Half-year Report

RNS Number : 9046E

Renold PLC

11 November 2020

 

Renold plc

("Renold" or the "Group")

Interim results for the half year ended 30 September 2020

11 November 2020

Renold, a leading international supplier of industrial chains and related power transmission products, today announces its unaudited interim results for the half year ended 30 September 2020 (the 'period').

Resilient performance…strong cash generation…significant net debt reduction

Financial highlights

		Half year ended
		30 September 2020	30 September 2019
		£m	£m
Adjusted results at constant exchange rates[1]
Revenue at constant exchange rates		81.5	97.4
Adjusted operating profit at constant exchange rates		5.8	7.7
Adjusted operating profit margin at constant exchange rates		7.1%	7.9%
Adjusted earnings per share		1.1p	1.5p
Net debt		26.4	34.2
Reported results
Revenue		81.5	98.2
Operating profit		5.3	6.3
Profit before tax		2.8	3.5
Basic earnings per share		0.9p	1.0p
·	Revenue from continuing operations down 17.0% to £81.5m, a resilient performance despite the impact of the Covid-19 pandemic
·	Adjusted operating profit from continuing operations at constant exchange rates of £5.8m (2019: £7.7m); adjusted operating margin 7.1% (2019: 7.9%), reflecting actions taken in both the current and prior years to improve the flexibility of the cost base
·	Strong cash generation resulting in a £10.2m reduction in net debt to £26.4m (31 March 2020: £36.6m); with net debt to adjusted EBITDA ratio of 1.2x (31 March 2020: 1.5x)
·	Adjusted EPS of 1.1p (2019: 1.5p)

Trading and operational highlights

·	Resilient margin performance and strong cash generation, as a result of focused working capital management, completion of restructuring program and careful reduction of costs
·	The impact of the Covid-19 pandemic on revenue is being partly mitigated by improved efficiency and productivity from recent years' capital investments and operational improvements
·	Order intake at the start of the period reflected customer destocking, however, trends through the period end suggest a continued modest improvement, albeit at levels below the prior year in the near term, this was most evident in India, South East Asia and to a lesser extent parts of Europe
·	The new factory in China continues to improve on time delivery, efficiency and productivity

Robert Purcell, Chief Executive of Renold plc, said:

" Whilst the market environment continues to be challenging, the strategic actions taken in recent years, augmented by the measures taken earlier this year in response to the Covid-19 pandemic, have resulted in a more resilient business that is better placed to overcome today's challenges.

Renold reacted quickly to the sharp decline in order intake arising from the pandemic and, as a result, delivered a robust operating margin and substantial reduction in net debt. I would like to thank all employees for their commitment and outstanding efforts in keeping our facilities open and serving our customers during this time.

The tight focus on cost and cash management in the first half has created a platform from which we can manage through short-term disruption. We are focused on ensuring Renold can respond strongly as markets recover."

Reconciliation of reported, constant exchange rate and adjusted results

	Revenue		Operating Profit
	H1 2020/21 £m	H1 2019/20 £m	H1 2020/21 £m	H1 2019/20 £m
Previously reported	81.5	98.2	5.3	6.3
Exchange impact	-	(0.8)	-	-
At constant exchange rates	81.5	97.4	5.3	6.3
Restructuring costs	-	-	-	0.9
Amortisation of acquired intangible assets	-	-	0.5	0.5
Adjusted at constant exchange rates	81.5	97.4	5.8	7.7

ENQUIRIES:

Renold plc	Peel Hunt LLP	Instinctif Partners
Robert Purcell, CEO	Mike Bell	Mark Garraway
Jim Haughey, Group FD	Ed Allsopp	Rosie Driscoll
Tel: [phone]	Tel: [phone]	Tel: [phone]

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

Renold delivered a resilient performance during the first half, despite the Group's markets being significantly impacted by the Covid-19 pandemic. Despite a significant reduction in revenue, the business produced an adjusted operating margin of 7.1% (2019: 7.8%) and achieved a significant reduction in net debt of £10.2m to £26.4m (31 March 2020: 36.6m).

Revenue for the period at £81.5m, supported for the first 3 months by the year end closing order book, was 17% lower than the prior year, reflecting the impact of shutdowns and lower levels of demand across a number of the Group's markets.

The effect of the pandemic has been more acute in order intake, which declined by 21% to £76m (2019: £96m). The earlier months of the period were impacted by customer destocking, especially in the OEM and distributor sectors, thereafter stabilising and, more recently, showing gradual improvement. Orders related to capital projects appear to have been the most severely affected while expenditure directed at ongoing maintenance has been impacted to a lesser degree. The trends exiting the period suggest that order intake should continue to improve slowly, albeit this is likely to be at levels below the prior year in the near term.

The Group benefited from the impact of the significant efforts undertaken in the current and previous years to lower the breakeven point and increase flexibility. In addition, tactical short-term cost saving measures, including tight control of operating costs, with significant reductions in discretionary expenditure and utilisation of Government-sponsored employment support schemes, limited the downside operational profit gearing.

Adjusted operating profit from continuing operations held up well at £5.8m (2019: £7.7m) with an adjusted operating profit margin of 7.1% (2019: 7.8%).

