Interim Results

RNS Number : 8612R

Renold PLC

10 November 2021

 

Renold plc

Interim results for the half year ended 30 September 2021

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

 Significant revenue growth…Record orderbook…Strong cash generation

Renold (AIM: RNO), a leading international supplier of industrial chains and related power transmission products, announces its interim results for the six month period ended 30 September 2021.

Financial highlights

	Half year ended
	30 September 2021	30 September 2020	Increase / (decrease)
	£m	£m	%
Adjusted results at constant exchange rates1
Revenue at constant exchange rates	95.3	78.1	22%
Adjusted operating profit at constant exchange rates	8.2	5.5	49%
Return on sales2 at constant exchange rates	8.6%	7.0%
Adjusted earnings per share	2.3p	1.1p	109%
Net debt3	13.9	26.4	(47%)
Results at actual exchange rates
Revenue	95.3	81.5	17%
Adjusted operating profit	8.2	5.8	41%
Return on sales2	8.6%	7.1%
Operating profit	8.2	5.3	55%
Profit before tax	6.2	2.8	121%
Basic earnings per share	2.3p	0.9p	156%

· Revenue up 17% to £95.3m (22% at constant exchange rates).

· Adjusted operating profit up 41% (49% at constant exchange rates) to £8.2m (2020: £5.8m).

· Excluding one-off items adjusted operating profit of £7.0m ⁴  up 21% and return on sales of 7.4% up 30bps.

· Net debt £13.9m, £4.5m reduction in the period; ratio to adjusted EBITDA 0.6x (31 March 2021: 0.9x).

· Adjusted EPS 2.3p (2020: 1.1p); Excluding one-off items Adjusted EPS 2.0p

Business highlights

· The Group's markets recovered strongly during the first half, as activity levels rebounded from Covid impact, returning to 96% of pre-pandemic level.

· Strong cash generation, with continuing focus on working capital and cost control, but allowing for inventory increases due to lengthened supply chains and a gradual restoration of capital expenditure.

· Group order intake in the period £113.0m, up 48.8% YoY as reported (54.9% at constant exchange rates).

· Orderbook at 30 September 2021, £72.1m, is a record high for the Group (30 September 2020: £46.5m).

· Completed bolt-on acquisition of the conveyor chain business of Brooks Ltd, which is performing ahead of expectations.

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

² Adjusted operating profit divided by revenue

³ See Note 9 for a reconciliation of net debt which excludes lease liabilities

⁴ Non-recurring items include £1.7m of US Payroll Protection Program (PPP) loan forgiveness offset by £0.5m of dilapidation charges relating to closed sites

Robert Purcell, Chief Executive of Renold plc, said:

" The strong trading momentum experienced in the fourth quarter of the last financial year has continued into the first half, resulting in growth of both revenues and profitability. Despite the widely reported global supply chain and inflationary pressures that remain present, particularly with respect to materials, transport and energy costs, Renold continues to benefit from geographic, customer and market sector diversity. With a record order book at the period end, coupled with the strategic initiatives previously implemented, we approach the second half with confidence, but cognisant of the very volatile and inflationary world we operate in."

Reconciliation of reported, constant exchange rate and adjusted results

	Revenue		Operating profit		Earnings per share
	H1 2021/22 £m	H1 2020/21 £m	H1 2021/22 £m	H1 2020/21 £m	H1 2021/22 pence	H1 2020/21 pence
Reported at actual exchange rates	95.3	81.5	8.2	5.3	2.3	0.9
Amortisation of acquired intangible assets	-	-	-	0.5	-	0.2
Adjusted	95.3	81.5	8.2	5.8	2.3	1.1
Exchange impact	-	(3.4)	-	(0.3)	-	-
Adjusted at constant exchange rates	95.3	78.1	8.2	5.5	2.3	1.1

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. You can identify forward-looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could", "may" or "might", the negative of such terms or other similar expressions. Renold plc (the Company) wishes to caution you that these statements are only predictions and that actual events or results may differ materially. The Company does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of the Group, including among others, general economic conditions, the competitive environment as well as many other risks specifically related to the Group and its operations. Past performance of the Group cannot be relied on as a guide to future performance.

NOTES FOR EDITORS

Renold is a global leader in the manufacture of industrial chains and also manufactures a range of torque transmission products which are sold throughout the world to a broad range of original equipment manufacturers, distributors and end-users. The Company has a reputation for quality that is recognised worldwide. Its products are used in a wide variety of industries including manufacturing, transportation, energy, metals and mining.

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

Chief Executive's Statement

The Group's markets recovered strongly during the first half, as activity levels continued to rebound in the aftermath of the  Covid-19 pandemic. Group order intake during the period was £113.0m, an increase of 48.8% on a reported basis and 54.9% at constant exchange rates, over the comparative prior year period. Excluding the recently announced £11.0m long term military contract, order intake for the period increased by 34.2% or 39.7% at constant exchange rates. The resultant order book of £72.1m, represents a record high for the Group (30 September 2020: £46.5m).

Conversion of orders into sales was also encouraging, with Group revenue for the period of £95.3m, an increase of 16.9% on a reported basis and 22.0% at constant exchange rates, over the comparative prior year period. 

Adjusted operating profit increased to £8.2m (2020: £5.8m) with an adjusted operating profit margin of 8.6% (2020: 7.1%). Operating profit increased to £8.2m (2020: £5.3m), with operating profit margins increasing from 6.5% to 8.6%.

Half year ended 30 September 2021	External revenue £m	Adjusted operating profit £m	Return on sales %
Reported	95.3	8.2	8.6
US PPP Loan forgiveness	-	(1.7)	-
Costs relating to closed sites	-	0.5	-
Reported excluding non-recurring items	95.3	7.0	7.4

During the period the Group benefitted from the forgiveness of £1.7m of loans received under the US Government's Payroll Protection Program, offsetting this, the Group also incurred £0.5m of non-recurring costs relating to closed sites, including repair and maintenance expenditure. Excluding these one-off items adjusted operating profit from continuing operations increased to £7.0m (2020: £5.8m), with corresponding operating profit margins rising to 7.4% (2020: 7.0%)  despite the impact of the widely reported industry headwinds, including the impact experienced on the supply chain, raw material availability and inflation.

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 prices, and whilst price increases have been passed through to customers, the Group expects further pressure on materials, energy and transportation to continue into the second half of the year.

Renold continues to make every effort to increase performance through specific projects aimed at better operational efficiency, through improved design and standardisation of products, better utilisation of machinery and workforce, including more flexible working practices, and leveraging the benefits of improved procurement strategies.

