Interim Results
Renold PLC
15 November 2004
15 November 2004
RENOLD plc
Interim results for the half year to 30 September 2004
Precision engineering group, Renold plc, a leading international manufacturer
and supplier of industrial chains and related power transmission products,
automotive cam drive systems and machine tools and rotors, today announces its
interim results for the half year to 30 September 2004.
Summary
• Performance in line with expectations and last year despite significant
adverse exchange rate movements and raw material price increases
• Strong improvement in North America and China but Europe remained weak
• Turnover at £95.3 million (2003: £94.9 million)
• Operating profit before goodwill amortisation and exceptional items
amounted to £3.5 million (2003: £3.6 million)
• Profit before tax before goodwill amortisation and exceptional items was
unchanged at £2.3 million (2003: £2.3 million)
• New Automotive facility in Germany now operational; US facility under
construction
• Adjusted earnings* per share were up 5% to 2.2p (2003: 2.1p)
• Basic earnings per share were 1.4p (2003: 5.3p including the exceptional
benefit of land sale)
• Interim dividend unchanged at 1.5p per share (2003: 1.5 p).
* before goodwill amortisation and exceptional items
Outlook
Roger Leverton, Chairman of Renold plc, said:
'Good progress is being made in North America, and the Machine Tool, Gears and
Couplings businesses have performed well. This is expected to continue in the
second half.
The Automotive business will continue to be adversely affected as supplier
quality issues are addressed and sales demand remains at a reduced level.
Operational efficiency improvements are being pursued aggressively to mitigate
the impact.
Overall, there are good growth prospects in North America for all the Group's
products but European markets remain soft and the twin pressures of exchange
rates and raw material price increases continue to hinder progress of the
Group's performance.'
RENOLD PLC
Chairman: Roger Leverton
Interim Statement for the half year
ended 30 September 2004
Financial Summary
First half year
2004/2005 2003/2004
£m £m
Turnover 95.3 94.9
Operating profit before goodwill amortisation and
exceptional items 3.5 3.6
Profit before tax, goodwill amortisation and
exceptional items 2.3 2.3
Profit before tax 1.4 4.2
Earnings per ordinary share
- based on adjusted earnings 2.2p 2.1p
- based on reported earnings 1.4p 5.3p
Interim dividend per ordinary share 1.5p 1.5p
Chairman's Statement
The results for the period to 30 September 2004 were in line with expectations
with pre exceptional profit before tax at the same level as the first half of
last year. This is despite significant adverse effects of currency and raw
material price increases. There was a strong improvement in the North American
market and China but trading conditions for power transmission products in
Europe remained weak.
The Automotive business continues to evolve with the new German facility
operational and supplying product. Construction is underway to develop a similar
facility in the USA. Production efficiency improvements at Calais were offset by
steel price increases, exchange and lower sales demand.
The Machine Tool and Rotor business remains ahead.
Group results
Sales for the half year to 30 September 2004 were £95.3 million (2003/04: £94.9
million). At constant exchange rates, sales were 6% ahead of last year.
Operating profit before goodwill amortisation and exceptional items was £3.5
million (2003/04: £3.6 million).
Profit before tax (and before goodwill amortisation and exceptional items) was
£2.3 million (2003/04: £2.3 million) with interest costs reduced by £0.1 million
compared with 2003/04. Reported profit before tax was £1.4 million (2003/04:
£4.2 million after a £2.8 million exceptional gain).
The tax charge in the period was £0.4 million (2003/04: £0.5 million). Adjusted
earnings per share, before goodwill amortisation and exceptional items, were 2.2
pence (2003/04: 2.1 pence) and basic earnings per share were 1.4 pence (2003/04:
5.3 pence).
Cash flow and borrowings
Operating cash flow net of capital spending was an outflow of £3.8 million (2003
/04: £0.6 million outflow) reflecting some increase in working capital in the
first half and higher capital expenditure. There was a net cash outflow of £7.5
million compared with an inflow of £0.2 million a year ago (last year benefiting
from disposal of the Leicester property for £5.1 million). Net borrowings
including finance leases at 30 September 2004 were £26.9 million compared with
£19.8 million at September 2003 and £19.2 million at year end, as a result of
the net cash outflow in the period and an increase of £0.2 million due to
exchange translation. Gearing was 33% of shareholders' funds compared with 24%
both at the year end and a year ago.
Dividend
The Board has declared an unchanged interim dividend of 1.5 pence. The dividend
will be paid on 28 January 2005 to shareholders on the register on 7 January
2005.
