TIDMRNO
RNS Number : 8978X
Renold PLC
25 November 2014
Renold plc
("Renold" or the "Group")
Interim results for the half year ended 30 September 2014
Renold, a leading international supplier of industrial chains
and related power transmission products, today announces a strong
performance for the half year ended 30 September 2014 ('the
period') driven by the continuing successful implementation of the
Group's Strategic Plan.
Performance highlights
-- Self help measures drove underlying adjusted operating profit up 67%
-- Adjusted[1] EPS more than doubled to 2.3p
-- Leverage[2] cut to 1.3x from 1.6x in prior year, to benefit financing costs
-- Double digit operating margin achieved in Chain division
-- Foundations being put in place for Organic Growth phase of our Strategic Plan
Financial Summary Half year ended
30 September
2014 2013
GBPm GBPm
Underlying adjusted results
Underlying[3] revenue 90.5 89.2
Underlying adjusted operating profit 7.5 4.5
Underlying adjusted operating margin 8.3% 5.0%
Reported statutory results
Revenue 90.5 95.6
Operating profit 6.6 3.7
Operating margin 7.3% 3.9%
Profit before tax 4.4 1.1
Net debt 24.4 22.0
Other information
Basic earnings per share 1.5p -
Adjusted earnings per share 2.3p 1.1p
Robert Purcell, Chief Executive of Renold plc, said:
"We continue to deliver robust and sustainable improvements in
operating profits and margins."
"Numerous self help projects remain to be exploited in future
years and their benefits will contribute to further margin
enhancement and revenue growth as we lay the foundations for the
Organic Growth phase of our Strategic Plan to be entered at the end
of the current financial year."
25 November 2014
Reconciliation of reported, underlying and adjusted results
Revenue Operating Profit
---------------------------- ----------------------- -------------------
2014/15 2013/14 2014/15 2013/14
First half year GBPm GBPm GBPm GBPm
Reported 90.5 95.6 6.6 3.7
Exchange impact - (6.4) - (0.6)
---------------------------- -------- -------- ----------- -----------
Underlying 90.5 89.2 6.6 3.1
Exceptional items - - 0.6 1.0
Pension administration
costs - - 0.3 0.4
Underlying adjusted 90.5 89.2 7.5 4.5
---------------------------- -------- -------- ----------- -----------
ENQUIRIES:
Renold plc Tel: 0161 498 4500
Robert Purcell, Chief Executive
Brian Tenner, Group Finance Director
Arden Partners Tel: 020 7614 5917
Chris Hardie
Instinctif Partners Tel: 020 7457 2020
Mark Garraway
Helen Tarbet
NOTES FOR EDITORS
Renold is a global leader in the manufacture of industrial
chains and also manufactures a range of torque transmission
products which are sold throughout the world to a broad range of
original equipment manufacturers, end users and distributors. The
Company has a well deserved reputation for quality that is
recognised worldwide. Its products are used in a wide variety of
industries including manufacturing, transportation, energy, steel
and mining.
Further information about Renold can be found on the website at:
www.renold.com
Chief Executive's Statement
We are pleased to report that we have continued to make further
significant and sustainable progress with phase one (the
'Restructuring' phase) of our Strategic Plan, as demonstrated by
the 67% increase in underlying adjusted operating profit compared
to the prior year. This improvement was primarily the result of the
cost savings generated from the Bredbury site closure but was also
supported by leveraging higher value added products and by other
group wide initiatives to reduce production costs and
overheads.
Strategic Plan Progress Review
Phase 1 - 'Restructuring'
We previously set out our medium term objective to deliver
steady and continuous improvements in adjusted earnings per share.
This would be delivered by implementing a three phase plan based
around 'Restructuring' in Phase 1, 'Organic Growth' in Phase 2, and
ultimately 'Structural Activities' in Phase 3. Phase 1 is based on
self help and continuous improvement activities in all aspects of
our business.
During the period we completed the closure of our Bredbury
facility and the transfer of its production to sister sites. The
project completed slightly ahead of schedule and within its
original budget. While still early days, it is reassuring to note
that our risk based allowance for the loss of up to 10% of the
Chain division sales that originated from our Bredbury facility has
not materialised, partly due to transitional protective
arrangements that were put in place. The project has already
delivered annualised operating profit gains of approximately
GBP3.2m with effect from the end of May 2014.
Further benefits from the closure project are expected to
include a series of efficiency gains in manufacturing processes at
the sites now responsible for the products formerly manufactured in
Bredbury. The activities to capture these benefits are collectively
referred to as 'Bredbury Phase 2'. We have already commissioned the
first 'Bredbury Phase 2' project in one plant and, through a rapid
payback capital investment, will add GBP0.2m of annual operating
profit next year by reducing considerably the production times on
an important range of products. The project will also help reduce
lead times and improve customer service.
Other expected benefits from Bredbury Phase 2 include:
-- concentration of capital spend in fewer facilities leveraged
for higher returns on investment;
-- greater selectivity in the quality of revenue streams we accept;
-- overall reduction in the level of working capital; and
-- further reductions in lead times and improvements to customer service.
During the period we initiated a detailed strategic planning
exercise in each individual business unit with a view to
identifying a road map of continuous improvement activities in the
areas of manufacturing efficiency but also in business process
efficiency. Our aim is to develop a series of improvement
initiatives for each of our business units that will span the next
five years.
Phase 2 - 'Organic Growth'
Given our goal of commencing the second, 'Organic Growth' phase
of our plan, towards the end of the current financial year, we have
also started to put in place foundations to support that phase.
Revenue expenditure on activities to support growth will increase
in the second half of the year. These preparations are being made
in parallel with the continuous improvement activities which will
be a permanent feature of our business in the future.