The Group reduced net debt by £4.5m during the period, to £13.9m (31 March 2021: £18.4m).

Acquisition

On 8 April 2021 Renold completed the acquisition of the conveyor chain business of Brooks Ltd ("Brooks") in Manchester, UK, for a total consideration of £0.7m, including £0.4m of deferred consideration. The business has been fully integrated into the Renold UK Service centre in Manchester. At the time of the acquisition, for the full year Brooks was expected to contribute incremental sales and Group operating profit of c.£1.0m and c.£0.2m respectively. Pleasingly, Brooks is performing ahead of these expectations.

Business and Financial Review

	Revenue at constant exchange rates		Adjusted operating profit at constant exchange rates		Adjusted operating margin at constant exchange rates
Six month period	2021/22 £m	2020/21 £m	2021/22 £m	2020/21 £m	2021/22 %	2020/21 %
Chain	76.6	60.7	9.0	5.5	11.7	9.1
Torque Transmission	20.6	19.8	1.8	2.4	8.7	12.1
Head office costs/ Intra group sales elimination	(1.9)	(2.4)	(3.8)	(2.4)	-	-
Total excluding non-recurring items	95.3	78.1	7.0	5.5	7.4	7.0
Non-recurring items1	-	-	1.2	-	-	-
Total	95.3	78.1	8.2	5.5	8.6	7.0

¹ Non-recurring items have been added back to the underlying business segments, these include to £1.7m of PPP loan forgiveness in the Chain division and £0.5m of dilapidation charges on closed sites in Head office costs.

Chain

The Chain division's revenue at constant exchange rates increased by 26.2% (£15.9m) to £76.6m.

Revenue recovered strongly in most regions:

· Europe, recorded a 41.1% increase driven by strong domestic demand and being our main production centre also benefited from increased demand in other geographies, especially from the US.

· The Americas, increased by 30.9%, with strong demand from the US OEM markets, especially for fork lift truck chain.

· Australasia's revenue was broadly unchanged, as the business benefitted greatly last year from the Australian markets move to more domestically produced manufactured goods, which largely offset the impact of Covid.

· India recovered strongly, and despite being subject to a pandemic related lock down in the current half year, recorded 64.2% revenue growth over the prior year comparator.

· Domestic sales revenue in China increased by 22.5%, albeit from a low base, while strong demand from Europe, the US and notably India, resulted in an overall increase in revenue of 36.9%. Significant progress continues to be made in improving the performance of the new  factory in Jintan.

Divisional adjusted operating profit before non-recurring items was £9.0m, £3.5m higher than the prior year at constant exchange rates. The adjusted operating profit margin before non-recurring items was 11.7% (2020: 9.1%). Including the impact of non-recurring items, adjusted operating profit and margins were £10.7m and 13.9% respectively.

Order intake at constant exchange rates increased by 49.8% to £83.3m, resulting in book to bill (ratio of orders to sales) for the first half of the year of 108.8% (2020: 91.7%).

Torque Transmission

Divisional revenues of £20.6m were £0.8m higher than in the prior first half year mainly due to increasing activity on the contract to supply couplings for the Royal Navy. The Group announced it had secured an £11m order for the second phase of this contract in July.

Divisional profit reduced by £0.6m to £1.8m mainly because of the one-off benefit of UK government Covid support of £0.7m in the first half of last financial year. Excluding this, divisional operating profit advanced by £0.1m relative to the first half of last year, reflecting the higher revenues.

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

Cash Flow and Net Debt

Half year to 30 September	2021/22 £m	2020/21 £m
Adjusted operating profit1	8.2	5.3
Add back depreciation and amortisation	4.9	5.7
Adjusted EBITDA	13.1	11.0
Movement in working capital	0.5	3.7
Net capital expenditure	(1.3)	(1.0)
Operating cash flow	12.3	13.7
Income taxes	(1.3)	1.0
Pensions cash costs	(2.4)	(1.1)
Restructuring spend	-	-
Repayment of principal under lease liabilities	(1.4)	(1.7)
Financing costs paid	(1.0)	(1.8)
Consideration paid for acquisition	(0.3)	-
Employee Benefit Trust share purchases	(1.8)	-
Other movements/share-based payments	0.4	0.1
Change in net debt1	4.5	10.2
Closing net debt1	(13.9)	(26.4)

¹ Adjusted operating profit and the change in net debt in the period ended 30 September 2021 include the US PPP loan forgiveness of £1.7m.

Cash generation in the first half was strong, with net debt reducing by £4.5m from the position at 31 March 2021, to £13.9m.

A continued and disciplined focus on working capital saw a £6.3m increase in inventory driven by lengthening supply chains and material cost increases , being offset by a significant increase in payables. Receivables also increased, but at a rate in line with the recovery of turnover. Further inflationary pressures on materials, together with a significant lengthening of the time to supply product between operating sites, will continue to result in increased levels of inventory in the second half year. This coupled with higher input prices will result in a modest increase in working capital.

Net capital expenditure at £1.3m remains well below pre-pandemic levels as supply chain issues have increased lead times for machinery purchases. The spend on improving production capabilities in prior years means that lower levels of maintenance capex will not impact operational performance. However, the delay does postpone the significant operational benefits expected from planned projects. Strategic investments in improved heat treatment, other production capabilities and the standardised IT system for the Group continue and are expected to gather pace during the second half of the year.

Corporation tax payments on account increased to more normal levels, with a total £1.3m tax paid in the first half of the year. Significant efforts were made last year to review payments on account, which led to a recovery of £1.3m and resulted in a net tax cash inflow of £1.0m in the prior half year.

The Group acquired the conveyor chain business of Brooks Ltd in Manchester, UK, during the period, for a total consideration of £0.7m, with £0.3m paid on completion and £0.4m deferred.

Cash financing costs reduced from £1.8m in the prior half year to £1.0m this half year, due to the significant reduction in the average net debt.

During the period the Group acquired shares in the employee benefit trust, totalling £1.8m. This will ensure no dilution when when share awards vest.

Pensions

The Group has a number of closed defined benefit pension schemes (accounted for in accordance with IAS 19R 'Employee benefits'). During the pandemic, the Group negotiated a £2.8m one-off reduction in annual contribution levels with the UK pension scheme trustees. Accordingly, contribution levels returned to normal levels during the period. The future repayment of the deferred contributions will commence on 1 April 2022, at approximately £0.6m per annum, for a period of five years, until April 2027.