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	2020/21 £m	2019/201 £m	2020/21 £m	2019/201 £m	2020/21 %	2019/201 %
Chain	62.5	75.9	5.7	8.1	9.1	10.7
Torque Transmission	19.0	21.5	2.5	2.3	13.2	10.7
Head office costs	-	-	(2.4)	(2.7)	-	-
Total	81.5	97.4	5.8	7.7	7.1	7.9

¹ The divisional split for the period ended 30 September 2019 has been re-presented due to the split of one Chain business unit into two, of which one has been allocated to Torque Transmission.

Chain

The Chain division's revenue at constant exchange rates was down 17.7% (£13.4m) to £62.5m.

While the impact of the Covid-19 pandemic resulted in a 19% drop across traditional markets including Europe and North America, this was partially offset by growth of 12% in the smaller South East Asia region.

Significant progress continues to be made in improving performance of the new Chinese factory. Notable headcount reductions were achieved whilst productivity and customer service levels continue to improve.

The benefits of recent capital investments have been apparent, with improved capability, capacity and flexibility, enabling the impact of reduced volumes to be substantially mitigated by cost reductions. Improved flexibility in the work force also allowed labour costs to be more closely matched with demand. As a result, despite a significant revenue decline, adjusted operating profit margin at constant exchange rates was robust at 9.1% (2019: 10.7%).

Order intake at constant exchange rates declined by 24% to £57.6m, resulting in book to bill (ratio of orders to sales) for the first half of the year of 92% (2019: 99%).

Torque Transmission

Trading was more stable in the Torque Transmission division, although most of our individual business units saw considerable market softening as a result of the pandemic. Revenue at constant exchange rates fell by 11.6% to £19.0m. The revenue reduction includes £0.5m in scheduled lower deliveries on a significant multi-year contract, which is expected to return to prior period levels in the second half of the financial year.

While demand across the traditional markets, including the UK and North America, dropped by 17%, this was partially offset by growth of 69% in China.

Significant actions to improve the Gears business unit were undertaken in the last financial year. The annualised benefits of these pricing and cost saving measures showed clearly in the first six months' operating performance, with the unit delivering a £0.4m year on year improvement in adjusted operating profit despite a significant reduction in revenue.

Divisional adjusted operating profit, at constant exchange rates, of £2.5m was 8.7% higher than the prior year, resulting in an adjusted operating profit margin of 13.2% (2019: 10.7%).

Order intake from continuing operations at constant exchange rates of £18.4m reduced by 5% in the period. The book to bill ratio for the first half of the year was 97% (2019: 91%).

Restructuring Costs

Restructuring costs in the period were nil (2019: £0.9m), following the completion of all major such initiatives in the prior year.

Cash Flow and Net Debt

Half year to 30 September	2020/21 £m	2019/20 £m
Adjusted operating profit	5.8	7.7
Add back depreciation and amortisation	5.2	5.1
Adjusted EBITDA	11.0	12.8
Movement in working capital	3.7	(4.4)
Net Capital expenditure	(1.0)	(4.6)
Operating cash flow	13.7	3.8
Income taxes	1.0	(1.4)
Pensions cash costs	(1.1)	(1.8)
Restructuring spend	-	(0.9)
Repayment of principal under lease liabilities	(1.7)	(1.6)
Financing costs paid	(1.8)	(1.6)
Other movements/FX	0.1	(0.4)
Change in net debt	10.2	(3.9)
Closing net debt	(26.4)	(34.2)

Cash generation in the first half was very strong, with net debt reducing by £10.2m from the position at 31 March 2020, to £26.4m.

Most of the £3.7m improvement in working capital was delivered in inventory (£4.9m) where measures were taken to improve the cash position in the short term. Specific and measured increases in inventory are planned in order to maintain customer service levels as demand returns. Receivables and payables moved broadly in line with activity levels in the period.

Net capital expenditure at £1.0m was tightly controlled and reduced by £3.6m compared to the prior period. The reduction in spend, down to maintenance levels, was possible due to prior year initiatives to invest in the production capabilities of our plants. Strategic investments in improved heat treatment facilities and the standardised IT system for the Group continue, but at a slower pace.

Corporation tax payments on account were reviewed across the Group with revised payment profiles leading to a recovery of £1.3m of prior year contributions.

Pensions

The Group has a number of defined benefit pension schemes (accounted for in accordance with IAS 19R 'Employee benefits'). During the period agreement was reached with the UK pension trustee to defer contributions (£2.8m) to the UK pension scheme. This delays agreed contributions, now payable between April 2022 and April 2027, but maintains the consistent cash requirements of the Group's schemes. Cash pension costs are sustainable, having remained consistent at approximately £5m for several years, and are expected to remain broadly stable over the longer term. The Group's retirement benefit obligations increased from £97.6m (£80.2m net of deferred tax) at 31 March 2020 to £115.6m (£94.7m net of deferred tax) at 30 September 2020.

