Renold plc
('Renold' or the 'Group')
Interim results for the half year ended 30
September 2015
Renold, a leading international
supplier of industrial chains and related power transmission
products, announces continued margin gains for the half year ended
30 September 2015 ('the period') driven by the continuing
implementation of the STEP 2020 Strategic Plan.
First half performance
highlights
· Underlying1 adjusted2 operating profit
up 2.6%
· Adjusted EPS up 8.7% to 2.5p
· Challenging markets resulted in underlying sales down
6.8%
· Significant increase in attractive capital investments to
£5.2m
· Agreement signed to acquire Aventics TC - an excellent fit
with our Strategic Plan
· New
five year borrowing agreement with accordion facility delivering
lower financing costs
· Leverage ratio (net debt : adjusted EBITDA) maintained below
1.0x, the lowest margin ratchet
Financial Summary |
Half year ended 30
September
|
Underlying adjusted interim
results3
|
2015
£m
|
|
2014
£m
|
Underlying revenue
|
84.5
|
|
90.7
|
Underlying adjusted operating
profit
|
7.9
|
|
7.7
|
Underlying adjusted operating
margin
|
9.3%
|
|
8.5%
|
|
|
|
|
Reported interim
results
|
|
|
|
Revenue
|
84.5
|
|
90.5
|
Operating profit
|
6.8
|
|
6.6
|
Operating margin
|
8.0%
|
|
7.3%
|
|
|
|
|
Profit before tax
|
4.6
|
|
4.4
|
Net debt
|
21.6
|
|
24.4
|
|
|
|
|
Other information
|
|
|
|
Basic earnings per share
|
1.6p
|
|
1.5p
|
Adjusted earnings per
share
|
2.5p
|
|
2.3p
|
Robert Purcell, Chief Executive of
Renold plc, said:
"The benefits of
our self-help projects have ensured that we continue to improve our
profit margins despite challenging and volatile end markets.
Further projects continue to be developed and delivered for the
future and, together with the increased expenditure on attractive
capital investments, will continue to lower our breakeven
point.
"While weaker trading patterns
since the half year end have lowered our expectations for full year
adjusted operating profit to around the lower end of the range of
market forecasts4, we remain focussed on delivering our
medium term goal of mid-teens operating margins.
"Our recently announced agreement
to purchase Aventics TC demonstrates that we are now also able to
take advantage of opportunistic bolt-on acquisitions as they
arise."
17 November 2015
_____________
1 ‘Underlying’
adjusts prior year figures to the current year exchange rates to
give a like for like comparison.
2
Throughout these interim results ‘adjusted’ means after eliminating
the effects of exceptional items, IAS 19 pensions charges (which
include financing charges and scheme administration costs included
in operating charges), and any associated tax thereon.
3
See overleaf for reconciliation of reported, underlying and
adjusted figures.
4
The current range of market forecasts for full year adjusted
operating profit is from £16.7m to £17.6m
Reconciliation of reported,
underlying and adjusted results
|
Revenue
|
Operating Profit
|
First half year
|
2015/16
£m
|
2014/15
£m
|
2015/16
£m
|
2014/15
£m
|
Reported
|
84.5
|
90.5
|
6.8
|
6.6
|
Exchange impact
|
-
|
0.2
|
-
|
0.2
|
Underlying
|
84.5
|
90.7
|
6.8
|
6.8
|
Exceptional items
|
-
|
-
|
0.8
|
0.6
|
Pension administration
costs
|
-
|
-
|
0.3
|
0.3
|
Underlying adjusted |
84.5
|
90.7
|
7.9
|
7.7
|
|
|
|
|
|
|
ENQUIRIES:
Renold plc
|
Tel: 0161 498 4500
|
Robert Purcell, Chief
Executive
|
|
Brian Tenner, Group Finance
Director
|
|
|
|
Arden Partners
|
Tel: 020 7614 5917
|
Chris Hardie
|
|
|
|
Instinctif Partners
|
Tel: 020 7457 2020
|
Mark Garraway
Helen Tarbet
|
|
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, end users and
distributors. The Company has a well deserved reputation for
quality that is recognised worldwide. Its products are used in a
wide variety of industries including manufacturing, transportation,
energy, steel and mining.