Cash pension costs are sustainable, having remained consistent at approximately £5.5m for several years. The Group's IAS 19R retirement benefit obligation decreased from £102.4m at 31 March 2021 to £100.3m at 30 September 2021.

	At 30 September 2021			At 31 March 2021
	UK Schemes	Overseas Schemes	Total	UK Schemes	Overseas Schemes	Total
	£m	£m	£m	£m	£m	£m
Total retirement benefit obligations	(75.6)	(24.7)	(100.3)	(77.5)	(24.9)	(102.4)
Net deferred tax asset	18.9	3.6	22.5	14.7	3.7	18.4
Retirement benefit obligations net of deferred tax asset	(56.7)	(21.1)	(77.8)	(62.8)	(21.2)	(84.0)

The ongoing subdued levels of corporate bond yields, which determine discount rates, have resulted in the continuing high levels of the deficits in the key UK and German schemes. In the UK, discount rates remained stable at 2.0% (31 March 2021: 2.0%) while the increase in the CPI inflation assumption, increasing to 2.9% (31 March 2021: 2.7%), has the effect of increasing the present value of future liabilities by £5.2m. Strong asset returns helped to mitigate the impact of the change in the financial assumptions, with the net UK deficit decreasing by £1.9m to £75.6m.

Pension liabilities in non-UK schemes reduced by £0.2m to £24.7m.

The net financing expense (a non-cash item) was £0.9m (2020: £1.0m).

Dividend

In light of the widely reported economic headwinds, including the impact on its supply chain, raw material availability, inflation and continuing investment in equipment and revenue expenditure to improve the performance of the business, the Board has decided not to declare an interim dividend. The dividend policy will remain under review as margin and cash flow performance continues to develop.

Going Concern

The interim condensed consolidated financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

The ongoing uncertainty as to the future impact on the Group of the Covid-19 pandemic, alongside the resilient half year trading performance of the Group, have been considered as part of the adoption of the going concern basis. During the first half of the year, manufacturing facilities in Western Europe, the USA, China and Australia remained open. Facilities in China and Malaysia were shut down for a period of time due to national restrictions, but had fully reopened prior to September 2021, and have remained open since. Across the Group, public health measures advised by governments are being followed. The Group continues to closely monitor operating costs, and capital expenditure and other cash demands are being managed effectively.

As part of its assessment, the Board has considered downside scenarios that reflect the current uncertainty in the global economy, including significant material and energy supply issues, and transport delays, and continuing inflationary pressures.

The Directors believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading performances and considering the existing banking facilities, including the available liquidity and covenant structure, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months following the date of approval of the interim financial statements. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Risks and Uncertainties

The principal risks and uncertainties affecting the business activities of the Group, as well as the risk mitigating controls put in place, remain those detailed on pages 40-46 of the 2020/21 Annual Report and Accounts. These include macro-economic and political uncertainty risks as well as various risks relating to Group treasury activities. Key operational risks are raw material prices, energy and other input cost prices.

During the period, risks relating to macro-economic factors and political uncertainty have continued, especially with regard to the impact of the global Covid-19 pandemic. The sustained effect of uncertainty has the potential to reduce demand in end-markets for the Group's products. Renold benefits from its geographic, customer and sector diversity which helps to mitigate the impact of localised issues, but cannot fully mitigate the effects of widespread reductions in demand.

The valuation of retirement benefit obligations can be significantly impacted by changes to the yields on corporate bonds and inflation prospects. The schemes' investment strategies provide a partial hedge against these risks, and other de-risking strategies are employed where sensible. However, it should be noted that the actual cash flows to support the pension scheme are quite stable and subject to long term funding plans which are reviewed every three years. The next triennial valuation will have an effective date of 5 April 2022.

Summary

Overall, activity in the first half was strong and in line with expectations, showing a good recovery as the worst effects of the pandemic receded.  Whilst this performance is expected to continue, supported by the record order book at the period end, the widely reported global supply chain issues are continuing to cause margin pressure, with significant inflationary trends being experienced, particularly with respect to materials, transport and energy costs. The Company is working to mitigate these headwinds as far as possible and the Group enjoys significant geographic, customer and sector diversity. With the Group benefiting from the strategic initiatives previously implemented, we are well placed for the future, with a robust business well positioned as markets continue to recover from the effects of the pandemic.

Responsibility statement

The Directors confirm that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;

· the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months of the financial year and description of principal risks and uncertainties for the remaining six months of the financial year); and

· the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The Directors of Renold plc are listed in the Annual Report for the year ended 31 March 2021. A list of current Directors is maintained on the Group website at www.renold.com.

By order of the Board

Robert Purcell  Jim Haughey

Chief Executive  Group Finance Director

10 November 2021  10 November 2021

Condensed Consolidated Income Statement

for the six months ended 30 September 2021

	Note	First half 2021/22 (unaudited) £m	First half 2020/21 (unaudited) £m	Full year 2020/21 (audited) £m
Revenue	3	95.3	81.5	165.3
Operating costs before adjusting items		(87.1)	(75.7)	(154.1)
Adjusted1 operating profit		8.2	5.8	11.2
Adjusting items
Amortisation of acquired intangible assets	4	-	(0.5)	(0.7)
Operating profit		8.2	5.3	10.5
Net financing costs	5	(2.0)	(2.5)	(4.6)
Profit before tax		6.2	2.8	5.9
Taxation	6	(1.2)	(0.8)	(2.1)
Profit for the period		5.0	2.0	3.8
Attributable to:
Owners of the parent		5.0	2.0	3.8
Earnings per share from continuing operations	7
Basic		2.3p	0.9p	1.7p
Diluted		2.1p	0.9p	1.6p
Basic adjusted earnings per share		2.3p	1.1p	2.0p
Diluted adjusted earnings per share		2.1p	1.1p	1.9p

¹ Adjusted: In addition to statutory reporting, the Group reports certain financial metrics on an adjusted basis. Definitions of adjusted measures, and information about the differences to statutory metrics are provided in Note 15 to the financial statements.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2021

