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6 Months : From Jul 2019 to Jan 2020
RNS Number : 7003P
14 October 2019
("Renold", "the Company" or "the Group")
Period End Trading Update
14 October 2019
Renold, a leading international supplier of industrial chains and related power transmission products, today issues a period end trading update covering the six months ended 30 September 2019 (the 'period') ahead of announcing interim results on 13 November 2019.
The ongoing focus on operational efficiency is helping to offset the impact of a challenging market environment and, assuming no significant further deterioration in trading conditions, the Group remains on course to deliver a result for the full-year in line with the Board's expectations.
Following a stable first quarter of the year, macro-economic conditions weakened during the second quarter and Group underlying(1) revenue for the period declined by 3.2% versus the same period in the prior year. On a reported basis, revenue benefited from a strengthening of the US dollar and declined by 0.7%. The underlying decline in revenue most significantly reflects a deterioration in the industrial goods sector, impacting demand from distributors and OEMs in the Group's key European and US industrial chain markets during the late summer period.
Order intake in the period also reflected the more challenging market conditions with a decline of 8.5% on an underlying(1) basis, with orders 2.4% behind revenue for the period.
Despite the backdrop, the Group continues to see the benefits of improved operational efficiency as a result of its strategic initiatives and ongoing investment. In addition, proactive cost action is underway to align the business with demand levels and help mitigate the impact of market weakness.
As part of the focus on optimising returns, the Group disposed of the non-strategic South African Torque Transmission business unit to its management team in late September for nominal consideration. This business unit, which generated revenue of GBP0.8m and a small operating loss in the period, has continued to struggle in an increasingly challenging South African market and would require significant capital investment and management input to make meaningful progress. The disposal to management will provide a continuing channel to market for products sourced from elsewhere in the Group.
Recent order intake trends suggest that current market weakness will continue into the second half of the year. However, as previously indicated, the Group expects the second half to benefit from an increasing contribution from the ongoing ramp-up in efficiency at the new Chinese factory, together with further cost reduction activities across the Group resulting in a more equal weighting between the first and second halves of the year.
As a result, and assuming no significant further deterioration in trading conditions, the Group remains on track to deliver an overall result for the full year in line with the Board's expectations.
Robert Purcell, Chief Executive, said:
"Our ongoing focus on delivering improvements in the underlying business structure and operations has helped to mitigate the impact of volatile market conditions. The sale of our South African business unit to management secures a continued route to market for the Group's products in the region permitting us to focus our capital investment in other markets with greater opportunities.
"Whilst market conditions remain challenging in the near term, we are encouraged by the positive impact of our ongoing strategic initiatives and this underpins our confidence in the long term opportunity for Renold."
1. The use of "underlying" excludes the impact of changes in foreign exchange rates by retranslating the prior year comparative figures to the current year exchange rate.
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
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
October 14, 2019 02:00 ET (06:00 GMT)