We have opened new customer service offices in a number of key
European territories reversing closures that have taken place in
recent years. Elsewhere we are splitting the activities of our
sales forces in a number of territories to allow more focussed and
dedicated sales effort on our Chain and Torque Transmission product
ranges. As part of our detailed strategic planning exercise we are
also further refining our commercial strategy and product
management ideas.
Business Review
Group Results
The Group experienced improving trading conditions in a number
of key markets in the first half of 2014/15. The table below shows
the change in underlying orders and sales for the last three
consecutive half year periods.
Underlying orders and sales
First
Second
half half First half
2014/15 2013/14 2013/14
Year on year change % % %
------------------------- --------- --------- -----------
Underlying order intake 4.0 2.2 (0.2)
Underlying sales 1.5 (0.8) (2.3)
------------------------- --------- --------- -----------
Both order intake and sales show an improving trend for
consecutive half years. These are discussed in further detail in
the Chain and Torque Transmission divisional operating segment
reviews below.
Underlying adjusted operating profit of GBP7.5m moved ahead
strongly (2013: GBP4.5m) as both divisions delivered on the self
help measures set out in the Strategic Plan announced in the
2013/14 Annual Report. The result was achieved despite the GBP0.6m
adverse impact of translational foreign exchange in the first half
of the current year.
Chain
The improving trends in the Group's order intake and sales have
been driven by a significantly improved performance in the Chain
division as shown below.
Underlying orders and sales
Second
First half half First half
2014/15 2013/14 2013/14
Year on year change % % %
------------------------- ----------- --------- -----------
Underlying order intake 8.0 2.2 0.4
Underlying sales 3.1 0.7 (0.9)
------------------------- ----------- --------- -----------
Underlying external sales increased in a number of regions.
Europe delivered 8.0% growth in underlying sales driven primarily
by a large project win that benefits the first and second half in
Switzerland. Excluding growth in Swiss orders, order intake in
Chain grew by 5.5% in the period. Modest growth was achieved in the
other major European sales territories of Germany, the UK and
France. Indian underlying sales grew by 26.0% with particularly
strong demand from domestic original equipment manufacturers. The
Americas were flat year on year, while in Australasia, underlying
external sales fell by 7.0% and remain depressed by the weak
domestic mining sector in Australia. In China the focus was on
Bredbury production transfers and our small external sales declined
slightly.
Chain delivered a key milestone in its development by achieving
a double digit operating margin. Adjusted underlying operating
profit of GBP7.1m was almost double that for the first half of the
prior year (2013: GBP3.8m), with adjusted ROS increasing from 5.7%
to 10.2%. Improvements in profitability were firstly driven by the
closure of the Bredbury manufacturing facility which completed in
the first quarter of the year and reduced the division's overhead
base. Secondly, growth of GBP2.1m in underlying sales combined with
an improving mix of higher value added products to improve margins.
Thirdly, other business improvement projects delivered better
operating margins in all regions except Australasia, which was
negatively impacted by the continued slow down in the domestic
mining sector.
Torque Transmission
The table below shows a more mixed picture for order intake and
sales in Torque Transmission.
Underlying orders and sales
Second
First half half First half
2014/15 2013/14 2013/14
Year on year change % % %
------------------------- ----------- --------- -----------
Underlying order intake (8.0) 2.3 (2.2)
Underlying sales (3.8) (5.3) (6.2)
------------------------- ----------- --------- -----------
The current year fall in underlying external order intake
primarily reflects a slow down in demand for UK sourced gear
products for use in power generation (from power stations in China
and engine manufacturers more generally). The fall in underlying
external revenues of 3.8% was driven firstly by this power
generation slow down and secondly, by the end of a mass transit
contract in the USA that had generated GBP1.1m of sales in the
first half of the prior year.
Adjusted underlying operating profit improved from GBP2.8m to
GBP3.4m in the first half compared to the prior year, with adjusted
ROS increasing from 12.7% to 16.0%. These gains reflect an
improving mix of higher value added product sales and a broad range
of continuous improvement initiatives across all sites to reduce
the overhead base. Overhead reductions in the first half compared
to the same period in the prior year amounted to GBP0.3m.
Financial Review
Underlying External Adjusted Operating Adjusted Operating
Revenue Profit Margin
--------------------- ---------------------- --------------------- ---------------------
2014/15 2013/14 2014/15 2013/14 2014/15 2013/14
First half year GBPm GBPm GBPm GBPm % %
Chain 69.3 67.2 7.1 3.8 10.2 5.7
Torque Transmission 21.2 22.0 3.4 2.8 16.0 12.7
Head office
costs - - (3.0) (2.1) - -
Total 90.5 89.2 7.5 4.5 8.3 5.0
--------------------- ---------- ---------- ---------- --------- ---------- ---------
Growth in underlying external revenue of 1.5% added
approximately GBP0.7m to the operating result in the period. The
Bredbury closure project had four full months of benefits in the
period and added approximately GBP1.0m to operating profit. Other
net overhead reduction projects added a further GBP1.0m across the
Group as a whole with the balance of the increase reflecting a
change in the mix of products towards a higher value added product
range. The increase in central costs reflects revenue investments
required to support the delivery of the Strategic Plan such as
market research and consulting activities. It also includes the
impact of new hires into the business to drive the group wide
initiatives in the Strategic Plan (for example, a new Group HR
Director and a Director of Business Systems) as well as increased
charges for long term incentive plans and annual bonus
provisions.
Exceptional items
During the period the Board concluded a review of the Group's
Strategy for a single integrated Enterprise Resource Planning
('ERP') system. While the merits of a single ERP remain compelling,
the Board concluded that a successful global implementation could
best be achieved by changing to a different system whose logic and
functionality was already better understood in the business. The
Board has selected M3, which is the updated version of Movex, an
ERP system which is already in use in a number of Renold locations.