		First half 2021/22 (unaudited) £m	First half 2020/21 (unaudited) £m	Full year 2020/21 (audited) £m
Profit for the period		5.0	2.0	3.8
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations		1.1	0.3	(5.8)
Gain/(loss) on hedges of the net investment in foreign operations		(0.1)	0.2	0.7
Cash flow hedges:
Fair value gain/(loss) arising on cash flow hedges during the period		(0.3)	0.1	(0.1)
Less: Cumulative gain arising on cash flow hedges reclassified to profit and loss		0.1	0.3	0.3
Income tax relating to items that may be reclassified subsequently to profit or loss		0.1	(0.3)	-
		0.9	0.6	(4.9)
Items not to be reclassified to the income statement in subsequent periods:
Re-measurement gains/(losses) on retirement benefit obligations		1.0	(17.1)	(5.6)
Tax on re-measurement losses/(gains) on retirement benefit obligations - excluding impact of statutory rate change		(0.2)	3.4	1.0
Effect of changes in statutory tax rate on deferred tax assets		4.0	-	-
		4.8	(13.7)	(4.6)
Other comprehensive income/(expense) for the period, net of tax		5.7	(13.1)	(9.5)
Total comprehensive income/(expense) for the period, net of tax		10.7	(11.1)	(5.7)
Attributable to:
Owners of the parent		10.7	(11.1)	(5.7)

Condensed Consolidated Statement of Financial Position

as at 30 September 2021

	Note	30 September 2021 (unaudited) £m	30 September 2020 (unaudited) £m	31 March  2021 (audited) £m
Assets Non-current assets
Goodwill		22.2	23.5	21.7
Other intangible fixed assets		6.3	7.3	6.1
Property, plant and equipment		46.7	52.0	47.8
Right-of-use assets		10.8	11.4	10.1
Deferred tax assets		25.3	24.2	21.0
		111.3	118.4	106.7
Current assets
Inventories		44.7	41.8	37.7
Trade and other receivables		37.8	31.5	30.3
Current tax		0.1	0.1	0.2
Derivative financial instruments		-	0.1	-
Cash and cash equivalents	9	11.5	19.6	19.9
		94.1	93.1	88.1
Total assets		205.4	211.5	194.8
Liabilities
Current liabilities
Borrowings	9	(0.1)	(0.1)	(2.3)
Trade and other payables		(45.5)	(32.5)	(31.5)
Lease liabilities		(2.2)	(3.4)	(2.5)
Current tax		(2.9)	(1.6)	(2.3)
Derivative financial instruments		(0.3)	-	(0.1)
Provisions		(0.2)	(0.7)	(1.4)
		(51.2)	(38.3)	(40.1)
Net current assets		42.9	54.8	48.0
Non-current liabilities
Borrowings	9	(24.8)	(45.4)	(35.5)
Preference stock	9	(0.5)	(0.5)	(0.5)
Trade and other payables		(5.7)	(5.2)	(5.4)
Lease liabilities		(13.3)	(13.3)	(12.9)
Deferred tax liabilities		(4.2)	(4.7)	(4.1)
Retirement benefit obligations	8	(100.3)	(115.6)	(102.4)
Provisions		(2.1)	-	-
		(148.8)	(184.7)	(160.8)
Total liabilities		(201.9)	(223.0)	(200.9)
Net assets/(liabilities)		3.3	(11.5)	(6.1)
Equity
Issued share capital	10	11.3	11.3	11.3
Share premium		-	30.1	30.1
Capital reserve		-	15.4	15.4
Currency translation reserve		7.9	12.1	6.8
Other reserves		(2.1)	0.1	(0.1)
Retained earnings		(13.8)	(80.5)	(69.6)
Total shareholders' surplus/(deficit)		3.3	(11.5)	(6.1)

 

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 September 2021

	First half 2021/22 (unaudited) £m	First half 2020/21 (unaudited) £m	Full year 2020/21 (audited) £m
Cash flows from operating activities
Cash generated by operations (Note 9)	10.1	13.7	26.0
Income taxes refunded/(paid)	(1.3)	1.0	0.7
Net cash flows from operating activities	8.8	14.7	26.7
Cash flows from investing activities
Proceeds from property disposals	0.1	0.2	0.2
Purchase of property, plant and equipment	(0.8)	(1.0)	(2.3)
Purchase of intangible assets	(0.6)	(0.2)	(0.8)
Consideration paid for acquisition	(0.3)	-	-
Net cash flows from investing activities	(1.6)	(1.0)	(2.9)
Cash flows from financing activities
Repayment of principal under lease liabilities	(1.4)	(1.7)	(3.2)
Financing costs paid	(0.8)	(1.8)	(2.0)
Own shares purchased	(1.8)	-	-
Proceeds from borrowings	-	2.8	2.8
Repayment of borrowings	(9.2)	(9.0)	(19.9)
Net cash flows from financing activities	(13.2)	(9.7)	(22.3)
Net (decrease)/increase in cash and cash equivalents	(6.0)	4.0	1.5
Net cash and cash equivalents at beginning of period	17.3	15.1	15.1
Effects of exchange rate changes	(0.1)	-	0.7
Net cash and cash equivalents at end of period	11.2	19.1	17.3

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 September 2021

	Share capital £m	Share premium account £m	Retained earnings £m	Currency translation reserve £m	Capital redemption reserve £m	Other reserves £m	Total equity £m
At 1 April 2020	11.3	30.1	(68.8)	11.9	15.4	(0.3)	(0.4)
Profit for the year	-	-	3.8	-	-	-	3.8
Other comprehensive income/(expense)	-	-	(4.6)	(5.1)	-	0.2	(9.5)
Total comprehensive income/(expense) for the year	-	-	(0.8)	(5.1)	-	0.2	(5.7)
Share-based payments	-	-	-	-	-	-	-
At 31 March 2021	11.3	30.1	(69.6)	6.8	15.4	(0.1)	(6.1)
Profit for the period	-	-	5.0	-	-	-	5.0
Other comprehensive income/(expense)	-	-	4.8	1.1	-	(0.2)	5.7
Total comprehensive income/(expense) for the period	-	-	9.8	1.1	-	(0.2)	10.7
Own shares purchased	-	-	-	-	-	(1.8)	(1.8)
Capital reorganisation (Note 11)	-	(30.1)	45.5	-	(15.4)	-	-
Share-based payments	-	-	0.5	-	-	-	0.5
At 30 September 2021	11.3	-	(13.8)	7.9	-	(2.1)	3.3
At 1 April 2020	11.3	30.1	(68.8)	11.9	15.4	(0.3)	(0.4)
Profit for the period	-	-	2.0	-	-	-	2.0
Other comprehensive income/(expense)	-	-	(13.7)	0.2	-	0.4	(13.1)
Total comprehensive income/(expense) for the period	-	-	(11.7)	0.2	-	0.4	(11.1)
Share-based payments	-	-	-	-	-	-	-
At 30 September 2020	11.3	30.1	(80.5)	12.1	15.4	0.1	(11.5)

Included in retained earnings is £1.3m (31 March 2021: £0.8m) relating to a share option reserve.

