10 "Consolidated Financial Statements" effective from 1 January 2013 (not yet endorsed);

·      IFRS 11 "Joint Arrangements" effective from 1 January 2013 (not yet endorsed);

·      IFRS 12 "Disclosures of Interests in Other Entities" effective from 1 January 2013 (not yet endorsed); and

·      IFRS 13 "Fair Value Measurement" effective from 1 January 2013 (not yet endorsed).

Going concern

The directors have a reasonable expectation that the business has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the interim condensed consolidated financial information.

Significant accounting judgements, estimates and assumptions

The preparation of these interim condensed consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were of the same type as those applied to the annual financial statements for the year ended 31 March 2011.

Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the annual financial statements for the year ended 31 March 2011.

3      Segment information

The Group is organised into business units according to the nature of their products and services. Having considered the management reporting and organisational structure of the Group, the directors have concluded that Renold plc has two reportable operating segments as follows:

·      The Chain segment manufactures and sells power transmission and conveyor chain and also includes sales of Torque Transmission product through Chain National Sales Centres; and

·      The Torque Transmission segment manufactures and sells Torque Transmission products such as gearboxes and couplings used in power transmission.

        No operating segments have been aggregated to form the above reportable segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

The segment results for the period ended 30 September 2011 were as follows:

Period ended 30 September 2011	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External sales	79.7		25.8		-		105.5
Inter-segment	0.5		3.1		(3.6)		-
Total revenue	80.2		28.9		(3.6)		105.5
Operating profit/(loss) before exceptional items	4.8		3.8		(2.3)		6.3
Exceptional items	(0.4)		-		-		(0.4)
Segment operating profit/(loss)	4.4		3.8		(2.3)		5.9
Net financing costs							(2.2)
Profit before tax							3.7
Other disclosures
Inventories	36.9		11.0		-		47.9
Capital expenditure	1.0		0.3		1.4		2.7
Depreciation and amortisation	1.7		0.5		0.1		2.3

Head office costs for the period ended 30 September 2011 were £2.3m.

The segment results for the period ended 30 September 2010 have been restated due to the re-categorisation of a business unit from the Chain segment to the Torque Transmission segment. The results were as follows:

Period ended 30 September 2010 (restated)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External sales	69.1		23.8		-		92.9
Inter-segment	1.1		2.4		(3.5)		-
Total revenue	70.2		26.2		(3.5)		92.9
Operating profit/(loss) before exceptional items	2.0		3.3		(2.2)		3.1
Exceptional items	(0.2)		-		-		(0.2)
Segment operating profit/(loss)	1.8		3.3		(2.2)		2.9
Net financing costs							(2.5)
Profit before tax							0.4
Other disclosures
Inventories	36.0		9.6		-		45.6
Capital expenditure	1.1		0.6		1.2		2.9
Depreciation and amortisation	1.8		0.5		0.2		2.5

Head office costs for the period ended 30 September 2010 were £2.2m.

The Board also reviews the performance of the business using information presented at consistent exchange rates. The prior year results have been restated using this year's exchange rates as follows:

Period ended 30 September 2010 (restated)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External sales	69.1		23.8		-		92.9
Foreign exchange	1.4		(0.7)		-		0.7
Underlying external sales	70.5		23.1		-		93.6
Operating profit/(loss) before exceptional items	2.0		3.3		(2.2)		3.1
Foreign exchange	0.1		(0.1)		-		-
Underlying operating profit/(loss) before exceptional items	2.1		3.2		(2.2)		3.1

The segment results for the year ended 31 March 2011 have been restated due to the re-categorisation of a business unit from the Chain segment to the Torque Transmission segment.

Year ended 31 March 2011 (restated)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External sales	143.0		48.0		-		191.0
Inter-segment	2.5		5.1		(7.6)		-
Total revenue	145.5		53.1		(7.6)		191.0
Operating profit/(loss) before exceptional items	4.7		6.4		(4.1)		7.0
Exceptional items	(2.7)		-		-		(2.7)
Segment operating profit/(loss)	2.0		6.4		(4.1)		4.3
Net financing costs							(5.6)
Loss before tax							(1.3)
Other disclosures
Inventories	33.6		10.5		-		44.1
Capital expenditure	2.8		1.1		3.2		7.1
Depreciation and amortisation	3.6		0.9		0.4		4.9

Head office costs for the year ended 31 March 2011 were £4.1m.

