TIDMRNO
RNS Number : 9046E
Renold PLC
11 November 2020
Renold plc
("Renold" or the "Group")
Interim results for the half year ended 30 September 2020
11 November 2020
Renold, a leading international supplier of industrial chains
and related power transmission products, today announces its
unaudited interim results for the half year ended 30 September 2020
(the 'period').
Resilient performance...strong cash generation...significant net
debt reduction
Financial highlights
Half year ended
------------------------------------------------------------------
30 September 30 September
2020 2019
GBPm GBPm
Adjusted results at constant exchange rates
[1]
---------------------------------------------- -------------------------------- --------------------------------
Revenue at constant exchange rates 81.5 97.4
---------------------------------------------- -------------------------------- --------------------------------
Adjusted operating profit at constant
exchange
rates 5.8 7.7
---------------------------------------------- -------------------------------- --------------------------------
Adjusted operating profit margin at constant
exchange rates 7.1% 7.9%
---------------------------------------------- -------------------------------- --------------------------------
Adjusted earnings per share 1.1p 1.5p
---------------------------------------------- -------------------------------- --------------------------------
Net debt 26.4 34.2
---------------------------------------------- -------------------------------- --------------------------------
Reported results
---------------------------------------------- -------------------------------- --------------------------------
Revenue 81.5 98.2
---------------------------------------------- -------------------------------- --------------------------------
Operating profit 5.3 6.3
---------------------------------------------- -------------------------------- --------------------------------
Profit before tax 2.8 3.5
---------------------------------------------- -------------------------------- --------------------------------
Basic earnings per share 0.9p 1.0p
---------------------------------------------- -------------------------------- --------------------------------
-- Revenue from continuing operations down 17.0% to GBP81.5m,
a resilient performance despite the impact of the Covid-19
pandemic
-- Adjusted operating profit from continuing operations at constant
exchange rates of GBP5.8m (2019: GBP7.7m); adjusted operating
margin 7.1% (2019: 7.9%), reflecting actions taken in both
the current and prior years to improve the flexibility of the
cost base
-- Strong cash generation resulting in a GBP10.2m reduction in
net debt to GBP26.4m (31 March 2020: GBP36.6m); with net debt
to adjusted EBITDA ratio of 1.2x (31 March 2020: 1.5x)
-- Adjusted EPS of 1.1p (2019: 1.5p)
Trading and operational highlights
-- Resilient margin performance and strong cash generation, as
a result of focused working capital management, completion of
restructuring program and careful reduction of costs
-- The impact of the Covid-19 pandemic on revenue is being partly
mitigated by improved efficiency and productivity from recent
years' capital investments and operational improvements
-- Order intake at the start of the period reflected customer destocking,
however, trends through the period end suggest a continued modest
improvement, albeit at levels below the prior year in the near
term, this was most evident in India, South East Asia and to
a lesser extent parts of Europe
-- The new factory in China continues to improve on time delivery,
efficiency and productivity
Robert Purcell, Chief Executive of Renold plc, said:
" Whilst the market environment continues to be challenging, the
strategic actions taken in recent years, augmented by the measures
taken earlier this year in response to the Covid-19 pandemic, have
resulted in a more resilient business that is better placed to
overcome today's challenges.
Renold reacted quickly to the sharp decline in order intake
arising from the pandemic and, as a result, delivered a robust
operating margin and substantial reduction in net debt. I would
like to thank all employees for their commitment and outstanding
efforts in keeping our facilities open and serving our customers
during this time.
The tight focus on cost and cash management in the first half
has created a platform from which we can manage through short-term
disruption. We are focused on ensuring Renold can respond strongly
as markets recover."
Reconciliation of reported, constant exchange rate and adjusted
results
Revenue Operating Profit
H1 H1 H1 H1
2020/21 2019/20 2020/21 2019/20
GBPm GBPm GBPm GBPm
-------------------------------------
Previously reported 81.5 98.2 5.3 6.3
Exchange impact - (0.8) - -
---------
At constant exchange rates 81.5 97.4 5.3 6.3
Restructuring costs - - - 0.9
Amortisation of acquired intangible
assets - - 0.5 0.5
Adjusted at constant exchange
rates 81.5 97.4 5.8 7.7
------------------------------------- --------- --------- --------- ---------
ENQUIRIES:
Renold plc Peel Hunt LLP Instinctif Partners
Robert Purcell, CEO Mike Bell Mark Garraway
Jim Haughey, Group FD Ed Allsopp Rosie Driscoll
Tel: 0161 498 4500 Tel: 020 7418 8900 Tel: 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.
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 on their website
at: www.renold.com
Chief Executive's Statement
Renold delivered a resilient performance during the first half,
despite the Group's markets being significantly impacted by the
Covid-19 pandemic. Despite a significant reduction in revenue, the
business produced an adjusted operating margin of 7.1% (2019: 7.8%)
and achieved a significant reduction in net debt of GBP10.2m to
GBP26.4m (31 March 2020: 36.6m).
Revenue for the period at GBP81.5m, supported for the first 3
months by the year end closing order book, was 17% lower than the
prior year, reflecting the impact of shutdowns and lower levels of
demand across a number of the Group's markets.
The effect of the pandemic has been more acute in order intake,
which declined by 21% to GBP76m (2019: GBP96m). The earlier months
of the period were impacted by customer destocking, especially in
the OEM and distributor sectors, thereafter stabilising and, more
recently, showing gradual improvement. Orders related to capital
projects appear to have been the most severely affected while
expenditure directed at ongoing maintenance has been impacted to a
lesser degree. The trends exiting the period suggest that order
intake should continue to improve slowly, albeit this is likely to
be at levels below the prior year in the near term.
The Group benefited from the impact of the significant efforts
undertaken in the current and previous years to lower the breakeven
point and increase flexibility. In addition, tactical short-term
cost saving measures, including tight control of operating costs,
with significant reductions in discretionary expenditure and
utilisation of Government-sponsored employment support schemes,
limited the downside operational profit gearing.
Adjusted operating profit from continuing operations held up
well at GBP5.8m (2019: GBP7.7m) with an adjusted operating profit
margin of 7.1% (2019: 7.8%).
Business and Financial Review
Adjusted operating Adjusted operating
Revenue profit margin
at constant exchange at constant exchange at constant exchange
rates rates rates
--------------------- ------------------------ ------------------------ ------------------------
2020/21 2019/20(1) 2020/21 2019/20(1) 2020/21 2019/20(1)
Six month period GBPm GBPm GBPm GBPm % %
Chain 62.5 75.9 5.7 8.1 9.1 10.7
Torque Transmission 19.0 21.5 2.5 2.3 13.2 10.7
Head office
costs - - (2.4) (2.7) - -
--------------------- ---------- ------------ ---------- ------------ ---------- ------------
Total 81.5 97.4 5.8 7.7 7.1 7.9
--------------------- ---------- ------------ ---------- ------------ ---------- ------------
(1) The divisional split for the period ended 30 September 2019
has been re-presented due to the split of one Chain business unit
into two, of which one has been allocated to Torque
Transmission.