Further information about Renold
can be found on the website at: www.renold.com
Chief Executive's
Statement
We are pleased to report that we
have continued to make good progress with the delivery of our STEP
2020 Strategic Plan. Operating margins have increased to 9.3% and
absolute operating profit has also increased. This has been
achieved despite challenging and volatile conditions in most of our
geographical markets which led to a fall in underlying Group
revenues by 6.8% with the impact being felt in both OEM and
maintenance, repair and overhaul sectors of the market. Our profit
performance was delivered by the optimisation of previously
executed projects such as the Bredbury site closure, new capital
investments and also new restructuring activities. The recently
announced acquisition of Aventics TC is an excellent fit with the
Group's strategy and demonstrates our ability to take advantage of
opportunistic bolt-on acquisitions as and when they
arise.
Strategic Plan Progress Review
Our STEP 2020 Strategic Plan is
built around three overlapping phases: 'Restructuring' in Phase 1,
'Organic Growth' in Phase 2, and ultimately 'Structural Activities'
in Phase 3. Phase 1 is based on self-help and continuous
improvement activities with a particular focus on manufacturing
efficiency and business process improvement. Our ongoing objective
is to drive down our breakeven point.
Phase 1 -
'Restructuring'
We previously set out our plans to
maintain focus on manufacturing and business process efficiency
throughout Phase 1 of the STEP 2020 Strategic Plan. During the
period we saw the capture of the full benefits from the closure of
the Bredbury facility with annual operating profit gains of £3.8m
following the elimination of excess transitional costs incurred
during the factory moves. We also delivered significant increases
in capital investment in our facilities, with projects both
delivered in the period and also new projects launched to come on
stream in the second half and in the next financial year. Capital
expenditure in the period almost doubled year on year from £2.7m to
£5.2m. We also made progress on our new Group wide Enterprise
Resource Planning system ('ERP') with the first site now being
prepared for Go Live alongside a number of new and improved
business processes.
Some of the capital investments
already made are part of Bredbury Phase 2 initiatives to further
optimise production processes in the sites that received the
Bredbury transfers. These investments will not only deliver savings
but also lead to enhancements in our service offering, particularly
with respect to on time delivery and shortening lead times that
will offer some protection for revenues in the short term and
ultimately will support organic growth. The net impact on the cost
base of the initiatives implemented since the start of our three
phase plan in 2013 has been a very significant lowering in the
Group's breakeven point. This has been instrumental in maintaining
the Group's profitability in the period despite lower
revenues.
Phase 2 - 'Organic
Growth'
We have continued to invest
further in growth orientated expenditure as we transition into the
second, 'Organic Growth' phase of our plan. This has undoubtedly
been challenging given the volatility and revenue headwinds in many
geographical markets. However, we have managed to protect sales and
marketing expenditure to ensure we position the business for growth
in the medium to long term. This activity is proceeding in parallel
with the continuous improvement activities which are now a
permanent feature of our business.
During the period we opened a new
sales office in South East Asia and a further site is in progress.
Our new customer service offices in a number of key European
territories are also progressing well with plans to expand our
local presence into further European territories. We also continue
to develop our service and product offering and to drive new
product management ideas.
Phase 3 - 'Structural
Activities
The active pursuit of acquisition
opportunities is not a priority for management at present. However,
we have said that if an attractive acquisition arose on an
opportunistic basis then we would consider it. The acquisition
would need to meet certain criteria: being easy to integrate with
the rest of the Group, capable of being run on a largely stand
alone basis for a reasonable period of time, or being in a niche or
unexplored product or market for Renold.
The current agreement to buy the
Tooth Chain business of Aventics Gmbh meets all of those criteria
and is an excellent strategic fit for the Group.