This revised approach will deliver a lower risk and more effective
implementation across the business. No material change is
anticipated in the time required or cost to complete the new system
compared to the estimates to complete the previous ERP.
As a result of this decision a number of licences for the
original ERP system have been impaired as they are unlikely ever to
be used generating a charge of GBP0.2m. A further GBP0.4m of
exceptional charges were incurred as the Group continues to
restructure and streamline the business. The total exceptional
charges of GBP0.6m (2013: GBP1.0m) are detailed further in Note 4
to the Interim Financial Statements.
Cash Flow and Net Debt
2014/15 2013/14
Half year to 30 September GBPm GBPm
Adjusted Operating Profit 7.5 5.1
Add back depreciation and amortisation 2.6 2.8
--------------------------------------------- -------- --------
Adjusted EBITDA 10.1 7.9
Net Working Capital movement (0.9) -
Pension cash costs and administration costs (2.4) (1.5)
Movements in provisions (1.9) (0.5)
Other operating cash flows (0.8) (1.6)
--------------------------------------------- -------- --------
Net cash flow from operating activities 4.1 4.3
Net capital expenditure (2.7) (3.0)
Net financing costs (0.8) (1.0)
Other net impacts on net debt (0.1) 0.7
Impact of foreign exchange (0.1) (0.2)
--------------------------------------------- -------- --------
Change in net debt 0.4 0.8
--------------------------------------------- -------- --------
Net Debt (Note 11) (24.4) (22.0)
--------------------------------------------- -------- --------
The business also continued to improve its cash performance with
net debt in the period reducing by GBP0.4m. Cash of GBP6.5m was
generated by operations before pension contributions and
administration costs of GBP2.4m. The prior year pension cash flow
was assisted by the refund of a GBP1.4m surplus in the South
African defined benefit scheme. The key performance indicator of
working capital as a ratio of rolling 12 month revenue weakened
slightly to an average level of 18.9% (2013: 18.5%). This was
largely driven by an increase in inventory levels required to
support the Bredbury factory closure and transfer of production
elsewhere in the Group. Selective investment was also made in
certain stock lines, to support sales growth. Working capital
remains an area where more gains can be made.
Pensions
The Group is responsible for a number of defined benefit pension
schemes which it accounts for in accordance with IAS 19 Employee
benefits. The Group's retirement benefit obligations increased from
GBP64.9m (GBP49.3m net of deferred tax) at 31 March 2014 to
GBP68.6m (GBP51.8m net of deferred tax) at 30 September 2014. This
mainly reflects the declining yield on UK corporate bonds which
drives the discount rate used to value the liabilities (4.5% at 31
March 2014 to 4.0% at 30 September 2014). In Germany discount rates
fell by 0.9%. These impacts were substantially offset by superior
asset returns with the UK assets returning more than double the
assumed rate of return.
The aggregate expense of administering the pension schemes was
GBP0.3m (2013: GBP0.4m) which is now included in operating costs
following the adoption of IAS 19R in the prior year. However, it is
excluded in arriving at adjusted operating profit as it relates to
closed legacy pension schemes which bear no relation to the ongoing
business and its performance. The net financing expense on pension
scheme balances was GBP1.2m (2013: GBP1.5m). It is similarly
excluded when calculating adjusted EPS.
Dividend
In light of the ongoing actions being taken to improve the
performance of the business, and the opportunities we have to
invest in new capital equipment, the Board has decided not to
declare an interim dividend. The dividend policy will remain under
review as performance continues to improve.
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 in the 2013/14 Annual Report.
The exception to this is the specific risk regarding the Bredbury
site closure which has now diminished significantly. These include
macro-economic 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, foreign exchange rates have proved highly
volatile. These have had an adverse translational impact on Group
revenue and operating profit. The anticipated GBP0.5m adverse full
year impact on operating profit actually materialised in the first
half alone. A similar impact is expected in the second half if
exchange rates remain unchanged. Underlying business performance
has not been significantly impacted. The Group's business and
assets are spread across multiple currencies and this provides a
form of natural hedge against some currency risks.
The valuation of retirement benefit obligations can be
significantly impacted by changes to the market based yields on
corporate bonds and inflation prospects. The schemes investment
strategies do provide a partial hedge against these risks. However,
it should be noted that the cash flows of the pension schemes are
more stable and subject to long term funding plans which are
reviewed every three years.
Outlook
In this first phase of our Strategic Plan, our attention remains
focussed on delivering internal self help measures. A detailed
planning exercise is underway in each of our operating units and
has already identified a wide range of opportunities for further
continuous improvement. These activities will remain an ongoing
value adding feature of our business even as we transition into the
'Organic Growth' phase towards the end of the current financial
year. Preparations for that transition are already underway. As the
remainder of the year progresses, we expect to increase revenue
investments in activities to support growth.
The Board's expectations for full year adjusted operating profit
remain in line with current market forecasts.
Statement of directors' responsibilities
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 as adopted by
the European Union;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of interim financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of Renold plc are listed in the Annual Report for
the year ended 31 March 2014. A list of current directors is
maintained on the Group website at www.renold.com.
