TIDMRNO
RNS Number : 8612R
Renold PLC
10 November 2021
Renold plc
Interim results for the half year ended 30 September 2021
("Renold", the "Company" or, together with its subsidiaries, the
"Group")
Significant revenue growth...Record orderbook...Strong cash
generation
Renold (AIM: RNO), a leading international supplier of
industrial chains and related power transmission products,
announces its interim results for the six month period ended 30
September 2021.
Financial highlights
Half year ended
--------------------------------------------- --------------
30 September 30 September Increase
2021 2020 / (decrease)
GBPm GBPm %
Adjusted results at constant exchange
rates(1)
----------------------------------------- ---------------------- --------------------- --------------
Revenue at constant exchange rates 95.3 78.1 22%
----------------------------------------- ---------------------- --------------------- --------------
Adjusted operating profit at constant
exchange rates 8.2 5.5 49%
----------------------------------------- ---------------------- --------------------- --------------
Return on sales(2) at constant exchange
rates 8.6% 7.0%
----------------------------------------- ---------------------- --------------------- --------------
Adjusted earnings per share 2.3p 1.1p 109%
----------------------------------------- ---------------------- --------------------- --------------
Net debt(3) 13.9 26.4 (47%)
----------------------------------------- ---------------------- --------------------- --------------
Results at actual exchange rates
----------------------------------------- ---------------------- --------------------- --------------
Revenue 95.3 81.5 17%
----------------------------------------- ---------------------- --------------------- --------------
Adjusted operating profit 8.2 5.8 41%
----------------------------------------- ---------------------- --------------------- --------------
Return on sales(2) 8.6% 7.1%
----------------------------------------- ---------------------- --------------------- --------------
Operating profit 8.2 5.3 55%
----------------------------------------- ---------------------- --------------------- --------------
Profit before tax 6.2 2.8 121%
----------------------------------------- ---------------------- --------------------- --------------
Basic earnings per share 2.3p 0.9p 156%
----------------------------------------- ---------------------- --------------------- --------------
-- Revenue up 17% to GBP95.3m (22% at constant exchange rates).
-- Adjusted operating profit up 41% (49% at constant exchange
rates) to GBP8.2m (2020: GBP5.8m).
-- Excluding one-off items adjusted operating profit of
GBP7.0m(4) up 21% and return on sales of 7.4% up 30bps.
-- Net debt GBP13.9m, GBP4.5m reduction in the period; ratio to
adjusted EBITDA 0.6x (31 March 2021: 0.9x).
-- Adjusted EPS 2.3p (2020: 1.1p); Excluding one-off items Adjusted EPS 2.0p
Business highlights
-- The Group's markets recovered strongly during the first half,
as activity levels rebounded from Covid impact, returning to 96% of
pre-pandemic level.
-- Strong cash generation, with continuing focus on working
capital and cost control, but allowing for inventory increases due
to lengthened supply chains and a gradual restoration of capital
expenditure.
-- Group order intake in the period GBP113.0m, up 48.8% YoY as
reported (54.9% at constant exchange rates).
-- Orderbook at 30 September 2021, GBP72.1m, is a record high
for the Group (30 September 2020: GBP46.5m).
-- Completed bolt-on acquisition of the conveyor chain business
of Brooks Ltd, which is performing ahead of expectations.
(1) See below for reconciliation of actual rate, constant
exchange rate and adjusted figures
(2) Adjusted operating profit divided by revenue
(3) See Note 9 for a reconciliation of net debt which excludes
lease liabilities
(4) Non-recurring items include GBP1.7m of US Payroll Protection
Program (PPP) loan forgiveness offset by GBP0.5m of dilapidation
charges relating to closed sites
Robert Purcell, Chief Executive of Renold plc, said:
" The strong trading momentum experienced in the fourth quarter
of the last financial year has continued into the first half,
resulting in growth of both revenues and profitability. Despite the
widely reported global supply chain and inflationary pressures that
remain present, particularly with respect to materials, transport
and energy costs, Renold continues to benefit from geographic,
customer and market sector diversity. With a record order book at
the period end, coupled with the strategic initiatives previously
implemented, we approach the second half with confidence, but
cognisant of the very volatile and inflationary world we operate
in. "
Reconciliation of reported, constant exchange rate and adjusted
results
Revenue Operating profit Earnings per
share
-------------------- -------------------- --------------------
H1 H1 H1 H1 H1 H1
2021/22 2020/21 2021/22 2020/21 2021/22 2020/21
GBPm GBPm GBPm GBPm pence pence
------------------------------- --------- --------- --------- --------- --------- ---------
Reported at actual exchange
rates 95.3 81.5 8.2 5.3 2.3 0.9
Amortisation of acquired
intangible assets - - - 0.5 - 0.2
------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted 95.3 81.5 8.2 5.8 2.3 1.1
Exchange impact - (3.4) - (0.3) - -
------------------------------- --------- --------- --------- --------- --------- ---------
Adjusted at constant exchange
rates 95.3 78.1 8.2 5.5 2.3 1.1
------------------------------- --------- --------- --------- --------- --------- ---------
ENQUIRIES:
Renold plc IFC Advisory Limited
Robert Purcell, Chief Executive Tim Metcalfe
Jim Haughey, Group Finance Director Graham Herring
renold@investor-focus.co.uk
0161 498 4500 020 3934 6630
Nominated Adviser and Joint Broker Joint Broker
Peel Hunt LLP F innCap Limited
Mike Bell Ed Frisby / Tim Harper (Corporate
Finance)
Ed Allsopp Andrew Burdis / Harriet Ward
(ECM)
020 7418 8900 020 7220 0500
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
The Group's markets recovered strongly during the first half, as
activity levels continued to rebound in the aftermath of the
Covid-19 pandemic. Group order intake during the period was
GBP113.0m, an increase of 48.8% on a reported basis and 54.9% at
constant exchange rates, over the comparative prior year period.
Excluding the recently announced GBP11.0m long term military
contract, order intake for the period increased by 34.2% or 39.7%
at constant exchange rates. The resultant order book of GBP72.1m,
represents a record high for the Group (30 September 2020:
GBP46.5m).
Conversion of orders into sales was also encouraging, with Group
revenue for the period of GBP95.3m, an increase of 16.9% on a
reported basis and 22.0% at constant exchange rates, over the
comparative prior year period.
Adjusted operating profit increased to GBP8.2m (2020: GBP5.8m)
with an adjusted operating profit margin of 8.6% (2020: 7.1%).
Operating profit increased to GBP8.2m (2020: GBP5.3m), with
operating profit margins increasing from 6.5% to 8.6%.