Comment
Power Transmission
- Industrial Chain
Demand for industrial chain products during the first half reflected good growth
in North America but weaker market conditions in Europe. Sales were 5% higher at
constant exchange rates.
The UK Chain business had a difficult first half with domestic demand flat and
increased supplies to the growing North American market hit by adverse exchange
rate effects and significant escalation in steel prices.
In Germany, sales to the USA were strong but the domestic market was flat and
profits were lower reflecting the adverse US Dollar/Euro exchange rate.
Other European markets, including France, achieved sales which were broadly in
line with the first half of last year at constant exchange rates.
In the USA, Jeffrey Chain experienced a strong first half with sales up 23% (at
constant exchange rates) and profits well ahead. Elsewhere in North America the
other chain businesses maintained profit levels.
The Asia Pacific region improved both sales and profits and order intake for the
new operation in China was encouraging.
- Gears and Couplings
The Gears and Couplings businesses increased sales and profits in the period and
the benefits of integrating the three Couplings units into a consolidated
business are starting to show. The Gears business was successful in mitigating
raw material price increases by outsourcing initiatives. During the first half a
further large order for gearboxes in China was received and the level of project
activity remains strong for both Gears and Couplings.
- Automotive Systems
Sales of Automotive Systems were 5% lower than the first half of last year (but
level at constant exchange rates). Production efficiency improvements at Calais
were offset by the US Dollar/Euro rate, steel prices and lower sales demand.
This situation was further exacerbated by recent supplier quality issues.
The German facility is operational and satisfying customers' requirements.
Work is in progress on the establishment of a US facility to supply US
automotive customers locally and it is intended to complete the facility during
the second half of the year and start shipping product at the end of the first
half of 2005/06.
Machine Tool and Rotor
Sales were 6% ahead of the previous year as the machine tool sector improved.
Profitability was substantially better than last year with a £0.4 million profit
compared with a breakeven performance in 2003/04.
Outlook
Good progress is being made in North America, and the Machine Tool, Gears and
Couplings businesses have performed well. This is expected to continue in the
second half.
The Automotive business will continue to be adversely affected as supplier
quality issues are addressed and sales demand remains at a reduced level.
Operational efficiency improvements are being pursued aggressively to mitigate
the impact.
Overall, there are good growth prospects in North America for all the Group's
products but European markets remain soft and the twin pressures of exchange
rates and raw material price increases continue to hinder progress of the
Group's performance.
RELEASE OF INTERIM STATEMENT
The Interim Statement will be posted to shareholders on 19 November 2004. Copies
will be available for the public from that date at the Company's registered
office, Renold House, Styal Road, Wythenshawe, Manchester M22 5WL.
For further information, please contact:
Renold plc
Bob Davies, Chief Executive 15 November 2004: 020 7067 0700
Steve Mole, Finance Director Thereafter: 0161 498 4500
Issued by:
Weber Shandwick Square Mile
Terry Garrett/Stephanie Badjonat Telephone: 020 7067 0700
This announcement and the Analysts' Presentation can also be viewed on the
website http://www.renold.com
Group Profit and Loss Account
for the half year ended 30 September 2004 (unaudited)
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
Turnover 95.3 94.9 192.1
Operating costs
- normal operating costs (91.8) (91.3) (184.4)
- goodwill amortisation (0.6) (0.7) (1.3)
- exceptional redundancy and restructuring costs (0.3) (0.2) (0.5)
- exceptional gain on disposal of property held
for sale - 2.8 2.8
--------- --------- ---------
(92.7) (89.4) (183.4)
--------- --------- ---------
Operating profit 2.6 5.5 8.7
Interest payable (1.2) (1.3) (2.3)
--------- --------- ---------
Profit on ordinary activities before tax 1.4 4.2 6.4
--------- --------- ---------
Tax: UK (0.2) (0.4) (0.3)
Overseas (0.2) (0.1) (0.7)
--------- --------- ---------
(0.4) (0.5) (1.0)
--------- --------- ---------
Profit for the period 1.0 3.7 5.4