Continuing declines in corporate bond yields, which determine discount rates, have increased the deficits in the key UK and German schemes. In the UK, discount rates falling to 1.55% (31 March 2020: 2.4%) and the CPI inflation assumption increasing to 2.2% (31 March 2020: 2.0%) has the effect of increasing the present value of future liabilities by £29.2m. Strong asset returns helped to mitigate the impact of change in the financial assumptions, with the net UK deficit increasing by £16.0m to £84.0m. 

Pension liabilities in non-UK schemes increased by £2.0m to £31.6m.

The net financing expense (a non-cash item) was £1.0m (2019: £1.1m).

Dividend

In light of the difficult trading environment and the 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. All manufacturing facilities which had been closed due to national restrictions reopened prior to June 2020 and have remained open since. Across the Group, public health measures advised by governments are being followed, operating costs have been reduced, 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. The most severe scenario considered Group revenue being more than 20% below revenues for the year ended 31 March 2020, and more than 25% below revenues in the year ended 31 March 2019. The downside scenario is considered to be severe but plausible, although recent trading activity and the improvement in net debt at 30 September 2020 results in the downside scenario being considered much less likely than it was at the year end.

The results of these scenarios show that there is sufficient liquidity in the business for a period of at least 12 months from the date of approval of these interim financial statements. However, the most severe downside case indicates the potential for a covenant breach during the test period, indicating a material uncertainty related to events or conditions which may cast significant doubt over the Group's ability to continue as a going concern in the event that, following a covenant breach, lenders elected to trigger a repayment of outstanding debt. In such circumstances, and without further mitigating actions, the Group may be unable to realise assets and discharge liabilities in the normal course of business. The condensed consolidated interim financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

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 amended 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 32-36 of the 2019/20 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 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 Renold'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 triennial valuation for the UK scheme has been agreed with no significant change required to the long term funding of the scheme. The next triennial valuation will have an effective date of 5 April 2022.

Summary

Renold reacted quickly to the sharp deterioration of the trading environment arising from the pandemic-related downturn. Most costs have been reduced in line with sales and, together with focused cash preservation actions and managed reductions in working capital, the Group has delivered a robust operating margin and a substantial reduction in net debt.

The trends exiting the period suggest that order intake should continue to improve slowly, albeit this is likely to be at levels below the prior year in the near term. The immediate outlook varies by both geography and sector, and is difficult to forecast, however, Renold benefits from its geographic, customer and sector diversity. The tight focus on cost and cash management in the first half has created a strong platform from which the Group can manage through short-term disruption, whilst retaining the ability to invest in support of our strategy as markets recover.

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 2020. 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
11 November 2020	11 November 2020

Condensed Consolidated Income Statement

for the six months ended 30 September 2020

	Note	First half 2020/21 (unaudited) £m	First half 2019/20 (unaudited) £m	Full year 2019/20 (audited) £m
Revenue	3	81.5	98.2	189.4
Operating costs before adjusting items		(75.7)	(90.5)	(176.0)
Adjusted1 operating profit		5.8	7.7	13.4
Adjusting items	4
Restructuring costs		-	(0.9)	(2.4)
Amortisation of acquired intangible assets		(0.5)	(0.5)	(0.9)
Operating profit		5.3	6.3	10.1
Net financing costs	5	(2.5)	(2.8)	(5.2)
Profit before tax		2.8	3.5	4.9
Taxation	6	(0.8)	(1.2)	(1.5)
Profit for the period from continuing operations		2.0	2.3	3.4
Discontinued operations	13	-	(1.5)	(1.5)
Profit for the period		2.0	0.8	1.9
Attributable to:
Owners of the parent		2.0	0.7	1.8
Non-controlling interests		-	0.1	0.1
		2.0	0.8	1.9
Earnings per share from continuing operations	7
Basic		0.9p	1.0p	1.5p
Diluted		0.9p	0.9p	1.5p
Basic adjusted earnings per share		1.1p	1.5p	2.9p
Diluted adjusted earnings per share		1.1p	1.5p	2.9p
Earnings per share from continuing and discontinued operations	7
Basic		0.9p	0.3p	0.8p
Diluted		0.9p	0.3p	0.8p

¹Adjusted: 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 14 to the financial statements.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2020

		First half 2020/21 (unaudited) £m	First half 2019/20 (unaudited) £m	Full year 2019/20 (audited) £m
Profit for the period		2.0	0.8	1.9
Other comprehensive income/(expense):
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations		0.3	3.5	1.8
Gain/(loss) on hedges of the net investment in foreign operations		0.2	(0.4)	(0.4)
Cash flow hedges:
Fair value gain/(loss) arising on cash flow hedges during the period		0.1	(0.5)	(0.3)
Add: Cumulative gain arising on cash flow hedges reclassified to profit and loss		0.3	0.4	0.4
Income tax relating to items that may be reclassified subsequently to profit or loss		(0.3)	-	0.1
		0.6	3.0	1.6
Items not to be reclassified to the income statement in subsequent periods:
Re-measurement (losses)/gains on retirement benefit obligations		(17.1)	(9.5)	3.1
Tax on re-measurement losses/(gains) on retirement benefit obligations - excluding impact of statutory rate change		3.4	1.7	(0.7)
Effect of changes in statutory tax rate on deferred tax assets		-	-	1.3
		(13.7)	(7.8)	3.7
Other comprehensive (expense)/income for the period, net of tax		(13.1)	(4.8)	5.3
Total comprehensive (expense)/income for the period, net of tax		(11.1)	(4.0)	7.2
Attributable to:
Owners of the parent		(11.1)	(4.2)	7.1
Non-controlling interests		-	0.2	0.1
		(11.1)	(4.0)	7.2