Adjusted
External operating Return
revenue profit on sales
Half year ended 30 September 2021 GBPm GBPm %
----------------------------------- --------- ----------- ----------
Reported 95.3 8.2 8.6
US PPP Loan forgiveness - (1.7) -
Costs relating to closed sites - 0.5 -
----------------------------------- --------- ----------- ----------
Reported excluding non-recurring
items 95.3 7.0 7.4
----------------------------------- --------- ----------- ----------
During the period the Group benefitted from the forgiveness of
GBP1.7m of loans received under the US Government's Payroll
Protection Program, offsetting this, the Group also incurred
GBP0.5m of non-recurring costs relating to closed sites, including
repair and maintenance expenditure. Excluding these one-off items
adjusted operating profit from continuing operations increased to
GBP7.0m (2020: GBP5.8m), with corresponding operating profit
margins rising to 7.4% (2020: 7.0%) despite the impact of the
widely reported industry headwinds, including the impact
experienced on the supply chain, raw material availability and
inflation.
The Group continued to benefit from the impact of the
significant efforts undertaken in the current and previous years to
lower the fixed cost base, increasing flexibility and operational
leverage. The Group has successfully managed a period of
significant supply chain disruption to materials and
transportation, both in terms of availability, lead times and
increased prices, and whilst price increases have been passed
through to customers, the Group expects further pressure on
materials, energy and transportation to continue into the second
half of the year.
Renold continues to make every effort to increase performance
through specific projects aimed at better operational efficiency,
through improved design and standardisation of products, better
utilisation of machinery and workforce, including more flexible
working practices, and leveraging the benefits of improved
procurement strategies.
The Group reduced net debt by GBP4.5m during the period, to
GBP13.9m (31 March 2021: GBP18.4m).
Acquisition
On 8 April 2021 Renold completed the acquisition of the conveyor
chain business of Brooks Ltd ("Brooks") in Manchester, UK, for a
total consideration of GBP0.7m, including GBP0.4m of deferred
consideration. The business has been fully integrated into the
Renold UK Service centre in Manchester. At the time of the
acquisition, for the full year Brooks was expected to contribute
incremental sales and Group operating profit of c.GBP1.0m and
c.GBP0.2m respectively. Pleasingly, Brooks is performing ahead of
these expectations.
Business and Financial Review
Revenue Adjusted operating Adjusted operating
at constant exchange profit at constant margin at constant
rates exchange rates exchange rates
------------------------ ------------------------ ---------------------- ----------------------
2021/22 2020/21 2021/22 2020/21 2021/22 2020/21
Six month period GBPm GBPm GBPm GBPm % %
Chain 76.6 60.7 9.0 5.5 11.7 9.1
Torque Transmission 20.6 19.8 1.8 2.4 8.7 12.1
Head office costs/
Intra group sales
elimination (1.9) (2.4) (3.8) (2.4) - -
------------------------ ----------- ----------- ---------- ---------- ---------- ----------
Total excluding
non-recurring items 95.3 78.1 7.0 5.5 7.4 7.0
Non-recurring items(1) - - 1.2 - - -
------------------------ ----------- ----------- ---------- ---------- ---------- ----------
Total 95.3 78.1 8.2 5.5 8.6 7.0
------------------------ ----------- ----------- ---------- ---------- ---------- ----------
(1) Non-recurring items have been added back to the underlying
business segments, these include to GBP1.7m of PPP loan forgiveness
in the Chain division and GBP0.5m of dilapidation charges on closed
sites in Head office costs.
Chain
The Chain division's revenue at constant exchange rates
increased by 26.2% (GBP15.9m) to GBP76.6m.
Revenue recovered strongly in most regions:
-- Europe, recorded a 41.1% increase driven by strong domestic
demand and being our main production centre also benefited from
increased demand in other geographies, especially from the US.
-- The Americas, increased by 30.9%, with strong demand from the
US OEM markets, especially for fork lift truck chain.
-- Australasia's revenue was broadly unchanged, as the business
benefitted greatly last year from the Australian markets move to
more domestically produced manufactured goods, which largely offset
the impact of Covid.
-- India recovered strongly, and despite being subject to a
pandemic related lock down in the current half year, recorded 64.2%
revenue growth over the prior year comparator.
-- Domestic sales revenue in China increased by 22.5%, albeit
from a low base, while strong demand from Europe, the US and
notably India, resulted in an overall increase in revenue of 36.9%.
Significant progress continues to be made in improving the
performance of the new factory in Jintan.
Divisional adjusted operating profit before non-recurring items
was GBP9.0m, GBP3.5m higher than the prior year at constant
exchange rates. The adjusted operating profit margin before
non-recurring items was 11.7% (2020: 9.1%). Including the impact of
non-recurring items, adjusted operating profit and margins were
GBP10.7m and 13.9% respectively.
Order intake at constant exchange rates increased by 49.8% to
GBP83.3m, resulting in book to bill (ratio of orders to sales) for
the first half of the year of 108.8% (2020: 91.7%).
Torque Transmission
Divisional revenues of GBP20.6m were GBP0.8m higher than in the
prior first half year mainly due to increasing activity on the
contract to supply couplings for the Royal Navy. The Group
announced it had secured an GBP11m order for the second phase of
this contract in July.
Divisional profit reduced by GBP0.6m to GBP1.8m mainly because
of the one-off benefit of UK government Covid support of GBP0.7m in
the first half of last financial year. Excluding this, divisional
operating profit advanced by GBP0.1m relative to the first half of
last year, reflecting the higher revenues.
Momentum in this division, which has a later trading cycle than
our Chain business, continues to be positive.
Cash Flow and Net Debt
2021/22 2020/21
Half year to 30 September GBPm GBPm
------------------------------------------------ -------- --------
Adjusted operating profit(1) 8.2 5.3
Add back depreciation and amortisation 4.9 5.7
------------------------------------------------ -------- --------
Adjusted EBITDA 13.1 11.0
Movement in working capital 0.5 3.7
Net capital expenditure (1.3) (1.0)
Operating cash flow 12.3 13.7
Income taxes (1.3) 1.0
Pensions cash costs (2.4) (1.1)
Restructuring spend - -
Repayment of principal under lease liabilities (1.4) (1.7)
Financing costs paid (1.0) (1.8)
Consideration paid for acquisition (0.3) -
Employee Benefit Trust share purchases (1.8) -
Other movements/share-based payments 0.4 0.1
------------------------------------------------ -------- --------
Change in net debt(1) 4.5 10.2
Closing net debt(1) (13.9) (26.4)
------------------------------------------------ -------- --------
(1) Adjusted operating profit and the change in net debt in the
period ended 30 September 2021 include the US PPP loan forgiveness
of GBP1.7m.
Cash generation in the first half was strong, with net debt
reducing by GBP4.5m from the position at 31 March 2021, to
GBP13.9m.
A continued and disciplined focus on working capital saw a
GBP6.3m increase in inventory driven by lengthening supply chains
and material cost increases , being offset by a significant
increase in payables. Receivables also increased, but at a rate in
line with the recovery of turnover. Further inflationary pressures
on materials, together with a significant lengthening of the time
to supply product between operating sites, will continue to result
in increased levels of inventory in the second half year. This
coupled with higher input prices will result in a modest increase
in working capital.
