Interim Results

Renold PLC

15 November 2023

 

Renold plc

Interim results for the half year ended 30 September 2023

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

Strategic and operational progress driving record earnings growth

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 2023.

Financial summary	Half year ended			Change % (Constant currency)1
£m	30 September 2023	30 September 2022	Change %
Revenue	125.3	116.3	+7.7%	+10.7%
Adjusted operating profit2	15.0	9.6	+56.3%	+59.4%
Return on sales2	12.0%	8.3%	+370bps	+360bps
Adjusted profit before tax2	11.3	7.3	+54.8%
Net debt3	28.3	34.0
Adjusted earnings per share2	3.8p	2.7p	+40.7%
Additional statutory measures
Operating profit	16.2	8.8	+84.1%
Profit before tax	12.5	6.5	+92.3%
Basic earnings per share	4.4p	2.3p	+91.3%

Financial highlights

·	Revenue up 7.7% (10.7% at constant exchange rates) to £125.3m (2022: £116.3m) driven by strong improvement in Torque Transmission ("TT") activity levels and continued growth in Chain.
·	Adjusted operating profit up 56.3% (59.4% at constant exchange rates) to £15.0m (2022: £9.6m).
·	Return on sales increased by 370bps, (360bps at constant exchange rates) to 12.0% (2022: 8.3%).
·	Net debt as at 30 September 2023 of £28.3m (31 March 2023: £29.8m), despite acquisition of Davidson Chain Pty ("Davidson") for £3.1m in the period and deferred payment of £1.7m for Industrias YUK S.A. ("YUK"). Net debt represented 0.7x rolling 12 months adjusted EBITDA.
·	Adjusted EPS up 40.7% to 3.8p (2022: 2.7p).
·	IAS 19 pension deficit reduced by 15.3% to £52.7m (31 March 2023: £62.2m).

Business highlights

·	Good progress on productivity improvements, cost reduction programmes and capital investment projects, accelerating the integration of Group-wide supply chain and increasing operational capabilities.
·	Strong first half sales performance, despite normalisation in order intake to £109.7m when compared to the prior H1 record order intake of £124.1m.
·	Order book at 30 September 2023 of £83.6m, compared to prior year's record high (30 September 2022: £99.0m) as the duration of the order book shortened following normalisation of supply chains this year.
·	Acquisition of Davidson for AU$6.0m, increasing the Group's access to the Australian conveyor and adapted transmission chain markets. The integration process is progressing well and the business is performing in line with expectations.
·	£2.2m exceptional profit from the assignment of a lease for a closed legacy site, resulting in a £0.7m per annum reduction in ongoing leased property costs.

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

² See Note 12 for definitions of adjusted measures and the differences to statutory measures.

³ See Note 8 for a reconciliation of net debt which excludes lease liabilities.

Robert Purcell, Chief Executive of Renold, said:

"I'm pleased to report continued progress which builds on the momentum the Group has enjoyed in recent periods, delivering a record half year result. Sales, margins, profits and cash generation have all progressed well. Global markets continue to be uncertain and we remain vigilant for changes in patterns of demand beyond the current order book shortening. We are delighted with the purchase of Davidson in Australia, which further builds our inorganic growth strategy and we remain well positioned to continue developing through acquisition. There remains uncertainty over the implication of global economic pressures in the medium term, however the Board is increasingly confident in delivering a result for the current year ahead of previous market expectations."

Reconciliation of reported, constant exchange rate and adjusted results

	Revenue		Operating profit		Earnings per share
	H1 2023/24 £m	H1 2022/23 £m	H1 2023/24 £m	H1 2022/23 £m	H1 2023/24 pence	H1 2022/23 pence
Statutory at actual exchange rates	125.3	116.3	16.2	8.8	4.4	2.3
Adjust for non-recurring items:
Assignment of lease of closed site	-	-	(2.2)	-
Acquisition and reorganisation costs	-	-	0.5	0.6
Amortisation of acquired intangible assets	-	-	0.5	0.2
Adjusted at actual exchange rates	125.3	116.3	15.0	9.6	3.8	2.7
Exchange impact	3.4	-	0.3	-
Adjusted at constant exchange rates	128.7	116.3	15.3	9.6

Investor Presentation

The Company will conduct a live presentation and Q&A session for investors at 5:30 pm GMT today, 15 November 2023. The presentation is open to all existing and potential shareholders. Those wishing to attend should register via the following link and they will be provided with log in details:

https://us02web.zoom.us/webinar/register/WN_DwsvKoYLQumb8x1YZg-klw

There will be the opportunity for participants to ask questions at the end of the presentation. Questions can also be emailed to [e-mail] ahead of the presentation.

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	Cavendish Capital Markets Limited
Mike Bell	Ed Frisby (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 at: www.renold.com

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014), as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

Chief Executive's statement

The Group's performance in the first six months of the year continued to be strong, delivering an increase in revenues of 7.7% to £125.3m (2022: £116.3m). At constant exchange rates, revenues increased 10.7%. The TT division, which saw revenue increase by 25.2%, has had an especially positive start to the year, as the benefit of the long-term military contracts within Couplings, along with increased capacity investments in Westfield, our North American TT operation, has allowed the business to capitalise on the current strong North American market.

Group adjusted operating profit increased by 56.3% to £15.0m (2022: £9.6m) as the benefits of increased sales and prior year productivity improvements translated into better financial results. Return on sales increased by 370bps, to 12.0% (2022: 8.3%), a record high for the Group, driven by increasing levels of productivity investments and projects, benefits of increased sales volumes both organic and through acquisition, passing on cost inflation and acquisition integration synergies. Statutory operating profit increased to £16.2m (2022: £8.8m), as an exceptional profit of £2.2m was recorded on the assignment of the lease of the closed Bredbury site, offset by costs associated with the acquisition of Davidson, with the statutory operating profit margin for the period increasing to 12.9% (2022: 7.6%).

Net debt reduced during the period by £1.5m to £28.3m (31 March 2023: £29.8m) despite the Group acquiring the trade and assets of Davidson for £3.1m, making a deferred consideration payment for the YUK acquisition of £1.7m, and bringing forward a UK pension scheme payment of £2.6m that was originally scheduled for the second half of the year. The accelerated pension payment will enable efficiencies in the evolution of the scheme's investment portfolio.

Order intake for the period was £109.7m, a decrease of 11.6% (2022: £124.1m), or a 9.0% decrease at constant exchange rates. YUK contributed £6.9m to order intake in the period. The order book as at 30 September 2023 of £83.6m remains higher than historic levels. However, there has been a normalisation of order intake following an improvement in global supply chains, with improvements to delivery times, allowing customers to reduce forward order placement as certainty of lead times increase. The order book at 30 September 2023 of £83.6m represents a constant currency decrease of 11.1% over the record high position at the end of the previous financial year.