Chain
The Chain division's revenue at constant exchange rates was down
17.7% (GBP13.4m) to GBP62.5m.
While the impact of the Covid-19 pandemic resulted in a 19% drop
across traditional markets including Europe and North America, this
was partially offset by growth of 12% in the smaller South East
Asia region.
Significant progress continues to be made in improving
performance of the new Chinese factory. Notable headcount
reductions were achieved whilst productivity and customer service
levels continue to improve.
The benefits of recent capital investments have been apparent,
with improved capability, capacity and flexibility, enabling the
impact of reduced volumes to be substantially mitigated by cost
reductions. Improved flexibility in the work force also allowed
labour costs to be more closely matched with demand. As a result,
despite a significant revenue decline, adjusted operating profit
margin at constant exchange rates was robust at 9.1% (2019:
10.7%).
Order intake at constant exchange rates declined by 24% to
GBP57.6m, resulting in book to bill (ratio of orders to sales) for
the first half of the year of 92% (2019: 99%).
Torque Transmission
Trading was more stable in the Torque Transmission division,
although most of our individual business units saw considerable
market softening as a result of the pandemic. Revenue at constant
exchange rates fell by 11.6% to GBP19.0m. The revenue reduction
includes GBP0.5m in scheduled lower deliveries on a significant
multi-year contract, which is expected to return to prior period
levels in the second half of the financial year.
While demand across the traditional markets, including the UK
and North America, dropped by 17%, this was partially offset by
growth of 69% in China.
Significant actions to improve the Gears business unit were
undertaken in the last financial year. The annualised benefits of
these pricing and cost saving measures showed clearly in the first
six months' operating performance, with the unit delivering a
GBP0.4m year on year improvement in adjusted operating profit
despite a significant reduction in revenue.
Divisional adjusted operating profit, at constant exchange
rates, of GBP2.5m was 8.7% higher than the prior year, resulting in
an adjusted operating profit margin of 13.2% (2019: 10.7%).
Order intake from continuing operations at constant exchange
rates of GBP18.4m reduced by 5% in the period. The book to bill
ratio for the first half of the year was 97% (2019: 91%).
Restructuring Costs
Restructuring costs in the period were nil (2019: GBP0.9m),
following the completion of all major such initiatives in the prior
year.
Cash Flow and Net Debt
2020/21 2019/20
Half year to 30 September GBPm GBPm
------------------------------------------------ -------- --------
Adjusted operating profit 5.8 7.7
Add back depreciation and amortisation 5.2 5.1
------------------------------------------------ -------- --------
Adjusted EBITDA 11.0 12.8
Movement in working capital 3.7 (4.4)
Net Capital expenditure (1.0) (4.6)
Operating cash flow 13.7 3.8
Income taxes 1.0 (1.4)
Pensions cash costs (1.1) (1.8)
Restructuring spend - (0.9)
Repayment of principal under lease liabilities (1.7) (1.6)
Financing costs paid (1.8) (1.6)
Other movements/FX 0.1 (0.4)
------------------------------------------------ -------- --------
Change in net debt 10.2 (3.9)
Closing net debt (26.4) (34.2)
------------------------------------------------ -------- --------
Cash generation in the first half was very strong, with net debt
reducing by GBP10.2m from the position at 31 March 2020, to
GBP26.4m.
Most of the GBP3.7m improvement in working capital was delivered
in inventory (GBP4.9m) where measures were taken to improve the
cash position in the short term. Specific and measured increases in
inventory are planned in order to maintain customer service levels
as demand returns. Receivables and payables moved broadly in line
with activity levels in the period.
Net capital expenditure at GBP1.0m was tightly controlled and
reduced by GBP3.6m compared to the prior period. The reduction in
spend, down to maintenance levels, was possible due to prior year
initiatives to invest in the production capabilities of our plants.
Strategic investments in improved heat treatment facilities and the
standardised IT system for the Group continue, but at a slower
pace.
Corporation tax payments on account were reviewed across the
Group with revised payment profiles leading to a recovery of
GBP1.3m of prior year contributions.
Pensions
The Group has a number of defined benefit pension schemes
(accounted for in accordance with IAS 19R 'Employee benefits').
During the period agreement was reached with the UK pension trustee
to defer contributions (GBP2.8m) to the UK pension scheme. This
delays agreed contributions, now payable between April 2022 and
April 2027, but maintains the consistent cash requirements of the
Group's schemes. Cash pension costs are sustainable, having
remained consistent at approximately GBP5m for several years, and
are expected to remain broadly stable over the longer term. The
Group's retirement benefit obligations increased from GBP97.6m
(GBP80.2m net of deferred tax) at 31 March 2020 to GBP115.6m
(GBP94.7m net of deferred tax) at 30 September 2020.
Continuing declines in corporate bond yields, which determine
discount rates, have increased the deficits in the key UK and
German schemes. In the UK, discount rates falling to 1.55% (31
March 2020: 2.4%) and the CPI inflation assumption increasing to
2.2% (31 March 2020: 2.0%) has the effect of increasing the present
value of future liabilities by GBP29.2m. Strong asset returns
helped to mitigate the impact of change in the financial
assumptions, with the net UK deficit increasing by GBP16.0m to
GBP84.0m.
Pension liabilities in non-UK schemes increased by GBP2.0m to
GBP31.6m.
The net financing expense (a non-cash item) was GBP1.0m (2019:
GBP1.1m).
Dividend
In light of the difficult trading environment and the continuing
investment in equipment and revenue expenditure to improve the
performance of the business, the Board has decided not to declare
an interim dividend. The dividend policy will remain under review
as margin and cash flow performance continues to develop.
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 uncertainty as to the future impact on the Group of
the Covid-19 pandemic, alongside the resilient half year trading
performance of the Group, have been considered as part of the
adoption of the going concern basis. All manufacturing facilities
which had been closed due to national restrictions reopened prior
to June 2020 and have remained open since. Across the Group, public
health measures advised by governments are being followed,
operating costs have been reduced, and capital expenditure and
other cash demands are being managed effectively.
As part of its assessment, the Board has considered downside
scenarios that reflect the current uncertainty in the global
economy. The most severe scenario considered Group revenue being
more than 20% below revenues for the year ended 31 March 2020, and
more than 25% below revenues in the year ended 31 March 2019. The
downside scenario is considered to be severe but plausible,
although recent trading activity and the improvement in net debt at
30 September 2020 results in the downside scenario being considered
much less likely than it was at the year end.
The results of these scenarios show that there is sufficient
liquidity in the business for a period of at least 12 months from
the date of approval of these interim financial statements.
