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RNS Number : 8655E
09 July 2019
Postponement of Annual General Meeting ("AGM")
9 July 2019
Renold plc ("Renold" or "the Group"), a leading international supplier of industrial chains and related power transmission products, today issues the following statement.
The Group announces the postponement of its AGM scheduled for 17 July 2019. The postponement follows the identification of historical accounting issues over the three years ending 31 March 2017, 2018 and 2019, arising from an overstatement of certain asset values and profit over this period by approximately GBP1.8m in the Gears business unit, which is part of the Torque Transmission division. No other business units are involved.
In order to rectify these issues, the Group intends to revise the financial statements for the year ending 31 March 2019, which will be subject to audit by Deloitte.
In light of these circumstances, the Board believes it is appropriate to postpone consideration of the resolutions at the AGM and, consequently, the AGM scheduled for 17 July 2019 will be adjourned immediately after its commencement. Notice of the reconvened meeting, which will be held no later than 30 September 2019 and at which revised Annual Accounts for the year ended 31 March 2019 can be considered along with the other AGM resolutions, will be made available in due course.
Following an internal review of the Gears business unit, an overstatement of certain asset values and an under-recognition of certain liabilities totalling up to GBP1.8m has been identified in the balance sheet as at 31 March 2019, with certain issues dating back to 31 March 2017.
Upon identifying a potential issue, the Board immediately initiated an independent investigation and now believes that adjusted operating profit for the Torque Transmission division, and therefore the Group, was overstated by GBP0.5m for the year to 31 March 2017, by GBP0.4m for the year to 31 March 2018 and by GBP0.9m for the year to 31 March 2019.
The overstatement of GBP0.9m for the year ended 31 March 2019 represents 5.5% of the adjusted operating profit reported in the preliminary results statement dated 28 May 2019. The overstatement relates predominantly to working capital balances and the impact on the Group's net debt as at 31 March 2019 is limited to an increase of GBP0.3m.
The independent internal audit investigation, supported by PwC, to verify the above findings and to identify any contributory control weaknesses, is ongoing. The findings of this review will be delivered to the Audit Committee in due course.
These issues relate solely to the Gears business unit and the Board's investigation indicates that the overstatement of profit has arisen from the intentional mis-statement of the financial reports at a local level.
The overstatement of adjusted operating profit for the Gears business unit in the year to 31 March 2019 was GBP0.9m. The Board's expectation of performance in the year to 31 March 2020 was based on profit at the reported levels.
The shortfall in the historical performance of the Gears business unit also undermines the ability of this operating unit to make the short-term progress that was originally anticipated. Hence, expectations for the Gears business unit for the year to 31 March 2020 have reduced by GBP1.1m.
Save for the reduction as a result of the revised forecast for Gears, outlined above, there are no other changes to the Board's expectations for the current year. Whilst continuing to be mindful of uncertain global economic conditions, the Board is confident in making further progress with its strategic initiatives. In line with previous guidance, the Group's performance will be weighted towards the second half of the year, predominantly as a result of the ramp-up in efficiency at the new Chinese factory, which is progressing well.
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("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.
Renold plc 0161 498 4500
Robert Purcell, Chief Executive
Ian Scapens, Group Finance Director
Peel Hunt LLP 020 7418 8900
Instinctif Partners 020 7457 2020
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
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(END) Dow Jones Newswires
July 09, 2019 04:31 ET (08:31 GMT)