The Group has continued to successfully manage a period of sustained cost inflation and changes to the supply chain, pursued efficiency gains and projects and passed on cost adjustments both up and down. The Group expects to experience further cost pressures through the second half of the year but the Board is confident that these will continue to be managed successfully.

Renold continues to focus efforts on driving and optimising performance through identified projects, some of which require capital investment, targeting better operational efficiency, improved design and standardisation of products, better asset utilisation, more flexible working practices, and leveraging improved procurement strategies.

Acquisitions

On 1 September 2023, the Group acquired the trading assets of Davidson, based in Melbourne, Australia, for a cash consideration of AU$6.0 million, enlarging the already established Australian Chain business by 26%. The Davidson acquisition demonstrates further strategic momentum, supplementing organic growth through high quality bolt-on acquisitions which can expand our geographic presence, grow our product offering and strengthen our market position in key end markets.

The Board is pleased with the performance of Davidson in the period since completion of the acquisition and remains excited by the opportunities beginning to emerge. Davidson has traded in line with the Board's expectations made at the time of the acquisition.

There remains an active pipeline of acquisition opportunities which the Group continues to review as part of its growth strategy. The Board adopts a disciplined approach to its acquisition strategy, with investments focussed on complementary industrial chain businesses, to supplement organic growth. Acquisitions are expected to be earnings accretive whilst leverage is maintained at conservative levels.

Business and financial review

	Revenue		Adjusted operating profit		Return on sales
Six month period	2023/24 £m	2022/23 £m	2023/24 £m	2022/23 £m	2023/24 %	2022/23 %
Chain	101.5	95.1	16.0	12.5	15.8	13.1
Torque Transmission	29.8	23.0	4.7	1.5	15.8	6.5
Head office costs/ Inter segment sales elimination	(2.6)	(1.8)	(5.4)	(4.4)	-	-
Total Adjusted at constant rates	128.7	116.3	15.3	9.6	11.9	8.3
Impact of foreign exchange	(3.4)	-	(0.3)	-	0.1
Total Adjusted at actual rates	125.3	116.3	15.0	9.6	12.0	8.3
Adjusting items:
Assignment of lease of closed site	-	-	2.2	-
Amortisation of acquired intangible assets	-	-	(0.5)	(0.2)
Acquisition and reorganisation costs	-	-	(0.5)	(0.6)
Statutory	125.3	116.3	16.2	8.8	12.9	7.6

Chain

The Chain division's revenue at constant exchange rates increased by 6.7% to £101.5m, and stayed above the psychologically important £100m milestone.

Chain Performance
	2023/24 £m	2022/23 £m	2023/24 ROS %	2022/23 ROS %
External revenue	98.4	94.7
Inter-segment revenue	0.5	0.4
Total revenue	98.9	95.1
Foreign exchange	2.6	-
Revenue at constant exchange rates	101.5	95.1
Operating profit	17.0	12.3	17.2	12.9
Assignment of lease of closed site	(2.2)	-
Amortisation of acquired intangible assets	0.5	-
Acquisition and reorganisation costs	0.5	0.2
Adjusted operating profit	15.8	12.5	16.0	13.1
Foreign exchange	0.2	-
Adjusted operating profit at constant exchange rates	16.0	12.5	15.8	13.1

Revenue increased across all regions:

·	Europe increased external revenue by 7.6% at constant currency rates. Excluding the impact of the YUK acquisition external revenue fell by 5.8%, as the impact of the Ukraine war, and cost inflation, was felt through the broader European economy. The integration of the YUK business has proceeded as planned with £7.2m of additional external revenue recorded, as the Group saw the benefits of substituting externally sourced products, increasing conveyor chain ("CVC") product sales (manufactured by YUK in Spain) throughout Europe, and increasing transmission chain ("TRC") sales in Spain.
·	The Americas increased constant currency revenues by 6.9%, with sales of Engineering chain remaining buoyant, and demand for transmission chain and leaf chain (used in Forklift trucks) remaining strong. New opportunities with distributors and strong demand was seen from end users especially for capital equipment in the food processing, ethanol and mining industries.
·	Australasian revenues increased by 6.7% at constant exchange rates, as the business continued to benefit from execution of its growth strategy, sales increased by double digit growth rates in New Zealand, and Malaysia, with Thailand also growing strongly. Sales to Indonesia were adversely impacted by continued import restrictions imposed by the Indonesian government, whilst Australia also saw the impact of a slowdown in activity.
·	External revenues in India fell in the first half of the year as the impact of slow agricultural sales were experienced, and there was an increase in competition from other local manufacturers. Capacity was utilised in supporting Group sales, especially increased demand within the US market, for larger sized Engineering chain products. Additional investment to support productivity and capacity improvements in India, have recently been initiated, and activities aimed at the expansion of the domestic dealer network and an increase in the number of local warehouses is underway, to enhance geographic coverage and service.
·	External revenues in China were up 50.1% (at constant exchange rates) as efforts aimed at growing domestic Chinese sales continue to bear fruit, the sales increase going someway to offset the softening in demand seen as a result of slower intra group demand from Europe. The transfer of externally purchased product volumes from the YUK acquisition to the Jintan factory continued with an increase in sales seen to the YUK business during the period. Significant progress has once again been made in enhancing the performance of the factory in Jintan, through a programme of standardisation and improvement projects, including the commissioning of new equipment, so the factory is increasingly able to manufacture higher specification products.

Divisional adjusted operating profit at constant exchange rates was £16.0m, £3.5m higher than the prior year. Return on sales increased by 270bps to 15.8% (2022: 13.1%).

Order intake at constant exchange rates decreased by 11.2% to £91.2m, resulting in a book to bill (ratio of orders to sales) for the first half of the year of 90.3% (2022: 105.0%).

Torque Transmission ("TT")

TT Performance
	2023/24 £m	2022/23 £m	2023/24  ROS %	2022/23 ROS %
External revenue	26.9	21.6
Inter-segment revenue	1.9	1.4
Total revenue	28.8	23.0
Foreign exchange	1.0	-
Revenue at constant exchange rates	29.8	23.0
Operating profit (and adjusted operating profit)	4.6	1.5	16.0	6.5
Foreign exchange	0.1	-
Adjusted operating profit at constant exchange rates	4.7	1.5	15.8	6.5

Divisional revenues at constant exchange rates of £29.8m were £6.8m (30%) higher than in the prior year, which continued the trend seen in the second half of the last financial year. This was due to increased demand for Military Couplings in the Cardiff business, and a further strengthening in demand in North America. Additionally, the division benefited from a significant increase in capacity primarily driven by capital investments in automated machines, and efficiency improvements driven by greater visibility following the implementation of M3.

