Interim Results

Renold PLC 23 November 2006 23 November 2006 Renold plc Interim results for the half year to 30 September 2006 Renold plc, a leading international supplier of industrial chains and related power transmission products, today announces its interim results for the half year ended 30 September 2006. Summary â€¢ Results in line with Board's expectations - significant improvement in operating profit from continuing operations â€¢ Revenue from continuing operations increased by 6% at constant exchange rates â€¢ Continuing operations' operating profit increased by Â£2.1 million to Â£4.6 million, with operating margin (before exceptional items) up to 6.1% (2005: 3.4%) â€¢ Continuing operations' profit before tax was Â£3.6 million (2005: Â£0.6 million) â€¢ Basic EPS for continuing operations more than doubled to 2.4p (2005: 1.0p). Adjusted EPS 2.7p (2005: 1.2p) (adjusted for the after tax effects of exceptional items) â€¢ Disposal of Automotive operations completed in the period; discussions with potential purchasers ongoing for the disposal of Machine Tools â€¢ Strengthened leadership team focused on developing and implementing the first stages of a profit and cash enhancement plan for presentation to shareholders early in 2007 Prospects Matthew Peacock, Chairman of Renold plc, said: 'With the order book higher than at the commencement of the year, increased sales volumes and continuing actions to reduce costs, the second half year should see continued performance improvement. ' For further information, please contact: Renold plc Bob Davies, Chief Executive 23 November 2006: 020 7067 0700 Peter Bream, Finance Director Thereafter: 0161 498 4500 Issued by: Weber Shandwick Square Mile Terry Garrett/Stephanie Badjonat Telephone: 020 7067 0700 This announcement and the Analysts' Presentation can also be viewed on the website http://www.renold.com 23 November 2006 Renold plc Chairman: Matthew Peacock Interim Statement for the half year ended 30 September 2006 FINANCIAL SUMMARY Half year ended 30 September 2006/2007 2005/2006 Â£m Â£m Continuing operations: Revenue 79.3 75.6 Operating profit 4.6 2.5 Operating profit before exceptional items 4.8 2.6 Profit before tax and exceptional items 3.6 0.7 Profit before tax 3.4 0.6 Discontinued operations: Loss from discontinued operations (6.4) (2.6) Other information: Basic and diluted loss per share - Group (6.8)p (2.8)p Basic and diluted earnings per share - continuing operations 2.4p 1.0p Adjusted earnings per share (adjusting for the after tax effects of exceptional items) 2.7p 1.2p Renold plc CHAIRMAN'S STATEMENT The results for the first half to 30 September 2006 are in line with the Board's expectations with a significant improvement in operating profit for the continuing operations over the first half of 2005/06. Continuing Operations Sales for the first half to 30 September 2006 were Â£79.3 million (2005/06: Â£75.6 million). At constant exchange rates sales were 6% ahead of last year. Operating profit before exceptional items was Â£4.8 million (2005/06: Â£2.6 million), a 6.1% (2005/06: 3.4%) return on sales. Net financing costs of Â£1.2 million (2005/06: Â£1.9 million) were lower principally because of the Â£0.6 million costs incurred in the renegotiation of the bank facilities in 2005/06. Financing included a net charge of Â£0.1 million (2005/06: Â£0.4 million) relating to pension plan balances and the fair value gains on derivatives amounting to Â£nil million (2005/06: Â£0.2 million). The tax charge in the period was Â£1.7 million (2005/06: credit Â£0.1 million). Adjusted earnings per share from continuing operations, before exceptional items, were 2.7 pence (2005/06: 1.2 pence) and basic earnings per share from continuing operations were 2.4 pence (2005/06: 1.0 pence). Cash Flow and Borrowings Cash generated from continuing operations was Â£1.1 million (2005/06: outflow Â£0.6 million). Capital expenditure amounted to Â£3.5 million (2005/06: Â£2.9 million). Net proceeds from the disposal of the Automotive business resulted in an inflow of Â£3.8 million in the period. Net borrowings, including finance lease obligations and preference shares, at 30 September 2006 were Â£27.0 million compared with