Through the acquisition of Aventics TC, Renold
will gain access to a high value-added product not currently part
of the Renold offering. The Group expects to expand sales through
Renold's existing international sales presence and network. In
addition, as the factory is close to Renold's plant in Einbeck,
Germany, the business will be able to share expertise and some
infrastructure services within the more substantial Renold
Group.
Business Review
Group Results
The Group continued to deliver
improvements in operating profits and margins despite experiencing
difficult trading conditions in the period with underlying sales
and orders down in comparison with the same period in the prior
year. Underlying sales in the period were down 6.8% (£6.2m)
compared with the prior year and the book to bill ratio was 0.96
(that is, order intake in the period was 4% lower than
sales).
Roughly one third of the fall in
orders and roughly half of the fall in sales (c.£3.0m in both
cases) are attributable to the large one-off Swiss contract win
disclosed in the prior year. The overall falls in both sales and
orders are discussed in more detail in the Chain and Torque
Transmission divisional operating segment reviews.
Underlying adjusted operating
profit increased to £7.9m (2014: £7.7m) despite lower sales, as
both divisions continue to deliver the benefits of cost savings and
margin enhancing self-help measures.
Chain
Driven by a focus on manufacturing efficiency,
the Chain division continued to make margin and operating profit
gains despite the revenue headwinds in many end markets. Underlying
sales were down 7.0% (£4.8m) in the period compared with the prior
year and the book to bill ratio in the first half was 0.96.
Underlying external sales
decreased in most territories compared with the same period in the
prior year. In Europe, underlying sales fell by 14% and
orders by 19%. A significant part of this decline was due to the
prior year benefitting from a large one off contract in Switzerland
(c.£3.0m of revenue) that was delivered in the first half of the
prior year. Excluding the impact of this contract, European sales
fell by a more modest 3% and order intake by 9% in the
period. In the Americas, a small increase in orders in Canada
was more than offset by a decrease in the US. However, North
American sales were more buoyant and showed a modest increase
compared with the prior year. Distributor destocking was
experienced in Europe and the Americas, particularly focussed in
the second quarter.
In Australasia, underlying external sales fell by
8% due to the continuing weak domestic market in Australia. A new
sales office was opened in Indonesia and a second is in progress in
Thailand. These remain sound decisions despite the short term
impact of a weaker than normal palm oil harvest.
Against the back drop of lower sales, the Chain
division continued to make gains on the double digit margin
milestone achieved in the prior year, with underlying adjusted
operating profit increasing from 10.5% for the prior year to
11.4%. Adjusted underlying operating profit of £7.3m was also
marginally ahead (2014: £7.2m), on 7.0% lower sales. These gains
result primarily from efficiencies made at the Germany facility
following the transfer of the Bredbury business in the prior year
and other smaller cost reduction projects. India continued to grow
its underlying operating profit on the back of an improving mix and
manufacturing efficiencies, despite sales being down 5%.
Torque Transmission
The Torque Transmission division also delivered
improved operating profit and operating margins in difficult
trading conditions with sales and orders down on the previous year.
Underlying sales were down 6.4% (£1.4m) and the book to bill ratio
in the period was 0.97.
The picture for the individual
Torque Transmission business units was mixed, with sales falls in
five units partially offset by growth in the other three. Demand
was good for our high value added Hi-Tec couplings and there were
also signs of new activity in the Chinese market for our UK sourced
products (gears and couplings). In our Westfield business, the
materials handling sector also showed some comparative
strength.
The underlying operating profit margin increased
from 16% to 18% and underlying adjusted operating profit increased
to £3.6m compared with £3.5m in the prior year. Both were achieved
against the back drop of the fall in underlying sales noted above.
Cost saving projects at all units have helped to ensure a lower
breakeven point for the division. In Milnrow, a low margin gear
production agreement came to an end, allowing the business to
reduce costs in the second half and refocus effort and capital
expenditure on higher margin product lines. Significant investment
in new equipment at the Cardiff couplings facility will provide
future efficiency gains as the machines enter production at the end
of the second half.