However, the most severe downside case indicates the potential for
a covenant breach during the test period, indicating a material
uncertainty related to events or conditions which may cast
significant doubt over the Group's ability to continue as a going
concern in the event that, following a covenant breach, lenders
elected to trigger a repayment of outstanding debt. In such
circumstances, and without further mitigating actions, the Group
may be unable to realise assets and discharge liabilities in the
normal course of business. The condensed consolidated interim
financial statements do not include the adjustments that would
result if the Group were unable to continue as a going concern.
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 amended
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 principal risks and uncertainties affecting the business
activities of the Group, as well as the risk mitigating controls
put in place, remain those detailed on pages 32-36 of the 2019/20
Annual Report and Accounts. These include macro-economic and
political uncertainty 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, risks relating to macro-economic factors and
political uncertainty have continued, especially with regard to the
impact of the global Covid-19 pandemic. The sustained effect of
uncertainty has the potential to reduce demand in end-markets for
Renold's products. Renold benefits from its geographic, customer
and sector diversity which helps to mitigate the impact of
localised issues, but cannot fully mitigate the effects of
widespread reductions in demand.
The valuation of retirement benefit obligations can be
significantly impacted by changes to the yields on corporate bonds
and inflation prospects. The schemes' investment strategies provide
a partial hedge against these risks, and other de-risking
strategies are employed where sensible. However, it should be noted
that the actual cash flows to support the pension scheme are quite
stable and subject to long term funding plans which are reviewed
every three years. The triennial valuation for the UK scheme has
been agreed with no significant change required to the long term
funding of the scheme. The next triennial valuation will have an
effective date of 5 April 2022.
Summary
Renold reacted quickly to the sharp deterioration of the trading
environment arising from the pandemic-related downturn. Most costs
have been reduced in line with sales and, together with focused
cash preservation actions and managed reductions in working
capital, the Group has delivered a robust operating margin and a
substantial reduction in net debt.
The trends exiting the period suggest that order intake should
continue to improve slowly, albeit this is likely to be at levels
below the prior year in the near term. The immediate outlook varies
by both geography and sector, and is difficult to forecast,
however, Renold benefits from its geographic, customer and sector
diversity. The tight focus on cost and cash management in the first
half has created a strong platform from which the Group can manage
through short-term disruption, whilst retaining the ability to
invest in support of our strategy as markets recover.
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 2020. A list of current Directors is
maintained on the Group website at www.renold.com.
By order of the Board
Robert Purcell Jim Haughey
Chief Executive Group Finance Director
11 November 2020 11 November 2020
Condensed Consolidated Income Statement
for the six months ended 30 September 2020
First half Full year
2019/20 2019/20
First half (unaudited) (audited)
2020/21
(unaudited)
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------- ------------- -----------
Revenue 3 81.5 98.2 189.4
Operating costs before adjusting
items (75.7) (90.5) (176.0)
--------------------------------------- ----- ------------- ------------- -----------
Adjusted(1) operating profit 5.8 7.7 13.4
--------------------------------------- ----- ------------- ------------- -----------
Adjusting items 4
Restructuring costs - (0.9) (2.4)
Amortisation of acquired intangible
assets (0.5) (0.5) (0.9)
Operating profit 5.3 6.3 10.1
----- ------------- -------------
Net financing costs 5 (2.5) (2.8) (5.2)
--------------------------------------- ----- ------------- ------------- -----------
Profit before tax 2.8 3.5 4.9
Taxation 6 (0.8) (1.2) (1.5)
--------------------------------------- ----- ------------- ------------- -----------
Profit for the period from continuing
operations 2.0 2.3 3.4
Discontinued operations 13 - (1.5) (1.5)
--------------------------------------- ----- ------------- ------------- -----------
Profit for the period 2.0 0.8 1.9
--------------------------------------- ----- ------------- ------------- -----------
Attributable to:
Owners of the parent 2.0 0.7 1.8
Non-controlling interests - 0.1 0.1
--------------------------------------- ----- ------------- ------------- -----------
2.0 0.8 1.9
--------------------------------------- ----- ------------- ------------- -----------
Earnings per share from continuing
operations 7
Basic 0.9p 1.0p 1.5p
Diluted 0.9p 0.9p 1.5p
Basic adjusted earnings per share 1.1p 1.5p 2.9p
Diluted adjusted earnings per share 1.1p 1.5p 2.9p
--------------------------------------- ----- ------------- ------------- -----------
Earnings per share from continuing
and discontinued operations 7
Basic 0.9p 0.3p 0.8p
Diluted 0.9p 0.3p 0.8p
--------------------------------------- ----- ------------- ------------- -----------
(1) Adjusted: In addition to statutory reporting, the Group
reports certain financial metrics on an adjusted basis. Definitions
of adjusted measures, and information about the differences to
statutory metrics are provided in Note 14 to the financial
statements.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2020
First half Full year
2019/20 2019/20
First half (unaudited) (audited)
2020/21
(unaudited)
GBPm GBPm GBPm
--------------------------------------------- ---- ------------- ------------- -----------
Profit for the period 2.0 0.8 1.9
Other comprehensive income/(expense):
Items that may be reclassified to
the income statement in subsequent
periods:
Exchange differences on translation
of foreign operations 0.3 3.5 1.8
Gain/(loss) on hedges of the net investment
in foreign operations 0.2 (0.4) (0.4)
Cash flow hedges:
Fair value gain/(loss) arising on
cash flow hedges during the period 0.1 (0.5) (0.3)
Add: Cumulative gain arising on cash
flow hedges reclassified
to profit and loss 0.3 0.4 0.4
Income tax relating to items that
may be reclassified subsequently to
profit or loss (0.3) - 0.1
--------------------------------------------------- ------------- ------------- -----------
0.6 3.0 1.6
-------------------------------------------------- ------------- ------------- -----------
Items not to be reclassified to the
income statement in subsequent periods:
Re-measurement (losses)/gains on retirement
benefit obligations (17.1) (9.5) 3.1
Tax on re-measurement losses/(gains)
on retirement benefit obligations
- excluding impact of statutory rate
change 3.4 1.7 (0.7)
Effect of changes in statutory tax
rate on deferred tax assets - - 1.3
--------------------------------------------------- ------------- ------------- -----------
(13.7) (7.8) 3.7
-------------------------------------------------- ------------- ------------- -----------
Other comprehensive (expense)/income
for the period, net of tax (13.1) (4.8) 5.3