Net capital expenditure at GBP1.3m remains well below
pre-pandemic levels as supply chain issues have increased lead
times for machinery purchases. The spend on improving production
capabilities in prior years means that lower levels of maintenance
capex will not impact operational performance. However, the delay
does postpone the significant operational benefits expected from
planned projects. Strategic investments in improved heat treatment,
other production capabilities and the standardised IT system for
the Group continue and are expected to gather pace during the
second half of the year.
Corporation tax payments on account increased to more normal
levels, with a total GBP1.3m tax paid in the first half of the
year. Significant efforts were made last year to review payments on
account, which led to a recovery of GBP1.3m and resulted in a net
tax cash inflow of GBP1.0m in the prior half year.
The Group acquired the conveyor chain business of Brooks Ltd in
Manchester, UK, during the period, for a total consideration of
GBP0.7m, with GBP0.3m paid on completion and GBP0.4m deferred.
Cash financing costs reduced from GBP1.8m in the prior half year
to GBP1.0m this half year, due to the significant reduction in the
average net debt.
During the period the Group acquired shares in the employee
benefit trust, totalling GBP1.8m. This will ensure no dilution when
when share awards vest.
Pensions
The Group has a number of closed defined benefit pension schemes
(accounted for in accordance with IAS 19R 'Employee benefits').
During the pandemic, the Group negotiated a GBP2.8m one-off
reduction in annual contribution levels with the UK pension scheme
trustees. Accordingly, contribution levels returned to normal
levels during the period. The future repayment of the deferred
contributions will commence on 1 April 2022, at approximately
GBP0.6m per annum, for a period of five years, until April
2027.
Cash pension costs are sustainable, having remained consistent
at approximately GBP5.5m for several years. The Group's IAS 19R
retirement benefit obligation decreased from GBP102.4m at 31 March
2021 to GBP100.3m at 30 September 2021.
At 30 September 2021 At 31 March 2021
Overseas Overseas
UK Schemes Schemes Total UK Schemes Schemes Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------- --------- -------- ----------- --------- --------
Total retirement benefit
obligations (75.6) (24.7) (100.3) (77.5) (24.9) (102.4)
Net deferred tax asset 18.9 3.6 22.5 14.7 3.7 18.4
-------------------------------- ----------- --------- -------- ----------- --------- --------
Retirement benefit obligations
net of deferred tax asset (56.7) (21.1) (77.8) (62.8) (21.2) (84.0)
-------------------------------- ----------- --------- -------- ----------- --------- --------
The ongoing subdued levels of corporate bond yields, which
determine discount rates, have resulted in the continuing high
levels of the deficits in the key UK and German schemes. In the UK,
discount rates remained stable at 2.0% (31 March 2021: 2.0%) while
the increase in the CPI inflation assumption, increasing to 2.9%
(31 March 2021: 2.7%), has the effect of increasing the present
value of future liabilities by GBP5.2m. Strong asset returns helped
to mitigate the impact of the change in the financial assumptions,
with the net UK deficit decreasing by GBP1.9m to GBP75.6m.
Pension liabilities in non-UK schemes reduced by GBP0.2m to
GBP24.7m.
The net financing expense (a non-cash item) was GBP0.9m (2020:
GBP1.0m).
Dividend
In light of the widely reported economic headwinds, including
the impact on its supply chain, raw material availability,
inflation and 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. During the first half of the
year, manufacturing facilities in Western Europe, the USA, China
and Australia remained open. Facilities in China and Malaysia were
shut down for a period of time due to national restrictions, but
had fully reopened prior to September 2021, and have remained open
since. Across the Group, public health measures advised by
governments are being followed. The Group continues to closely
monitor operating costs, 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, including significant material and energy supply issues,
and transport delays, and continuing inflationary pressures.
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 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 40-46 of the 2020/21
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, energy 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
the Group'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 next triennial valuation will have an
effective date of 5 April 2022.
Summary
Overall, activity in the first half was strong and in line with
expectations, showing a good recovery as the worst effects of the
pandemic receded. Whilst this performance is expected to continue,
supported by the record order book at the period end, the widely
reported global supply chain issues are continuing to cause margin
pressure, with significant inflationary trends being experienced,
particularly with respect to materials, transport and energy costs.
The Company is working to mitigate these headwinds as far as
possible and the Group enjoys significant geographic, customer and
sector diversity. With the Group benefiting from the strategic
initiatives previously implemented, we are well placed for the
future, with a robust business well positioned as markets continue
to recover from the effects of the pandemic.
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 2021. 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
10 November 2021 10 November 2021
Condensed Consolidated Income Statement
for the six months ended 30 September 2021
First half Full year
2020/21 2020/21
First half (unaudited) (audited)
2021/22
(unaudited)
Note GBPm GBPm GBPm
------------------------------------- ----- ------------- ------------- -----------
Revenue 3 95.3 81.5 165.3
Operating costs before adjusting
items (87.1) (75.7) (154.1)
------------------------------------- ----- ------------- ------------- -----------
Adjusted(1) operating profit 8.2 5.8 11.2
------------------------------------- ----- ------------- ------------- -----------
Adjusting items
Amortisation of acquired intangible
assets 4 - (0.5) (0.7)
Operating profit 8.2 5.3 10.5
----- ------------- -------------
Net financing costs 5 (2.0) (2.5) (4.6)
------------------------------------- ----- ------------- ------------- -----------
Profit before tax 6.2 2.8 5.9
Taxation 6 (1.2) (0.8) (2.1)
------------------------------------- ----- ------------- ------------- -----------
Profit for the period 5.0 2.0 3.8
------------------------------------- ----- ------------- ------------- -----------
Attributable to:
Owners of the parent 5.0 2.0 3.8
------------------------------------- ----- ------------- ------------- -----------
Earnings per share from continuing
operations 7
Basic 2.3p 0.9p 1.7p
Diluted 2.1p 0.9p 1.6p
Basic adjusted earnings per share 2.3p 1.1p 2.0p
Diluted adjusted earnings per share 2.1p 1.1p 1.9p
------------------------------------- ----- ------------- ------------- -----------
(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 15 to the financial
statements.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 September 2021
First half Full year
2020/21 2020/21
First half (unaudited) (audited)
2021/22
(unaudited)
GBPm GBPm GBPm
--------------------------------------------- ---- ------------- ------------- -----------
Profit for the period 5.0 2.0 3.8
Other comprehensive income/(expense):
Items that may be reclassified to
the income statement in subsequent
periods:
Exchange differences on translation
of foreign operations 1.1 0.3 (5.8)
Gain/(loss) on hedges of the net investment
in foreign operations (0.1) 0.2 0.7