Â£20.7 million at 31 March 2006. Dividend The Board has decided to recommend that no interim dividend be paid but it will consider the payment of a dividend in the light of results for the year as a whole. Industrial Power Transmission The business operated in an environment of stable, albeit relatively high, raw material prices, but with increased utility and freight costs. At constant exchange rates sales grew by 6% over the first half of 2005/06 with good growth in Europe, the USA and China. Margins have been improved through sales price and volume increases plus continued reductions in the cost base across the business. The new Polish facility and outsourcing have been contributors to the cost reductions. The business has begun to benefit in the last few weeks from new members to the senior executive team, including Peter Bream as the Finance Director and two new non-executives of which I am one and Rod Powell the other. The new leadership team is focused on developing and implementing the first stages of a profit and cash enhancement plan ('PACE') which will run through to the end of March 2008. This will accelerate the commitment to our low cost manufacturing sites in Poland and China, as a principal driver of profitability. Additionally inventory reduction projects are in progress as part of a general review of our balance sheet management and cash generation. The PACE plan will enhance return on capital employed, which has improved to 14% but remains below our expectations. Discontinued Operations Automotive The sale of the automotive business was completed on 3 August. Â£3.8 million was received on completion and a further amount is expected to be received subject to agreement of the net working capital balance. It was announced at the Annual General Meeting that investigations were ongoing into a potential quality problem with deliveries of chain for one engine system. The net costs incurred in relation to this matter are now not expected to be material to the Group. Machine Tools Following the Board's rejection of an offer for this business, negotiations are no longer taking place with VPE/Ferranti. Discussions are however ongoing with other potential buyers. Burton Site The initial planning application for redevelopment of the Burton site was rejected, but discussions are continuing on a revised submission with a planning decision expected by fiscal year end. Pensions The gross pension deficit shows an increase of Â£2.5 million from 31 March 2006. This is principally due to lower than expected asset returns over the period, particularly in the quarter to June 2006. Auditors The Company has appointed Ernst & Young LLP as auditors to the Group for the year ending 31 March 2007. Board I should like to conclude by recording the Company's thanks to my predecessor, Roger Leverton, and to Mark Smith, for their long service to the Board. Outlook With the order book higher than at the commencement of the year, increased sales volumes and continuing actions to reduce costs, the second half year should see continued performance improvement. Release of Interim Statement The Interim Statement will be posted to shareholders on 29 November 2006. Copies will be available for the public from that date at the Company's registered office, Renold House, Styal Road, Wythenshawe, Manchester M22 5WL. RENOLD PLC Consolidated Income Statement for the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Continuing operations: Revenue (Note 2) 79.3 75.6 155.0 Operating costs (74.7) (73.1) (149.6) -------- -------- -------- Operating profit 4.6 2.5 5.4 -------- -------- -------- ______________________________________ Operating profit before exceptional | | items | 4.8 2.6 6.8 | Exceptional items | (0.2) (0.1) (1.4) | | -------- -------- -------- | Operating profit | 4.6 2.5 5.4 | | -------- -------- -------- | |______________________________________| Financial expenses (6.9) (7.4) (14.1) Financial income 5.7 5.5 10.5 -------- -------- -------- Net financing costs (Note 3) (1.2) (1.9) (3.6) -------- -------- -------- Profit before tax 3.4 0.6 1.8 Taxation (Note 4) (1.7) 0.1 (1.5) -------- -------- -------- Profit for the period from continuing operations 1.7 0.7 0.3 -------- -------- -------- Discontinued operations Loss for the financial period from discontinued operations (Note 5) (6.4) (2.6) (13.9) -------- -------- -------- Loss for the financial period (4.7) (1.9) (13.6) ======== ======== ======== Earnings per share (Note 6) Basic and diluted loss per share (6.8)p (2.8)p (19.6)p Basic and diluted earnings per share from continuing operations 2.4p 1.0p 0.4p RENOLD PLC Consolidated Balance Sheet as at 30 September 2006 (unaudited) At At At 30 September 30 September 31 March 2006 2005 2006 Â£m Â£m Â£m Assets Non-current assets Goodwill 15.9 16.3 17.1 Other intangible fixed assets 0.2 0.6 0.2 Property, plant and equipment 36.9 61.7 38.2 Other non-current assets 0.3 0.3 0.3 Deferred tax assets 18.9 20.1 18.4 ---------- ---------- -------- 72.2 99.0 74.2 ---------- ---------- -------- Current assets Inventories 37.4 50.0 36.5 Trade and other receivables 26.0 40.2 25.8 Derivative financial instruments 0.2 0.2 Cash and cash equivalents 9.6 22.4 17.8 ---------- ---------- -------- 73.0 112.8 80.3 Asset held for sale 3.4 3.4 Assets of discontinued operations 13.4 37.1 ---------- ---------- -------- 89.8 112.8 120.8 ---------- ---------- -------- Total assets 162.0 211.8 195.0 ---------- ---------- -------- Liabilities Current liabilities Borrowings (32.3) (35.7) (12.4) Derivative financial instruments (0.2) (0.1) Trade and other payables (27.3) (44.8) (31.3) Provisions (0.2) (8.5) (0.4) Current tax liabilities (1.3) (0.8) (0.7) ---------- ---------- -------- (61.3) (89.9) (44.8) Liabilities directly associated with discontinued operations (6.9) (28.1) ---------- ---------- -------- (68.2) (89.9) (72.9) ---------- ---------- -------- Net current assets 21.6 22.9 47.9 ---------- ---------- -------- Non-current liabilities Borrowings (3.8) (8.4) (25.6) Derivative financial instruments (0.4) (0.1) Preference shares (0.5) (0.5) (0.5) Trade and other payables (1.3) (1.0) (0.7) Deferred tax liabilities (0.8) (1.5) (0.7) Retirement benefit obligations (56.4) (59.7) (53.9) ---------- ---------- -------- (62.8) (71.5) (81.5) ---------- ---------- -------- Total liabilities (131.0) (161.4) (154.4) ---------- ---------- -------- Net assets 31.0 50.4 40.6 ========== ========== ======== Equity Issued share capital 17.4 17.3 17.4 Share premium and other reserves 7.2 6.0 8.7 Retained earnings 6.4 27.1 14.5 ---------- ---------- -------- Total shareholders' equity 31.0 50.4 40.6 ========== ========== ======== RENOLD PLC Consolidated Cash Flow Statement for the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Cash flows from operating activities (Note7) Cash generated/(absorbed) by operations - continuing 1.1 (0.6) 4.7 Cash (absorbed)/generated by operations - discontinued (6.3) 0.4 1.7 --------- -------- -------- (5.2) (0.2) 6.4 Income taxes paid (0.6) (0.8) (1.7) --------- -------- -------- Net cash from operating activities (5.8) (1.0) 4.7 --------- -------- -------- Cash flows from investing activities Disposal of businesses 3.8 Purchase of property, plant and equipment (3.5) (2.9) (6.7) Purchase of intangible assets (0.1) (0.2) Proceeds on disposal of property, plant and equipment 1.5 3.2 --------- -------- -------- Net cash from investing activities 0.3 (1.5) (3.7) --------- -------- -------- Cash flows from financing activities Financing costs paid (1.3) (1.6) (3.3) (Decrease)/increase in borrowings (0.5) 1.8 6.9 Issue of ordinary shares 0.1 New obligations under finance leases 0.2 Payment of finance lease obligations (0.3) (0.1) --------- -------- -------- Net cash from financing activities (1.9) 0.2 3.6 --------- -------- -------- Net (decrease)/increase in cash and cash equivalents (7.4) (2.3) 4.6 Net cash and cash equivalents at beginning of period 9.6 4.8 4.8 Effects of exchange rate changes (0.3) 0.1 0.2 --------- -------- -------- Net cash and cash equivalents at end of period 1.9 2.6 9.6 ========= ======== ======== In the balance sheet net cash and cash equivalents comprised: Cash and cash equivalents 9.6 22.4 17.8 Overdrafts (included in borrowings - Note 7) (7.7) (19.8) (8.2) --------- -------- -------- 1.9 2.6 9.6 ========= ======== ======== RENOLD PLC Statement of recognised income and expense for