TIDMRNO
RNS Number : 1533K
Renold PLC
27 August 2019
Renold plc
Completion of investigation
27 August 2019
Renold plc ("Renold" or "the Group"), a leading international
supplier of industrial chains and related power transmission
products, today issues the following statement.
Summary
On 9 July 2019, the Group announced the postponement of the
Annual General Meeting ("AGM") to permit the preparation of revised
audited financial statements for the year ended 31 March 2019,
following the identification of historical accounting issues in the
Gears business unit, which is part of the Torque Transmission
division.
In order to prepare accurate revised financial statements, an
independent internal audit investigation, supported by PwC, has
been undertaken to assess the extent and impact of the historical
misstatement of results. This independent investigation has now
been concluded and the Board can confirm that these issues, the
nature of which were as set out in the announcement of 9 July 2019,
were confined to the Gears business unit.
With the independent investigation complete, revised financial
statements have been prepared and audited. The over-statements of
profit for the years ended 31 March 2018 and 2019 are broadly
consistent with the guidance provided on 9 July 2019 and the final
outcome of the investigation does not affect the outlook commentary
provided at that time. A summary of the adjustments made to the
historic accounts as a result of this investigation is provided
below.
Investigation and findings
A review of the Gears business unit was initially undertaken
following comments made by the Auditor to the Audit Committee
regarding application of accounting controls in the business unit.
The initial management investigation identified intentional
misstatement of results at a local level, and as a result the Board
immediately initiated an independent internal audit investigation,
supported by PwC, reporting directly to the Audit Committee.
In the announcement on 9 July 2019, the Company reported that
the initial investigation had identified a total overstatement of
the balance sheet at 31 March 2019 of GBP1.8m. The more extensive
independent investigation largely corroborated the initial
findings, in addition to identifying further errors which
principally impact profit in the year to 31 March 2017. The
cumulative effect of these misstatements resulted in net assets at
31 March 2019 being overstated by GBP2.5m in total, and adjusted
operating profit in the year to 31 March 2019 being overstated by
GBP1.0m.
This independent investigation concluded that the misstatement
was a result of intentional mis-reporting of financial information
at a local level. The misstatement comprised many adjustments
across a number of balance sheet categories. The impact on cash and
net debt of GBP0.3m is unchanged from the announcement on 9 July
2019.
Robert Purcell, Chief Executive of Renold, said:
"These events are frustrating and deeply disappointing but the
Board, in conjunction with the Audit Committee, have acted swiftly
to fully investigate all matters. We are working closely with
Deloitte, the Group's Auditor, to ensure that recommended
improvements to the internal control environment are quickly and
effectively implemented.
"With the investigation and audit of the revised accounts
completed, we can refocus our efforts on operational improvement
and generating value for shareholders."
Impact of findings on historical financial results
A summary of the impact of the adjustments is set out below.
More detail is included in notes 27 and 28 of the revised 2019
annual report and accounts which can be found on the Group's
website at www.renold.com.
Consolidated statement of comprehensive income (extract):
2017 2018 2019
------------------------------------- ------------------------------------- --------------------------------
As As As
previously 2017 previously 2018 previously 2019
reported Restate-ment restated reported Restate-ment restated reported Revision revised
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Revenue 183.4 - 183.4 191.6 - 191.6 202.4 - 202.4
Operating
costs
before
adjusting
items (168.9) (1.0) (169.9) (177.4) (0.5) (177.9) (186.0) (1.0) (187.0)
--------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Adjusted
operating
profit 14.5 (1.0) 13.5 14.2 (0.5) 13.7 16.4 (1.0) 15.4
Adjusting
items (3.5) - (3.5) (8.6) - (8.6) (0.2) - (0.2)
--------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Operating
profit 11.0 (1.0) 10.0 5.6 (0.5) 5.1 16.2 (1.0) 15.2
Net financing
costs (4.3) - (4.3) (4.2) - (4.2) (5.0) - (5.0)
--------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Profit before
tax 6.7 (1.0) 5.7 1.4 (0.5) 0.9 11.2 (1.0) 10.2
Taxation (1.9) - (1.9) (3.6) - (3.6) (3.5) - (3.5)
--------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Profit/(loss) 4.8 (1.0) 3.8 (2.2) (0.5) (2.7) 7.7 (1.0) 6.7
Consolidated balance sheet (extract):
2017 2018 2019
------------------------------------- ------------------------------------- --------------------------------
As As As
previously 2017 previously 2018 previously 2019
reported Restate-ment restated reported Restate-ment restated reported Revision revised
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
ASSETS
Non-current
assets 104.2 (0.4) 103.8 98.2 (0.4) 97.8 107.0 (0.3) 106.7
Current
assets
Inventories 40.4 (0.2) 40.2 41.0 (0.2) 40.8 44.8 (0.5) 44.3
Trade and
other
receivables 36.8 (0.1) 36.7 36.4 (0.3) 36.1 37.8 (0.3) 37.5
Cash and
cash
equivalents 16.4 - 16.4 14.3 - 14.3 17.9 (0.3) 17.6
------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Current
assets 93.6 (0.3) 93.3 91.7 (0.5) 91.2 100.5 (1.1) 99.4
Non-current
assets 0.3 - 0.3 - - - - - -
------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
TOTAL ASSETS 198.1 (0.7) 197.4 189.9 (0.9) 189.0 207.5 (1.4) 206.1
LIABILITIES
Current
liabilities
Trade and
other
payables (41.9) (0.3) (42.2) (39.6) (0.6) (40.2) (41.0) (1.1) (42.1)
Other
current
liabilities (8.7) - (8.7) (7.1) - (7.1) (1.6) - (1.6)
------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
Current
liabilities (50.6) (0.3) (50.9) (46.7) (0.6) (47.3) (42.6) (1.1) (43.7)
Non-current
liabilities (139.7) - (139.7) (142.1) - (142.1) (163.3) - (163.3)
------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
NET ASSETS 7.8 (1.0) 6.8 1.1 (1.5) (0.4) 1.6 (2.5) (0.9)
------------- ----------- ------------- --------- ----------- ------------- --------- ----------- --------- --------
ENQUIRIES:
Renold plc 0161 498 4500
Robert Purcell, Chief Executive
Ian Scapens, Group Finance Director
Peel Hunt LLP 020 7418 8900
Mike Bell
Ross Allister
Ed Allsopp
Instinctif Partners 020 7457 2020
Mark Garraway
Rosie Driscoll
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
(the Group). 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 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
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCDMGZRLVDGLZM
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