As a result of the increased sales activity, selling price rises and improved operational output, as well as a normalisation in product mix, divisional operating profit at constant currency increased by £3.2m to £4.7m.

Return on sales increased in the period to 16.0% (2022: 6.5%). This is now beyond pre COVID pandemic level rates of return.

The closing order book for the division of £34.1m should ensure that momentum will continue into the second half of the year at similar rates, however, second half comparators are significantly stronger than those in H1.

Cash flow and net debt

Half year to 30 September	2023/24 £m	2022/23 £m
Adjusted operating profit	15.0	9.6
Add back: Depreciation and amortisation	4.9	4.9
Share-based payments	0.7	0.5
Adjusted EBITDA	20.6	15.0
Movement in working capital	(1.4)	(7.6)
Net capital expenditure	(2.1)	(2.2)
Operating cash flow	17.1	5.2
Income taxes	(1.3)	(1.3)
Pensions cash costs	(6.0)	(3.1)
Repayment of principal under lease liabilities	(1.4)	(1.2)
Financing costs paid	(2.2)	(1.3)
Consideration paid for acquisitions1	(4.9)	(17.8)
Other movements	0.2	(0.7)
Change in net debt	1.5	(20.2)
Closing net debt	(28.3)	(34.0)

¹ Includes £1.7m deferred consideration in relation to the acquisition of Industrias YUK S.A in the prior year and £0.2m of acquisition costs for Davidson Chain Pty.

Net Debt reduced from the prior financial year end by £1.5m in the period to £28.3m. Cash collections were strong, especially in North America, where receipts from significant orders shipped at the end of the last financial year were collected in the period. Offsetting this inflow, the Group paid £3.1m in cash consideration for the Davidson acquisition, and made the initial deferred payment of £1.7m for the YUK acquisition, along with associated acquisition and reorganisation costs of £0.5m.

Working capital increased during the period, with the Group increasing inventory levels especially in North America where demand continues to be strong, particularly in the Engineered chain segment.

Net capital expenditure of £2.1m remained broadly in line with prior years. Strategic investments in production capabilities, especially in our Chinese and Indian facilities continue apace, including expansion of press capabilities, improved heat treatment and continuing the roll-out of the group's standard business systems.

Corporation tax payments on account of £1.3m were at similar levels to the first half of last year.

Interest cash costs increased relative to the first half of last year reflecting the increase in market interest rates over the intervening period.

Pensions

The Group has a number of closed defined benefit pension schemes (accounted for in accordance with IAS 19 'Employee Benefits'). During the Covid-19 pandemic, the Group negotiated a £2.8m one-off deferral of contributions with the UK pension scheme trustees. Contributions have now returned to normal levels, with the second of five annual deferred payments of c.£0.6m being made. Additionally, the Group had a longstanding agreement with the UK scheme to pay an additional £1.0m of annual cash contributions, to the extent that the Group's adjusted operating profit exceeds £16.0m; the additional cash contributions commenced in the half year. The Group took the opportunity to bring forward £2.6m of contributions to the UK pension scheme from the second half of the year, in order to increase efficiency in the evolution of the investment portfolio. Excluding these amounts, underlying pension contributions reduced following the closure of the New Zealand pension scheme in FY23, and a reduction in administration costs. The cash contributions into the UK Scheme are known and stable, though increasing with RPI capped at 5%. In FY24 this cost is expected to be £5.3m. In addition there are administration and actuarial costs, including the PPF levy, which may vary. The cost of pensions in payment in Germany (there is no scheme or fund) are expected to be £1.2m in FY24. This amount will rise with inflation but the total will fall gradually over time.

The Group's IAS 19 deficit decreased from £61.3m at 30 September 2022 to £52.7m at 30 September 2023.

	At 30 September 2023			At 31 March 2023
	UK schemes	Overseas schemes	Total	UK schemes	Overseas schemes	Total
	£m	£m	£m	£m	£m	£m
IAS 19 retirement benefit obligations	(36.6)	(16.1)	(52.7)	(44.2)	(18.0)	(62.2)
Net deferred tax asset	1.6	1.4	3.0	3.3	1.8	5.1
Retirement benefit obligations net of deferred tax asset	(35.0)	(14.7)	(49.7)	(40.9)	(16.2)	(57.1)

The yield on corporate bonds increased further during the period. Consequently the discount rates used for the UK scheme rose from 4.85% to 5.70%, and resulted in a net reduction in UK pension liabilities of £7.6m, and overseas pension liabilities of £1.9m. The long term expectation for CPI inflation remained broadly stable at 3.35% (3.30% at September 2022). Asset values were impacted as both the value of gilts and equities fell during the period. The scheme has insurance assets linked directly to the benefits of certain scheme members. As the liability to these members reduces, for example with an increase in discount rate, so does the value of the corresponding insurance asset.

Pension liabilities in overseas schemes reduced by £1.9m to £16.1m, again due in the main to an increase in discount rates.

The net pension financing expense (a non-cash item) was £1.4m (2022: £1.0m).

Borrowing Facilities

The Group refinanced its borrowing facilities in May 2023. The new facilities consist of a £85.0m multi-currency revolving credit facility and a £20.0m accordion option which will provide the Company access to additional funding in support of its acquisition programme. The principal facility term, being the Net Debt / Adjusted EBITDA covenant, was also improved from the previous level of 2.5 times Adjusted EBITDA to 3.0 times Adjusted EBITDA, with other key terms remaining unchanged.

Dividend

In line with recent policy based on enhancing Group performance through focussed investment in new equipment and earnings enhancing acquisitions the Board has decided not to declare an interim ordinary dividend. The dividend policy will remain under review as margin and cash flow performance continues to develop.

Summary

Sales in the first half remained strong. Margins rose markedly as better volumes, good cost management, complementary acquisitions and strong execution of productivity and efficiency programmes, aided by a consistent and coherent strategy all came together. The robust Renold business with a strengthening balance sheet and growing cash generation is positioned well for tackling whatever global economic headwinds may transpire in the upcoming period.

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 macro-economic uncertainty, and inflationary environment, together with the impact of the war in Ukraine alongside the continued improvement in the half year trading performance of the Group have been considered as part of the adoption of the going concern basis. The Group continues to closely monitor operating costs, and capital expenditure and other cash demands are being managed carefully.

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 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 Directors have reviewed the principal risks and uncertainties of the Group. The Directors consider that the principal risks and uncertainties of the Group published in the Annual Report for the year ended 31 March 2023 remain appropriate. The risks and associated mitigation processes can be found on pages 50-57 of the 2023 Annual Report, which is available at www.renold.com.