Financial Review
|
Underlying External
Revenue
|
Adjusted Operating
Profit
|
Adjusted Operating
Margin
|
First half year
|
2015/16
£m
|
2014/15
£m
|
2015/16
£m
|
2014/15
£m
|
2015/16
%
|
2014/15
%
|
Chain
|
64.0
|
68.8
|
7.3
|
7.2
|
11.4
|
10.5
|
Torque Transmission
|
20.5
|
21.9
|
3.6
|
3.5
|
17.6
|
16.0
|
Head office costs
|
-
|
-
|
(3.0)
|
(3.0)
|
-
|
-
|
Total |
84.5
|
90.7
|
7.9
|
7.7
|
9.3
|
8.5
|
The fall in underlying sales of
6.8% could have resulted in a fall of approximately £2.9m in
operating profit had it not been for the benefit of cost reduction
and margin enhancement projects that were successfully completed in
the period. Against this back drop of uncertain trading conditions,
there is a continued focus to identify areas to reduce costs and
further reduce the breakeven point for the Group. At the same time
the Group is working hard to protect attractive investment
opportunities and also to keep positioning the Group for the
Organic Growth Phase of the Strategic Plan.
Exceptional items
During the period, we announced
the restructuring of our Milnrow and Australian facilities,
responding to the end of an agreement for a low margin gear product
and the continuing weakness in the local market respectively.
Exceptional redundancy and restructuring costs of £0.5m arose as a
result.
The Group also relocated to new
Head Office premises. This move will generate cost savings in
excess of £0.1m per annum with costs incurred during the relocation
of £0.3m. The total exceptional charges of £0.8m (2014: £0.6m) are
detailed further in Note 4 to the Interim Financial
Statements.
Financing
In May 2015 the Group completed an
amendment and extension to its core banking facilities. This
delivered an important foundation for the next phases of the
Strategic Plan. The revised facilities give the Group access to
longer term financing that matures in 2020, a flexible £20.0m
accordion facility that can be used for major investments or
strategically aligned opportunistic bolt-on acquisitions, and also
lowers the cost of financing the Group's net debt. External
financing costs in the period fell to £0.8m (2014:
£0.9m).
Cash Flow and Net Debt
|
|
Half year to 30
September
|
2015/16
£m
|
2014/15
£m
|
Adjusted Operating Profit
|
7.9
|
7.5
|
Add back depreciation and
amortisation
|
2.8
|
2.6
|
Adjusted EBITDA
|
10.7
|
10.1
|
Net Working Capital
movement
|
(2.5)
|
(0.9)
|
Pension cash costs and
administration costs
|
(2.3)
|
(2.4)
|
Movements in provisions
|
(0.7)
|
(1.9)
|
Other operating cash
flows
|
(1.2)
|
(0.8)
|
Net cash flow from operating
activities
|
4.0
|
4.1
|
Net capital expenditure
|
(5.2)
|
(2.7)
|
Net financing costs
|
(1.1)
|
(0.8)
|
Other net impacts on net
debt
|
0.3
|
(0.1)
|
Impact of foreign
exchange
|
(0.1)
|
(0.1)
|
Change in net debt
|
(2.1)
|
0.4
|
Net Debt (Note 11) |
(21.6)
|
(24.4)
|
Cash of £6.3m was generated by
operations before pension contributions and administration costs of
£2.3m. Net debt in the period increased by £2.1m as a result of a
significant increase in capital expenditure in the period which
increased by £2.5m compared with the same period in the prior year.
Financing cash costs increased in the period due to the upfront
costs associated with the refinancing in May 2015. Working capital
as a ratio of rolling 12 month revenue improved to a period end
level of 17.6% (2014: 18.9%).
Pensions
The Group is responsible for a
number of defined benefit pension schemes which it accounts for in
accordance with IAS 19 Employee
benefits. The Group's
retirement benefit obligations increased from £75.7m (£61.2m net of
deferred tax) at 31 March 2015 to £76.0m (£61.6m net of deferred
tax) at 30 September 2015. Whilst the net increase was small, the
individual movements were significant. Weaker asset performance,
and an increase in the inflation rate used to determine future
pension liabilities in the UK, was offset by an increase in
discount rates in the UK and Germany (3.7% and 2.4% respectively at
30 September 2015, compared with 3.3% and 1.4% respectively at 31
March 2015).