Condensed Consolidated Statement of Financial Position

as at 30 September 2020

	Note	30 September 2020 (unaudited) £m	30 September 2019 (unaudited, re-presented1) £m	31 March  2020 (audited) £m
Assets Non-current assets
Goodwill		23.5	24.3	24.0
Other intangible fixed assets		7.3	6.0	8.0
Property, plant and equipment		52.0	57.0	53.3
Right-of-use assets		11.4	9.5	11.3
Deferred tax assets		24.2	22.9	20.4
		118.4	119.7	117.0
Current assets
Inventories		41.8	49.1	46.1
Trade and other receivables		31.5	37.1	35.8
Current tax		0.1	1.7	1.5
Derivative financial instruments		0.1	-	-
Cash and cash equivalents	9	19.6	17.6	15.6
		93.1	105.5	99.0
Total assets		211.5	225.2	216.0
Liabilities
Current liabilities
Borrowings	9	(0.1)	(0.2)	(0.3)
Trade and other payables		(32.5)	(41.5)	(37.6)
Lease liabilities		(3.4)	(3.3)	(3.0)
Current tax		(1.6)	(1.2)	(1.0)
Derivative financial instruments		-	(0.5)	(0.3)
Provisions		(0.7)	(0.2)	(0.7)
		(38.3)	(46.9)	(42.9)
Net current assets		54.8	58.6	56.1
Non-current liabilities
Borrowings	9	(45.4)	(51.1)	(51.4)
Preference stock	9	(0.5)	(0.5)	(0.5)
Trade and other payables		(5.2)	(5.2)	(5.3)
Lease liabilities		(13.3)	(13.4)	(14.1)
Deferred tax liabilities		(4.7)	(6.0)	(4.6)
Retirement benefit obligations	8	(115.6)	(111.5)	(97.6)
		(184.7)	(187.9)	(173.5)
Total liabilities		(223.0)	(234.8)	(216.4)
Net liabilities		(11.5)	(9.6)	(0.4)
Equity
Issued share capital	10	11.3	11.3	11.3
Share premium		30.1	30.1	30.1
Capital reserve		15.4	15.4	15.4
Currency translation reserve		12.1	13.4	11.9
Other reserves		0.1	(0.5)	(0.3)
Retained earnings		(80.5)	(81.5)	(68.8)
Equity attributable to owners of the parent		(11.5)	(12.0)	(0.4)
Non-controlling interests		-	2.4	-
Total shareholders' deficit		(11.5)	(9.6)	(0.4)

¹The balance sheet at 30 September 2019 has been re-presented to reflect an adjustment of £0.2m between non-current lease liabilities and opening reserves on adoption of IFRS 16.

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 September 2020

	First half 2020/21 (unaudited) £m	First half 2019/20 (unaudited) £m	Full year 2019/20 (audited) £m
Cash flows from operating activities
Cash generated by operations (Note 9)	13.7	5.3	12.5
Income taxes refunded/(paid)	1.0	(1.4)	(1.6)
Net cash flows from operating activities	14.7	3.9	10.9
Cash flows from investing activities
Proceeds from property disposals	0.2	-	0.1
Purchase of property, plant and equipment	(1.0)	(4.0)	(6.7)
Purchase of intangible assets	(0.2)	(0.6)	(2.5)
Disposal of business	-	(0.1)	(0.1)
Consideration paid for acquisition of minority interest	-	-	(1.8)
Net cash flows from investing activities	(1.0)	(4.7)	(11.0)
Cash flows from financing activities
Repayment of principal under lease liabilities	(1.7)	(1.6)	(3.3)
Financing costs paid	(1.8)	(1.6)	(2.7)
Proceeds from borrowings	2.8	4.6	7.5
Repayment of borrowings	(9.0)	(1.0)	(4.2)
Net cash flows from financing activities	(9.7)	0.4	(2.7)
Net (decrease)/increase in cash and cash equivalents	4.0	(0.4)	(2.8)
Net cash and cash equivalents at beginning of period	15.1	17.4	17.4
Effects of exchange rate changes	-	0.2	0.5
Net cash and cash equivalents at end of period	19.1	17.2	15.1