Cash flow hedges:
Fair value gain/(loss) arising on
cash flow hedges during the period (0.3) 0.1 (0.1)
Less: Cumulative gain arising on cash
flow hedges reclassified
to profit and loss 0.1 0.3 0.3
Income tax relating to items that
may be reclassified subsequently to
profit or loss 0.1 (0.3) -
--------------------------------------------------- ------------- ------------- -----------
0.9 0.6 (4.9)
-------------------------------------------------- ------------- ------------- -----------
Items not to be reclassified to the
income statement in subsequent periods:
Re-measurement gains/(losses) on retirement
benefit obligations 1.0 (17.1) (5.6)
Tax on re-measurement losses/(gains)
on retirement benefit obligations
- excluding impact of statutory rate
change (0.2) 3.4 1.0
Effect of changes in statutory tax
rate on deferred tax assets 4.0 - -
--------------------------------------------- ---- ------------- ------------- -----------
4.8 (13.7) (4.6)
-------------------------------------------------- ------------- ------------- -----------
Other comprehensive income/(expense)
for the period, net of tax 5.7 (13.1) (9.5)
--------------------------------------------------- ------------- ------------- -----------
Total comprehensive income/(expense)
for the period, net of tax 10.7 (11.1) (5.7)
--------------------------------------------------- ------------- ------------- -----------
Attributable to:
Owners of the parent 10.7 (11.1) (5.7)
--------------------------------------------------- ------------- ------------- -----------
Condensed Consolidated Statement of Financial Position
as at 30 September 2021
31 March
30 September 30 September
2021 2020 2021
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------- ------------- -----------
Assets
Non-current assets
Goodwill 22.2 23.5 21.7
Other intangible fixed assets 6.3 7.3 6.1
Property, plant and equipment 46.7 52.0 47.8
Right-of-use assets 10.8 11.4 10.1
Deferred tax assets 25.3 24.2 21.0
111.3 118.4 106.7
--------------------------------------- ----- ------------- ------------- -----------
Current assets
Inventories 44.7 41.8 37.7
Trade and other receivables 37.8 31.5 30.3
Current tax 0.1 0.1 0.2
Derivative financial instruments - 0.1 -
Cash and cash equivalents 9 11.5 19.6 19.9
--------------------------------------- ----- ------------- ------------- -----------
94.1 93.1 88.1
--------------------------------------- ----- ------------- ------------- -----------
Total assets 205.4 211.5 194.8
--------------------------------------- ----- ------------- ------------- -----------
Liabilities
Current liabilities
Borrowings 9 (0.1) (0.1) (2.3)
Trade and other payables (45.5) (32.5) (31.5)
Lease liabilities (2.2) (3.4) (2.5)
Current tax (2.9) (1.6) (2.3)
Derivative financial instruments (0.3) - (0.1)
Provisions (0.2) (0.7) (1.4)
--------------------------------------- ----- ------------- ------------- -----------
(51.2) (38.3) (40.1)
--------------------------------------- ----- ------------- ------------- -----------
Net current assets 42.9 54.8 48.0
--------------------------------------- ----- ------------- ------------- -----------
Non-current liabilities
Borrowings 9 (24.8) (45.4) (35.5)
Preference stock 9 (0.5) (0.5) (0.5)
Trade and other payables (5.7) (5.2) (5.4)
Lease liabilities (13.3) (13.3) (12.9)
Deferred tax liabilities (4.2) (4.7) (4.1)
Retirement benefit obligations 8 (100.3) (115.6) (102.4)
Provisions (2.1) - -
(148.8) (184.7) (160.8)
--------------------------------------- ----- ------------- ------------- -----------
Total liabilities (201.9) (223.0) (200.9)
--------------------------------------- ----- ------------- ------------- -----------
Net assets/(liabilities) 3.3 (11.5) (6.1)
--------------------------------------- ----- ------------- ------------- -----------
Equity
Issued share capital 10 11.3 11.3 11.3
Share premium - 30.1 30.1
Capital reserve - 15.4 15.4
Currency translation reserve 7.9 12.1 6.8
Other reserves (2.1) 0.1 (0.1)
Retained earnings (13.8) (80.5) (69.6)
--------------------------------------- ----- ------------- ------------- -----------
Total shareholders' surplus/(deficit) 3.3 (11.5) (6.1)
--------------------------------------- ----- ------------- ------------- -----------
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 September 2021
First half First half
Full year
2021/22 2020/21 2020/21
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
Cash generated by operations (Note
9) 10.1 13.7 26.0
Income taxes refunded/(paid) (1.3) 1.0 0.7
------------------------------------------- ------------- ------------- -----------
Net cash flows from operating activities 8.8 14.7 26.7
------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Proceeds from property disposals 0.1 0.2 0.2
Purchase of property, plant and equipment (0.8) (1.0) (2.3)
Purchase of intangible assets (0.6) (0.2) (0.8)
Consideration paid for acquisition (0.3) - -
------------------------------------------- ------------- ------------- -----------
Net cash flows from investing activities (1.6) (1.0) (2.9)
------------------------------------------- ------------- ------------- -----------
Cash flows from financing activities
Repayment of principal under lease
liabilities (1.4) (1.7) (3.2)
Financing costs paid (0.8) (1.8) (2.0)
Own shares purchased (1.8) - -
Proceeds from borrowings - 2.8 2.8
Repayment of borrowings (9.2) (9.0) (19.9)
------------------------------------------- ------------- ------------- -----------
Net cash flows from financing activities (13.2) (9.7) (22.3)
------------------------------------------- ------------- ------------- -----------
Net (decrease)/increase in cash and
cash equivalents (6.0) 4.0 1.5
Net cash and cash equivalents at
beginning of period 17.3 15.1 15.1
Effects of exchange rate changes (0.1) - 0.7
------------------------------------------- ------------- ------------- -----------
Net cash and cash equivalents at
end of period 11.2 19.1 17.3
------------------------------------------- ------------- ------------- -----------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 September 2021
Share Currency Capital
Share premium Retained translation redemption Other Total
capital account earnings reserve reserve reserves equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
At 1 April 2020 11.3 30.1 (68.8) 11.9 15.4 (0.3) (0.4)
Profit for the year - - 3.8 - - - 3.8
Other comprehensive
income/(expense) - - (4.6) (5.1) - 0.2 (9.5)
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
Total comprehensive
income/(expense)
for the year - - (0.8) (5.1) - 0.2 (5.7)
Share-based payments - - - - - - -
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
At 31 March 2021 11.3 30.1 (69.6) 6.8 15.4 (0.1) (6.1)
Profit for the period - - 5.0 - - - 5.0
Other comprehensive
income/(expense) - - 4.8 1.1 - (0.2) 5.7
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
Total comprehensive
income/(expense)
for the period - - 9.8 1.1 - (0.2) 10.7
Own shares purchased - - - - - (1.8) (1.8)
Capital reorganisation (Note 11) - (30.1) 45.5 - (15.4) - -
Share-based payments - - 0.5 - - - 0.5
At 30 September 2021 11.3 - (13.8) 7.9 - (2.1) 3.3
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
At 1 April 2020 11.3 30.1 (68.8) 11.9 15.4 (0.3) (0.4)
Profit for the period - - 2.0 - - - 2.0
Other comprehensive
income/(expense) - - (13.7) 0.2 - 0.4 (13.1)
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
Total comprehensive
income/(expense)
for the period - - (11.7) 0.2 - 0.4 (11.1)
Share-based payments - - - - - - -
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
At 30 September 2020 11.3 30.1 (80.5) 12.1 15.4 0.1 (11.5)
--------------------------------- --------- --------- ---------- ------------- ------------ ---------- --------
Included in retained earnings is GBP1.3m (31 March 2021:
GBP0.8m) relating to a share option reserve.