The other reserves are stated after deducting £1.8m (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 30 September 2021 the Renold Employee Benefit Trust held 7,622,509 (31 March 2021: 199,790) ordinary shares of 5p each and, following recommendations by the employer, are provisionally allocated to satisfy awards under employee incentive schemes. At 30 September 2021 the market value of these shares was £1.9m (31 March 2021: £0.035m).                                                                                                                                                                                                                         

Notes to the Interim Condensed Consolidated Financial Statements

1.  Corporate information

The interim condensed consolidated financial statements for the six months to 30 September 2021 were approved by the Board on 10 November 2021. These statements have not been audited or reviewed by the Group's auditor pursuant to the Auditing Practices Board guidance on the Review of Interim Financial Information. 

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

These interim condensed consolidated financial statements do not constitute statutory accounts of the Group within the meaning of Section 434 of the Companies Act 2006. The statutory accounts for the year ended 31 March 2021 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 2021 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 of the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group's annual consolidated financial statements for the year ended 31 March 2021.

The accounting policies, presentation and methods of computation applied by the Group in these interim condensed consolidated financial statements are the same as those applied in the Group's latest audited annual consolidated financial statements for the year ended 31 March 2021, except as noted below. 

The excess of the consideration transferred, the amount of any non-controlling interest and the acquisition date fair value of any previously held equity interest in the acquired entity as compared with the Group's share of the identifiable net assets are recognised as goodwill. Where the Group's share of identifiable net assets acquired exceeds the total consideration transferred, a gain from a bargain purchase is recognised immediately in the income statement after the fair values initially determined have been reassessed. 

New and amended standards adopted by the Group 

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. 

As a result of the Covid-19 pandemic, the Group has utilised £nil (31 March 2021: £4.0m; 30 September 2020: £2.3m) of government assistance across its units in the form of employee support schemes. In line with IAS 20, this income was recognised in the income statement at the date at which the conditions attached to receipt of such assistance have been met, in the period it becomes receivable.

New standards and interpretations not yet effective and not adopted  

At the date of publishing these interim condensed consolidated financial statements, a number of new and revised standards and interpretations have been issued by the International Accounting Standards Board (IASB). The relevant standards which are deemed to apply to Renold are documented below.   

During April 2021 a finalised decision by the IFRS Interpretations Committee regarding configuration and customisation costs in Cloud Computing Arrangements (Software as a Service, 'SaaS') under IAS 38 was made. This new announcement offers clarification of the treatment of  how a customer should account for the costs of configuring or customising the supplier's application software in a SaaS arrangement that is determined to be a service contract. The Group intends to perform an assessment by year end to determine which costs should continue to be capitalised, and those which should be expensed.

Going concern

The condensed consolidated financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the condensed consolidated financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The business and financial review included in these Interim results provides a summary of the Group's financial position, cash flows, liquidity position and borrowings.

The current and plausible future impact of Covid-19 on the Group's activities and performance, in addition to other factors and risks, has been considered by the Board of Directors in preparing its going concern assessment. The Group has modelled potential severe but plausible impacts on revenues, profits and cash flows in its assessment. In preparing its assessment, the Directors have considered the actual impact that Covid-19 has had on the business since the beginning of the outbreak and the related decline in revenues.

The key covenants attached to the Group's multi-currency revolving credit facility relate to leverage (net debt to EBITDA) and interest cover, which are measured on a pre-IFRS 16 basis. The maximum leverage ratio permitted under the covenants is 2.5x and the minimum interest cover ratio permitted is 4.0x. In the severe but plausible downside scenario modelled, the Group continues to maintain sufficient liquidity and meets its gearing and interest cover covenants under the facility with substantial headroom.

In addition to the above scenarios, management has performed reverse stress testing over the model to determine the extent of downturn which would result in a breach of covenants. Assuming similar levels of cash conversion as seen in recent months, a monthly revenue decline compared with the year ended 31 March 2019, well in excess of the maximum decline experienced in any month over the last 18 months would need to persist throughout the going concern period for a covenant breach to occur, which is considered very unlikely. This stress test also does not incorporate additional mitigating actions or cash preservation responses, which the Group would implement in the event of a severe and extended revenue decline.

Following this assessment, the Directors have formed a judgement, at the time of approving the condensed consolidated financial statements, that there are no material uncertainties that cast doubt on the Group's going concern status and that it is a reasonable expectation that the Group has adequate resources to continue in operational existence for at least the next 12 months. For this reason, the Directors continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

Significant accounting judgements, estimates and assumptions  

In the course of preparing these interim condensed consolidated financial statements, no judgements have been made in the process of applying the Group's accounting policies that have had a significant effect on the amounts recognised in the financial statements, other than those involving estimation uncertainty. The key sources of estimation uncertainty are those which applied in the annual consolidated financial statements for the year ended 31 March 2021, namely: 

• taxation 

• retirement benefit obligations 

• right-of-use assets 

Prior to the adoption of IFRS 16 'Leases', the Group had previously assessed operating lease arrangements at the Bredbury (UK) facility as onerous, with an onerous lease provision recorded in the Group's balance sheet accordingly. On adoption of IFRS 16 the onerous lease provision, £2.7m on transition date for this site, was reclassified as a reduction to the opening value of the associated right-of-use asset. During the six months ended 30 September 2021, £0.6m of the original onerous lease provision has been reclassified from the right-of-use asset to provisions, representing the element of the £2.7m brought forward onerous lease provision relating to expected remediation costs at the site. At the end of the current reporting period, the resulting value of the Bredbury right-of-use asset is based on assumptions upon future sub-let income streams and the discount rate used.

• inventory valuation 

• impairment of non-financial assets 

Financial risk management 

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 March 2021.

3.  Segmental information

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

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

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

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

The Chief Operating Decision Maker (CODM) for the purposes of IFRS 8 'Operating Segments' is considered to be the Board of Directors of Renold plc. Management monitor the results of the separate reportable operating segments based on operating profit and loss which is measured consistently with operating profit and loss in the consolidated financial statements. The same segmental basis applies to decisions about resource allocation. Disclosure has 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 net financing costs, retirement benefit obligations and income taxes are managed on a Group basis and therefore are not allocated to operating segments. Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.   