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 September 2020

	Share capital £m	Share premium account £m	Retained earnings £m	Currency translation reserve £m	Capital redemption reserve £m	Other reserves £m	Attributable to owners of parent £m	Non-controlling interests £m	Total equity £m
At 1 April 2019	11.3	30.1	(74.2)	10.4	15.4	(0.4)	(7.4)	2.2	(5.2)
Profit for the year	-	-	1.8	-	-	-	1.8	0.1	1.9
Other comprehensive income	-	-	3.7	1.5	-	0.1	5.3	-	5.3
Total comprehensive income for the year	-	-	5.5	1.5	-	0.1	7.1	0.1	7.2
Acquisition of non-controlling interest	-	-	0.5	-	-	-	0.5	(2.3)	(1.8)
Share-based payments	-	-	(0.6)	-	-	-	(0.6)	-	(0.6)
At 31 March 2020	11.3	30.1	(68.8)	11.9	15.4	(0.3)	(0.4)	-	(0.4)
Profit for the period	-	-	2.0	-	-	-	2.0	-	2.0
Other comprehensive income/(expense)	-	-	(13.7)	0.2	-	0.4	(13.1)	-	(13.1)
Total comprehensive income/(expense) for the period	-	-	(11.7)	0.2	-	0.4	(11.1)	-	(11.1)
At 30 September 2020	11.3	30.1	(80.5)	12.1	15.4	0.1	(11.5)	-	(11.5)
At 1 April 2019	11.3	30.1	(74.2)	10.4	15.4	(0.4)	(7.4)	2.2	(5.2)
Profit for the period	-	-	0.7	-	-	-	0.7	0.1	0.8
Other comprehensive income/(expense)	-	-	(7.8)	3.0	-	(0.1)	(4.9)	0.1	(4.8)
Total comprehensive income/(expense) for the period	-	-	(7.1)	3.0	-	(0.1)	(4.2)	0.2	(4.0)
Share-based payments	-	-	(0.2)	-	-	-	(0.2)	-	(0.2)
At 30 September 2019 (re-presented1)	11.3	30.1	(81.5)	13.4	15.4	(0.5)	(11.8)	2.4	(9.4)

¹The balance sheet at 30 September 2019 has been re-presented to reflect an adjustment of £0.2m between non-current lease liabilities and opening reserves on adoption of IFRS 16.

Notes to the Interim Condensed Consolidated Financial Statements

1.  Corporate information

The interim condensed consolidated financial statements for the six months to 30 September 2020 were approved by the Board on 11 November 2020. 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 2020 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified but contained a material uncertainty paragraph in relation to going concern (see page 101 of the consolidated financial statements for the year ended 31 March 2020 for further detail). The auditor's report 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 2020 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 2020.

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 2020, 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 £2.3m (31 March 2020: £nil; 30 September 2019: £nil) of government assistance across its European units in the form of employee support schemes. In line with IAS 20, this income is 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). None of these new and revised standards and interpretations are considered relevant to the Group and they have not been adopted early.

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. All manufacturing facilities which had been closed due to national restrictions reopened prior to June 2020 and have remained open since. Across the Group, public health measures advised by governments are being followed, operating costs have been reduced, 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. The most severe scenario considered Group revenue being more than 20% below revenues for the year ended 31 March 2020, and more than 25% below revenues in the year ended 31 March 2019. The downside scenario is considered to be severe but plausible, although recent trading activity and the improvement in net debt at 30 September 2020 results in the downside scenario being considered much less likely than it was at the year end.

The results of these scenarios show that there is sufficient liquidity in the business for a period of at least 12 months from the date of approval of these interim financial statements. However, the most severe downside case indicates the potential for a covenant breach during the test period, indicating a material uncertainty related to events or conditions which may cast significant doubt over the Group's ability to continue as a going concern in the event that, following a covenant breach, lenders elected to trigger a repayment of outstanding debt. In such circumstances and without further mitigating actions, the Group may be unable to realise assets and discharge liabilities in the normal course of business. The condensed consolidated interim financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

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 amended 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.

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 2020, namely:

• taxation

• retirement benefit obligations

• right-of-use assets

• 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 2020.

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 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 with modest sales of chain products.

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 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
Restructuring costs	-		-		-		-
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

The segment results for the period ended 30 September 2019 were as follows:

Period ended 30 September 2019 (re-presented1)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External Customer	76.5		21.7		-		98.2
Inter-segment	0.5		2.0		(2.5)		-
Total revenue	77.0		23.7		(2.5)		98.2
Adjusted operating profit/(loss)	8.1		2.4		(2.8)		7.7
Restructuring costs	(0.4)		(0.4)		(0.1)		(0.9)
Amortisation of acquired intangible assets	(0.5)		-		-		(0.5)
Operating profit/(loss)	7.2		2.0		(2.9)		6.3
Net financing costs							(2.8)
Profit before tax from continuing operations							3.5
Taxation							(1.2)
Discontinued operations							(1.5)
Profit after tax and discontinued operations							0.8
Other disclosures
Working capital	35.0		10.5		(0.8)		44.7
Capital expenditure	4.1		0.2		0.6		4.9
Depreciation and amortisation included in adjusted operating profit/(loss)	3.2		1.0		0.9		5.1
Amortisation of acquired intangibles	0.5		-		-		0.5
Total depreciation and amortisation	3.7		1.0		0.9		5.6

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 14 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 14.

Period ended 30 September 2019 (re-presented1)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External revenue from continuing operations	76.5		21.7		-		98.2
Foreign exchange retranslation	(0.6)		(0.2)		-		(0.8)
External revenue from continuing operations at constant exchange rates	75.9		21.5		-		97.4
Adjusted operating profit/(loss) from continuing operations	8.1		2.4		(2.8)		7.7
Foreign exchange retranslation	-		(0.1)		0.1		-
Adjusted profit/(loss) from continuing operations at constant exchange rates	8.1		2.3		(2.7)		7.7

¹  The divisional split for the period ended 30 September 2019 has been re-presented due to the split of one Chain business unit into two, of which one has been allocated to Torque Transmission.