By order of the Board
Robert Purcell Brian Tenner
Chief Executive Finance Director
25 November 2014 25 November 2014
RENOLD PLC
Condensed Consolidated Income Statement
for the six months ended 30 September 2014
First half Full year
Note 2014/15 2013/14 2013/14
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------- ----- ------------- ------------- -----------
Revenue 3 90.5 95.6 184.0
Operating costs before pension
administration costs and exceptional
items (83.0) (90.5) (172.9)
Operating profit before pension
administration costs and exceptional
items 7.5 5.1 11.1
Pension administration costs
(excluding exceptional items)
Exceptional items
(0.3) (0.4) (0.6)
4 (0.6) (1.0) (11.8)
--------------------------------------- ----- ------------- ------------- -----------
Operating profit/(loss) 6.6 3.7 (1.3)
--------------------------------------- ----- ------------- ------------- -----------
Financing costs (0.9) (1.1) (1.8)
Net IAS 19 financing costs (1.2) (1.5) (2.8)
Discount on provisions (0.1) - -
Net financing costs 5 (2.2) (2.6) (4.6)
--------------------------------------- ----- ------------- ------------- -----------
Profit/(loss) before tax 4.4 1.1 (5.9)
Taxation 6 (0.9) (1.1) (4.8)
--------------------------------------- ----- ------------- ------------- -----------
Profit/(loss) for the period 3.5 - (10.7)
--------------------------------------- ----- ------------- ------------- -----------
Attributable to:
Owners of the parent 3.4 (0.1) (10.9)
Non-controlling interests 0.1 0.1 0.2
--------------------------------------- ----- ------------- ------------- -----------
3.5 - (10.7)
--------------------------------------- ----- ------------- ------------- -----------
Earnings per share 7
Basic earnings/(loss) per
share 1.5p - (4.9)p
Diluted earnings/(loss) per
share 1.5p - (4.9)p
Adjusted earnings per share 2.3p 1.1p 3.2p
Diluted adjusted earnings
per share 2.3p 1.1p 3.2p
--------------------------------------- ----- ------------- ------------- -----------
RENOLD PLC
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2014
First half Full
year
2014/15 2013/14 2013/14
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------- -----------
Profit/(loss) for the period 3.5 - (10.7)
--------------------------------------------- ------------- ------------- -----------
Other comprehensive income/(expense)
Items that may be reclassified to
profit or loss in subsequent periods:
Net (losses)/gains on cash flow hedges
taken to other comprehensive income (0.2) 0.3 0.2
Foreign exchange translation differences 0.5 (3.5) (8.5)
Foreign exchange differences on loans
forming part of the net investment
in foreign operations (0.1) (2.3) 0.6
0.2 (5.5) (7.7)
Items not to be reclassified to profit
or loss in subsequent periods:
Re-measurement (losses)/gains on retirement
benefit obligations (5.8) 4.0 2.9
Tax on components of other comprehensive
income 0.9 (2.5) 2.1
--------------------------------------------- ------------- ------------- -----------
(4.9) 1.5 5.0
Other comprehensive expense for the
period, net of tax (4.7) (4.0) (2.7)
--------------------------------------------- ------------- ------------- -----------
Total comprehensive expense for the
period, net of tax (1.2) (4.0) (13.4)
--------------------------------------------- ------------- ------------- -----------
Attributable to:
Owners of the parent (1.3) (4.0) (13.5)
Non-controlling interests 0.1 - 0.1
--------------------------------------------- ------------- ------------- -----------
Total comprehensive expense for the
period (1.2) (4.0) (13.4)
--------------------------------------------- ------------- ------------- -----------
RENOLD PLC
Condensed Consolidated Statement of Financial Position
as at 30 September 2014
Note 30 September 30 September 31 March
2014 2013
(unaudited) (unaudited) 2014
GBPm GBPm (audited)
GBPm
----------------------------------- ----- ------------- ------------- -----------
Assets Non-current assets
Goodwill 20.1 20.3 19.8
Other intangible fixed assets 6.5 6.4 6.1
Property, plant and equipment 38.2 38.3 39.3
Investment property 1.3 1.4 1.3
Other non-current assets 0.2 0.2 0.2
19.3 18.1 18.9
Deferred tax assets Retirement
benefit surplus 8 0.5 - 0.4
----------------------------------- ----- ------------- ------------- -----------
86.1 84.7 86.0
----------------------------------- ----- ------------- ------------- -----------
Current assets
Inventories 38.1 38.3 35.9
Trade and other receivables 29.0 29.7 29.7
Retirement benefit surplus - 0.1 -
Derivative financial instruments 8 - - 0.1
Cash and cash equivalents 11 10.6 9.2 6.7
----------------------------------- ----- ------------- ------------- -----------
77.7 77.3 72.4
Non-current asset classified
as held for sale 1.5 1.7 1.6
----------------------------------- ----- ------------- ------------- -----------
79.2 79.0 74.0
----------------------------------- ----- ------------- ------------- -----------
Total assets 165.3 163.7 160.0
----------------------------------- ----- ------------- ------------- -----------
Liabilities
Current liabilities
Borrowings 11 (0.7) (0.1) (0.1)
Trade and other payables (35.9) (36.0) (34.9)
Current tax (1.8) (1.5) (1.7)
Derivative financial instruments (0.1) - -
Provisions (1.7) (1.4) (2.4)
----------------------------------- ----- ------------- ------------- -----------
(40.2) (39.0) (39.1)
----------------------------------- ----- ------------- ------------- -----------
Net current assets 39.0 40.0 34.9
----------------------------------- ----- ------------- ------------- -----------
Non-current liabilities
Borrowings 11 (33.8) (30.6) (30.9)
Preference stock 11 (0.5) (0.5) (0.5)
Trade and other payables (0.3) (0.1) (0.6)
Deferred tax liabilities (0.2) (0.6) (0.2)
Retirement benefit obligations 8 (69.1) (65.4) (65.3)
Provisions (4.3) - (5.3)
----------------------------------- ----- ------------- ------------- -----------