The other reserves are stated after deducting GBP1.8m (31 March
2021: GBP0.035m) relating to shares held in the Renold plc Employee
Benefit Trust. The Renold Employee Benefit Trust holds Renold plc
shares and satisfies awards made under various employee incentive
schemes when issuance of new shares is not appropriate.
At 30 September 2021 the Renold Employee Benefit Trust held
7,622,509 (31 March 2021: 199,790) ordinary shares of 5p each and,
following recommendations by the employer, are provisionally
allocated to satisfy awards under employee incentive schemes. At 30
September 2021 the market value of these shares was GBP1.9m (31
March 2021: GBP0.035m).
Notes to the Interim Condensed Consolidated Financial
Statements
1. Corporate information
The interim condensed consolidated financial statements for the
six months to 30 September 2021 were approved by the Board on 10
November 2021. 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 2021 have been filed with the Registrar of
Companies. The auditor's report on those accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain
any statement under Section 498(2) or Section 498(3) of the
Companies Act 2006.
2. Accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 30 September 2021 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 2021.
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 2021, 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
GBPnil (31 March 2021: GBP4.0m; 30 September 2020: GBP2.3m) of
government assistance across its units in the form of employee
support schemes. In line with IAS 20, this income was 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). The relevant standards which are deemed to
apply to Renold are documented below.
During April 2021 a finalised decision by the IFRS
Interpretations Committee regarding configuration and customisation
costs in Cloud Computing Arrangements (Software as a Service,
'SaaS') under IAS 38 was made. This new announcement offers
clarification of the treatment of how a customer should account for
the costs of configuring or customising the supplier's application
software in a SaaS arrangement that is determined to be a service
contract. The Group intends to perform an assessment by year end to
determine which costs should continue to be capitalised, and those
which should be expensed.
Going concern
The condensed consolidated financial statements have been
prepared on a going concern basis. In determining the appropriate
basis of preparation of the condensed consolidated financial
statements, the Directors are required to consider whether the
Group can continue in operational existence for the foreseeable
future. The business and financial review included in these Interim
results provides a summary of the Group's financial position, cash
flows, liquidity position and borrowings.
The current and plausible future impact of Covid-19 on the
Group's activities and performance, in addition to other factors
and risks, has been considered by the Board of Directors in
preparing its going concern assessment. The Group has modelled
potential severe but plausible impacts on revenues, profits and
cash flows in its assessment. In preparing its assessment, the
Directors have considered the actual impact that Covid-19 has had
on the business since the beginning of the outbreak and the related
decline in revenues.
The key covenants attached to the Group's multi-currency
revolving credit facility relate to leverage (net debt to EBITDA)
and interest cover, which are measured on a pre-IFRS 16 basis. The
maximum leverage ratio permitted under the covenants is 2.5x and
the minimum interest cover ratio permitted is 4.0x. In the severe
but plausible downside scenario modelled, the Group continues to
maintain sufficient liquidity and meets its gearing and interest
cover covenants under the facility with substantial headroom.
In addition to the above scenarios, management has performed
reverse stress testing over the model to determine the extent of
downturn which would result in a breach of covenants. Assuming
similar levels of cash conversion as seen in recent months, a
monthly revenue decline compared with the year ended 31 March 2019,
well in excess of the maximum decline experienced in any month over
the last 18 months would need to persist throughout the going
concern period for a covenant breach to occur, which is considered
very unlikely. This stress test also does not incorporate
additional mitigating actions or cash preservation responses, which
the Group would implement in the event of a severe and extended
revenue decline.
Following this assessment, the Directors have formed a
judgement, at the time of approving the condensed consolidated
financial statements, that there are no material uncertainties that
cast doubt on the Group's going concern status and that it is a
reasonable expectation that the Group has adequate resources to
continue in operational existence for at least the next 12 months.
For this reason, the Directors continue to adopt the going concern
basis in preparing the condensed 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 2021, namely:
-- taxation
-- retirement benefit obligations
-- right-of-use assets
Prior to the adoption of IFRS 16 'Leases', the Group had
previously assessed operating lease arrangements at the Bredbury
(UK) facility as onerous, with an onerous lease provision recorded
in the Group's balance sheet accordingly. On adoption of IFRS 16
the onerous lease provision, GBP2.7m on transition date for this
site, was reclassified as a reduction to the opening value of the
associated right-of-use asset. During the six months ended 30
September 2021, GBP0.6m of the original onerous lease provision has
been reclassified from the right-of-use asset to provisions,
representing the element of the GBP2.7m brought forward onerous
lease provision relating to expected remediation costs at the site.
At the end of the current reporting period, the resulting value of
the Bredbury right-of-use asset is based on assumptions upon future
sub-let income streams and the discount rate used.
-- 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 2021.
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
products through Chain National Sales Companies (NSCs); and
-- The Torque Transmission segment manufactures and sells torque
transmission products, such as gearboxes and couplings .
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 2021 were
as follows:
Head office
Torque costs(1)
Period ended 30 September Chain(2) Transmission and eliminations Consolidated
2021 GBPm GBPm GBPm GBPm
------------------------------------- --------- -------------- ------------------ -------------
Revenue
External customer 76.2 19.1 - 95.3
Inter-segment 0.4 1.5 (1.9) -
------------------------------------- --------- -------------- ------------------ -------------
Total revenue 76.6 20.6 (1.9) 95.3
------------------------------------- --------- -------------- ------------------ -------------
Adjusted operating profit/(loss) 10.7 1.8 (4.3) 8.2
Amortisation of acquired
intangible assets - - - -
------------------------------------- --------- -------------- ------------------ -------------
Operating profit/(loss) 10.7 1.8 (4.3) 8.2
Net financing costs (2.0)
------------------------------------- --------- -------------- ------------------ -------------
Profit before tax 6.2
Taxation (1.2)
Profit after tax 5.0
------------------------------------- --------- -------------- ------------------ -------------
Other disclosures
Working capital 32.5 8.0 (3.5) 37.0
Capital expenditure 0.5 0.4 0.4 1.3
Depreciation and amortisation
included in adjusted operating
profit/(loss) 3.1 0.9 0.9 4.9
Amortisation of acquired
intangibles - - - -
------------------------------------- --------- -------------- ------------------ -------------
Total depreciation and amortisation 3.1 0.9 0.9 4.9
------------------------------------- --------- -------------- ------------------ -------------
(1) The head office operating loss includes non-recurring costs
of GBP0.5m relating to dilapidations charges on closed sites.
(2) Chain operating profit includes non-recurring income of
GBP1.7m relating to US PPP loan forgiveness.
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
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
------------------------------------- ------ -------------- ------------------ -------------
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 15
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 15.