The segment results for the year ended 31 March 2020 were as follows:

Year ended 31 March 2020 (re-presented1)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External Customer	147.9		41.5		-		189.4
Inter-segment	1.1		4.6		(5.7)		-
Total revenue	149.0		46.1		(5.7)		189.4
Adjusted operating profit/(loss)	13.8		5.3		(5.7)		13.4
Restructuring costs	(1.9)		(0.4)		(0.1)		(2.4)
Amortisation of acquired intangible assets	(0.9)		-		-		(0.9)
Operating profit/(loss)	11.0		4.9		(5.8)		10.1
Net financing costs							(5.2)
Profit before tax from continuing operations							4.9
Taxation							(1.5)
Discontinued operations							(1.5)
Profit after tax and discontinued operations							1.9
Other disclosures
Working capital	33.1		10.7		0.5		44.3
Capital expenditure	6.8		1.0		1.3		9.1
Depreciation and amortisation included in adjusted operating profit/(loss)	6.8		2.0		1.7		10.5
Amortisation of acquired intangibles	0.9		-		-		0.9
Total depreciation and amortisation	7.7		2.0		1.7		11.4

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

Year ended 31 March 2020 (re-presented1)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External revenue from continuing operations	147.9		41.5		-		189.4
Foreign exchange retranslation	0.4		0.1		-		0.5
External revenue from continuing operations at constant exchange rates	148.3		41.6		-		189.9
Adjusted operating profit/(loss) from continuing operations	13.8		5.3		(5.7)		13.4
Foreign exchange retranslation	-		-		-		-
Adjusted profit/(loss) from continuing operations at constant exchange rates	13.8		5.3		(5.7)		13.4

¹  The divisional split for the period ended 30 September 2019 has been re-presented due to the split of one Chain business unit into two, of which one has been allocated to Torque Transmission.

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 14 to the interim condensed consolidated financial statements.

	First half				Full year
	2020/21 £m		2019/20 £m		2019/20 £m
Included in operating costs:
Strategic Plan restructuring costs	-		0.5		2.0
Other	-		0.4		0.4
Restructuring Costs	-		0.9		2.4
Amortisation of acquired intangible assets (Note 8)	0.5		0.5		0.9
Adjusting items in operating profit	0.5		1.4		3.3
Taxation on adjusting items	-		(0.2)		-
Total adjusting items	0.5		1.2		3.3

Restructuring costs

No restructuring costs were incurred in the six months ended 30 September 2020. All major restructuring initiatives are complete.

Prior year restructuring costs included redundancy costs associated with headcount reductions and various other smaller costs associated with restructuring. A further £0.4m of other costs were incurred in relation to the investigation of the historical overstatement of profit in the Gears business unit and the purchase of the non-controlling interest in the Group's Indian operations.

Restructuring costs are recognised as adjusting items because they are considered material and non-recurring.

Amortisation of acquired intangible assets

Acquisition related intangible asset amortisation costs of £0.5m (2019: £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.

5.  Net financing costs

	First half				Full year
	2020/21 £m		2019/20 £m		2019/20 £m
Financing costs:
Interest payable on bank loans and overdrafts	(0.9)		(1.2)		(2.1)
Interest paid on lease liabilities	(0.3)		(0.3)		(0.5)
Amortised financing costs	(0.2)		(0.1)		(0.2)
Loan financing costs	(1.4)		(1.6)		(2.8)
Net IAS 19 financing costs	(1.0)		(1.1)		(2.2)
Discount unwind on non-current trade and other payables	(0.1)		(0.1)		(0.2)
Net financing costs	(2.5)		(2.8)		(5.2)

6.  Taxation

	First half				Full year
	2020/21 £m		2019/20 £m		2019/20 £m
Current tax:
- UK	-		-		-
- Overseas	(0.9)		(0.4)		(0.6)
	(0.9)		(0.4)		(0.6)
Deferred tax:
- UK	-		(0.1)		(0.2)
- Overseas	0.1		(0.7)		(0.8)
- Effects of changes in corporate tax rates	-		-		0.1
Total deferred tax charge (Note 17)	0.1		(0.8)		(0.9)
Total income tax expense	(0.8)		(1.2)		(1.5)

Factors affecting current and future tax charges

The overseas deferred tax credit relates to an increase in the deferred tax asset held in respect of overseas pensions, partially offset by the utilisation of recognised deferred tax assets. The increase in overseas current corporate tax relates to jurisdictions where historical tax losses have now been fully utilised.