The segment results for the period ended 30 September 2021 were as follows:

Period ended 30 September 2021	Chain2 £m		Torque Transmission £m		Head office costs1 and eliminations £m		Consolidated £m
Revenue
External customer	76.2		19.1		-		95.3
Inter-segment	0.4		1.5		(1.9)		-
Total revenue	76.6		20.6		(1.9)		95.3
Adjusted operating profit/(loss)	10.7		1.8		(4.3)		8.2
Amortisation of acquired intangible assets	-		-		-		-
Operating profit/(loss)	10.7		1.8		(4.3)		8.2
Net financing costs							(2.0)
Profit before tax							6.2
Taxation							(1.2)
Profit after tax							5.0
Other disclosures
Working capital	32.5		8.0		(3.5)		37.0
Capital expenditure	0.5		0.4		0.4		1.3
Depreciation and amortisation included in adjusted operating profit/(loss)	3.1		0.9		0.9		4.9
Amortisation of acquired intangibles	-		-		-		-
Total depreciation and amortisation	3.1		0.9		0.9		4.9

¹ The head office operating loss includes non-recurring costs of £0.5m relating to dilapidations charges on closed sites.

² Chain operating profit includes non-recurring income of £1.7m relating to US PPP loan forgiveness.

The segment results for the period ended 30 September 2020 were as follows:

Period ended 30 September 2020	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External Customer	62.5		19.0		-		81.5
Inter-segment	0.8		1.6		(2.4)		-
Total revenue	63.3		20.6		(2.4)		81.5
Adjusted operating profit/(loss)	5.7		2.5		(2.4)		5.8
Amortisation of acquired intangible assets	(0.5)		-		-		(0.5)
Operating profit/(loss)	5.2		2.5		(2.4)		5.3
Net financing costs							(2.5)
Profit before tax							2.8
Taxation							(0.8)
Profit after tax							2.0
Other disclosures
Working capital	29.0		9.7		2.1		40.8
Capital expenditure	0.7		0.6		0.3		1.6
Depreciation and amortisation included in adjusted operating profit/(loss)	3.4		0.9		0.9		5.2
Amortisation of acquired intangibles	0.5		-		-		0.5
Total depreciation and amortisation	3.9		0.9		0.9		5.7

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 15 to the interim condensed consolidated financial statements. Constant exchange rate results are retranslated to current year exchange rates and therefore only the prior year comparatives are an alternative performance measure. A reconciliation is provided below and in Note 15. 

Period ended 30 September 2020	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External revenue	62.5		19.0		-		81.5
Inter-segment	0.8		1.6		(2.4)		-
Foreign exchange retranslation	(2.6)		(0.8)		-		(3.4)
Total revenue at constant exchange rates	60.7		19.8		(2.4)		78.1
Adjusted operating profit/(loss) at constant exchange rates	5.7		2.5		(2.4)		5.8
Foreign exchange retranslation	(0.2)		(0.1)		-		(0.3)
Adjusted operating profit/(loss) at constant exchange rates	5.5		2.4		(2.4)		5.5

The segment results for the year ended 31 March 2021 were as follows:

Year ended 31 March 2021	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External Customer	128.9		36.4		-		165.3
Inter-segment	1.1		2.7		(3.8)		-
Total revenue	130.0		39.1		(3.8)		165.3
Adjusted operating profit/(loss)	13.3		5.0		(7.1)		11.2
Amortisation of acquired intangible assets	(0.7)		-		-		(0.7)
Operating profit/(loss)	12.6		5.0		(7.1)		10.5
Net financing costs							(4.6)
Profit before tax							5.9
Taxation							(2.1)
Profit after tax							3.8
Other disclosures
Working capital	29.5		7.8		(0.8)		36.5
Capital expenditure	1.7		0.7		0.6		3.0
Depreciation and amortisation included in adjusted operating profit/(loss)	6.5		1.9		1.8		10.2
Amortisation of acquired intangibles	0.7		-		-		0.7
Total depreciation and amortisation	7.2		1.9		1.8		10.9

The prior year results have been restated using this year's exchange rates as follows:

Year ended 31 March 2021	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External revenue	128.9		36.4		-		165.3
Inter-segment	1.1		2.7		(3.8)		-
Foreign exchange retranslation	(4.2)		(1.0)		-		(5.2)
Total revenue at constant exchange rates	125.8		38.1		(3.8)		160.1
Adjusted operating profit/(loss)	13.3		5.0		(7.1)		11.2
Foreign exchange retranslation	(0.4)		(0.1)		-		(0.5)
Adjusted operating profit/(loss) at constant exchange rates	12.9		4.9		(7.1)		10.7

4.  Adjusting items

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 15 to the interim condensed consolidated financial statements.   

	First half				Full year
	2021/22 £m		2020/21 £m		2020/21 £m
Included in operating costs:
Amortisation of acquired intangible assets (Note 8)	-		0.5		0.7
Adjusting items in operating profit	-		0.5		0.7

Amortisation of acquired intangible assets 

Acquisition related intangible asset amortisation costs of £0.04m (2020: £0.5m) were recognised in the current period. This is considered to be an adjusting item on the basis that these charges result from acquisition accounting and do not relate to current trading activity. 

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. In the period ended 30 September 2021 the business generated additional sales for the Group of £0.4m and added £0.2m to Group operating profit. The business has been integrated into the Renold UK Service centre in Manchester. The Group recognised £0.4m of acquired intangibles on acquisition of the Brooks business. The acquired intangibles are being amortised over a period of five years.   

5.  Net financing costs

	First half				Full year
	2021/22 £m		2020/21 £m		2020/21 £m
Financing costs:
Interest payable on bank loans and overdrafts	(0.6)		(0.9)		(1.6)
Interest paid on lease liabilities	(0.2)		(0.3)		(0.5)
Amortised financing costs	(0.2)		(0.2)		(0.2)
Loan financing costs	(1.0)		(1.4)		(2.3)
Net IAS 19R financing costs	(0.9)		(1.0)		(2.2)
Discount unwind on non-current trade and other payables	(0.1)		(0.1)		(0.1)
Net financing costs	(2.0)		(2.5)		(4.6)

6.  Taxation

	First half				Full year
	2021/22 £m		2020/21 £m		2020/21 £m
Current tax:
- UK	-		-		-
- Overseas	(1.5)		(0.9)		(2.2)
Current income tax charge	(1.5)		(0.9)		(2.2)
Deferred tax:
- UK	(0.2)		-		0.2
- Overseas	(0.1)		0.1		(0.1)
- Effects of changes in corporate tax rates	0.6		-		-
Total deferred tax charge	0.3		0.1		0.1
Total income tax expense	(1.2)		(0.8)		(2.1)

Factors affecting current and future tax charges 

The increase in overseas current corporate tax is driven by the improved trading in the first six months of the year. The deferred tax movement relates solely to pensions with the £0.6m credit arising in respect of the restatement of UK deferred tax balances at the new 25% substantively enacted rate (previously tax effected at 19%).