the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Loss for the period (4.7) (1.9) (13.6) --------- --------- --------- Net gains/(losses) recognised directly in equity: Foreign exchange translation differences (1.5) 1.6 1.1 Gains/(losses) on fair value of hedging net investments in foreign operations (0.9) 0.1 1.1 Actuarial losses on retirement benefit obligations (3.5) (6.8) (5.3) Tax on items taken directly to equity 1.0 2.1 1.7 --------- --------- --------- Total expense recognised directly in equity (4.9) (3.0) (1.4) --------- --------- --------- Total recognised income and expense for the period (9.6) (4.9) (15.0) ========= ========= ========= Reconciliation of changes in consolidated shareholders' equity for the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Shareholders' equity at beginning of the period 40.6 56.1 56.1 Adoption of IAS 32 and IAS 39 (0.8) (0.8) --------- --------- --------- 40.6 55.3 55.3 Total recognised income and expense for the period (9.6) (4.9) (15.0) Employee share options: - value of employee services 0.2 - proceeds from shares issued 0.1 --------- --------- --------- Net reduction in shareholders' equity in the period (9.6) (4.9) (14.7) --------- --------- --------- Shareholders' equity at the end of the period 31.0 50.4 40.6 ========= ========= ========= Notes to the Interim Financial Statements 1 Basis of preparation The unaudited interim financial statements for the six months to 30 September 2006 have been prepared on the basis of the accounting policies set out in the Group's consolidated financial statements for the year ended 31 March 2006. These interim financial statements do not constitute statutory accounts of the Group within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 March 2006 have been filed with the Registrar of Companies. The Auditors' report on those accounts was unqualified and did not contain any statement under Section 237 of the Companies Act 1985. The interim financial statements were approved by the Board on 23 November 2006. 2 Segment information The Group's continuing activities are in one class of business, Industrial Power Transmission. The consolidated income statement for continuing operations therefore relates wholly to the Industrial Power Transmission business. The geographical analysis of revenue by market areas is as follows: First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m United Kingdom 10.1 10.5 20.4 Germany 7.8 7.2 14.6 France 3.8 4.2 7.4 Rest of Europe 14.6 13.8 28.2 North and South America 28.9 27.3 57.2 Other countries 14.1 12.6 27.2 --------- -------- --------- 79.3 75.6 155.0 ========= ======== ========= 3 Net financing costs First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Financial expenses: Interest payable on bank loans and overdrafts (1.2) (1.1) (2.3) Interest cost on pension plan balances (5.7) (5.7) (11.1) Costs associated with refinancing (0.6) (0.7) --------- -------- --------- (6.9) (7.4) (14.1) --------- -------- --------- Financial income: Interest receivable on bank deposits and cash equivalents 0.1 0.1 Expected return on pension plan assets 5.6 5.3 10.1 Fair value gains on derivative instruments 0.2 0.3 --------- -------- --------- 5.7 5.5 10.5 --------- -------- --------- Net financing costs (1.2) (1.9) (3.6) ========= ======== ========= 4 Taxation First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Current tax: - UK - Overseas (1.0) (0.5) (1.3) --------- -------- --------- (1.0) (0.5) (1.3) Deferred tax: - UK 0.8 (0.3) - Overseas (0.2) (0.2) 0.4 --------- -------- --------- (0.2) 0.6 0.1 --------- -------- --------- Income tax expense (1.2) 0.1 (1.2) ========= ======== ========= Attributable to: - Continuing operations (1.7) 0.1 (1.5) - Discontinued operations 0.5 0.3 --------- -------- --------- (1.2) 0.1 (1.2) ========= ======== ========= 5 Discontinued operations First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m External revenue 24.9 31.3 70.1 ========= ======== ========= Operating loss before exceptional items (2.7) (2.4) (1.5) Exceptional items (0.1) 0.5 --------- -------- --------- Operating loss (2.7) (2.5) (1.0) Net financing costs (0.2) (0.1) (0.4) --------- -------- --------- Loss before taxation (2.9) (2.6) (1.4) Taxation 