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
	2020/21			2019/20			2019/20
	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	2.0	0.9p		0.7	0.3p		1.8	0.8p
Loss for the period from discontinued operations	-	-		1.5	0.7p		1.5	0.7p
Basic EPS from continuing operations	2.0	0.9p		2.2	1.0p		3.3	1.5p
Effect of adjusting items, after tax:
Restructuring costs in operating costs	-	-		0.8	0.4p		2.4	1.1p
Amortisation of acquired intangible assets	0.5	0.2p		0.4	0.1p		0.9	0.3p
Adjusted EPS	2.5	1.1p		3.4	1.5p		6.6	2.9p

	First half				Full year
	2020/21 Thousands		2019/20 Thousands		2019/20 Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share	225,418		225,418		225,418
Effect of dilutive potential ordinary shares: Shares subject to performance conditions	6,210		6,900		1,944
For the purpose of calculating diluted earnings per share	231,628		232,318		227,362

	First half				Full year
	2020/21 (pence)		2019/20 (pence)		2019/20 (pence)
Diluted EPS from continuing and discontinued operations	0.9p		0.3p		0.8p
Diluted EPS from continuing operations	0.9p		0.9p		1.5p
Diluted adjusted EPS	1.1p		1.5p		2.9p

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 2020 £m		At 30 September 2019 £m		At 31 March 2020 £m
Funded plan obligations	(242.8)		(244.1)		(215.3)
Funded plan assets	153.8		160.9		141.7
Net funded plan obligations	(89.0)		(83.2)		(73.6)
Unfunded obligations	(26.6)		(28.3)		(24.0)
Total retirement benefit obligations	(115.6)		(111.5)		(97.6)

Analysed as follows:

Non-current liabilities: Retirement benefit obligations	(115.6)		(111.5)		(97.6)
Net deferred tax asset	20.9		18.1		17.4
Retirement benefit obligation net of deferred tax	(94.7)		(93.4)		(80.2)

The increase in the Group's net pre-tax deficit from £97.6m at 31 March 2020 to £115.6m at 30 September 2020 primarily reflects a decrease in discount rates and increase in inflation rates across all schemes, partially offset by asset outperformance and experience gains in the UK scheme.

9.  Additional Cashflow Information

Reconciliation of operating profit to net cash flows from operations:

	First half				Full year
	2020/21 £m		2019/20 £m		2019/20 £m
Cash generated from operations:
Operating profit from continuing and discontinued operations	5.3		6.0		9.8
Depreciation of property, plant and equipment - owned assets	3.2		3.0		6.1
Depreciation of property, plant and equipment - right-of-use-assets	1.4		1.2		2.5
Amortisation of intangible assets	1.1		1.4		2.8
Loss on disposals of plant and equipment	-		0.1		-
Equity share plans	-		(0.2)		(0.6)
Decrease/(increase) in inventories	4.9		(3.9)		(1.7)
Decrease in receivables	4.6		1.0		1.6
Decrease in payables	(5.8)		(1.5)		(4.4)
Decrease in provisions	-		-		0.6
Cash contribution to pension schemes	(1.1)		(1.8)		(4.4)
Pension current service costs (non-cash)	0.1		-		0.2
Cash generated from operations	13.7		5.3		12.5

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

	First half				Full year
	2020/21 £m		2019/20 £m		2019/20 £m
Increase/(decrease) in cash and cash equivalents	4.0		(0.4)		2.8
Change in net debt resulting from cash flows	6.4		(3.6)		(3.3)
Foreign Currency translation differences	-		0.1		-
Non-cash movement on capitalised finance costs	(0.2)		-		(0.2)
Change in net debt during the period	10.2		(3.9)		(6.3)
Net debt at start of period	(36.6)		(30.3)		(30.3)
Net debt at end of period	(26.4)		(34.2)		(36.6)

Net debt comprises:

	First half				Full year
	At 30 September 2020 £m		At 30 September 2019 £m		At 31 March 2020 £m
Cash and cash equivalents	19.6		17.6		15.6
Total debt	(46.0)		(51.8)		(52.2)
	(26.4)		(34.2)		(36.6)

	First half				Full year
	At 30 September 2020		At 30 September 2019		At 31 March 2020
Net cash and cash equivalents	£m		£m		£m
Cash and cash equivalents	19.6		17.6		15.6
Less: overdrafts	(0.5)		(0.4)		(0.5)
Net cash and cash equivalents	19.1		17.2		15.1

	First half				Full year
	At 30 September 2020		At 30 September 2019		At 31 March 2020
Total debt	£m		£m		£m
Borrowings:
Overdrafts	(0.5)		(0.4)		(0.5)
Capitalised costs	0.4		0.2		0.2
Current borrowings	(0.1)		(0.2)		(0.3)
Bank Loans	(45.7)		(51.7)		(51.9)
Capitalised costs	0.3		0.6		0.5
Non-current borrowings	(45.4)		(51.1)		(51.4)
Total borrowings	(45.5)		(51.3)		(51.7)
Preference stock	(0.5)		(0.5)		(0.5)
Total debt	(46.0)		(51.8)		(52.2)

10. Called up share capital

	At 30 September 2020 £m		At 30 September 2019 £m		At 31 March 2020 £m
Ordinary shares of 5p each	11.3		11.3		11.3

At 30 September 2020, the issued ordinary share capital comprised 225,417,740 ordinary shares of 5p each (30 September 2019: 225,417,740 shares).