The aggregate expense of
administering the pension schemes was £0.3m (2014: £0.3m) which is
now included in operating costs but is excluded in arriving at
adjusted operating profit as it relates to closed legacy pension
schemes which bear no relation to the ongoing business and its
performance. The net financing expense on pension scheme balances
was £1.3m (2014: £1.2m). It is similarly excluded when calculating
adjusted EPS.
During the period the Renold
Pension Scheme completed a medically underwritten insured buy-in
that fully de-risked approximately £25m (or 25%) of the current UK
pensioner liabilities in respect of the highest liability pensioner
members (35 members in total). The Scheme was able to secure the
liabilities at a small discount to their assumed funding valuation.
This transaction is approximately neutral from an accounting
perspective as the insurance policy remains an asset of the Scheme.
As a result, the transaction has no impact on the funding of the
Scheme and did not require any additional contributions from the
Group.
The Group also initiated a 'small
pots' exercise which gave members an option to take advantage of
recent changes in legislation that raised the limit for the size of
pension pot that can be taken as a one-off lump sum. That exercise
completed after the period end and resulted in a reduction in the
membership of the scheme by 204 members (or approximately 6% of the
membership at the start of the year). Since March 2012, membership
of the UK schemes has fallen by 2,250 members (equivalent to 41% of
the membership at that time). Finally, in Australia, notice
to terminate the existing defined benefit scheme was given and the
liquidation process is progressing well. The scheme was in surplus
when terminated and therefore there will be no additional cost for
the Group when the final payments are made. The accounting impact
is expected to be broadly neutral and will be included in the full
year results.
Dividend
In light of the ongoing actions
being taken to improve the performance of the business and the
opportunities the Group has to invest in new capital equipment, the
Board has decided not to declare an interim dividend. The dividend
policy will remain under review as margin and cash flow performance
continue to develop.
Going concern
The directors have a reasonable
expectation that the business has adequate resources to continue in
operational existence for the foreseeable future. Thus they
continue to adopt the going concern basis in preparing the
condensed consolidated interim financial information.
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 in the 2014/15 Annual Report and Accounts. The
exception to this is the specific risk regarding the Bredbury site
closure which has now diminished significantly. These include
macro-economic 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, foreign
exchange rates have continued to be volatile. These have had a
favourable translational impact on Group
revenue and a similar impact on operating profit. Transactional foreign exchange losses of £0.2m were
included in operating profit in the period. These impacts primarily
reflect the weakening Euro being offset by the strengthening of the
US Dollar since the same period in the prior year. A similar
impact is expected in the second half if exchange rates remain
unchanged. Longer term differences in foreign exchange rates could
impact the Group's ability to maintain competitive production
prices in certain territories. However, the Group's business and
assets are spread across multiple currencies and this provides a
form of natural hedge against some currency risks as well as
providing some opportunity to move production to different
facilities to overcome potential foreign exchange disadvantages. In
addition, the Group's treasury and foreign exchange hedging
policies are designed to manage and mitigate residual risks in
these areas.
The valuation of retirement
benefit obligations can be significantly impacted by changes to the
market based 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 more stable and
subject to long term funding plans which are reviewed every three
years.
Outlook
Trading conditions since the half
year end have weakened across the Group with demand down in most
regions. The actions already delivered and those now underway will
allow the Group to partially offset the impact of the weaker
demand. In the expectation that current trading patterns persist in
the second half, the Board now expects full year adjusted operating
profit to be around the lower end of current market
forecasts.
Notwithstanding the comment above,
the Group is pleased to have maintained positive momentum in
margins, profits and earnings. The Group is working hard to
continue to do the right things to protect capital and revenue
investment in projects to support the medium term delivery of the
STEP 2020 Strategic Plan rather than simply cost cutting to deliver
short term gains at the expense of the Group's future
development.