0.5 0.3 --------- -------- --------- Loss after taxation (2.4) (2.6) (1.1) Impairment of disposal groups (4.0) (12.8) --------- -------- --------- Loss for the period on discontinued operations (6.4) (2.6) (13.9) ========= ======== ========= In the annual accounts to 31 March 2006 the Automotive and Machine Tools businesses were treated as discontinued operations, following the Group's stated intention to dispose of these operations. On 3 August 2006 it was announced that the sale of certain assets and liabilities of the Automotive business had been completed on that date. Final Completion Accounts for that disposal are currently being reviewed in accordance with the terms of the respective Sale and Purchase contract. The proposed disposal of Machine Tools has been the subject of continuing negotiation. The additional impairment charges in the half year financial statements reflect the current status of these negotiations and the Automotive Completion Accounts . 6 Earnings per share Basic earnings per share is calculated by dividing the profit for the period by the weighted average number of shares in issue during the period. Diluted earnings per share takes into account the dilutive effect of the options and awards outstanding under the Group's employee share schemes. First half Full year 2006/07 2005/06 2005/06 Pence per share Pence per share Pence per share Basic and diluted EPS (6.8) (2.8) (19.6) Basic and diluted EPS from continuing operations 2.4 1.0 0.4 Adjusted EPS from continuing operations 2.7 1.2 1.7 ========= ========= ========= Â£m Â£m Â£m Continuing operations Profit for the period 1.7 0.7 0.3 Discontinued operations Loss from discontinued operations (6.4) (2.6) (13.9) --------- --------- --------- Continuing and discontinued operations (4.7) (1.9) (13.6) ========= ========= ========= Â£m Â£m Â£m Profit for calculation of adjusted EPS for continuing operations Profit from continuing operations 1.7 0.7 0.3 Adjusted for the after tax effects of exceptional items: Redundancy and restructuring costs 0.2 0.1 0.9 --------- --------- --------- 1.9 0.8 1.2 ========= ========= ========= Thousands Thousands Thousands Weighted average number of ordinary shares For calculating basic earnings per share 69,438 69,335 69,350 Effect of dilutive securities - employee share options 109 1 63 --------- --------- --------- For calculating diluted earnings per share 69,547 69,336 69,413 ========= ========= ========= 7 Cash generated by operations First half Full year 2006/07 2005/06 2005/06 Â£m Â£m Â£m Continuing operations: Profit before taxation 3.4 0.6 1.8 Depreciation and amortisation 2.5 2.7 5.4 Equity share plans 0.2 Net finance costs 1.2 1.9 3.6 (Increase) in inventories (2.7) (1.0) (1.8) (Increase) in receivables (1.1) (1.3) (0.4) (Decrease)/increase in payables (1.9) (1.2) 2.7 (Decrease) in provisions (0.2) (3.2) (2.7) Movement on pension schemes (0.4) (3.8) Movement on derivative financial instruments 0.3 (0.3) --------- -------- --------- Cash generated/(absorbed) by continuing operations 1.1 (1.5) 4.7 --------- -------- --------- Discontinued operations: Loss before taxation (2.9) (2.6) (1.4) Depreciation and amortisation 1.5 3.1 Plant and equipment impairment 0.8 Gain on plant and equipment disposals (0.1) Net finance cost 0.2 0.1 0.4 (Increase) in inventories (0.5) (0.9) (0.6) Decrease in receivables 1.0 3.0 0.2 (Decrease)/increase in payables (3.5) 0.2 5.3 (Decrease) in provisions (0.6) (5.7) Movement on pension schemes (0.3) --------- -------- --------- Cash (absorbed)/generated by discontinued operations (6.3) 1.3 1.7 --------- -------- --------- Cash (absorbed)/generated by operations (5.2) (0.2) 6.4 ========= ======== ========= Net debt comprised: At At At 30 September 30 September 31 March 2006 2005 2006 Cash and cash equivalents 9.6 22.4 17.8 Borrowings: Bank overdrafts (7.7) (19.8) (8.2) Bank loans (28.0) (23.9) (29.3) Obligations under finance leases (0.4) (0.4) (0.5) Preference shares (0.5) (0.5) (0.5) --------- --------- -------- (27.0) (22.2) (20.7) ========= ========= ======== This information is provided by RNS The company news service from the London Stock Exchange

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