11. Capital commitments

At 30 September 2020 capital expenditure contracted for but not provided for in these accounts amounted to £1.0m (30 September 2019: £0.9m). 

12. 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.

13. Discontinued operations

In the prior half year the Group sold its shareholding in Renold Crofts (Pty) Ltd, the legal entity for the South African Torque Transmission business unit, for £0.1m consideration. The results of the discontinued operations are included as a single line item in the condensed consolidated income statement for the half year ended 30 September 2019 and the full year ended 31 March 2020. The results for the half year ended 30 September 2020 arise from continuing operations only.

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
• 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	I
• net debt	J	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	K
• gearing ratio	L
• legacy pension cash costs	M	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
	2020/21		2019/20		2019/20
	£m		£m		£m
Statutory operating profit from continuing operations	5.3		6.3		10.1
Add back:
Restructuring costs	-		0.9		2.4
Amortisation of acquired intangible assets	0.5		0.5		0.9
Adjusted operating profit	5.8		7.7		13.4

(B) Adjusted profit before taxation

	First half				Full year
	2020/21		2019/20		2019/20
	£m		£m		£m
Statutory profit before taxation from continuing operations	2.8		3.5		4.9
Add back:
Restructuring costs	-		0.9		2.4
Amortisation of acquired intangible assets	0.5		0.5		0.9
Adjusted profit before taxation	3.3		4.9		8.2

(C) Adjusted earnings per share

Adjusted EPS is reconciled to statutory EPS in Note 7.

(D) Return on sales

	First half				Full year
	2020/21		2019/20		2019/20
	£m		£m		£m
Adjusted operating profit	5.8		7.7		13.4
Revenue	81.5		98.2		189.4
Return on sales %	7.1%		7.8%		7.1%

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

Period ended 30 September 2020	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Adjusted operating profit	5.7		2.5		(2.4)		5.8
Revenue	62.5		19.0		-		81.5
Adjusted operating profit margin %	9.1%		13.2%		-		7.1%

Period ended 30 September 2019 (re-presented1)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
External revenue from continuing operations	76.5		21.7		-		98.2
Foreign exchange retranslation	(0.6)		(0.2)		-		(0.8)
Revenue at constant exchange rates	75.9		21.5		-		97.4
Adjusted operating profit	8.1		2.4		(2.8)		7.7
Foreign exchange retranslation	-		(0.1)		0.1		-
Adjusted operating profit at constant exchange rates	8.1		2.3		(2.7)		7.7
Adjusted operating profit margin at constant exchange rates %	10.7%		10.7%		-		7.9%

Year ended 31 March 2020 (re-presented1)	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
External revenue from continuing operations	147.9		41.5		-		189.4
Foreign exchange retranslation	0.4		0.1		-		0.5
Revenue at constant exchange rates	148.3		41.6		-		189.9
Adjusted operating profit	13.8		5.3		(5.7)		13.4
Foreign exchange retranslation	-		-		-		-
Adjusted operating profit at constant exchange rates	13.8		5.3		(5.7)		13.4
Adjusted operating profit margin at constant exchange rates %	9.3%		12.7%		-		7.1%

¹ The divisional split for the period ended 30 September 2019 has been re-presented due to the split of one Chain business unit into two, of which one has been allocated to Torque Transmission.

(H & I) EBITDA and adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation)

	First half				Full year
	2020/21		2019/20		2019/20
	£m		£m		£m
Statutory operating profit from continuing operations	5.3		6.3		10.1
Depreciation and amortisation	5.7		5.6		11.4
EBITDA	11.0		11.9		21.5
Add back:
Restructuring costs	-		0.9		2.4
Adjusted EBITDA	11.0		12.8		23.9

(J) Net debt

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

(K) Leverage ratio

	At 30 September 2020 £m		At 30 September 2019 £m		At 31 March 2020 £m
Net debt (see Note 9)	26.4		34.2		36.6
H2 2018/19 Adjusted EBITDA	-		11.4		-
H1 2019/20 Adjusted EBITDA	-		12.8		12.8
H2 2019/20 Adjusted EBITDA	11.1		-		11.1
H1 2020/21 Adjusted EBITDA	11.0		-		-
12 months rolling adjusted EBITDA	22.1		24.2		23.9
Leverage ratio	1.2 times		1.4 times		1.5 times

(L) Gearing ratio

	At 30 September 2020 £m		At 30 September 2019 £m		At 31 March 2020 £m
Net debt (see Note 9)	26.4		34.2		36.6
Equity attributable to equity holders of the parent	(11.5)		(11.8)		(0.4)
Net debt (see Note 9)	26.4		34.2		36.6
Total capital plus net debt	14.9		22.4		36.2
Gearing ratio %	177%		153%		101%

(M) Legacy pension cash costs

	First half				Full year
	2020/21		2019/20		2019/20
	£m		£m		£m
Cash contributions to pension schemes	0.5		1.2		3.2
Pension payments in respect of unfunded schemes	0.6		0.6		1.2
Scheme administration costs	0.4		0.4		0.8
	1.5		2.2		5.2

Ends

 

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[1] See overleaf for reconciliation of reported, constant exchange rate and adjusted figures

 

END

 

 

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