The Board also reviews the performance of the business using information presented at consistent exchange rates. The prior year results have been restated using this year's exchange rates as follows:

Year ended 31 March 2011 (restated)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External sales	143.0		48.0		-		191.0
Foreign exchange	2.6		(0.8)		-		1.8
Underlying external sales	145.6		47.2		-		192.8
Operating profit/(loss) before exceptional items	4.7		6.4		(4.1)		7.0
Foreign exchange	0.2		(0.1)		-		0.1
Underlying operating profit/(loss) before exceptional items	4.9		6.3		(4.1)		7.1

4      Exceptional items

	First half				Full year
	2011/12 £m		2010/11 £m		2010/11 £m
Included in operating costs:
Reorganisation and redundancy costs	0.4		0.2		2.7
	0.4		0.2		2.7

5      Net financing costs

	First half				Full year
	2011/12 £m		2010/11 £m		2010/11 £m
Financial costs:
Interest payable on bank loans and overdrafts	(1.2)		(0.8)		(2.1)
Total financial costs	(1.2)		(0.8)		(2.1)
Financial revenue:
Ineffectiveness of net investment hedge	-		-		0.1
Total financial revenue	-		-		0.1
IAS 19 financing costs:
Interest cost on plan assets	(5.7)		(6.2)		(12.7)
Expected return on pension plan assets	4.7		4.5		9.1
Net IAS 19 financing costs	(1.0)		(1.7)		(3.6)
Net financing costs	(2.2)		(2.5)		(5.6)

6      Taxation

	First half			Full year
	2011/12 £m		2010/11 £m		2010/11 £m
Current tax:
- UK	-		-		-
- Overseas	0.1		0.3		0.8
	0.1		0.3		0.8
Deferred tax:
- UK	0.4		(0.1)		(0.1)
- Overseas	0.4		-		(1.1)
	0.8		(0.1)		(1.2)
Income tax expense/(credit)	0.9		0.2		(0.4)

In the Budgets of 22 June 2010 and 23 March 2011, the Chancellor announced future changes to the main rate of UK corporation tax which, if enacted in the proposed manner, may affect the Company's future tax position.

The Budget of 22 June 2010 proposed a decrease in the rate of UK corporation tax to be enacted annually from 1 April 2011, from 28% to 24%, with a 1% decrease for each of four consecutive years. Subsequently, the Budget of 23 March 2011 proposed an additional 1% decrease, such that the rate of UK corporation tax would become 26% from 1 April 2011 (rather than 27% previously proposed), with the following three 1% reductions then due to reduce the rate to 23% from April 2014.

The effect of the reduction in the tax rate to 23% on the Company's deferred tax asset would be to reduce it by £0.9m.

The Treasury has confirmed that the staggered reduction will be enacted in each period rather than in a single Finance Act. As at 30 September 2011, the reductions in the rate of corporation tax to 26% from 1 April 2011 and 25% from 1 April 2012 have been substantially enacted and as such, recognised deferred tax has been provided at a rate of 25%. The effect on the Company of the proposed future changes, including the effect of the proposals in the Budget of 23 March 2011, to the tax rate will be reflected in the Company's financial statements in future years, as appropriate, once the proposals have been substantially enacted.

7    Earnings/(loss) per share

Basic earnings per share is calculated by dividing the profit/(loss) for the period by the weighted average number of shares in issue during the period.  Diluted earnings per share takes into account the dilutive effect of the options and awards outstanding under the Group's employee share schemes. The calculation of earnings per share is based on the following data:

	First half				Full year
	2011/12 Pence per share		2010/11 Pence per share		2010/11 Pence per share
Basic EPS	1.3		0.1		(0.4)
Diluted EPS	1.3		0.1		(0.4)
Adjusted EPS	1.8		0.7		2.0
Diluted adjusted EPS	1.8		0.7		2.0
	£m		£m		£m
Profit/(loss) for calculation of adjusted EPS
Profit/(loss) for the financial period	2.8		0.2		(0.9)
Adjusted for exceptional items3:
- Redundancy and restructuring costs	0.4		0.2		2.8
- Net IAS 19 pension financing costs	0.8		1.2		2.6
Profit for the calculation of adjusted EPS	4.0		1.6		4.5
	Thousands		Thousands		Thousands
Weighted average number of ordinary shares
For calculating basic earnings per share	219,565		219,565		219,565
Effect of dilutive securities:
- employee share options	1,833		444		1,293
- warrants over shares	1,406		609		1,107
For calculating diluted earnings per share	222,804		220,618		221,965