The business remains engaged in a
number of value adding projects that will further enhance
manufacturing and business processes, reducing costs and making our
service proposition more compelling for customers. We are
positioning ourselves to create and exploit growth opportunities
over the medium and longer term.
The recent improvements in the
robustness of the business allowed the Group to take advantage of
the opportunity to purchase the Aventics Tooth Chain business when
it arose. That business is an excellent fit with the Strategic Plan
and the acquisition is a clear sign that the Group can take
advantage of good opportunities as they arise.
Statement of directors'
responsibilities
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 as adopted by
the European Union;
· the
interim management report includes a fair review of the information
required by:
(a)
DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of interim financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b)
DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of
the current financial year and that have materially affected the
financial position or performance of the Group during that period;
and any changes in the related party transactions described in the
last annual report that could do so.
The directors of Renold plc are
listed in the Annual Report for the year ended 31 March 2015. A
list of current directors is maintained on the Group website
at www.renold.com.
By order of the Board
Robert Purcell
Brian Tenner
Chief
Executive
Finance Director
16 November
2015
16 November
2015
RENOLD PLC
Condensed Consolidated Income
Statement
for the six months ended 30
September 2015
|
|
|
First half
|
|
Full year
|
|
|
|
Note
|
|
2015/16
(unaudited)
£m
|
|
2014/15
(unaudited)
£m
|
|
2014/15
(audited)
£m
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
3
|
|
84.5
|
|
90.5
|
|
181.4
|
|
Operating costs before exceptional
items
|
|
|
(76.9)
|
|
(83.3)
|
|
(166.4)
|
|
Operating profit before
exceptional items
|
|
|
7.6
|
|
7.2
|
|
15.0
|
|
Exceptional
items |
4
|
|
(0.8)
|
|
(0.6)
|
|
(2.9)
|
|
Operating
profit |
|
|
6.8
|
|
6.6
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
Financing
costs |
|
|
(0.8)
|
|
(0.9)
|
|
(1.7)
|
|
Net IAS 19
financing costs |
|
|
(1.3)
|
|
(1.2)
|
|
(2.5)
|
|
Discount on
provisions |
|
|
(0.1)
|
|
(0.1)
|
|
(0.2)
|
|
Net
financing costs |
5
|
|
(2.2)
|
|
(2.2)
|
|
(4.4)
|
|
Profit
before tax |
|
|
4.6
|
|
4.4
|
|
7.7
|
|
Taxation |
6
|
|
(0.9)
|
|
(0.9)
|
|
(2.1)
|
|
Profit for
the period |
|
|
3.7
|
|
3.5
|
|
5.6
|
|
Attributable
to: |
|
|
|
|
|
|
|
|
Owners of
the parent |
|
|
3.6
|
|
3.4
|
|
5.5
|
|
Non-controlling interests |
|
|
0.1
|
|
0.1
|
|
0.1
|
|
|
|
|
3.7
|
|
3.5
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share |
7
|
|
|
|
|
|
|
|
Basic
earnings per share |
|
|
1.6p
|
|
1.5p
|
|
2.5p
|
|
Diluted
earnings per share |
|
|
1.6p
|
|
1.5p
|
|
2.5p
|
|
Adjusted
earnings per share |
|
|
2.5p
|
|
2.3p
|
|
5.0p
|
|
Diluted
adjusted earnings per share |
|
|
2.5p
|
|