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 .

7.  Earnings per share

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

	First half						Full year
	2021/22			2020/21			2020/21
	Earnings	Per share amount		Earnings	Per share amount		Earnings	Per share amount
	£m	(pence)		£m	(pence)		£m	(pence)
Basic EPS from continuing and discontinued operations
Profit attributed to ordinary shareholders	5.0	2.3p		2.0	0.9p		3.8	1.7p
Basic EPS from continuing operations	5.0	2.3p		2.0	0.9p		3.8	1.7p
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets	-	-		0.5	0.2p		0.7	0.3p
Adjusted EPS	5.0	2.3p		2.5	1.1p		4.5	2.0p

	First half				Full year
	2021/22 Thousands		2020/21 Thousands		2020/21 Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share	219,458		225,418		225,418
Effect of dilutive potential ordinary shares:   Shares subject to performance conditions	14,195		6,210		7,293
For the purpose of calculating diluted earnings per share	233,653		231,628		232,711

	First half				Full year
	2021/22 (pence)		2020/21 (pence)		2020/21 (pence)
Diluted EPS from continuing and discontinued operations	2.1p		0.9p		1.6p
Diluted EPS from continuing operations	2.1p		0.9p		1.6p
Diluted adjusted EPS	2.1p		1.1p		1.9p

The adjusted EPS numbers have been provided to give a useful indication of underlying performance by the exclusion of adjusting items. Due to the existence of unrecognised deferred tax assets there were no associated tax credits on some of the adjusting items and in these instances adjusting items are added back in full. 

8.  Retirement benefit obligations

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

	At 30 September 2021 £m		At 30 September 2020 £m		At 31 March 2021 £m
Funded plan obligations	(233.5)		(242.8)		(230.5)
Funded plan assets	156.1		153.8		151.2
Net funded plan obligations	(77.4)		(89.0)		(79.3)
Unfunded obligations	(22.9)		(26.6)		(23.1)
Total retirement benefit obligations	(100.3)		(115.6)		(102.4)

Analysed as follows:

Non-current liabilities: Retirement benefit obligations	(100.3)		(115.6)		(102.4)
Net deferred tax asset	22.5		20.9		18.4
Retirement benefit obligation net of deferred tax	(77.8)		(94.7)		(84.0)

The increase in the Group's net pre-tax deficit from £102.4m at 31 March 2021 to £100.3m at 30 September 2021 primarily reflects employer contributions made in the period.

9.  Additional Cashflow Information

Reconciliation of operating profit to net cash flows from operations:

	First half				Full year
	2021/22 £m		2020/21 £m		2020/21 £m
Cash generated from operations:
Operating profit from continuing and discontinued operations	8.2		5.3		10.5
Depreciation of property, plant and equipment - owned assets	2.7		3.2		5.5
Depreciation of property, plant and equipment - right-of-use-assets	1.4		1.4		2.8
Amortisation of intangible assets	0.8		1.1		2.6
Loss on disposals of plant and equipment	-		-		0.1
US PPP loan forgiveness	(1.7)
Equity share plans	0.5		-		-
(Increase)/decrease in inventories	(6.3)		4.9		6.3
(Increase)/decrease in receivables	(7.1)		4.6		4.2
Increase/(decrease) in payables	13.6		(5.8)		(5.0)
Increase in provisions	0.3		-		0.7
Cash contribution to pension schemes	(2.4)		(1.1)		(2.1)
Pension current service cost (non-cash)	0.1		0.1		0.1
Pension past service cost (non-cash)	-		-		0.3
Cash generated from operations	10.1		13.7		26.0

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

	First half				Full year
	2021/22 £m		2020/21 £m		2020/21 £m
(Decrease)/increase in cash and cash equivalents	(6.0)		4.0		1.5
Change in net debt resulting from cash flows	9.2		6.4		17.1
US PPP loan forgiveness	1.7		-		-
Foreign Currency translation differences	(0.2)		-		(0.2)
Non-cash movement on capitalised finance costs	(0.2)		(0.2)		(0.2)
Change in net debt during the period	4.5		10.2		18.2
Net debt at start of period	(18.4)		(36.6)		(36.6)
Net debt at end of period	(13.9)		(26.4)		(18.4)

Net debt comprises:

	At 30 September 2021 £m		At 30 September 2020 £m		At 31 March 2021 £m
Cash and cash equivalents	11.5		19.6		19.9
Total debt	(25.4)		(46.0)		(38.3)
	(13.9)		(26.4)		(18.4)

	At 30 September 2021		At 30 September 2020		At 31 March 2021
Net cash and cash equivalents	£m		£m		£m
Cash and cash equivalents	11.5		19.6		19.9
Less: Overdrafts	(0.3)		(0.5)		(2.6)
Net cash and cash equivalents	11.2		19.1		17.3

	At 30 September 2021		At 30 September 2020		At 31 March 2021
Total debt	£m		£m		£m
Borrowings:
Overdrafts	(0.3)		(0.5)		(2.6)
Capitalised costs	0.2		0.4		0.3
Current borrowings	(0.1)		(0.1)		(2.3)
Bank Loans	(25.0)		(45.7)		(35.7)
Capitalised costs	0.2		0.3		0.2
Non-current borrowings	(24.8)		(45.4)		(35.5)
Total borrowings	(24.9)		(45.5)		(37.8)
Preference stock	(0.5)		(0.5)		(0.5)
Total debt	(25.4)		(46.0)		(38.3)

10. Called up share capital

	At 30 September 2021 £m		At 30 September 2020 £m		At 31 March 2021 £m
Ordinary shares of 5p each	11.3		11.3		11.3

At 30 September 2021, the issued ordinary share capital comprised 225,417,740 ordinary shares of 5p each (30 September 2020: 225,417,740 shares).

11. Capital reorganisation

As part of its long-term financial planning Renold plc, the Company, has 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 were non-distributable reserves and accordingly, the purposes for which the Company could use these were extremely 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. This provided flexibility in such matters as making payments to the holders of Preference Stock, commencing a share buy-back programme consistent with the authority granted by Shareholders at the last annual general meeting, in order to, inter alia, fund employee share schemes, thereby avoiding dilution for existing Shareholders or, should the Board determine it appropriate to do so in the future, make dividend distributions to Shareholders.

The order of the High Court confirming the above capital reorganisation became effective on 27 May 2021, increasing distributable reserves by £45.5m. 

12. Capital commitments

At 30 September 2021 capital expenditure contracted for but not provided for in these accounts amounted to £0.3m (30 September 2020: £1.0m). 