--------------------------------------------------- ------------- ------------- -----------
Total comprehensive (expense)/income
for the period, net of tax (11.1) (4.0) 7.2
--------------------------------------------------- ------------- ------------- -----------
Attributable to:
Owners of the parent (11.1) (4.2) 7.1
Non-controlling interests - 0.2 0.1
--------------------------------------------------- ------------- ------------- -----------
(11.1) (4.0) 7.2
-------------------------------------------------- ------------- ------------- -----------
Condensed Consolidated Statement of Financial Position
as at 30 September 2020
31 March
30 September 30 September
2020 2019 2020
(unaudited,
re-presented(1)
(unaudited) ) (audited)
Note GBPm GBPm GBPm
---------------------------------- ----- ------------- ------------------ -----------
Assets
Non-current assets
Goodwill 23.5 24.3 24.0
Other intangible fixed assets 7.3 6.0 8.0
Property, plant and equipment 52.0 57.0 53.3
Right-of-use assets 11.4 9.5 11.3
Deferred tax assets 24.2 22.9 20.4
118.4 119.7 117.0
---------------------------------- ----- ------------- ------------------ -----------
Current assets
Inventories 41.8 49.1 46.1
Trade and other receivables 31.5 37.1 35.8
Current tax 0.1 1.7 1.5
Derivative financial instruments 0.1 - -
Cash and cash equivalents 9 19.6 17.6 15.6
---------------------------------- ----- ------------- ------------------ -----------
93.1 105.5 99.0
---------------------------------- ----- ------------- ------------------ -----------
Total assets 211.5 225.2 216.0
---------------------------------- ----- ------------- ------------------ -----------
Liabilities
Current liabilities
Borrowings 9 (0.1) (0.2) (0.3)
Trade and other payables (32.5) (41.5) (37.6)
Lease liabilities (3.4) (3.3) (3.0)
Current tax (1.6) (1.2) (1.0)
Derivative financial instruments - (0.5) (0.3)
Provisions (0.7) (0.2) (0.7)
---------------------------------- ----- ------------- ------------------ -----------
(38.3) (46.9) (42.9)
---------------------------------- ----- ------------- ------------------ -----------
Net current assets 54.8 58.6 56.1
---------------------------------- ----- ------------- ------------------ -----------
Non-current liabilities
Borrowings 9 (45.4) (51.1) (51.4)
Preference stock 9 (0.5) (0.5) (0.5)
Trade and other payables (5.2) (5.2) (5.3)
Lease liabilities (13.3) (13.4) (14.1)
Deferred tax liabilities (4.7) (6.0) (4.6)
Retirement benefit obligations 8 (115.6) (111.5) (97.6)
(184.7) (187.9) (173.5)
---------------------------------- ----- ------------- ------------------ -----------
Total liabilities (223.0) (234.8) (216.4)
---------------------------------- ----- ------------- ------------------ -----------
Net liabilities (11.5) (9.6) (0.4)
---------------------------------- ----- ------------- ------------------ -----------
Equity
Issued share capital 10 11.3 11.3 11.3
Share premium 30.1 30.1 30.1
Capital reserve 15.4 15.4 15.4
Currency translation reserve 12.1 13.4 11.9
Other reserves 0.1 (0.5) (0.3)
Retained earnings (80.5) (81.5) (68.8)
---------------------------------- ----- ------------- ------------------ -----------
Equity attributable to owners
of the parent (11.5) (12.0) (0.4)
Non-controlling interests - 2.4 -
---------------------------------- ----- ------------- ------------------ -----------
Total shareholders' deficit (11.5) (9.6) (0.4)
---------------------------------- ----- ------------- ------------------ -----------
(1) The balance sheet at 30 September 2019 has been re-presented
to reflect an adjustment of GBP0.2m between non-current lease
liabilities and opening reserves on adoption of IFRS 16.
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 September 2020
First half First half
Full year
2020/21 2019/20 2019/20
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
Cash generated by operations (Note
9) 13.7 5.3 12.5
Income taxes refunded/(paid) 1.0 (1.4) (1.6)
------------------------------------------- ------------- ------------- -----------
Net cash flows from operating activities 14.7 3.9 10.9
------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Proceeds from property disposals 0.2 - 0.1
Purchase of property, plant and equipment (1.0) (4.0) (6.7)
Purchase of intangible assets (0.2) (0.6) (2.5)
Disposal of business - (0.1) (0.1)
Consideration paid for acquisition
of minority interest - - (1.8)
------------------------------------------- ------------- ------------- -----------
Net cash flows from investing activities (1.0) (4.7) (11.0)
------------------------------------------- ------------- ------------- -----------
Cash flows from financing activities
Repayment of principal under lease
liabilities (1.7) (1.6) (3.3)
Financing costs paid (1.8) (1.6) (2.7)
Proceeds from borrowings 2.8 4.6 7.5
Repayment of borrowings (9.0) (1.0) (4.2)
------------------------------------------- ------------- ------------- -----------
Net cash flows from financing activities (9.7) 0.4 (2.7)
------------------------------------------- ------------- ------------- -----------
Net (decrease)/increase in cash and
cash equivalents 4.0 (0.4) (2.8)
Net cash and cash equivalents at
beginning of period 15.1 17.4 17.4
Effects of exchange rate changes - 0.2 0.5
------------------------------------------- ------------- ------------- -----------
Net cash and cash equivalents at
end of period 19.1 17.2 15.1
------------------------------------------- ------------- ------------- -----------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 September 2020
Share Currency Capital Attributable
Share premium Retained translation redemption Other to owners Non-controlling Total
capital account earnings reserve reserve reserves of parent interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
At 1 April 2019 11.3 30.1 (74.2) 10.4 15.4 (0.4) (7.4) 2.2 (5.2)
Profit for the
year - - 1.8 - - - 1.8 0.1 1.9
Other
comprehensive
income - - 3.7 1.5 - 0.1 5.3 - 5.3
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
Total
comprehensive
income for
the year - - 5.5 1.5 - 0.1 7.1 0.1 7.2
Acquisition of
non-controlling
interest - - 0.5 - - - 0.5 (2.3) (1.8)
Share-based
payments - - (0.6) - - - (0.6) - (0.6)
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
At 31 March 2020 11.3 30.1 (68.8) 11.9 15.4 (0.3) (0.4) - (0.4)
Profit for the
period - - 2.0 - - - 2.0 - 2.0
Other
comprehensive
income/(expense) - - (13.7) 0.2 - 0.4 (13.1) - (13.1)
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
Total
comprehensive
income/(expense)
for the period - - (11.7) 0.2 - 0.4 (11.1) - (11.1)
At 30 September
2020 11.3 30.1 (80.5) 12.1 15.4 0.1 (11.5) - (11.5)
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
At 1 April 2019 11.3 30.1 (74.2) 10.4 15.4 (0.4) (7.4) 2.2 (5.2)
Profit for the
period - - 0.7 - - - 0.7 0.1 0.8
Other
comprehensive
income/(expense) - - (7.8) 3.0 - (0.1) (4.9) 0.1 (4.8)
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
Total
comprehensive
income/(expense)
for the period - - (7.1) 3.0 - (0.1) (4.2) 0.2 (4.0)
Share-based
payments - - (0.2) - - - (0.2) - (0.2)
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
At 30 September
2019
(re-presented(1)
) 11.3 30.1 (81.5) 13.4 15.4 (0.5) (11.8) 2.4 (9.4)
------------------ -------- -------- --------- ------------ ----------- --------- ------------- ---------------- -------
(1) The balance sheet at 30 September 2019 has been re-presented
to reflect an adjustment of GBP0.2m between non-current lease
liabilities and opening reserves on adoption of IFRS 16.