The risks referred to and which could have a material impact on the Group's performance for the remainder of the current financial year relate to:

·	Macroeconomic and geopolitical volatility, including continuing uncertainty over energy supply inflation and disruption, together with a weakening in the broader European economy;
·	Strategy execution;
·	Product liability;
·	Health and safety in the workplace;
·	Security and effective deployment and utilisation of IT systems;
·	Prolonged loss of a major manufacturing site;
·	People and change;
·	Liquidity, foreign exchange and banking arrangements;
·	Pension deficit; and
·	Legal, financial and regulatory compliance.

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 2023. A list of current Directors is maintained on the Group website at www.renold.com.

By order of the Board

Robert Purcell Chief Executive 15 November 2023

Jim Haughey Group Finance Director 15 November 2023

Condensed consolidated income statement

for the six months ended 30 September 2023

	Note	First half 2023/24 (unaudited) £m	First half 2022/23 (unaudited) £m	Full year 2022/23 (audited) £m
Revenue	3	125.3	116.3	247.1
Operating costs		(109.1)	(107.5)	(224.2)
Operating profit	3	16.2	8.8	22.9
Finance costs	4	(3.7)	(2.3)	(5.6)
Profit before tax		12.5	6.5	17.3
Taxation	5	(3.4)	(1.7)	(5.5)
Profit for the period		9.1	4.8	11.8
Earnings per share	6
Basic earnings per share		4.4p	2.3p	5.7p
Diluted earnings per share		3.8p	2.1p	5.1p
Basic adjusted earnings per share1		3.8p	2.7p	6.5p
Diluted adjusted earnings per share1		3.3p	2.4p	5.9p

¹ Adjusted: In addition to statutory reporting, the Group reports certain financial metrics on an adjusted basis. Definitions of adjusted measures and reconciliations to statutory metrics are provided in Note 12 to the financial statements.

All results are from continuing operations.

Condensed consolidated statement of comprehensive income

for the six months ended 30 September 2023

		First half 2023/24 (unaudited) £m	First half 2022/23 (unaudited) £m	Full year 2022/23 (audited) £m
Profit for the period		9.1	4.8	11.8
Items that may be reclassified to the income statement in subsequent periods:
Exchange differences on translation of foreign operations		(0.3)	9.3	2.7
Gain/(loss) on hedges of the net investment in foreign operations		0.2	(1.2)	(0.8)
Cash flow hedges:
(Loss)/gain arising on cash flow hedges during the period		(0.3)	(1.4)	0.3
Cumulative (loss)/gain arising on cash flow hedges reclassified to profit and loss		(0.4)	0.7	0.6
Income tax relating to items that may be reclassified subsequently to profit or loss		0.1	0.2	(0.2)
		(0.7)	7.6	2.6
Items not to be reclassified to the income statement in subsequent periods:
Remeasurement gains/(losses) on retirement benefit obligations		4.7	24.7	22.2
Tax on remeasurement gains on retirement benefit obligations		(1.1)	(6.4)	(5.8)
		3.6	18.3	16.4
Other comprehensive income for the period, net of tax		2.9	25.9	19.0
Total comprehensive income for the period, net of tax		12.0	30.7	30.8

Condensed consolidated balance sheet

as at 30 September 2023

	Note	30 September 2023 (unaudited) £m	Restated1 30 September 2022 (unaudited) £m	31 March  2023 (audited) £m
Assets Non-current assets
Goodwill		30.1	30.0	28.2
Intangible assets		11.9	10.3	10.9
Property, plant and equipment		54.4	57.3	56.8
Right-of-use assets		15.7	17.6	16.5
Deferred tax assets		9.7	15.8	11.8
		121.8	131.0	124.2
Current assets
Inventories		65.2	70.8	61.8
Trade and other receivables		41.3	43.5	43.5
Current tax		0.6	0.1	0.6
Derivative financial assets		-	0.1	0.3
Cash and cash equivalents	8	19.5	15.7	19.3
		126.6	130.2	125.5
Total assets		248.4	261.2	249.7
Liabilities
Current liabilities
Borrowings	8	(3.5)	(2.9)	(47.3)
Trade and other payables		(56.2)	(63.7)	(57.2)
Lease liabilities		(2.1)	(2.6)	(2.7)
Current tax		(9.4)	(4.5)	(6.6)
Derivative financial liabilities		(0.3)	(1.5)	-
Provisions		(0.8)	-	(0.9)
		(72.3)	(75.2)	(114.7)
Net current assets		54.3	55.0	10.8
Non-current liabilities
Borrowings	8	(43.8)	(46.3)	(1.3)
Preference stock	8	(0.5)	(0.5)	(0.5)
Trade and other payables		(2.5)	(6.8)	(2.5)
Lease liabilities		(13.5)	(18.8)	(17.5)
Deferred tax liabilities		(6.5)	(10.1)	(7.8)
Retirement benefit obligations	7	(52.7)	(61.3)	(62.2)
Provisions		(4.8)	(4.0)	(4.1)
		(124.3)	(147.8)	(95.9)
Total liabilities		(196.6)	(223.0)	(210.6)
Net assets		51.8	38.2	39.1
Equity
Issued share capital	9	11.3	11.3	11.3
Currency translation reserve		11.5	18.1	11.5
Other reserves		(5.2)	(6.1)	(4.5)
Retained earnings		34.2	14.9	20.8
Total shareholders' funds		51.8	38.2	39.1

¹ See Note 11 for details of the prior period restatements.

Condensed consolidated statement of changes in equity

for the six months ended 30 September 2023

	Share capital (Note 9) £m	Share premium account £m	Restated1 Retained earnings /(deficit) £m	Currency translation reserve £m	Capital redemption reserve £m	Other reserves £m	Restated1 Total shareholders' funds £m
At 1 April 2022	11.3	-	(8.7)	9.8	-	(5.4)	7.0
Profit for the year	-	-	11.8	-	-	-	11.8
Other comprehensive income	-	-	16.4	1.7	-	0.9	19.0
Total comprehensive income for the year	-	-	28.2	1.7	-	0.9	30.8
Share-based payments	-	-	1.3	-	-	-	1.3
At 31 March 2023	11.3	-	20.8	11.5	-	(4.5)	39.1
Profit for the period	-	-	9.1	-	-	-	9.1
Other comprehensive income/(expense)	-	-	3.6	-	-	(0.7)	2.9
Total comprehensive income/(expense) for the period	-	-	12.7	-	-	(0.7)	12.0
Share-based payments	-	-	0.7	-	-	-	0.7
At 30 September 2023	11.3	-	34.2	11.5	-	(5.2)	51.8
At 1 April 2022	11.3	-	(8.7)	9.8	-	(5.4)	7.0
Profit for the period	-	-	4.8	-	-	-	4.8
Other comprehensive income/(expense)	-	-	18.3	8.3	-	(0.7)	25.9
Total comprehensive income/(expense) for the period	-	-	23.1	8.3	-	(0.7)	30.7
Share-based payments	-	-	0.5	-	-	-	0.5
At 30 September 2022 (Restated)1	11.3	-	14.9	18.1	-	(6.1)	38.2

¹ See Note 11 for details of the prior period restatements.