Dividends (including non-equity) (1.1) (1.1) (3.2)
--------- --------- ---------
(Loss)/retained profit for the period (0.1) 2.6 2.2
--------- --------- ---------
Adjusted earnings per ordinary share
- based on reported earnings adjusted for goodwill
amortisation and exceptional items after tax
relief 2.2 p 2.1 p 5.4 p
--------- --------- ---------
Basic and diluted earnings per ordinary share
- based on reported earnings 1.4 p 5.3 p 7.7 p
--------- --------- ---------
Dividends per ordinary share 1.5 p 1.5 p 4.5 p
--------- --------- ---------
Group Balance Sheet
as at 30 September 2004 (unaudited)
At At At
30 September 27 September 3 April
2004 2003 2004
£m £m £m
Fixed assets
Intangible asset - goodwill 18.3 21.1 18.8
Tangible assets 47.3 48.1 47.0
--------- --------- ---------
65.6 69.2 65.8
--------- --------- ---------
Current assets
Stocks 49.3 47.3 47.0
Debtors 48.1 42.6 47.2
Cash and short-term deposits 5.1 9.4 8.9
--------- --------- ---------
102.5 99.3 103.1
--------- --------- ---------
Creditors - due within one year
Loans and overdrafts (14.7) (17.0) (12.1)
Other creditors (38.3) (40.2) (44.4)
--------- --------- ---------
(53.0) (57.2) (56.5)
--------- --------- ---------
Net current assets 49.5 42.1 46.6
--------- --------- ---------
Total assets less current liabilities 115.1 111.3 112.4
Creditors - due after one year
Loans (16.8) (12.2) (15.5)
Other creditors (1.4) (0.8) (1.4)
Provisions for liabilities and charges (15.0) (14.3) (14.3)
--------- --------- ---------
Net assets 81.9 84.0 81.2
--------- --------- ---------
Capital and reserves
(including non-equity interests)
Called up share capital 17.9 17.9 17.9
Share premium 6.0 6.0 6.0
Profit and loss account 58.0 60.1 57.3
--------- --------- ---------
Shareholders' funds 81.9 84.0 81.2
--------- --------- ---------
Summarised Group Cash Flow Statement
for the half year ended 30 September 2004 (unaudited)
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
Cash flow from operating activities
Operating profit 2.6 5.5 8.7
Depreciation 4.2 4.4 8.8
Goodwill amortisation 0.6 0.7 1.3
(Increase) in working capital (7.6) (5.7) (7.0)
Exceptional gain on property held for sale - (2.8) (2.8)
Other 0.3 0.2 0.2
--------- --------- ---------
Net cash inflow from operating activities 0.1 2.3 9.2
Servicing of finance (1.1) (1.4) (3.3)
Taxation (0.5) (0.8) (1.6)
Capital expenditure and financial investment
- purchase of tangible fixed assets (3.9) (2.9) (6.0)
- proceeds from disposal of property held for sale - 5.1 5.1
Equity dividends paid (2.1) (2.1) (3.2)
--------- --------- ---------
Cash (outflow)/inflow before use of liquid
resources and financing (7.5) 0.2 0.2
Management of liquid resources
- transfers from/(to) short-term deposits 0.3 (5.3) (1.0)
Financing
- Increase/(decrease) in debt and lease financing 4.6 (6.2) (6.4)
--------- --------- ---------
(Decrease) in cash in the period (2.6) (11.3) (7.2)
--------- --------- ---------
Reconciliation of net cash flow to movement in net debt
(Decrease) in cash in the period (2.6) (11.3) (7.2)
Cash flow from (increase)/decrease in debt and
lease financing (4.6) 6.2 6.4
Cash flow from (decrease)/increase in liquid resources (0.3) 5.3 1.0
--------- --------- ---------
Change in net debt resulting from cash flows (7.5) 0.2 0.2
New finance leases - - (0.5)
Other non-cash changes - - (0.1)
Exchange translation difference (0.2) 0.9 2.1
--------- --------- ---------
Movement in net debt in the period (7.7) 1.1 1.7
Net debt at beginning of period (19.2) (20.9) (20.9)
--------- --------- ---------
Net debt at end of period (26.9) (19.8) (19.2)
--------- --------- ---------
Other Group Statements
Statement of total recognised gains and losses
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
Profit for the period 1.0 3.7 5.4
Exchange translation differences on foreign
currency net investments 0.8 (0.7) (3.1)
--------- --------- ---------
Total recognised gains and losses 1.8 3.0 2.3
Reconciliation of movements in shareholders' funds
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
Profit for the period 1.0 3.7 5.4
Dividends (1.1) (1.1) (3.2)
--------- --------- ---------
(Loss)/retained profit for the period (0.1) 2.6 2.2
Exchange translation differences on foreign
currency net investments 0.8 (0.7) (3.1)
--------- --------- ---------
Net increase/(reduction) in shareholders' funds 0.7 1.9 (0.9)
Opening shareholders' funds (including
non-equity of £0.6m) 81.2 82.1 82.1
--------- --------- ---------
Closing shareholders' funds (including