Head office
Torque costs
Period ended 30 September Chain Transmission and eliminations Consolidated
2020 GBPm GBPm GBPm GBPm
---------------------------------- ------ -------------- ------------------ -------------
Revenue
External revenue 62.5 19.0 - 81.5
Inter-segment 0.8 1.6 (2.4) -
Foreign exchange retranslation (2.6) (0.8) - (3.4)
---------------------------------- ------ -------------- ------------------ -------------
Total revenue at constant
exchange rates 60.7 19.8 (2.4) 78.1
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss)
at constant exchange rates 5.7 2.5 (2.4) 5.8
Foreign exchange retranslation (0.2) (0.1) - (0.3)
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss)
at constant exchange rates 5.5 2.4 (2.4) 5.5
---------------------------------- ------ -------------- ------------------ -------------
The segment results for the year ended 31 March 2021 were as
follows:
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Year ended 31 March 2021 GBPm GBPm GBPm GBPm
------------------------------------- ------ -------------- ------------------ -------------
Revenue
External Customer 128.9 36.4 - 165.3
Inter-segment 1.1 2.7 (3.8) -
------------------------------------- ------ -------------- ------------------ -------------
Total revenue 130.0 39.1 (3.8) 165.3
------------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss) 13.3 5.0 (7.1) 11.2
Amortisation of acquired
intangible assets (0.7) - - (0.7)
------------------------------------- ------ -------------- ------------------ -------------
Operating profit/(loss) 12.6 5.0 (7.1) 10.5
Net financing costs (4.6)
------------------------------------- ------ -------------- ------------------ -------------
Profit before tax 5.9
Taxation (2.1)
Profit after tax 3.8
------------------------------------- ------ -------------- ------------------ -------------
Other disclosures
Working capital 29.5 7.8 (0.8) 36.5
Capital expenditure 1.7 0.7 0.6 3.0
Depreciation and amortisation
included in adjusted operating
profit/(loss) 6.5 1.9 1.8 10.2
Amortisation of acquired
intangibles 0.7 - - 0.7
------------------------------------- ------ -------------- ------------------ -------------
Total depreciation and amortisation 7.2 1.9 1.8 10.9
------------------------------------- ------ -------------- ------------------ -------------
The prior year results have been restated using this year's
exchange rates as follows:
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Year ended 31 March 2021 GBPm GBPm GBPm GBPm
---------------------------------- ------ -------------- ------------------ -------------
Revenue
External revenue 128.9 36.4 - 165.3
Inter-segment 1.1 2.7 (3.8) -
Foreign exchange retranslation (4.2) (1.0) - (5.2)
---------------------------------- ------ -------------- ------------------ -------------
Total revenue at constant
exchange rates 125.8 38.1 (3.8) 160.1
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss) 13.3 5.0 (7.1) 11.2
Foreign exchange retranslation (0.4) (0.1) - (0.5)
---------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit/(loss)
at constant exchange rates 12.9 4.9 (7.1) 10.7
---------------------------------- ------ -------------- ------------------ -------------
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 15
to the interim condensed consolidated financial statements.
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
------------------------------------- --------- -------- ----------
Included in operating costs:
Amortisation of acquired intangible
assets (Note 8) - 0.5 0.7
------------------------------------- ---------- -------- ----------
Adjusting items in operating profit - 0.5 0.7
------------------------------------- ---------- -------- ----------
Amortisation of acquired intangible assets
Acquisition related intangible asset amortisation costs of
GBP0.04m (2020: 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.
On the 8 April 2021 Renold completed the acquisition of the
conveyor chain business of Brooks Ltd in Manchester, UK, for a
total consideration of GBP0.7m, including GBP0.4m of deferred
consideration. In the period ended 30 September 2021 the business
generated additional sales for the Group of GBP0.4m and added
GBP0.2m to Group operating profit. The business has been integrated
into the Renold UK Service centre in Manchester. The Group
recognised GBP0.4m of acquired intangibles on acquisition of the
Brooks business. The acquired intangibles are being amortised over
a period of five years.
5. Net financing costs
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
-------------------------------------- -------- -------- ----------
Financing costs:
Interest payable on bank loans and
overdrafts (0.6) (0.9) (1.6)
Interest paid on lease liabilities (0.2) (0.3) (0.5)
Amortised financing costs (0.2) (0.2) (0.2)
Loan financing costs (1.0) (1.4) (2.3)
-------------------------------------- -------- -------- ----------
Net IAS 19R financing costs (0.9) (1.0) (2.2)
Discount unwind on non-current trade
and other payables (0.1) (0.1) (0.1)
Net financing costs (2.0) (2.5) (4.6)
-------------------------------------- -------- -------- ----------
6. Taxation
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
----------------------------------- -------- -------- ----------
Current tax:
- UK - - -
- Overseas (1.5) (0.9) (2.2)
----------------------------------- -------- -------- ----------
Current income tax charge (1.5) (0.9) (2.2)
Deferred tax:
- UK (0.2) - 0.2
- Overseas (0.1) 0.1 (0.1)
- Effects of changes in corporate
tax rates 0.6 - -
Total deferred tax charge 0.3 0.1 0.1
----------------------------------- -------- -------- ----------
Total income tax expense (1.2) (0.8) (2.1)
----------------------------------- -------- -------- ----------
Factors affecting current and future tax charges
The increase in overseas current corporate tax is driven by the
improved trading in the first six months of the year. The deferred
tax movement relates solely to pensions with the GBP0.6m credit
arising in respect of the restatement of UK deferred tax balances
at the new 25% substantively enacted rate (previously tax effected
at 19%).
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
2021/22 2020/21 2020/21
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 5.0 2.3p 2.0 0.9p 3.8 1.7p
------------------------------- --------- -------- --------- -------- --------- --------
Basic EPS from continuing
operations 5.0 2.3p 2.0 0.9p 3.8 1.7p
Effect of adjusting items,
after tax:
Amortisation of acquired
intangible assets - - 0.5 0.2p 0.7 0.3p
Adjusted EPS 5.0 2.3p 2.5 1.1p 4.5 2.0p
------------------------------- --------- -------- --------- -------- --------- --------
First half Full year
2021/22 2020/21 2020/21
Thousands Thousands Thousands
------------------------------------------- ----------- ----------- -----------
Weighted average number of ordinary
shares:
For the purpose of calculating basic
earnings per share 219,458 225,418 225,418
Effect of dilutive potential ordinary
shares:
Shares subject to performance conditions 14,195 6,210 7,293
------------------------------------------- ----------- ----------- -----------
For the purpose of calculating diluted
earnings per share 233,653 231,628 232,711
------------------------------------------- ----------- ----------- -----------
First half Full year
2021/22 2020/21 2020/21
(pence) (pence) (pence)
---------------------------------------------- --------- --- --------- --- ----------
Diluted EPS from continuing and discontinued
operations 2.1p 0.9p 1.6p
Diluted EPS from continuing operations 2.1p 0.9p 1.6p
Diluted adjusted EPS 2.1p 1.1p 1.9p
---------------------------------------------- --------- --- --------- --- ----------
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
2021 2020 2021
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- --------
Funded plan obligations (233.5) (242.8) (230.5)
Funded plan assets 156.1 153.8 151.2
-------------------------------------- ----------- ----------- --------
Net funded plan obligations (77.4) (89.0) (79.3)
Unfunded obligations (22.9) (26.6) (23.1)
-------------------------------------- ----------- ----------- --------
Total retirement benefit obligations (100.3) (115.6) (102.4)
-------------------------------------- ----------- ----------- --------
Analysed as follows:
Non-current liabilities: Retirement
benefit obligations (100.3) (115.6) (102.4)
Net deferred tax asset 22.5 20.9 18.4
Retirement benefit obligation net
of deferred tax (77.8) (94.7) (84.0)
------------------------------------- -------- -------- --------
The increase in the Group's net pre-tax deficit from GBP102.4m
at 31 March 2021 to GBP100.3m at 30 September 2021 primarily
reflects employer contributions made in the period.
