Trading Update

RNS Number : 3948M

Renold PLC

13 October 2016

 

Renold plc

("Renold", "the Company" or "the Group")

Period End Trading Update and Strategic Plan Progress

Renold, a leading international supplier of industrial chains and related power transmission products, is today issuing a period end trading update covering the six months ending 30 September 2016 (the 'Period') and an update on the Group's STEP 2020 Strategic Plan.

Period End Trading Update

Group revenue in the Period grew by 4.5% on a reporting basis, reflecting the benefit of the Group's significant non-sterling based operations. On an underlying⁽¹⁾ basis, Group revenue fell by 4.0% in the Period compared to the first half of the prior year. This was marginally ahead of previously announced expectations. Order intake in the Period grew by 9.2% on a reporting basis (or 0.2% on an underlying basis). The underlying Book to Bill⁽²⁾ ratio in the Period was 101% (2015: 97%).

The Chain Division performed ahead of expectations in the Period by delivering growth in underlying revenue of 2.0% and underlying order intake of 4.8%. Both compare favourably to reductions seen in the immediately preceding half year (H2 2015: down 7.6% and 9.7% respectively). Revenue growth was driven by good European performance with modest growth also seen in Australasia, partly offset by continuing weakness in the Americas. The Chain underlying Book to Bill ratio was 99% (2015: 96%).

Markets for Torque Transmission were particularly challenging in the Period with falls in underlying sales of 22.9% and underlying order intake of 13.7%, both of which were similar to the immediately preceding half year (H2 2015: down 22.0% and 12.5% respectively). Approximately 5% of the fall in underlying sales was expected following the decision in the second half of the prior year to cease a low margin long term supply agreement with one customer. In addition, the marine and land based power generation markets were weak globally with commodity related industries also suffering in North America. As noted at the time of the AGM, order intake in the Period outstripped sales and hence the underlying Book to Bill ratio was 110% (2015: 97%).

The level of underlying sales activity and adjusted⁽³⁾ operating profit in the Period has been in line with expectations and broadly similar to the second half of the previous year. However the impact of weaker sterling will boost reported results in the first half of the current year by approximately 10 per cent which will flow into the full year results. At this stage, it is too early to say the extent to which the beneficial currency impact will continue into the second half of the year. Our markets remain uncertain following the referendum vote and we do not have sufficient clarity on the final quarter of the year, traditionally the strongest, to be other than cautious about the longer term outlook.

STEP 2020 Strategic Plan

European Distribution Centre Employee Consultation Process

Subsequent to the previous announcement released on 1 September 2016, the Company has concluded the consultation process with its employees and their representatives at the European Distribution Centre near Lille in France. A project has now commenced to cease warehousing and distribution activities at the site. Our facility in Einbeck will consolidate the broader European warehousing and distribution activities with its own similar activities in Germany. The project is expected to complete during the third quarter of the current financial year with annualised savings of approximately £0.3m p.a. being delivered thereafter.

Sale of Freehold Property in France

Independently of the consultation process, the site near Lille had been marketed for sale since January 2015. The Group has now signed an agreement to sell its freehold interest in the site for its current book value of approximately £1.1m (€1.3m). This sale process is expected to complete in the next few months.

The Group's performance has allowed continued investment in both operating costs and capital spend to support delivery of the STEP 2020 Strategic Plan. Integration of the Tooth Chain acquisition continues to proceed well. International chain markets remain highly fragmented and management will continue to consider future acquisition opportunities which can support business growth.

There have been no other significant changes in the position of the Company over the period since the publication of the AGM Statement on 20 July 2016.

The Group expects to announce its Interim Results on 15th November 2016.

Notes:

(1)   The use of "underlying" excludes the impact of changes in foreign exchange rates by retranslating the prior year comparative figures to the current year exchange rate.

(2)   The Book to Bill ratio is the ratio of order intake in the Period to sales in the Period.

(3)   Adjusted items exclude exceptional items, the costs of administering closed defined benefit pension schemes, the amortisation of acquired intangibles and any associated tax thereon.

13 October 2016

ENQUIRIES:

Renold plc	0161 498 4500
Robert Purcell, Chief Executive
Brian Tenner, Finance Director
Arden Partners	020 7614 5917
Chris Hardie
Instinctif Partners	020 7457 2020
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 the website at: www.renold.com

 

END

 

 

TSTLLFEEIILFLIR