(108.2) (97.2) (102.8)
----------------------------------- ----- ------------- ------------- -----------
Total liabilities (148.4) (136.2) (141.9)
----------------------------------- ----- ------------- ------------- -----------
Net assets 16.9 27.5 18.1
----------------------------------- ----- ------------- ------------- -----------
Equity
Issued share capital 12 26.6 26.6 26.6
Share premium 29.9 29.9 29.9
Currency translation reserve (1.3) 0.4 (1.7)
Other reserves 1.0 1.3 1.2
Retained earnings (41.9) (33.1) (40.4)
----------------------------------- ----- ------------- ------------- -----------
Equity attributable to owners
of the parent 14.3 25.1 15.6
Non-controlling interests 2.6 2.4 2.5
----------------------------------- ----- ------------- ------------- -----------
Total shareholders' equity 16.9 27.5 18.1
----------------------------------- ----- ------------- ------------- -----------
RENOLD PLC
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 September 2014
First half Full year
2014/15 2013/14 2013/14
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
(Note 9)
Cash generated by operations 4.6 4.8 7.0
Income taxes paid (0.5) (0.5) (0.9)
-------------------------------------------- ------------- ------------- -----------
Net cash flows from operating activities 4.1 4.3 6.1
-------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (1.5) (2.3) (6.0)
Purchase of intangible assets (1.2) (0.7) (1.1)
Net cash flows from investing activities (2.7) (3.0) (7.1)
-------------------------------------------- ------------- ------------- -----------
Cash flows from financing activities
Proceeds from share issue - 0.4 0.4
Financing costs paid (0.8) (1.0) (1.5)
Proceeds from borrowings 3.2 6.0 8.0
Repayment of borrowings - (6.4) (8.0)
Net cash flows from financing activities 2.4 (1.0) (1.1)
-------------------------------------------- ------------- ------------- -----------
Net increase/(decrease) in cash and
cash equivalents 3.8 0.3 (2.1)
Net cash and cash equivalents at beginning
of period 6.6 9.2 9.2
Effects of exchange rate changes (0.1) (0.4) (0.5)
-------------------------------------------- ------------- ------------- -----------
Net cash and cash equivalents at end
of period 10.3 9.1 6.6
-------------------------------------------- ------------- ------------- -----------
Cash and cash equivalents (Note 11) 10.6 9.2 6.7
Overdrafts (included in borrowings
- Note 11) (0.3) (0.1) (0.1)
-------------------------------------------- ------------- ------------- -----------
Net cash and cash equivalents at end
of period 10.3 9.1 6.6
-------------------------------------------- ------------- ------------- -----------
RENOLD PLC
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 September 2014
Share Share Retained Currency Other Attributable Non-controlling Total
capital premium earnings translation reserves to equity interests equity
account reserve holders
of parent GBPm
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Balance at 1 April 2013 26.5 29.6 (34.8) 6.1 1.2 28.6 2.4 31.0
(Loss)/profit for the
year - - (10.9) - - (10.9) 0.2 (10.7)
Other comprehensive income - - 5.0 (7.8) 0.2 (2.6) (0.1) (2.7)
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Total comprehensive income/(expense)
for the year - - (5.9) (7.8) 0.2 (13.5) 0.1 (13.4)
Share-based payment credit - - 0.1 - - 0.1 - 0.1
Exercise of share warrants:
* release of share warrant reserve - - 0.2 - (0.2) - - -
* proceeds from share issue 0.1 0.3 - - - 0.4 - 0.4
Balance at 31 March 2014 26.6 29.9 (40.4) (1.7) 1.2 15.6 2.5 18.1
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Profit for the period - - 3.4 - - 3.4 0.1 3.5
Other comprehensive income - - (4.9) 0.4 (0.2) (4.7) - (4.7)
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Total comprehensive income/(expense)
for the period - - (1.5) 0.4 (0.2) (1.3) 0.1 (1.2)
Balance at 30 September
2014 26.6 29.9 (41.9) (1.3) 1.0 14.3 2.6 16.9
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Balance at 1 April 2013 26.5 29.6 (34.8) 6.1 1.2 28.6 2.4 31.0
(Loss)/profit for the
year - - (0.1) - - (0.1) 0.1 -
Other comprehensive income - - 1.5 (5.7) 0.3 (3.9) (0.1) (4.0)
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Total comprehensive income/(expense)
for the year - - 1.4 (5.7) 0.3 (4.0) - (4.0)
Share-based payment credit - - 0.1 - - 0.1 - 0.1
Exercise of share warrants:
* release of share warrant reserve - - 0.2 - (0.2) - - -
* proceeds from share issue 0.1 0.3 - - - 0.4 - 0.4
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Balance at 30 September
2013 26.6 29.9 (33.1) 0.4 1.3 25.1 2.4 27.5
--------------------------------------------- -------- -------- --------- ------------ --------- ------------- ---------------- -------
Notes to the Interim Condensed Consolidated Financial
Statements
1 Corporate information
The interim condensed consolidated financial statements for the
six months to 30 September 2014 were approved by the Board on 25
November 2014. 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 and the performance in the
half year is set out in the Interim Management Report.
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 2014 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 2014 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 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 2014.
Except as described below, 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 2014.
Changes in accounting policy
The Group has adopted all applicable amendments to standards
with an effective date from 1 April 2014.
The Group has adopted IFRS 10, IFRS 12 and IAS 27 Separate
Financial Statements, IAS 32 Offsetting Financial Assets and
Financial Liabilities, IAS 36 Recoverable Amount Disclosures for
Non-Financial Assets, IAS 39 Novation of Derivatives and
Continuation of Hedge Accounting and IFRIC 21 Levies all effective
from 1 January 2014.