Included in retained earnings is £3.3m (31 March 2023: £2.7m) relating to a share option reserve.

The other reserves include Renold shares held by 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 2023 the Renold Employee Benefit Trust held 16,265,023 (31 March 2023: 16,888,938) ordinary shares of 5p each and, following recommendations by the employer, are provisionally allocated to satisfy awards under employee incentive schemes. At 30 September 2023 the market value of these shares was £5.0m (31 March 2023: £4.3m).               

Condensed consolidated statement of cash flows

for the six months ended 30 September 2023

	First half 2023/24 (unaudited) £m	First half 2022/23 (unaudited) £m	Full year 2022/23 (audited) £m
Cash flows from operating activities
Cash generated by operations (Note 8)	13.0	3.7	19.4
Income taxes paid	(1.3)	(1.3)	(2.7)
Net cash flows from operating activities	11.7	2.4	16.7
Cash flows from investing activities
Proceeds from property disposals	-	0.3	-
Cash outflow on disposal of right-of-use assets	(0.3)	-	-
Purchase of property, plant and equipment	(1.2)	(1.9)	(7.0)
Purchase of intangible assets	(0.6)	(0.6)	(1.4)
Consideration paid for acquisitions	(4.7)	(14.5)	(14.5)
Net cash flows from investing activities	(6.8)	(16.7)	(22.9)
Cash flows from financing activities
Repayment of principal under lease liabilities	(1.4)	(1.2)	(2.9)
Financing costs paid	(3.1)	(1.1)	(3.0)
Proceeds from borrowings	83.5	23.3	28.3
Repayment of borrowings	(84.0)	(3.9)	(8.3)
Net cash flows from financing activities	(5.0)	17.1	14.1
Net (decrease)/increase in cash and cash equivalents	(0.1)	2.8	7.9
Net cash and cash equivalents at beginning of period	17.5	9.5	9.5
Effects of exchange rate changes	-	0.5	0.1
Net cash and cash equivalents at end of period	17.4	12.8	17.5

Notes to the interim condensed consolidated financial statements

1.   Corporate information

The interim condensed consolidated financial statements for the six months ended 30 September 2023 were approved by the Board on 15 November 2023. 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 2023 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 2023 have been prepared in accordance with the UK adopted International Accounting Standard 34, 'Interim financial reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority (FCA).

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended 31 March 2023, which were prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under these standards.

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 2023, 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 revised accounting standards adopted by the Group 

During the period, the International Accounting Standards Board and International Financial Reporting Interpretations Committee have issued the following standards, amendments and interpretations, which are considered relevant to the Group. Their adoption has not had any significant impact on the amounts or disclosures reported in these financial statements.

·      IFRS 17 'Insurance Contracts'

·      Amendments to IAS 1 and IFRS Practice Statement 2 (Disclosure of accounting policies)

·      Amendments to IAS 18 Definition of accounting estimates

·      Amendments to IAS 12 (Deferred Tax related to Assets and Liabilities arising from a single transaction)

New and revised accounting standards and interpretations which were in issue but were not yet effective and have not been adopted early by the Group

The IASB published a number of amendments to IFRSs, new standards and interpretations which are not yet effective, and of which some have been endorsed for use in the EU. An impact assessment has been performed for each of these, with no significant financial impact being identified for the consolidated financial statements of the Group and the separate financial statements of Renold plc. The amendments, new standards and interpretations will be adopted in accordance with their effective dates.

·      Amendments to IFRS 16 Lease Liability in a Sale and Leaseback

·      Amendments to IAS 1 (Classification of Liabilities as Current or Non-Current)      

·      Amendments to IAS 1 (Non-current Liabilities with covenants)

·      IAS 7 Statement of cash flows and IFRS 7 Financial Instrument Disclosures

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 mostly those which applied in the annual consolidated financial statements for the year ended 31 March 2023, namely:

·      Taxation

·      Retirement benefit obligations

·      Right-of-use assets

·      Inventory valuation; with the addition of:

·      Revenue and profit recognition over time

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 2023.

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 been included in respect of working capital as opposed to operating assets of each segment as this is the measure reported to the CODM on a regular basis. However, Group finance 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 2023 were as follows:

Period ended 30 September 2023	Chain1 £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External customer - transferred at a point in time	98.4		24.1		-		122.5
External customer - transferred over time	-		2.8		-		2.8
Inter-segment	0.5		1.9		(2.4)		-
Total revenue	98.9		28.8		(2.4)		125.3
Operating profit/(loss)	17.0		4.6		(5.4)		16.2
Finance costs							(3.7)
Profit before tax							12.5
Taxation							(3.4)
Profit after tax							9.1
Other disclosures
Working capital	47.5		11.2		(8.4)		50.3
Capital expenditure	1.2		0.2		0.6		2.0
Total depreciation and amortisation	3.6		0.8		1.0		5.4

¹ Chain operating profit includes non-recurring costs of £0.5m relating to the acquisition and reorganisation costs of the Davidson business, £0.5m relating to amortisation of acquired intangible assets and £2.2m of profit on assignment of lease of closed site.

The segment results for the period ended 30 September 2022 were as follows:

Period ended 30 September 2022	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External customer- transferred at a point in time	94.7		21.0		-		115.7
External customer - transferred over time	-		0.6		-		0.6
Inter-segment	0.4		1.4		(1.8)		-
Total revenue	95.1		23.0		(1.8)		116.3
Operating profit/(loss)	12.3		1.5		(5.0)		8.8
Finance costs							(2.3)
Profit before tax							6.5
Taxation							(1.7)
Profit after tax							4.8
Other disclosures
Working capital	49.7		10.4		(9.5)		50.6
Capital expenditure	0.9		1.6		0.5		3.0
Total depreciation and amortisation	3.3		0.8		1.0		5.1

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 12 to the interim condensed consolidated financial statements. Constant exchange rate results are current period results retranslated using prior year exchange rates. A reconciliation is provided below and in Note 12.          