Notes to the Interim Condensed Consolidated Financial
Statements
1. Corporate information
The interim condensed consolidated financial statements for the
six months to 30 September 2020 were approved by the Board on 11
November 2020. 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 2020 have been filed with the Registrar of
Companies. The auditor's report on those accounts was unqualified
but contained a material uncertainty paragraph in relation to going
concern (see page 101 of the consolidated financial statements for
the year ended 31 March 2020 for further detail). The auditor's
report 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 2020 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 of 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 2020.
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 2020, 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 amended standards adopted by the Group
The same accounting policies, presentation and methods of
computation are followed in the condensed set of financial
statements as applied in the Group's latest annual audited
financial statements.
As a result of the Covid-19 pandemic, the Group has utilised
GBP2.3m (31 March 2020: GBPnil; 30 September 2019: GBPnil) of
government assistance across its European units in the form of
employee support schemes. In line with IAS 20, this income is
recognised in the income statement at the date at which the
conditions attached to receipt of such assistance have been met, in
the period it becomes receivable.
New standards and interpretations not yet effective and not
adopted
At the date of publishing these interim condensed consolidated
financial statements, a number of new and revised standards and
interpretations have been issued by the International Accounting
Standards Board (IASB). None of these new and revised standards and
interpretations are considered relevant to the Group and they have
not been adopted early.
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 uncertainty as to the future impact on the Group of
the Covid-19 pandemic, alongside the resilient half year trading
performance of the Group, have been considered as part of the
adoption of the going concern basis. All manufacturing facilities
which had been closed due to national restrictions reopened prior
to June 2020 and have remained open since. Across the Group, public
health measures advised by governments are being followed,
operating costs have been reduced, and capital expenditure and
other cash demands are being managed effectively.
As part of its assessment, the Board has considered downside
scenarios that reflect the current uncertainty in the global
economy. The most severe scenario considered Group revenue being
more than 20% below revenues for the year ended 31 March 2020, and
more than 25% below revenues in the year ended 31 March 2019. The
downside scenario is considered to be severe but plausible,
although recent trading activity and the improvement in net debt at
30 September 2020 results in the downside scenario being considered
much less likely than it was at the year end.
The results of these scenarios show that there is sufficient
liquidity in the business for a period of at least 12 months from
the date of approval of these interim financial statements.
However, the most severe downside case indicates the potential for
a covenant breach during the test period, indicating a material
uncertainty related to events or conditions which may cast
significant doubt over the Group's ability to continue as a going
concern in the event that, following a covenant breach, lenders
elected to trigger a repayment of outstanding debt. In such
circumstances and without further mitigating actions, the Group may
be unable to realise assets and discharge liabilities in the normal
course of business. The condensed consolidated interim financial
statements do not include the adjustments that would result if the
Group were unable to continue as a going concern.
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 amended
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.
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 those which applied in
the annual consolidated financial statements for the year ended 31
March 2020, namely:
-- taxation
-- retirement benefit obligations
-- right-of-use assets
-- inventory valuation
-- impairment of non-financial assets
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 2020.
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
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 with modest sales of chain products.
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 not been included in respect of the operating assets of each
segment as they are not reported to the CODM on a regular basis.
However, Group net financing 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 2020 were
as follows:
Head office
Torque costs
Period ended 30 September Chain Transmission and eliminations Consolidated
2020 GBPm GBPm GBPm GBPm
------------------------------------- ------ -------------- ------------------ -------------
Revenue
External customer 62.5 19.0 - 81.5
Inter-segment 0.8 1.6 (2.4) -
------------------------------------- ------ -------------- ------------------ -------------
Total revenue 63.3 20.6 (2.4) 81.5
------------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss) 5.7 2.5 (2.4) 5.8
Restructuring costs - - - -
Amortisation of acquired
intangible assets (0.5) - - (0.5)
------------------------------------- ------ -------------- ------------------ -------------
Operating profit/(loss) 5.2 2.5 (2.4) 5.3
Net financing costs (2.5)
------------------------------------- ------ -------------- ------------------ -------------
Profit before tax 2.8
Taxation (0.8)
Profit after tax 2.0
------------------------------------- ------ -------------- ------------------ -------------
Other disclosures
Working capital 29.0 9.7 2.1 40.8
Capital expenditure 0.7 0.6 0.3 1.6
Depreciation and amortisation
included in adjusted operating
profit/(loss) 3.4 0.9 0.9 5.2
Amortisation of acquired
intangibles 0.5 - - 0.5
------------------------------------- ------ -------------- ------------------ -------------
Total depreciation and amortisation 3.9 0.9 0.9 5.7
------------------------------------- ------ -------------- ------------------ -------------
The segment results for the period ended 30 September 2019 were
as follows:
Head office
Period ended 30 September Torque costs
2019 Chain Transmission and eliminations Consolidated
(re-presented(1) ) GBPm GBPm GBPm GBPm
------------------------------------- ------ -------------- ------------------ -------------
Revenue
External Customer 76.5 21.7 - 98.2
Inter-segment 0.5 2.0 (2.5) -
------------------------------------- ------ -------------- ------------------ -------------
Total revenue 77.0 23.7 (2.5) 98.2
------------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss) 8.1 2.4 (2.8) 7.7
Restructuring costs (0.4) (0.4) (0.1) (0.9)
Amortisation of acquired
intangible assets (0.5) - - (0.5)
------------------------------------- ------ -------------- ------------------ -------------
Operating profit/(loss) 7.2 2.0 (2.9) 6.3
Net financing costs (2.8)
------------------------------------- ------ -------------- ------------------ -------------
Profit before tax from continuing
operations 3.5
Taxation (1.2)
Discontinued operations (1.5)
Profit after tax and discontinued
operations 0.8
------------------------------------- ------ -------------- ------------------ -------------
Other disclosures
Working capital 35.0 10.5 (0.8) 44.7
Capital expenditure 4.1 0.2 0.6 4.9
Depreciation and amortisation
included in adjusted operating
profit/(loss) 3.2 1.0 0.9 5.1
Amortisation of acquired
intangibles 0.5 - - 0.5
------------------------------------- ------ -------------- ------------------ -------------
Total depreciation and amortisation 3.7 1.0 0.9 5.6
------------------------------------- ------ -------------- ------------------ -------------
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 14
to the interim condensed consolidated financial statements.
Constant exchange rate results are retranslated to current year
exchange rates and therefore only the prior year comparatives are
an alternative performance measure. A reconciliation is provided
below and in Note 14.