Adoption of these standards did not have any material impact on
financial performance or position of the Group.
Going concern
The directors have a reasonable expectation that the business
has adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis in preparing the condensed consolidated interim financial
information.
Significant accounting judgements, estimates and assumptions
The preparation of these interim condensed consolidated
financial statements, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were of the same type as those applied to
the annual consolidated financial statements for the year ended 31
March 2014, namely;
-- assumptions used to evaluate potential impairment of non-financial assets;
-- recognition of deferred tax assets; and
-- assumptions used in the valuation of retirement benefit obligations.
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 2014.
3 Segment information
The Group is organised into business units according to the
nature of their products and services. Having considered the
management reporting and organisational structure of the Group, the
directors have concluded that Renold plc has two reportable
operating segments as follows:
-- 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.
No operating segments have been aggregated to form the above
reportable segments. Management monitors the operating results of
its business units separately for the purpose of making decisions
about resource allocation and performance assessment.
The segment results for the period ended 30 September 2014 were
as follows:
Chain Torque Head office Consolidated
Transmission costs and
eliminations
Period ended 30 September GBPm GBPm GBPm
2014 GBPm
---------------------------------- ------ -------------- -------------- -------------
Revenue
External revenue 69.3 21.2 - 90.5
Inter-segment 0.1 2.4 (2.5) -
---------------------------------- ------ -------------- -------------- -------------
Total revenue 69.4 23.6 (2.5) 90.5
---------------------------------- ------ -------------- -------------- -------------
Adjusted operating profit/(loss) 7.1 3.4 (3.0) 7.5
Pension administration
costs - - (0.3) (0.3)
Exceptional items (0.5) (0.1) - (0.6)
---------------------------------- ------ -------------- -------------- -------------
Segment operating profit/(loss) 6.6 3.3 (3.3) 6.6
Net financing costs (2.2)
---------------------------------- ------ -------------- -------------- -------------
Profit before tax 4.4
---------------------------------- ------ -------------- -------------- -------------
Other disclosures
Working capital 27.4 9.2 (5.7) 30.9
Capital expenditure 1.3 0.3 1.1 2.7
Depreciation and amortisation 1.4 0.6 0.6 2.6
The segment results for the period ended 30 September 2013 were
as follows:
Chain Torque Head office Consolidated
Transmission costs and
eliminations
Period ended 30 September GBPm GBPm GBPm GBPm
2013
--------------------------------- ------ -------------- -------------- -------------
Revenue
External revenue 72.2 23.4 - 95.6
Inter-segment 0.1 2.7 (2.8) -
--------------------------------- ------ -------------- -------------- -------------
Total revenue 72.3 26.1 (2.8) 95.6
--------------------------------- ------ -------------- -------------- -------------
Operating profit/(loss)
before pension administration
costs and exceptional
items 4.3 2.9 (2.1) 5.1
Pension administration
costs - - (0.4) (0.4)
Exceptional items (0.4) (0.3) (0.3) (1.0)
--------------------------------- ------ -------------- -------------- -------------
Segment operating profit/(loss) 3.9 2.6 (2.8) 3.7
Net financing costs (2.6)
--------------------------------- ------ -------------- -------------- -------------
Profit before tax 1.1
--------------------------------- ------ -------------- -------------- -------------
Other disclosures
Working capital 21.2 10.5 0.2 31.9
Capital expenditure 1.7 0.3 1.0 3.0
Depreciation and amortisation 2.1 0.7 - 2.8
The Board also reviews the performance of the business using
information presented at consistent exchange rates. The prior year
results have been restated using this year's exchange rates as
follows:
Chain Torque Head office Consolidated
Transmission costs and
eliminations
Period ended 30 September GBPm GBPm GBPm
2013 GBPm
-------------------------------- ------ -------------- -------------- -------------
Revenue
External revenue 72.2 23.4 - 95.6
Foreign exchange (5.0) (1.4) - (6.4)
-------------------------------- ------ -------------- -------------- -------------
Underlying external sales 67.2 22.0 - 89.2
-------------------------------- ------ -------------- -------------- -------------
Operating profit/(loss)
before pension administration
costs and exceptional
items 4.3 2.9 (2.1) 5.1
Foreign exchange (0.5) (0.1) - (0.6)
-------------------------------- ------ -------------- -------------- -------------
Underlying profit/(loss)
before pension administration
costs and exceptional
items 3.8 2.8 (2.1) 4.5
-------------------------------- ------ -------------- -------------- -------------
The segment results for the year ended 31 March 2014 were as
follows:
Chain Torque Head office Consolidated
Transmission costs and
eliminations
Year ended 31 March 2014 GBPm GBPm GBPm
GBPm
--------------------------------- ------- -------------- -------------- -------------
Revenue
External revenue 139.6 44.4 - 184.0
Inter-segment 0.3 5.0 (5.3) -
--------------------------------- ------- -------------- -------------- -------------
Total revenue 139.9 49.4 (5.3) 184.0
--------------------------------- ------- -------------- -------------- -------------
Operating profit/(loss)
before pension administration
costs and exceptional
items 9.9 5.8 (4.6) 11.1
Pension administration
costs - - (0.6) (0.6)
Exceptional items (11.5) (0.3) - (11.8)
--------------------------------- ------- -------------- -------------- -------------
Segment operating (loss)/profit (1.6) 5.5 (5.2) (1.3)
Net financing costs (4.6)
--------------------------------- ------- -------------- -------------- -------------
Loss before tax (5.9)
--------------------------------- ------- -------------- -------------- -------------
Other disclosures
Working capital 22.6 8.6 (1.1) 30.1