9. Additional Cashflow Information
Reconciliation of operating profit to net cash flows from
operations:
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
------------------------------------------ -------- -------- ----------
Cash generated from operations:
Operating profit from continuing and
discontinued operations 8.2 5.3 10.5
Depreciation of property, plant and
equipment - owned assets 2.7 3.2 5.5
Depreciation of property, plant and
equipment - right-of-use-assets 1.4 1.4 2.8
Amortisation of intangible assets 0.8 1.1 2.6
Loss on disposals of plant and equipment - - 0.1
US PPP loan forgiveness (1.7)
Equity share plans 0.5 - -
(Increase)/decrease in inventories (6.3) 4.9 6.3
(Increase)/decrease in receivables (7.1) 4.6 4.2
Increase/(decrease) in payables 13.6 (5.8) (5.0)
Increase in provisions 0.3 - 0.7
Cash contribution to pension schemes (2.4) (1.1) (2.1)
Pension current service cost (non-cash) 0.1 0.1 0.1
Pension past service cost (non-cash) - - 0.3
Cash generated from operations 10.1 13.7 26.0
------------------------------------------ -------- -------- ------------
Reconciliation of net change in cash and cash equivalents to
movement in net debt:
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
------------------------------------------ -------- -------- ----------
(Decrease)/increase in cash and cash
equivalents (6.0) 4.0 1.5
Change in net debt resulting from
cash flows 9.2 6.4 17.1
US PPP loan forgiveness 1.7 - -
Foreign Currency translation differences (0.2) - (0.2)
Non-cash movement on capitalised finance
costs (0.2) (0.2) (0.2)
Change in net debt during the period 4.5 10.2 18.2
Net debt at start of period (18.4) (36.6) (36.6)
------------------------------------------ -------- -------- ----------
Net debt at end of period (13.9) (26.4) (18.4)
------------------------------------------ -------- -------- ----------
Net debt comprises:
At 30 September At 30 September
2021 2020 At 31 March
GBPm GBPm 2021
GBPm
--------------------------- ---------------- ---------------- --------------
Cash and cash equivalents 11.5 19.6 19.9
Total debt (25.4) (46.0) (38.3)
(13.9) (26.4) (18.4)
--------------------------- ---------------- ---------------- --------------
At 30 September At 30 September
2021 2020 At 31 March
2021
Net cash and cash equivalents GBPm GBPm GBPm
------------------------------- ---------------- ---------------- --------------
Cash and cash equivalents 11.5 19.6 19.9
Less: Overdrafts (0.3) (0.5) (2.6)
Net cash and cash equivalents 11.2 19.1 17.3
------------------------------- ---------------- ---------------- --------------
At 30 September At 30 September
2021 2020 At 31 March
2021
Total debt GBPm GBPm GBPm
------------------------ ---------------- ---------------- --------------
Borrowings:
Overdrafts (0.3) (0.5) (2.6)
Capitalised costs 0.2 0.4 0.3
------------------------ ---------------- ---------------- --------------
Current borrowings (0.1) (0.1) (2.3)
Bank Loans (25.0) (45.7) (35.7)
Capitalised costs 0.2 0.3 0.2
------------------------ ---------------- ---------------- --------------
Non-current borrowings (24.8) (45.4) (35.5)
------------------------ ---------------- ---------------- --------------
Total borrowings (24.9) (45.5) (37.8)
Preference stock (0.5) (0.5) (0.5)
Total debt (25.4) (46.0) (38.3)
------------------------ ---------------- ---------------- --------------
10. Called up share capital
At 30 At 30 At 31
September September March
2021 2020 2021
GBPm GBPm GBPm
---------------------------- ----------- ----------- -------
Ordinary shares of 5p each 11.3 11.3 11.3
---------------------------- ----------- ----------- -------
At 30 September 2021, the issued ordinary share capital
comprised 225,417,740 ordinary shares of 5p each (30 September
2020: 225,417,740 shares).
11. Capital reorganisation
As part of its long-term financial planning Renold plc, the
Company, has reorganised its balance sheet and reserves through the
cancellation of the entire amount of its share premium account and
capital redemption reserve. The share premium account and capital
redemption reserve were non-distributable reserves and accordingly,
the purposes for which the Company could use these were extremely
restricted. The reduction of capital creates sufficient
distributable reserves to provide the Board with greater
flexibility with regard to how it manages its capital resources.
This provided flexibility in such matters as making payments to the
holders of Preference Stock, commencing a share buy-back programme
consistent with the authority granted by Shareholders at the last
annual general meeting, in order to, inter alia, fund employee
share schemes, thereby avoiding dilution for existing Shareholders
or, should the Board determine it appropriate to do so in the
future, make dividend distributions to Shareholders.
The order of the High Court confirming the above capital
reorganisation became effective on 27 May 2021, increasing
distributable reserves by GBP45.5m.
12. Capital commitments
At 30 September 2021 capital expenditure contracted for but not
provided for in these accounts amounted to GBP0.3m (30 September
2020: GBP1.0m).
13. 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.
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
-- operating profit gearing 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 H
--------------------------------------
-- operating cash flow H
----------------------------------- ---------- --------------------------------------
-- net debt Net debt, leverage and gearing
I are used to assess the level
of borrowings within the Group
and are widely used in capital
markets analysis
--------------------------------------
-- leverage ratio J
--------------------------------------
-- gearing ratio K
----------------------------------- ---------- --------------------------------------
-- legacy pension cash costs L 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
2021/22 2020/21 2020/21
GBPm GBPm GBPm
-------------------------------------------- -------- -------- ----------
Statutory operating profit from continuing
operations 8.2 5.3 10.5
Add back:
Amortisation of acquired intangible
assets - 0.5 0.7
Adjusted operating profit 8.2 5.8 11.2
-------------------------------------------- -------- -------- ----------
(B) Adjusted profit before taxation
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
--------------------------------------- -------- -------- ----------
Statutory profit before taxation from
continuing operations 6.2 2.8 5.9
Add back:
Amortisation of acquired intangible
assets - 0.5 0.7
Adjusted profit before taxation 6.2 3.3 6.6
--------------------------------------- -------- -------- ----------
(C) Adjusted earnings per share
Adjusted EPS is reconciled to statutory EPS in Note 7.