Period ended 30 September 2023	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Total revenue	98.9		28.8		(2.4)		125.3
Foreign exchange retranslation	2.6		1.0		(0.2)		3.4
Total revenue at constant exchange rates	101.5		29.8		(2.6)		128.7
Operating profit/(loss)	17.0		4.6		(5.4)		16.2
Foreign exchange retranslation	0.2		0.1		-		0.3
Operating profit/(loss) at constant exchange rates	17.2		4.7		(5.4)		16.5

The segment results for the year ended 31 March 2023 were as follows:

Year ended 31 March 2023	Chain £m		Torque Transmission £m		Head office costs and eliminations £m		Consolidated £m
Revenue
External customer - transferred at a point in time	201.5		43.4		-		244.9
External customer - transferred over time	-		2.2		-		2.2
Inter-segment	0.9		3.2		(4.1)		-
Total revenue	202.4		48.8		(4.1)		247.1
Operating profit/(loss)	26.5		5.4		(9.0)		22.9
Finance costs							(5.6)
Profit before tax							17.3
Taxation							(5.5)
Profit after tax							11.8
Other disclosures
Working capital	44.0		10.9		(6.8)		48.1
Capital expenditure	5.6		2.2		1.2		9.0
Total depreciation and amortisation	6.9		1.6		2.6		11.1

4.   Finance costs

	First half				Full year
	2023/24 £m		2022/23 £m		2022/23 £m
Finance costs:
Interest payable on bank loans and overdrafts	1.8		0.9		2.3
Interest expense on lease liabilities	0.4		0.2		0.7
Amortised financing costs	0.1		0.2		0.3
Loan finance costs	2.3		1.3		3.3
Net IAS 19 finance costs	1.4		1.0		2.1
Discount unwind on non-current trade and other payables	-		-		0.2
Finance costs	3.7		2.3		5.6

5.   Taxation

Analysis of tax charge in the year

	First half				Full year
	2023/24 £m		2022/23 £m		2022/23 £m
Current tax:
- UK	-		-		(0.1)
- Overseas	1.3		1.5		3.6
- Adjustments in respect of prior periods	1.8		(0.3)		0.7
Current income tax charge	3.1		1.2		4.2
Deferred tax:
- UK	0.9		-		0.2
- Overseas	(0.6)		0.5		1.5
- Adjustments in respect of prior periods	-		-		(0.4)
Total deferred tax charge	0.3		0.5		1.3
Tax charge on profit on ordinary activities	3.4		1.7		5.5

Factors affecting current and future tax charges                                  

The increase in the current tax charge for the period is attributable to increased taxable profits in jurisdictions for which the corporation tax rate is higher than the prevailing UK rate, currently 25%. The deferred tax charge is primarily attributable to the half year unwind of the deferred tax asset held in respect of the defined benefit pension scheme, partially offset by a recognition of additional deferred tax in overseas jurisdictions as supported by forecast taxable profits.

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.

6.   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
	2023/24			2022/23			2022/23
	Earnings	Per share amount		Earnings	Per share amount		Earnings	Per share amount
	£m	(pence)		£m	(pence)		£m	(pence)
Basic EPS - Profit attributed to ordinary shareholders	9.1	4.4		4.8	2.3		11.8	5.7
Effect of adjusting items, after tax:
Amortisation of acquired intangible assets	0.5	0.2		0.2	0.1		0.7	0.3
Acquisition and reorganisation costs	0.5	0.2		0.6	0.3		0.6	0.3
Assignment of lease of closed site	(2.2)	(1.0)		-	-		-	-
Tax adjustments relating to prior year	-	-		-	-		0.4	0.2
Adjusted EPS	7.9	3.8		5.6	2.7		13.5	6.5

	First half				Full year
	2023/24 Thousands		2022/23 Thousands		2022/23 Thousands
Weighted average number of ordinary shares:
For the purpose of calculating basic earnings per share	208,980		206,995		207,242
Effect of dilutive potential ordinary shares: Shares subject to performance conditions	28,546		23,737		23,003
For the purpose of calculating diluted earnings per share	237,526		230,732		230,245

	First half				Full year
	2023/24 (pence)		2022/23 (pence)		2022/23 (pence)
Diluted EPS	3.8		2.1		5.1
Diluted adjusted EPS	3.3		2.4		5.9

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.           

7.   Retirement benefit obligations

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

	At 30 September 2023 £m		At 30 September 2022 £m		At 31 March 2023 £m
Funded plan obligations	(145.3)		(160.7)		(158.8)
Funded plan assets	109.6		118.8		114.5
Net funded plan obligations	(35.7)		(41.9)		(44.3)
Unfunded obligations	(17.0)		(19.4)		(17.9)
Total retirement benefit obligations	(52.7)		(61.3)		(62.2)

Analysed as:

	At 30 September 2023 £m		At 30 September 2022 £m		At 31 March 2023 £m
Net funded plan obligations:
UK	(36.6)		(41.2)		(44.2)
Other	0.9		(0.7)		(0.1)
	(35.7)		(41.9)		(44.3)
Unfunded obligations:
Germany	(16.8)		(19.3)		(17.7)
Other	(0.2)		(0.1)		(0.2)
	(17.0)		(19.4)		(17.9)

The decrease in the Group's net pre-tax deficit from £62.2m at 31 March 2023 to £52.7m at 30 September 2023 primarily reflects changes in the underlying assumptions, such as the discount rate, plus employer contributions made in the period.

8.   Additional cash flow information

Reconciliation of operating profit to net cash flows from operations:

	First half				Full year
	2023/24 £m		2022/23 £m		2022/23 £m
Cash generated from operations:
Operating profit	16.2		8.8		22.9
Depreciation of property, plant and equipment - owned assets	3.1		2.9		6.1
Depreciation of property, plant and equipment - right-of-use-assets	1.3		1.2		2.5
Amortisation of intangible assets	1.0		1.0		2.5
Loss on disposals of plant and equipment	-		-		0.3
Profit on disposal of right-of-use-asset	(2.2)		-		-
Equity share plans	0.7		0.5		1.3
Increase in inventories	(3.3)		(10.9)		(4.5)
Decrease/(increase) in receivables	2.3		(0.9)		(2.8)
(Decrease)/increase in payables	(0.3)		4.2		(4.2)
Increase in provisions	0.2		-		1.0
Cash contribution to pension schemes	(6.0)		(3.1)		(5.8)
Pension current service cost (non-cash)	-		-		0.1
Cash generated from operations	13.0		3.7		19.4