Capital expenditure 4.8 1.3 1.0 7.1
Depreciation and amortisation 3.1 1.1 1.2 5.4
The Board also reviews the performance of the business using
information presented at consistent exchange rates. The prior year
results have been restated using this year's exchange rates as
follows:
Chain Torque Head office Consolidated
Transmission costs and
eliminations
Year ended 31 March 2014 GBPm GBPm GBPm
GBPm
-------------------------------- ------ -------------- -------------- -------------
Revenue
External sales 139.6 44.4 - 184.0
Foreign exchange (6.2) (1.7) - (7.9)
-------------------------------- ------ -------------- -------------- -------------
Underlying external sales 133.4 42.7 - 176.1
-------------------------------- ------ -------------- -------------- -------------
Operating profit/(loss)
before pension administration
costs and exceptional
items 9.9 5.8 (4.6) 11.1
Foreign exchange (0.6) - - (0.6)
-------------------------------- ------ -------------- -------------- -------------
Underlying adjusted operating
profit/(loss) 9.3 5.8 (4.6) 10.5
-------------------------------- ------ -------------- -------------- -------------
4 Exceptional items
First half Full year
2014/15 2013/14 2013/14
GBPm GBPm GBPm
--------------------------------- -------- -------- ----------
Included in operating costs:
ERP licence impairment 0.2 - -
Bredbury factory closure costs 0.3 - 4.7
Bredbury site onerous lease
provision - - 5.7
Chain business model review
asset impairment - - 0.6
Reorganisation and redundancy
costs 0.1 0.8 0.8
Pension merger and asset backed - 0.2 -
funding costs
Net exceptional costs 0.6 1.0 11.8
--------------------------------- -------- -------- ----------
During the period the Board concluded a review of the Group's
Strategy for a single integrated Enterprise Resource Planning
('ERP') system. While the merits of a single ERP remain a
compelling business case, the Board concluded that a successful
global implementation could best be achieved by changing to a
different system whose logic and functionality was already better
understood in the business. As a result, a number of licences for
the previous ERP of choice will now no longer come into use and
they have therefore been written off.
Those sites where the previous ERP of choice has already been
implemented will continue to use that system in the medium term and
the carrying value of expenditure to date is supported by the cash
flows of those business units. The already installed ERP system is
expected to continue in use for four to five years which is
approximately one year less than the originally assessed useful
economic life. Therefore, future periods will include approximately
GBP0.2m per annum of accelerated depreciation to reflect the
shorter useful economic life.
The Bredbury factory closure costs incurred in the period
primarily result from operational decisions to upgrade to new
equipment or new processes following production transfers and these
resulted in the write off of some additional machinery and stock.
The project and its charges completed during the first quarter.
Details of the exceptional Bredbury closure and site onerous
lease provision costs as reported in the full year 2013/14 can be
found in the Group's annual consolidated financial statements for
the year ended 31 March 2014.
5 Net financing costs
First half Full year
2014/15 2013/14 2013/14
GBPm GBPm GBPm
-------------------------------- -------- -------- ----------
Financing costs:
Interest payable on bank loans
and overdrafts 0.8 1.0 1.5
Amortised financing costs 0.1 0.1 0.3
Discount on provisions 0.1 - -
Total financing costs 1.0 1.1 1.8
-------------------------------- -------- -------- ----------
IAS 19 financing costs 1.2 1.5 2.8
Net financing costs 2.2 2.6 4.6
-------------------------------- -------- -------- ----------
6 Taxation
First half Full
year
2014/15 2013/14 2013/14
GBPm GBPm GBPm
-------------------- -------- -------- --------
Current tax:
- UK - - -
- Overseas 0.7 0.6 1.2
-------------------- -------- -------- --------
0.7 0.6 1.2
Deferred tax:
- UK (0.1) 0.3 3.0
- Overseas 0.3 0.2 0.6
-------------------- -------- -------- --------
0.2 0.5 3.6
-------------------- -------- -------- --------
Income tax expense 0.9 1.1 4.8
-------------------- -------- -------- --------
The UK Finance Act 2013 reduced the main rate of UK corporation
tax from 23% to 21% from 1 April 2014 and then 20% from 1 April
2015. The effect of these reductions have been incorporated into
the closing deferred tax balances in the periods ended 30 September
2013, 31 March 2014 and 30 September 2014.
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.
7 Earnings/(loss) per share
Basic earnings per share is calculated by dividing the
profit/(loss) 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. The
calculation of earnings per share is based on the following
data:
First half Full year
2014/15 2013/14 2013/14
Pence per Pence per Pence per
share share share
------------------------------------- ----------- ----------- -----------
Basic EPS 1.5 - (4.9)
Diluted EPS 1.5 - (4.9)
Adjusted EPS 2.3 1.1 3.2
Diluted adjusted EPS 2.3 1.1 3.2
------------------------------------- ----------- ----------- -----------
GBPm GBPm GBPm
------------------------------------- ----------- ----------- -----------
Profit/(loss) for calculation
of adjusted EPS
Profit/(loss) for the financial
period 3.4 - (10.9)
Adjusted for exceptional items,
after tax:
- Exceptional items in operating
costs 0.6 1.0 11.4
- Exceptional tax charge - - 3.5
- Pension administration costs
included in operating costs 0.3 0.4 0.6
- Net pension financing costs 0.9 1.1 2.4
Profit for the calculation of
adjusted EPS 5.2 2.5 7.0
------------------------------------- ----------- ----------- -----------
Thousands Thousands Thousands
Weighted average number of ordinary
shares
For calculating basic earnings
per share 223,065 221,350 222,398
Inclusion of the dilutive securities, comprising 6,528,000
(2013: 3,249,000) additional shares due to share options and nil
(2013: 417,000) additional shares due to warrants over shares, in
the calculation of adjusted EPS has the impact shown above (2013:
no change).