(D) Return on sales and operating profit gearing
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
--------------------------- -------- -------- ----------
Adjusted operating profit 8.2 5.8 11.2
Revenue 95.3 81.5 165.3
Return on sales % 8.6% 7.1% 6.8%
--------------------------- -------- -------- ----------
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Period ended 30 September
2021 GBPm GBPm GBPm GBPm
--------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 10.7 1.8 (4.3) 8.2
Total revenue (including
inter-segment sales) 76.6 20.6 (1.9) 95.3
--------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin % 14.0% 8.7% n/a 8.6%
--------------------------- ------ -------------- ------------------ -------------
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Period ended 30 September
2020 GBPm GBPm GBPm GBPm
--------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 5.7 2.5 (2.4) 5.8
Total revenue (including
inter-segment sales) 63.3 20.6 (2.4) 81.5
--------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin % 9.0% 12.1% n/a 7.1%
--------------------------- ------ -------------- ------------------ -------------
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Year ended 31 March 2021 GBPm GBPm GBPm GBPm
--------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 13.3 5.0 (7.1) 11.2
Total revenue (including
inter-segment sales) 130.0 39.1 (3.8) 165.3
--------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin % 10.2% 12.8% n/a 6.8%
--------------------------- ------ -------------- ------------------ -------------
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Period ended 30 September
2021 GBPm GBPm GBPm GBPm
----------------------------------- ------ -------------- ------------------ -------------
Year-on-year change in adjusted
operating profit 5.0 (0.7) (1.9) 2.4
Year-on-year change in total
revenue (including inter-segment
sales) 13.3 - 0.5 13.8
----------------------------------- ------ -------------- ------------------ -------------
Operating profit gearing
% 38% -% n/a 17%
----------------------------------- ------ -------------- ------------------ -------------
(E),(F) & (G) Revenue, adjusted operating profit and
adjusted operating profit margin at constant exchange rates
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Six months ended 30 September
2020 GBPm GBPm GBPm GBPm
-------------------------------- ------ -------------- ------------------ -------------
External revenue 62.5 19.0 - 81.5
Inter-segment 0.8 1.6 (2.4) -
Foreign exchange retranslation (2.6) (0.8) - (3.4)
-------------------------------- ------ -------------- ------------------ -------------
Revenue at constant exchange
rates 60.7 19.8 (2.4) 78.1
-------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 5.7 2.5 (2.4) 5.8
Foreign exchange retranslation (0.2) (0.1) - (0.3)
-------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
at constant exchange rates 5.5 2.4 (2.4) 5.5
-------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin % 9.1% 12.1% - 7.0%
-------------------------------- ------ -------------- ------------------ -------------
Head office
Torque costs
Chain Transmission and eliminations Consolidated
Year ended 31 March 2021 GBPm GBPm GBPm GBPm
-------------------------------- ------ -------------- ------------------ -------------
External revenue 128.9 36.4 - 165.3
Inter-segment 1.1 2.7 (3.8) -
Foreign exchange retranslation (4.2) (1.0) - (5.2)
-------------------------------- ------ -------------- ------------------ -------------
Revenue at constant exchange
rates 125.8 38.1 (3.8) 160.1
-------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit 13.3 5.0 (7.1) 11.2
Foreign exchange retranslation (0.4) (0.1) - (0.5)
-------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
at constant exchange rates 12.9 4.9 (7.1) 10.7
-------------------------------- ------ -------------- ------------------ -------------
Adjusted operating profit
margin % 10.3% 12.9% - 6.7%
-------------------------------- ------ -------------- ------------------ -------------
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation,
depreciation and amortisation) and operating cashflow
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
-------------------------------------------- -------- -------- ----------
Statutory operating profit from continuing
operations 8.2 5.3 10.5
Depreciation and amortisation 4.9 5.7 10.9
-------------------------------------------- -------- -------- ----------
EBITDA and Adjusted EBITDA 13.1 11.0 21.4
-------------------------------------------- -------- -------- ----------
Inventories (Note 9) (6.3) 4.9 6.3
Trade and other receivables (Note
9) (7.1) 4.6 4.2
Trade and other payables (Note 9) 13.6 (5.8) (5.0)
Provisions (Note 9) 0.3 - 0.7
Less: Restructuring cash spend - - 0.2
-------------------------------------------- -------- -------- ----------
Movement in working capital 0.5 3.7 6.4
-------------------------------------------- -------- -------- ----------
Purchase of property, plant and equipment (0.8) (1.0) (2.3)
Purchase of intangible assets (0.6) (0.2) (0.8)
Proceeds from property disposals 0.1 0.2 0.2
-------------------------------------------- -------- -------- ----------
Net capital expenditure (1.6) (1.0) (2.9)
-------------------------------------------- -------- -------- ----------
Operating cash flow 12.3 13.7 24.9
-------------------------------------------- -------- -------- ----------
(I) Net debt
Net debt is reconciled to the statutory balance sheet in Note
9.
(J) Leverage ratio
At 30 At 30 At 31
September September March
2021 2020 2021
GBPm GBPm GBPm
----------------------------------- ----------- ----------- ----------
Net debt (see Note 9) 13.9 26.4 18.4
H2 2019/20 Adjusted EBITDA - 11.1 -
H1 2020/21 Adjusted EBITDA - 11.0 11.0
H2 2020/21 Adjusted EBITDA 10.4 - 10.4
H1 2021/22 Adjusted EBITDA 13.1 - -
----------------------------------- ----------- ----------- ----------
12 months rolling adjusted EBITDA 23.5 22.1 23.9
----------------------------------- ----------- ----------- ----------
Leverage ratio 0.6 times 1.2 times 0.9 times
----------------------------------- ----------- ----------- ----------
(K) Gearing ratio
At 30 At 30 At 31
September September March
2021 2020 2021
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------
Net debt (see Note 9) 13.9 26.4 18.4
Equity attributable to equity holders
of the parent 3.3 (11.5) (6.1)
Net debt (see Note 9) 13.9 26.4 18.4
---------------------------------------- ----------- ----------- -------
Total capital plus net debt 17.2 14.9 12.3
---------------------------------------- ----------- ----------- -------
Gearing ratio % 81% 177% 150%
---------------------------------------- ----------- ----------- -------
(L) Legacy pension cash costs
First half Full year
2021/22 2020/21 2020/21
GBPm GBPm GBPm
----------------------------------------- -------- -------- ----------
Cash contributions to pension schemes 1.8 0.5 0.8
Pension payments in respect of unfunded
schemes 0.6 0.6 1.3
Scheme administration costs 0.3 0.4 0.5
2.7 1.5 2.6
----------------------------------------- -------- -------- ----------
Ends
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END
IR DKLFBFFLEFBK
(END) Dow Jones Newswires
November 10, 2021 02:00 ET (07:00 GMT)
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