Head office
Period ended 30 September Torque costs
2019 Chain Transmission and eliminations Consolidated
(re-presented(1) ) GBPm GBPm GBPm GBPm
---------------------------------- ------ -------------- ------------------ -------------
Revenue
External revenue from continuing
operations 76.5 21.7 - 98.2
Foreign exchange retranslation (0.6) (0.2) - (0.8)
---------------------------------- ------ -------------- ------------------ -------------
External revenue from continuing
operations at constant exchange
rates 75.9 21.5 - 97.4
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss)
from continuing operations 8.1 2.4 (2.8) 7.7
Foreign exchange retranslation - (0.1) 0.1 -
---------------------------------- ------ -------------- ------------------ -------------
Adjusted profit/(loss) from
continuing operations at
constant exchange rates 8.1 2.3 (2.7) 7.7
---------------------------------- ------ -------------- ------------------ -------------
(1) The divisional split for the period ended 30 September 2019
has been re-presented due to the split of one Chain business unit
into two, of which one has been allocated to Torque
Transmission.
The segment results for the year ended 31 March 2020 were as
follows:
Torque
Year ended 31 March 2020 Head office
costs
Chain Transmission and eliminations Consolidated
(re-presented(1) ) GBPm GBPm GBPm GBPm
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Revenue
External Customer 147.9 41.5 - 189.4
Inter-segment 1.1 4.6 (5.7) -
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Total revenue 149.0 46.1 (5.7) 189.4
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Adjusted operating profit/(loss) 13.8 5.3 (5.7) 13.4
Restructuring costs (1.9) (0.4) (0.1) (2.4)
Amortisation of acquired
intangible assets (0.9) - - (0.9)
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Operating profit/(loss) 11.0 4.9 (5.8) 10.1
Net financing costs (5.2)
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Profit before tax from continuing
operations 4.9
Taxation (1.5)
Discontinued operations (1.5)
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Profit after tax and discontinued
operations 1.9
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Other disclosures
Working capital 33.1 10.7 0.5 44.3
Capital expenditure 6.8 1.0 1.3 9.1
Depreciation and amortisation
included in adjusted operating
profit/(loss) 6.8 2.0 1.7 10.5
Amortisation of acquired
intangibles 0.9 - - 0.9
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
Total depreciation and amortisation 7.7 2.0 1.7 11.4
------------------------------------- ------ --- -------------- --- ------------------ --- -------------
The prior year results have been restated using this year's
exchange rates as follows:
Torque
Year ended 31 March 2020 Head office
costs
Chain Transmission and eliminations Consolidated
(re-presented(1) ) GBPm GBPm GBPm GBPm
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Revenue
External revenue from continuing
operations 147.9 41.5 - 189.4
Foreign exchange retranslation 0.4 0.1 - 0.5
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
External revenue from continuing
operations at constant exchange
rates 148.3 41.6 - 189.9
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Adjusted operating profit/(loss)
from continuing operations 13.8 5.3 (5.7) 13.4
Foreign exchange retranslation - - - -
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Adjusted profit/(loss) from
continuing operations at
constant exchange rates 13.8 5.3 (5.7) 13.4
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
(1) The divisional split for the period ended 30 September 2019
has been re-presented due to the split of one Chain business unit
into two, of which one has been allocated to Torque
Transmission.
4. Adjusting items
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 14
to the interim condensed consolidated financial statements.
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
------------------------------------- -------- -------- ----------
Included in operating costs:
Strategic Plan restructuring costs - 0.5 2.0
Other - 0.4 0.4
------------------------------------- -------- -------- ----------
Restructuring Costs - 0.9 2.4
Amortisation of acquired intangible
assets (Note 8) 0.5 0.5 0.9
------------------------------------- -------- -------- ----------
Adjusting items in operating profit 0.5 1.4 3.3
------------------------------------- -------- -------- ----------
Taxation on adjusting items - (0.2) -
------------------------------------- -------- -------- ----------
Total adjusting items 0.5 1.2 3.3
------------------------------------- -------- -------- ----------
Restructuring costs
No restructuring costs were incurred in the six months ended 30
September 2020. All major restructuring initiatives are
complete.
Prior year restructuring costs included redundancy costs
associated with headcount reductions and various other smaller
costs associated with restructuring. A further GBP0.4m of other
costs were incurred in relation to the investigation of the
historical overstatement of profit in the Gears business unit and
the purchase of the non-controlling interest in the Group's Indian
operations.
Restructuring costs are recognised as adjusting items because
they are considered material and non-recurring.
Amortisation of acquired intangible assets
Acquisition related intangible asset amortisation costs of
GBP0.5m (2019: GBP0.5m) were recognised in the current period. This
is considered to be an adjusting item on the basis that these
charges result from acquisition accounting and do not relate to
current trading activity.
5. Net financing costs
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
-------------------------------------- -------- -------- ----------
Financing costs:
Interest payable on bank loans and
overdrafts (0.9) (1.2) (2.1)
Interest paid on lease liabilities (0.3) (0.3) (0.5)
Amortised financing costs (0.2) (0.1) (0.2)
Loan financing costs (1.4) (1.6) (2.8)
-------------------------------------- -------- -------- ----------
Net IAS 19 financing costs (1.0) (1.1) (2.2)
Discount unwind on non-current trade
and other payables (0.1) (0.1) (0.2)
Net financing costs (2.5) (2.8) (5.2)
-------------------------------------- -------- -------- ----------
6. Taxation
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
------------------------------------- -------- -------- ----------
Current tax:
- UK - - -
- Overseas (0.9) (0.4) (0.6)
------------------------------------- -------- -------- ----------
(0.9) (0.4) (0.6)
Deferred tax:
- UK - (0.1) (0.2)
- Overseas 0.1 (0.7) (0.8)
- Effects of changes in corporate
tax rates - - 0.1
Total deferred tax charge (Note 17) 0.1 (0.8) (0.9)
------------------------------------- -------- -------- ----------
Total income tax expense (0.8) (1.2) (1.5)
------------------------------------- -------- -------- ----------
Factors affecting current and future tax charges
The overseas deferred tax credit relates to an increase in the
deferred tax asset held in respect of overseas pensions, partially
offset by the utilisation of recognised deferred tax assets. The
increase in overseas current corporate tax relates to jurisdictions
where historical tax losses have now been fully utilised.
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.