The adjusted earnings per share numbers have been provided in
order to give a useful indication of the underlying performance of
the business by the exclusion of exceptional items. Due to the
existence of unrecognised deferred tax assets, there was no
associated tax credit on some of the exceptional charges and in
these instances exceptional costs are added back in full.
8 Retirement benefit obligations
The Group's retirement benefit obligations are summarised as
follows:
At 30 At 30 At 31
September September March
2014 2013 2014
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- --------
Funded plan obligations (206.4) (198.6) (200.3)
Funded plan assets 162.6 157.2 159.0
-------------------------------------- ----------- ----------- --------
Net funded plan obligations (43.8) (41.4) (41.3)
Unfunded obligations (24.8) (23.9) (23.6)
-------------------------------------- ----------- ----------- --------
Total retirement benefit obligations (68.6) (65.3) (64.9)
-------------------------------------- ----------- ----------- --------
Analysed as follows:
Non-current assets
Retirement benefit surplus 0.5 - 0.4
Current assets
Retirement benefit surplus - 0.1 -
Non-current liabilities
Retirement benefit obligations (69.1) (65.4) (65.3)
----------------------------------- ------- ------- -------
Net retirement benefit obligation (68.6) (65.3) (64.9)
Net deferred tax asset 16.8 10.8 15.6
Retirement benefit obligation
net of deferred tax (51.8) (54.5) (49.3)
----------------------------------- ------- ------- -------
The increase in the Group's pre-tax liability from GBP64.9m at
31 March 2014 to GBP68.6m at 30 September 2014 primarily reflects
the reduction in yields on corporate bonds which in turn have led
to lower discount rates being applied to the future pension
liabilities. In the UK (which represents 82% of the total
liabilities), the discount rate has fallen by 0.5% from 4.5% at 31
March 2014 to 4.0% at 30 September 2014. This was partially offset
by strong asset performance in the period generating returns at
more than double the expected rate. In addition, there was a small
reduction in the assumed rate of UK inflation (CPI) at 30 September
2014 (3.0% compared to 31 March 2014: 3.2%). The retirement benefit
surplus is all in Australia.
9 Cash generated by operations
First half Full year
2014/15 2013/14 2013/14
GBPm GBPm GBPm
------------------------------------ -------- -------- ----------
Operating profit/(loss) 6.6 3.7 (1.3)
Depreciation and amortisation 2.6 2.8 5.4
Impairment of intangible assets 0.2 - -
Proceeds from plant and equipment
disposals 0.1 - 0.2
Equity share plans - 0.1 0.1
(Increase)/decrease in inventories (2.4) 0.1 1.8
Decrease in receivables 0.5 1.5 0.8
Increase/(decrease) in payables 1.0 (1.6) (1.8)
(Decrease)/increase in provisions (1.9) (0.5) 5.8
Movement on pension plans (2.1) (1.1) (3.8)
Movement on derivative financial
instruments - (0.2) (0.2)
------------------------------------ -------- -------- ----------
Cash generated by operations 4.6 4.8 7.0
------------------------------------ -------- -------- ----------
10 Reconciliation of the movement in cash and cash equivalents to movement in net debt
First half Full year
2014/15 2013/14 2013/14
GBPm GBPm GBPm
-------------------------------- --------- --------- ----------
Increase/(decrease) in cash
and cash equivalents 3.8 0.3 (2.1)
Change in net debt resulting
from cash flows (3.2) 0.4 -
Other non-cash movement (0.2) (0.1) (0.3)
Foreign currency translation
differences - 0.2 0.4
-------------------------------- ------- ---------- ----------
Change in net debt during the
period 0.4 0.8 (2.0)
Net debt at start of period (24.8) (22.8) (22.8)
-------------------------------- ------- ---------- ----------
Net debt at end of period (24.4) (22.0) (24.8)
-------------------------------- ------- ---------- ----------
11 Net Debt
At 30 At 30 At 31
September September March
2014 2013 2014
GBPm GBPm GBPm
-------------------------------- ----------- ----------- -------
Cash and cash equivalents 10.6 9.2 6.7
Borrowings:
Bank overdrafts (0.3) (0.1) (0.1)
Bank loans - current (0.4) - -
Sub-total - current borrowings (0.7) (0.1) (0.1)
Bank loans - non-current (33.8) (30.6) (30.9)
Preference stock (0.5) (0.5) (0.5)
-------------------------------- ----------- ----------- -------
Net debt (24.4) (22.0) (24.8)
-------------------------------- ----------- ----------- -------
12 Called-up share capital
At 30 At 30 At 31
September September March
2014 2013 2014
GBPm GBPm GBPm
----------------------------- ----------- ----------- -------
Ordinary shares of 5p each 11.2 11.2 11.2
Deferred shares of 20p each 15.4 15.4 15.4
26.6 26.6 26.6
----------------------------- ----------- ----------- -------
At 30 September 2014, the issued ordinary share capital
comprised 223,064,703 ordinary shares of 5p each (31 March 2014 -
223,064,703) and 77,064,703 deferred shares of 20p each (31 March
2014 - 77,064,703).
[1] Throughout these interim results "adjusted" means after
eliminating the effects of exceptional items, IAS 19 pensions
charges (which include financing charges and scheme administration
costs included in operating charges), and any associated tax
thereon.
[2] Calculated as net debt divided by rolling 12 month adjusted
earnings before interest, tax, depreciation and amortisation.
[3] "Underlying" adjusts prior year figures to the current year
exchange rates to give a like for like comparison.
[4] See reconciliation of reported, underlying and adjusted
figures.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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