13. Related party transactions

Transactions between the Company and its wholly owned subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed. 
 

14. 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 the presentation of the income statement with 'Adjusted' measures shown separately from statutory items. Amortisation of acquired intangibles, restructuring costs, discontinued operations and material one-off items or remeasurements are identified separately as management seek to present a measure of performance which is not impacted by material non-recurring items or items considered non-operational. See Note 4 for a breakdown and explanation of the items excluded from adjusted profit. 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 period 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 operating profit margin at constant exchange rates	G
• EBITDA	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

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

(A) Adjusted operating profit

	First half				Full year
	2021/22		2020/21		2020/21
	£m		£m		£m
Statutory operating profit from continuing operations	8.2		5.3		10.5
Add back:
Amortisation of acquired intangible assets	-		0.5		0.7
Adjusted operating profit	8.2		5.8		11.2

(B) Adjusted profit before taxation

	First half				Full year
	2021/22		2020/21		2020/21
	£m		£m		£m
Statutory profit before taxation from continuing operations	6.2		2.8		5.9
Add back:
Amortisation of acquired intangible assets	-		0.5		0.7
Adjusted profit before taxation	6.2		3.3		6.6

(C) Adjusted earnings per share

Adjusted EPS is reconciled to statutory EPS in Note 7.

(D) Return on sales and operating profit gearing

	First half				Full year
	2021/22		2020/21		2020/21
	£m		£m		£m
Adjusted operating profit	8.2		5.8		11.2
Revenue	95.3		81.5		165.3
Return on sales %	8.6%		7.1%		6.8%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Period ended 30 September 2021	£m		£m		£m		£m
Adjusted operating profit	10.7		1.8		(4.3)		8.2
Total revenue (including inter-segment sales)	76.6		20.6		(1.9)		95.3
Adjusted operating profit margin %	14.0%		8.7%		n/a		8.6%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Period ended 30 September 2020	£m		£m		£m		£m
Adjusted operating profit	5.7		2.5		(2.4)		5.8
Total revenue (including inter-segment sales)	63.3		20.6		(2.4)		81.5
Adjusted operating profit margin %	9.0%		12.1%		n/a		7.1%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Year ended 31 March 2021	£m		£m		£m		£m
Adjusted operating profit	13.3		5.0		(7.1)		11.2
Total revenue (including inter-segment sales)	130.0		39.1		(3.8)		165.3
Adjusted operating profit margin %	10.2%		12.8%		n/a		6.8%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Period ended 30 September 2021	£m		£m		£m		£m
Year-on-year change in adjusted operating profit	5.0		(0.7)		(1.9)		2.4
Year-on-year change in total revenue (including inter-segment sales)	13.3		-		0.5		13.8
Operating profit gearing %	38%		-%		n/a		17%

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

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Six months ended 30 September 2020	£m		£m		£m		£m
External revenue	62.5		19.0		-		81.5
Inter-segment	0.8		1.6		(2.4)		-
Foreign exchange retranslation	(2.6)		(0.8)		-		(3.4)
Revenue at constant exchange rates	60.7		19.8		(2.4)		78.1
Adjusted operating profit	5.7		2.5		(2.4)		5.8
Foreign exchange retranslation	(0.2)		(0.1)		-		(0.3)
Adjusted operating profit at constant exchange rates	5.5		2.4		(2.4)		5.5
Adjusted operating profit margin %	9.1%		12.1%		-		7.0%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Year ended 31 March 2021	£m		£m		£m		£m
External revenue	128.9		36.4		-		165.3
Inter-segment	1.1		2.7		(3.8)		-
Foreign exchange retranslation	(4.2)		(1.0)		-		(5.2)
Revenue at constant exchange rates	125.8		38.1		(3.8)		160.1
Adjusted operating profit	13.3		5.0		(7.1)		11.2
Foreign exchange retranslation	(0.4)		(0.1)		-		(0.5)
Adjusted operating profit at constant exchange rates	12.9		4.9		(7.1)		10.7
Adjusted operating profit margin %	10.3%		12.9%		-		6.7%

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

	First half				Full year
	2021/22		2020/21		2020/21
	£m		£m		£m
Statutory operating profit from continuing operations	8.2		5.3		10.5
Depreciation and amortisation	4.9		5.7		10.9
EBITDA and Adjusted EBITDA	13.1		11.0		21.4
Inventories (Note 9)	(6.3)		4.9		6.3
Trade and other receivables (Note 9)	(7.1)		4.6		4.2
Trade and other payables (Note 9)	13.6		(5.8)		(5.0)
Provisions (Note 9)	0.3		-		0.7
Less: Restructuring cash spend	-		-		0.2
Movement in working capital	0.5		3.7		6.4
Purchase of property, plant and equipment	(0.8)		(1.0)		(2.3)
Purchase of intangible assets	(0.6)		(0.2)		(0.8)
Proceeds from property disposals	0.1		0.2		0.2
Net capital expenditure	(1.6)		(1.0)		(2.9)
Operating cash flow	12.3		13.7		24.9

(I) Net debt

Net debt is reconciled to the statutory balance sheet in Note 9.

(J) Leverage ratio

	At 30 September 2021 £m		At 30 September 2020 £m		At 31 March 2021 £m
Net debt (see Note 9)	13.9		26.4		18.4
H2 2019/20 Adjusted EBITDA	-		11.1		-
H1 2020/21 Adjusted EBITDA	-		11.0		11.0
H2 2020/21 Adjusted EBITDA	10.4		-		10.4
H1 2021/22 Adjusted EBITDA	13.1		-		-
12 months rolling adjusted EBITDA	23.5		22.1		23.9
Leverage ratio	0.6 times		1.2 times		0.9 times

(K) Gearing ratio

	At 30 September 2021 £m		At 30 September 2020 £m		At 31 March 2021 £m
Net debt (see Note 9)	13.9		26.4		18.4
Equity attributable to equity holders of the parent	3.3		(11.5)		(6.1)
Net debt (see Note 9)	13.9		26.4		18.4
Total capital plus net debt	17.2		14.9		12.3
Gearing ratio %	81%		177%		150%

(L) Legacy pension cash costs

	First half				Full year
	2021/22		2020/21		2020/21
	£m		£m		£m
Cash contributions to pension schemes	1.8		0.5		0.8
Pension payments in respect of unfunded schemes	0.6		0.6		1.3
Scheme administration costs	0.3		0.4		0.5
	2.7		1.5		2.6

Ends

 

END

 

 

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