7. 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
2020/21 2019/20 2019/20
Per Per Per
share share share
Earnings amount Earnings amount Earnings amount
GBPm (pence) GBPm (pence) GBPm (pence)
------------------------------- --------- -------- --------- -------- --------- --------
Basic EPS from continuing
and discontinued operations
Profit attributed to ordinary
shareholders 2.0 0.9p 0.7 0.3p 1.8 0.8p
Loss for the period from
discontinued operations - - 1.5 0.7p 1.5 0.7p
Basic EPS from continuing
operations 2.0 0.9p 2.2 1.0p 3.3 1.5p
Effect of adjusting items,
after tax:
Restructuring costs in
operating costs - - 0.8 0.4p 2.4 1.1p
Amortisation of acquired
intangible assets 0.5 0.2p 0.4 0.1p 0.9 0.3p
Adjusted EPS 2.5 1.1p 3.4 1.5p 6.6 2.9p
------------------------------- --------- -------- --------- -------- --------- --------
First half Full year
2020/21 2019/20 2019/20
Thousands Thousands Thousands
------------------------------------------- ----------- ----------- -----------
Weighted average number of ordinary
shares:
For the purpose of calculating basic
earnings per share 225,418 225,418 225,418
Effect of dilutive potential ordinary
shares:
Shares subject to performance conditions 6,210 6,900 1,944
------------------------------------------- ----------- ----------- -----------
For the purpose of calculating diluted
earnings per share 231,628 232,318 227,362
------------------------------------------- ----------- ----------- -----------
First half Full year
2020/21 2019/20 2019/20
(pence) (pence) (pence)
---------------------------------------------- --------- --- --------- --- ----------
Diluted EPS from continuing and discontinued
operations 0.9p 0.3p 0.8p
Diluted EPS from continuing operations 0.9p 0.9p 1.5p
Diluted adjusted EPS 1.1p 1.5p 2.9p
---------------------------------------------- --------- --- --------- --- ----------
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.
8. Retirement benefit obligations
The Group's retirement benefit obligations are summarised as
follows:
At 30 At 30 At 31
September September March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- --------
Funded plan obligations (242.8) (244.1) (215.3)
Funded plan assets 153.8 160.9 141.7
-------------------------------------- ----------- ----------- --------
Net funded plan obligations (89.0) (83.2) (73.6)
Unfunded obligations (26.6) (28.3) (24.0)
-------------------------------------- ----------- ----------- --------
Total retirement benefit obligations (115.6) (111.5) (97.6)
-------------------------------------- ----------- ----------- --------
Analysed as follows:
Non-current liabilities: Retirement
benefit obligations (115.6) (111.5) (97.6)
Net deferred tax asset 20.9 18.1 17.4
Retirement benefit obligation net
of deferred tax (94.7) (93.4) (80.2)
------------------------------------- -------- -------- -------
The increase in the Group's net pre-tax deficit from GBP97.6m at
31 March 2020 to GBP115.6m at 30 September 2020 primarily reflects
a decrease in discount rates and increase in inflation rates across
all schemes, partially offset by asset outperformance and
experience gains in the UK scheme.
9. Additional Cashflow Information
Reconciliation of operating profit to net cash flows from
operations:
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
------------------------------------------ -------- -------- ----------
Cash generated from operations:
Operating profit from continuing and
discontinued operations 5.3 6.0 9.8
Depreciation of property, plant and
equipment - owned assets 3.2 3.0 6.1
Depreciation of property, plant and
equipment - right-of-use-assets 1.4 1.2 2.5
Amortisation of intangible assets 1.1 1.4 2.8
Loss on disposals of plant and equipment - 0.1 -
Equity share plans - (0.2) (0.6)
Decrease/(increase) in inventories 4.9 (3.9) (1.7)
Decrease in receivables 4.6 1.0 1.6
Decrease in payables (5.8) (1.5) (4.4)
Decrease in provisions - - 0.6
Cash contribution to pension schemes (1.1) (1.8) (4.4)
Pension current service costs (non-cash) 0.1 - 0.2
Cash generated from operations 13.7 5.3 12.5
------------------------------------------ -------- -------- ------------
Reconciliation of net change in cash and cash equivalents to
movement in net debt:
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
------------------------------------------ -------- -------- ----------
Increase/(decrease) in cash and cash
equivalents 4.0 (0.4) 2.8
Change in net debt resulting from
cash flows 6.4 (3.6) (3.3)
Foreign Currency translation differences - 0.1 -
Non-cash movement on capitalised finance
costs (0.2) - (0.2)
Change in net debt during the period 10.2 (3.9) (6.3)
Net debt at start of period (36.6) (30.3) (30.3)
------------------------------------------ -------- -------- ----------
Net debt at end of period (26.4) (34.2) (36.6)
------------------------------------------ -------- -------- ----------
Net debt comprises:
First half Full year
At 30 September At 30 September
2020 2019 At 31 March
GBPm GBPm 2020
GBPm
--------------------------- ---------------- ---------------- --------------
Cash and cash equivalents 19.6 17.6 15.6
Total debt (46.0) (51.8) (52.2)
(26.4) (34.2) (36.6)
--------------------------- ---------------- ---------------- --------------
First half Full year
At 30 September At 30 September
2020 2019 At 31 March
2020
Net cash and cash equivalents GBPm GBPm GBPm
------------------------------- ---------------- ---------------- --------------
Cash and cash equivalents 19.6 17.6 15.6
Less: overdrafts (0.5) (0.4) (0.5)
Net cash and cash equivalents 19.1 17.2 15.1
------------------------------- ---------------- ---------------- --------------
First half Full year
At 30 September At 30 September
2020 2019 At 31 March
2020
Total debt GBPm GBPm GBPm
------------------------ ---------------- ---------------- --------------
Borrowings:
Overdrafts (0.5) (0.4) (0.5)
Capitalised costs 0.4 0.2 0.2
------------------------ ---------------- ---------------- --------------
Current borrowings (0.1) (0.2) (0.3)
Bank Loans (45.7) (51.7) (51.9)
Capitalised costs 0.3 0.6 0.5
------------------------ ---------------- ---------------- --------------
Non-current borrowings (45.4) (51.1) (51.4)
------------------------ ---------------- ---------------- --------------
Total borrowings (45.5) (51.3) (51.7)
Preference stock (0.5) (0.5) (0.5)
Total debt (46.0) (51.8) (52.2)
------------------------ ---------------- ---------------- --------------
10. Called up share capital
At 30 At 30 At 31
September September March
2020 2019 2020
GBPm GBPm GBPm
---------------------------- ----------- ----------- -------
Ordinary shares of 5p each 11.3 11.3 11.3
---------------------------- ----------- ----------- -------
At 30 September 2020, the issued ordinary share capital
comprised 225,417,740 ordinary shares of 5p each (30 September
2019: 225,417,740 shares).
11. Capital commitments
At 30 September 2020 capital expenditure contracted for but not
provided for in these accounts amounted to GBP1.0m (30 September
2019: GBP0.9m).
12. Related party transactions
Transactions between the Company and its wholly owned
subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed.
13. Discontinued operations
In the prior half year the Group sold its shareholding in Renold
Crofts (Pty) Ltd, the legal entity for the South African Torque
Transmission business unit, for GBP0.1m consideration. The results
of the discontinued operations are included as a single line item
in the condensed consolidated income statement for the half year
ended 30 September 2019 and the full year ended 31 March 2020. The
results for the half year ended 30 September 2020 arise from
continuing operations only.