non-equity of £0.6m) 81.9 84.0 81.2
--------- --------- ---------
Notes to the Interim Statement
1. Analysis of activities
Activities classified by business segment:
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
Turnover
Power transmission 85.8 86.1 174.2
Machine tool and rotor 10.5 9.9 20.7
--------- --------- ---------
96.3 96.0 194.9
Less: Inter activity sales (1.0) (1.1) (2.8)
--------- --------- ---------
95.3 94.9 192.1
--------- --------- ---------
Operating Profit
Power transmission 3.1 3.6 7.4
Machine tool and rotor 0.4 0.3
--------- --------- ---------
3.5 3.6 7.7
Less: Goodwill amortisation (0.6) (0.7) (1.3)
Exceptional redundancy and restructuring
costs (0.3) (0.2) (0.5)
Add: Exceptional gain on disposal of property
held for sale 2.8 2.8
--------- --------- ---------
2.6 5.5 8.7
--------- --------- ---------
Operating Assets
Power transmission 83.9 79.7 76.9
Machine tool and rotor 12.9 12.6 11.6
--------- --------- ---------
96.8 92.3 88.5
--------- --------- ---------
The exceptional redundancy and restructuring cost of £0.3 million is attributed to the power
transmission segment (2003/2004: £0.1 million to the power transmission segment and £0.1 million
to the machine tool and rotor segment). Of the total goodwill charge of £0.6 million, £0.5 million
(2003/2004: £0.6 million) relates to the power transmission business and £0.1 million (2003/2004:
£0.1 million) to the machine tool and rotor business. The 2003/2004 exceptional gain of £2.8 million
relates to the disposal of a non-trading property held for sale. This property was part of the machine
tool and rotor segment.
Activities classified by geographical region of operation:
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
Turnover
United Kingdom 35.4 34.9 70.8
Germany 16.1 16.4 31.9
France 22.6 24.0 49.1
Rest of Europe 7.9 8.3 16.0
North America 24.1 23.5 49.2
Other countries 10.5 9.1 18.4
--------- --------- ---------
116.6 116.2 235.4
Less: Intra Group sales (21.3) (21.3) (43.3)
--------- --------- ---------
95.3 94.9 192.1
--------- --------- ---------
Turnover by geographical region includes intra group sales as follows:
United Kingdom 14.3 14.1 29.1
Germany 5.9 5.9 11.4
France 0.8 1.0 2.1
Operating Profit
United Kingdom 0.5 1.5 2.8
Germany 0.9 1.4 2.4
France (0.1) (0.4) (0.6)
Rest of Europe 0.4 0.3 0.4
North America 1.5 0.7 2.2
Other countries 0.3 0.1 0.5
--------- --------- ---------
3.5 3.6 7.7
Less: Goodwill amortisation (0.6) (0.7) (1.3)
Exceptional redundancy and restructuring costs (0.3) (0.2) (0.5)
Add: Exceptional gain on disposal of property held
for sale 2.8 2.8
--------- --------- ---------
2.6 5.5 8.7
--------- --------- ---------
The exceptional redundancy and restructuring cost of £0.3 million arose £0.2 million in France
and £0.1 million in North America (2003/2004: £0.1 million in the UK and £0.1 million in France).
The goodwill amortisation is attributed to business acquisitions in North America. The exceptional
gain on the asset held for sale arose in the UK.
Operating Assets
United Kingdom 38.2 38.7 37.8
Germany 14.3 13.0 12.3
France 18.4 13.7 14.8
Rest of Europe 4.0 4.0 3.9
North America 15.2 15.9 13.2
Other countries 6.7 7.0 6.5
--------- --------- ---------
96.8 92.3 88.5
--------- --------- ---------
Operating assets comprise fixed assets, current assets less creditors but exclude goodwill, cash,
borrowings, dividends, current and deferred corporate tax, finance lease obligations, pension
prepayments and other provisions for liabilities and charges.
Geographical analysis of external turnover by market area:
First half year Full year
2004/2005 2003/2004 2003/2004
£m £m £m
United Kingdom 12.9 11.5 24.4
Germany 12.0 12.7 25.4
France 4.7 4.8 9.2
Rest of Europe 16.7 18.6 36.8
North and South America 34.7 34.0 70.1
Other countries 14.3 13.3 26.2
--------- --------- ---------
95.3 94.9 192.1
--------- --------- ---------
2. Accounting policies and basis of preparation
The interim accounts are unaudited and do not constitute statutory accounts. They have been
prepared under the historical cost convention (but include some past revaluations of properties
and equipment) and in accordance with applicable accounting standards, using the accounting
policies set out in the Annual Report for the year ended 3 April 2004. There is no material
difference between the result in the profit and loss account and the result on an unmodified
historical cost basis. The Board approved the Interim Statement on 15 November 2004.
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