3 The adjusted earnings per share numbers have been provided in order to give a useful indication of underlying performance by the exclusion of exceptional items, the non-cash IAS19 charge and any tax thereon.

8      Retirement benefit obligations

        The Group's retirement benefit obligations are summarised as follows:

	At 30 September 2011 £m		At 30 September 2010 £m		At 31 March 2011 £m
Funded plan obligations	(198.0)		(227.9)		(194.3)
Funded plan assets	158.0		164.7		163.3
Net funded plan obligations	(40.0)		(63.2)		(31.0)
Unfunded obligations	(20.5)		(22.4)		(20.5)
Total retirement benefit obligations	(60.5)		(85.6)		(51.5)

        Analysed as follows:

Current assets
Retirement benefit surplus	1.5		1.5		1.7
Non-current liabilities
Retirement benefit obligations	(62.0)		(87.1)		(53.2)
Net retirement benefit obligations	(60.5)		(85.6)		(51.5)
Net deferred tax asset	11.9		19.1		9.5
Retirement benefit obligations net of deferred tax	(48.6)		(66.5)		(42.0)

The increase in the Group's liability from £51.5m at 31 March 2011 to £60.5m at 30 September 2011 reflects the current market volatility that has seen a fall in equity asset values. In addition, yields on corporate bonds have fallen leading to lower discount rates being applied to the future pension liabilities. These factors have been partly offset by lower expectations for inflation and hence lower pension increases in future.

9      Cash generated by operations

	First half				Full year
	2011/12 £m		2010/11 £m		2010/11 £m
Operating profit	5.9		2.9		4.3
Depreciation and amortisation	2.3		2.5		4.9
Impairment charge included in exceptional items	-		-		0.2
Loss on plant and equipment disposals	-		-		0.1
Equity share plans	(0.1)		0.2		(0.1)
Increase in inventories	(3.8)		(3.4)		(1.6)
Increase in receivables	(5.2)		(5.4)		(4.6)
(Decrease)/increase in payables	(0.6)		1.8		7.7
Decrease in provisions	-		(0.1)		-
Movement on pension plans	(2.4)		(0.7)		(4.4)
Movement on derivative financial instruments	(0.2)		-		0.1
Cash (absorbed)/generated by operations	(4.1)		(2.2)		6.6

10     Reconciliation of the movement in cash and cash equivalents to movement in net debt

	At 30 September 2011 £m		At 30 September 2010 £m		At 31 March 2011 £m
Decrease in cash and cash equivalents	(8.5)		(5.5)		(1.0)
Change in net debt resulting from cash flows	-		(0.8)		(1.6)
Foreign currency translation differences	(0.5)		0.6		0.5
Change in net debt during the period	(9.0)		(5.7)		(2.1)
Net debt at start of period	(20.0)		(17.9)		(17.9)
Net debt at end of period	(29.0)		(23.6)		(20.0)

11     Net Debt

	At 30 September 2011 £m		At 30 September 2010 £m		At 31 March 2011 £m
Cash and cash equivalents	4.2		4.5		7.4
Borrowings:
Bank overdrafts	(8.0)		(4.1)		(2.5)
Bank loans - current	(24.6)		(12.0)		(11.0)
Obligations under finance leases - current	(0.1)		(0.1)		(0.1)
Sub-total - current borrowings	(32.7)		(16.2)		(13.6)
Bank loans - non-current	-		(11.3)		(13.2)
Obligations under finance leases - non-current	-		(0.1)		(0.1)
Sub-total - non-current borrowings	-		(11.4)		(13.3)
Preference stock	(0.5)		(0.5)		(0.5)
Net debt	(29.0)		(23.6)		(20.0)

 

END

 

 

IR GGGMWGUPGUQA