14. 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), including the presentation of the income statement
with 'Adjusted' measures shown separately from statutory items.
Amortisation of acquired intangibles, restructuring costs,
discontinued operations and material one-off items or
remeasurements are identified separately as management seek to
present a measure of performance which is not impacted by material
non-recurring items or items considered non-operational. See Note 4
for a breakdown and explanation of the items excluded from adjusted
profit. 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 comparative to current period 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
----------
-- revenue at constant exchange E Constant exchange rate metrics
rates 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
--------------------------------------
-- adjusted operating profit G
margin at constant exchange rates
----------------------------------- ---------- --------------------------------------
-- EBITDA H EBITDA is a widely utilised
measure of profitability,
adjusting to remove non-cash
depreciation and amortisation
charges
--------------------------------------
-- adjusted EBITDA I
----------------------------------- ---------- --------------------------------------
-- net debt Net debt, leverage and gearing
J are used to assess the level
of borrowings within the Group
and are widely used in capital
markets analysis
--------------------------------------
-- leverage ratio K
--------------------------------------
-- gearing ratio L
----------------------------------- ---------- --------------------------------------
-- legacy pension cash costs M 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 measure as
follows:
(A) Adjusted operating profit
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
-------------------------------------------- -------- -------- ----------
Statutory operating profit from continuing
operations 5.3 6.3 10.1
Add back:
Restructuring costs - 0.9 2.4
Amortisation of acquired intangible
assets 0.5 0.5 0.9
Adjusted operating profit 5.8 7.7 13.4
-------------------------------------------- -------- -------- ----------
(B) Adjusted profit before taxation
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
--------------------------------------- -------- -------- ----------
Statutory profit before taxation from
continuing operations 2.8 3.5 4.9
Add back:
Restructuring costs - 0.9 2.4
Amortisation of acquired intangible
assets 0.5 0.5 0.9
Adjusted profit before taxation 3.3 4.9 8.2
--------------------------------------- -------- -------- ----------
(C) Adjusted earnings per share
Adjusted EPS is reconciled to statutory EPS in Note 7.
(D) Return on sales
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
--------------------------- -------- -------- ----------
Adjusted operating profit 5.8 7.7 13.4
Revenue 81.5 98.2 189.4
Return on sales % 7.1% 7.8% 7.1%
--------------------------- -------- -------- ----------
(E),(F) & (G) Revenue, adjusted operating profit and
adjusted operating profit margin at constant exchange rates
Head office
Torque costs
Period ended 30 September Chain Transmission and eliminations Consolidated
2020 GBPm GBPm GBPm GBPm
----------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 5.7 2.5 (2.4) 5.8
Revenue 62.5 19.0 - 81.5
----------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin % 9.1% 13.2% - 7.1%
----------------------------- ------ -------------- ------------------ -------------
Head office
Period ended 30 September Torque costs
2019 Chain Transmission and eliminations Consolidated
(re-presented(1) ) GBPm GBPm GBPm GBPm
---------------------------------- ------ -------------- ------------------ -------------
External revenue from continuing
operations 76.5 21.7 - 98.2
Foreign exchange retranslation (0.6) (0.2) - (0.8)
---------------------------------- ------ -------------- ------------------ -------------
Revenue at constant exchange
rates 75.9 21.5 - 97.4
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 8.1 2.4 (2.8) 7.7
Foreign exchange retranslation - (0.1) 0.1 -
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
at constant exchange rates 8.1 2.3 (2.7) 7.7
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin at constant exchange
rates % 10.7% 10.7% - 7.9%
---------------------------------- ------ -------------- ------------------ -------------
Torque
Year ended 31 March 2020 Head office
costs
Chain Transmission and eliminations Consolidated
(re-presented(1) ) GBPm GBPm GBPm GBPm
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
External revenue from continuing
operations 147.9 41.5 - 189.4
Foreign exchange retranslation 0.4 0.1 - 0.5
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Revenue at constant exchange
rates 148.3 41.6 - 189.9
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Adjusted operating profit 13.8 5.3 (5.7) 13.4
Foreign exchange retranslation - - - -
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Adjusted operating profit
at constant exchange rates 13.8 5.3 (5.7) 13.4
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
Adjusted operating profit
margin at constant exchange
rates % 9.3% 12.7% - 7.1%
---------------------------------- ------ --- -------------- --- ------------------ --- -------------
(1) The divisional split for the period ended 30 September 2019
has been re-presented due to the split of one Chain business unit
into two, of which one has been allocated to Torque
Transmission.
(H & I) EBITDA and adjusted EBITDA (earnings before
interest, taxation, depreciation and amortisation)
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
-------------------------------------------- -------- -------- ----------
Statutory operating profit from continuing
operations 5.3 6.3 10.1
Depreciation and amortisation 5.7 5.6 11.4
-------------------------------------------- -------- -------- ----------
EBITDA 11.0 11.9 21.5
Add back:
Restructuring costs - 0.9 2.4
Adjusted EBITDA 11.0 12.8 23.9
-------------------------------------------- -------- -------- ----------
(J) Net debt
Net debt is reconciled to the statutory balance sheet in Note
9.
(K) Leverage ratio
At 30 At 30 At 31
September September March
2020 2019 2020
GBPm GBPm GBPm
----------------------------------- ----------- ----------- ----------
Net debt (see Note 9) 26.4 34.2 36.6
H2 2018/19 Adjusted EBITDA - 11.4 -
H1 2019/20 Adjusted EBITDA - 12.8 12.8
H2 2019/20 Adjusted EBITDA 11.1 - 11.1
H1 2020/21 Adjusted EBITDA 11.0 - -
----------------------------------- ----------- ----------- ----------
12 months rolling adjusted EBITDA 22.1 24.2 23.9
----------------------------------- ----------- ----------- ----------
Leverage ratio 1.2 times 1.4 times 1.5 times
----------------------------------- ----------- ----------- ----------
(L) Gearing ratio
At 30 At 30 At 31
September September March
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------
Net debt (see Note 9) 26.4 34.2 36.6
Equity attributable to equity holders
of the parent (11.5) (11.8) (0.4)
Net debt (see Note 9) 26.4 34.2 36.6
---------------------------------------- ----------- ----------- -------
Total capital plus net debt 14.9 22.4 36.2
---------------------------------------- ----------- ----------- -------
Gearing ratio % 177% 153% 101%
---------------------------------------- ----------- ----------- -------
(M) Legacy pension cash costs
First half Full year
2020/21 2019/20 2019/20
GBPm GBPm GBPm
----------------------------------------- -------- -------- ----------
Cash contributions to pension schemes 0.5 1.2 3.2
Pension payments in respect of unfunded
schemes 0.6 0.6 1.2
Scheme administration costs 0.4 0.4 0.8
1.5 2.2 5.2
----------------------------------------- -------- -------- ----------
Ends
[1] See overleaf for reconciliation of reported, constant exchange rate and adjusted figures
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