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

	First half				Full year
	2023/24 £m		2022/23 £m		2022/23 £m
(Decrease)/increase in cash and cash equivalents	(0.1)		2.8		7.9
Change in net debt resulting from cash flows
- Proceeds from borrowings	(83.5)		(23.3)		(28.3)
- Repayment of borrowings	84.0		1.2		8.3
Foreign currency translation differences	0.2		(0.7)		(0.7)
Non-cash movement on capitalised finance costs	0.9		(0.2)		(0.3)
Net debt acquired as part of the business combination	-		-		(2.9)
Change in net debt during the period	1.5		(20.2)		(16.0)
Net debt at start of period	(29.8)		(13.8)		(13.8)
Net debt at end of period	(28.3)		(34.0)		(29.8)

Net debt comprises:

	At 30 September 2023 £m		At 30 September 2022 £m		At 31 March 2023 £m
Cash and cash equivalents	19.5		15.7		19.3
Total debt	(47.8)		(49.7)		(49.1)
Net debt	(28.3)		(34.0)		(29.8)

	At 30 September 2023		At 30 September 2022		At 31 March 2023
Net cash and cash equivalents	£m		£m		£m
Cash and cash equivalents	19.5		15.7		19.3
Less: Overdrafts	(2.1)		(2.9)		(1.8)
Net cash and cash equivalents	17.4		12.8		17.5

	At 30 September 2023		At 30 September 2022		At 31 March 2023
Total debt	£m		£m		£m
Borrowings:
Overdrafts	(2.1)		(2.9)		(1.8)
Bank Loans	(1.7)		-		(45.5)
Capitalised costs	0.3		-		-
Current borrowings	(3.5)		(2.9)		(47.3)
Bank Loans	(44.4)		(46.3)		(1.3)
Capitalised costs	0.6		-		-
Non-current borrowings	(43.8)		(46.3)		(1.3)
Total borrowings	(47.3)		(49.2)		(48.6)
Preference stock	(0.5)		(0.5)		(0.5)
Total debt	(47.8)		(49.7)		(49.1)

9.   Called up share capital

	At 30 September 2023 £m	At 30 September 2022 £m	At 31 March 2023 £m
Ordinary shares of 5p each - issued and fully paid	11.3	11.3	11.3

At 30 September 2023, the issued ordinary share capital comprised 225,417,740 ordinary shares of 5p each (30 September 2022: 225,417,740 shares).

10. Acquisition of businesses

During the period the Group completed the acquisition of the trading assets of Davidson Chain Pty ("Davidson") for the total consideration of AU$6.0m (£3.1m), of which AU$5.7m (£3.0m) was paid on the date of the acquisition and the remaining AU$0.3m (£0.1m) being deferred, to be paid in September 2024. Davidson is based in Melbourne, Australia, and is a manufacturer and distributor of high quality conveyor chain ("CVC").

The transaction has been accounted for as a business combination under IFRS 3 and is summarised below:

	Provisional as at 30 September 2023
	£m
Fair value of net assets acquired:
Intangible assets	1.4
Property, plant and equipment	0.1
Inventories	0.4
Trade and other receivables	0.3
Trade and other payables	(0.4)
Deferred tax liabilities	(0.4)
Net identifiable assets and liabilities	1.4
Goodwill	1.7
Total consideration	3.1
Consideration
Cash consideration	3.0
Deferred consideration	0.1
Total consideration transferred/to be transferred	3.1
Net cash outflow arising on acquisition:
Cash consideration paid	(3.0)
Add: Cash and cash equivalents acquired	-
	(3.0)
Increase in net debt arising on acquisition:
Net cash outflow arising on acquisition	(3.0)
Less: Acquisition costs	(0.2)
	(3.2)

Acquisition related costs amounted to £0.2m and have been included in the condensed consolidated income statement.

The gross contractual value of the trade and other receivables was £0.3m. The best estimate at the acquisition date of the contractual cash flows not expected to be collected was £nil.

Deferred consideration of £0.1m is payable within one year.

The goodwill arising on acquisition has been allocated to the Australia CGU and is expected to be deductible for tax purposes. The goodwill is attributable to:

• the anticipated profitability of the distribution of the Group's services in new markets; and

• the synergies that can be achieved in the business combination including management, processes and maximising site capacities.

The business was acquired on 1 September 2023 and contributed £0.2m revenue and £0.0m adjusted operating profit for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on the first day of the financial period, the acquisition would have contributed £1.2m to Group revenue, £0.2m to Group operating profit and £0.4m adjusted operating profit (after adding back £0.2m for acquisition costs).

During the year deferred consideration of €2.0m (£1.7m) was also paid in relation to the acquisition of the conveyor chain business of Industrias YUK S.A. in the prior year.

Total net cash outflow arising on acquisitions:
Davidson Chain Pty	(3.0)
Industrias YUK S.A.	(1.7)
	(4.7)
Total increase in net debt arising on acquisitions:
Davidson Chain Pty	(3.2)
Industrias YUK S.A.	(1.7)
	(4.9)

11. Prior period adjustments

Following a review of complex tax judgements looking back over a number of years undertaken at the last financial year end, a prior year adjustment of £1.3m was identified relating to errors in the recognition of deferred tax on certain intragroup and stock consolidation adjustments. Included in this amount is the recognition of deferred tax for losses following errors identified in the profitability forecasts for which increased deferred tax can be ascribed. The prior year adjustment to deferred tax is offset by an equal and opposite adjustment to current tax arising in respect of an error identified in the Group's historic transfer pricing calculation. A final adjustment has been identified in relation to a deferred tax asset in respect of interest restriction of £1.2m which should have been recognised historically to the extent it offsets the deferred tax liability in the respective tax jurisdiction. The adjustment recognises this deferred tax asset in the opening balance and opening reserves of the Group.

The impact, on a line item basis for those affected, on the Condensed balance sheet as at 30 September 2022 is as follows:

Condensed consolidated balance sheet as at 30 September 2022				As previously reported	Deferred / Current tax recognition	Restated
				£m	£m	£m
Assets
Non-current assets
Deferred tax assets				13.3	2.5	15.8
				13.3	2.5	15.8
Total assets				258.7	2.5	261.2
Liabilities
Current liabilities
Current tax				(3.2)	(1.3)	(4.5)
				(3.2)	(1.3)	(4.5)
Total Liabilities				(221.7)	(1.3)	(223.0)
Net assets				37.0	1.2	38.2
Equity
Retained earnings				13.7	1.2	14.9
Total shareholders' funds				37.0	1.2	38.2

12. 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). Amortisation of acquired intangible assets, restructuring costs, discontinued operations and material one-off items or remeasurements are added back / (deducted) as adjusting items as management seek to present a measure of performance which is not impacted by material non-recurring items or items considered non-operational. 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 current year results using prior year 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
• return on sales at constant exchange rates	G
• EBITDA	H	EBITDA is a widely utilised measure of profitability, adjusting to remove non-cash depreciation, amortisation charges and share-based payment charge
• 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 measures as follows:

(A) Adjusted operating profit

	Period ended 30 September 2023
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Operating profit	17.0	4.6	(5.4)	16.2
Add back/(deduct):
Amortisation of acquired intangible assets	0.5	-	-	0.5
Acquisition and reorganisation costs	0.5	-	-	0.5
Assignment of lease of closed site	(2.2)	-	-	(2.2)
Adjusted operating profit	15.8	4.6	(5.4)	15.0

	Period ended 30 September 2022
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Operating profit	12.3	1.5	(5.0)	8.8
Add back/(deduct):
Amortisation of acquired intangible assets	0.2	-	-	0.2
Acquisition costs	-	-	0.6	0.6
Adjusted operating profit	12.5	1.5	(4.4)	9.6

	Year ended 31 March 2023
	Chain	Torque Transmission	Head office costs and eliminations	Consolidated
	£m	£m	£m	£m
Operating profit	26.5	5.4	(9.0)	22.9
Add back/(deduct):
Amortisation of acquired intangible assets	0.7	-	-	0.7
Acquisition costs	-	-	0.6	0.6
Adjusted operating profit	27.2	5.4	(8.4)	24.2

(B) Adjusted profit before taxation

	First half				Full year
	2023/24		2022/23		2022/23
	£m		£m		£m
Profit before taxation	12.5		6.5		17.3
Add back/(deduct):
Amortisation of acquired intangible assets	0.5		0.2		0.7
Acquisition and reorganisation costs	0.5		0.6		0.6
Assignment of lease of closed site	(2.2)		-		-
Adjusted profit before taxation	11.3		7.3		18.6

(C) Adjusted earnings per share

Adjusted EPS is reconciled to statutory EPS in Note 6.

(D) Return on sales and operating profit gearing

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Period ended 30 September 2023	£m		£m		£m		£m
Adjusted operating profit	15.8		4.6		(5.4)		15.0
Total revenue (including inter-segment sales)	98.9		28.8		(2.4)		125.3
Return on sales %	16.0%		16.0%		n/a		12.0%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Period ended 30 September 2022	£m		£m		£m		£m
Adjusted operating profit	12.5		1.5		(4.4)		9.6
Total revenue (including inter-segment sales)	95.1		23.0		(1.8)		116.3
Return on sales %	13.1%		6.5%		n/a		8.3%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Year ended 31 March 2023	£m		£m		£m		£m
Adjusted operating profit	27.2		5.4		(8.4)		24.2
Total revenue (including inter-segment sales)	202.4		48.8		(4.1)		247.1
Return on sales %	13.4%		11.1%		n/a		9.8%

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Period ended 30 September 2023	£m		£m		£m		£m
Year-on-year change in adjusted operating profit	3.3		3.1		(1.0)		5.4
Year-on-year change in total revenue (including inter-segment sales)	3.8		5.8		(0.6)		9.0
Adjusted operating profit gearing %	87%		53%		n/a		60%

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

	Chain		Torque Transmission		Head office costs and eliminations		Consolidated
Six months ended 30 September 2023	£m		£m		£m		£m
Total revenue	98.9		28.8		(2.4)		125.3
Foreign exchange retranslation	2.6		1.0		(0.2)		3.4
Revenue at constant exchange rates	101.5		29.8		(2.6)		128.7
Adjusted operating profit	15.8		4.6		(5.4)		15.0
Foreign exchange retranslation	0.2		0.1		-		0.3
Adjusted operating profit at constant exchange rates	16.0		4.7		(5.4)		15.3
Return on sales at constant exchange rates %	15.8%		15.8%		n/a		11.9%

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

	First half				Full year
	2023/24		2022/23		2022/23
	£m		£m		£m
Operating profit	16.2		8.8		22.9
Depreciation and amortisation	5.4		5.1		11.1
Loss on disposal of plant & equipment	-		-		0.3
Share-based payments	0.7		0.5		1.3
EBITDA1	22.3		14.4		35.6
Add back/(deduct):
Acquisition and reorganisation costs	0.5		0.6		0.6
Assignment of lease of closed site	(2.2)		-		-
Adjusted EBITDA1	20.6		15.0		36.2
Inventories	(3.3)		(10.9)		(4.5)
Trade and other receivables	2.3		(0.9)		(2.8)
Trade and other payables	(0.3)		4.2		(4.2)
Provisions	0.2		-		1.0
Movement in working capital	(1.1)		(7.6)		(10.5)
Purchase of property, plant and equipment	(1.2)		(1.9)		(7.0)
Purchase of intangible assets	(0.6)		(0.6)		(1.4)
Proceeds from property disposals	-		0.3		-
Cash outflow on disposal of right-of-use assets	(0.3)		-		-
Net capital expenditure	(2.1)		(2.2)		(8.4)
Operating cash flow	17.4		5.2		17.3

¹ The calculation of EBITDA, adjusted EBITDA and operating cash flow includes the add back for the non-cash share-based payment charge of £0.7m for the period ended 30 September 2023 (2022: £0.5m).

(I) Net debt

Net debt is reconciled to the statutory balance sheet in Note 8.

 (J) Leverage ratio

	At 30 September 2023 £m		At 30 September 2022 £m		At 31 March 2023 £m
Net debt (see Note 8)	28.3		34.0		29.8
H2 2021/22 Adjusted EBITDA	-		13.4		-
H1 2022/23 Adjusted EBITDA	-		15.0		15.0
H2 2022/23 Adjusted EBITDA	21.2		-		21.2
H1 2023/24 Adjusted EBITDA	20.6		-		-
12 months rolling adjusted EBITDA	41.8		28.4		36.2
Leverage ratio	0.7 times		1.2 times		0.8 times

(K) Gearing ratio

	At 30 September 2023 £m		Restated1 At 30 September 2022 £m		At 31 March 2023 £m
Net debt (see Note 8)	28.3		34.0		29.8
Equity attributable to equity holders of the parent	51.8		38.2		39.1
Net debt (see Note 8)	28.3		34.0		29.8
Total capital plus net debt	80.1		72.2		68.9
Gearing ratio %	35%		47%		43%

¹ See Note 11 for details of the prior period restatement.

(L) Legacy pension cash costs

	First half				Full year
	2023/24		2022/23		2022/23
	£m		£m		£m
Cash contributions to pension schemes	5.4		2.5		4.6
Pension payments in respect of unfunded schemes	0.6		0.6		1.2
Scheme administration costs	0.2		0.4		0.7
	6.2		3.5		6.5

 

END