2.3p
|
|
5.0p
|
|
RENOLD PLC
Condensed Consolidated Statement
of Comprehensive Income
for the six months ended 30
September 2015
|
First half
|
|
Full year
|
|
2015/16
(unaudited)
£m
|
|
2014/15
(unaudited)
£m
|
|
2014/15
(audited)
£m
|
|
|
|
|
|
|
Profit for the period
|
3.7
|
|
3.5
|
|
5.6
|
|
|
|
|
|
|
Other comprehensive
income/(expense)
Items that may be reclassified to
profit or loss in subsequent periods:
|
|
|
|
|
|
Net gains/(losses) on cash flow
hedges taken to other comprehensive income
|
0.1
|
|
(0.2)
|
|
(0.2)
|
Foreign exchange translation
differences
|
(3.1)
|
|
0.5
|
|
4.6
|
Foreign exchange differences on
loans hedging the net investment in foreign operations
|
0.1
|
|
(0.1)
|
|
(0.6)
|
|
(2.9)
|
|
0.2
|
|
3.8
|
Items not to be reclassified to
profit or loss in subsequent periods:
|
|
|
|
|
|
Re-measurement (losses) on
retirement benefit obligations
|
(0.7)
|
|
(5.8)
|
|
(15.1)
|
Tax on re-measurement losses/(gains)
on retirement benefit obligations
|
(0.6)
|
|
0.9
|
|
3.4
|
|
(1.3)
|
|
(4.9)
|
|
(11.7)
|
Other comprehensive income/(expense)
for the period, net of tax
|
(4.2)
|
|
(4.7)
|
|
(7.9)
|
Total comprehensive income/(expense)
for the period, net of tax
|
(0.5)
|
|
(1.2)
|
|
(2.3)
|
|
|
|
|
|
|
Attributable
to: |
|
|
|
|
|
Owners of
the parent |
(0.6)
|
|
(1.3)
|
|
(2.4)
|
Non-controlling interests |
0.1
|
|
0.1
|
|
0.1
|
Total comprehensive expense for the
period
|
(0.5)
|
|
(1.2)
|
|
(2.3)
|
RENOLD PLC
Condensed Consolidated Statement of Financial
Position
as at 30 September 2015
|
Note
|
30 September 2015
(unaudited)
£m
|
|
30 September 2014
(unaudited)
restated £m
|
|
31 March
2015
(audited)
£m
|
Assets Non-current
assets |
|
|
|
|
|
|
Goodwill |
|
21.4
|
|
20.1
|
|
21.9
|
Other intangible fixed assets |
|
6.5
|
|
6.5
|
|
6.1
|
Property, plant and equipment |
|
40.9
|
|
38.2
|
|
39.7
|
Investment property |
|
-
|
|
1.3
|
|
-
|
Other non-current assets |
|
-
|
|
0.2
|
|
-
|
Deferred tax assets Retirement
benefit surplus |
8
|
16.5
0.1
|
|
15.1
0.5
|
|
17.3
0.2
|
|
|
85.4
|
|
81.9
|
|
85.2
|
Current assets |
|
|
|
|
|
|
Inventories |
|
36.0
|
|
38.1
|
|
35.8
|
Trade and other receivables |
|
28.1
|
|
29.0
|
|
30.6
|
Derivative financial
instruments
|
|
0.1
|
|
-
|
|
-
|
Cash and cash equivalents |
11
|
12.2
|
|
10.6
|
|
12.6
|
|
|
76.4
|
|
77.7
|
|
79.0
|
Non-current asset classified as held for sale |
|
1.4
|
|
1.5
|
|
1.4
|
|
|
77.8
|
|
79.2
|
|
80.4
|
Total assets |
|
163.2
|
|
161.1
|
|
165.6
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Borrowings |
11
|
(1.9)
|
|
(0.7)
|
|
(0.7)
|
Trade and other payables |
|
(33.4)
|
|
(35.9)
|
|
(36.6)
|
Current tax |
|
(1.9)
|
|
(1.8)
|
|
(1.6)
|
Derivative financial instruments |
|
-
|
|
(0.1)
|
|
(0.1)
|
Provisions |
|
(2.2)
|
|
(1.7)
|
|
(2.1)
|
|
|
(39.4)
|
|
(40.2)
|
|
(41.1)
|
Net current
assets |
|
38.4
|
|
39.0
|
|
39.3
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Borrowings |
11
|
(31.4)
|
|
(33.8)
|
|
(30.9)
|
Preference stock |
11
|
(0.5)
|
|
(0.5)
|
|
(0.5)
|
Trade and other payables |
|
(0.7)
|
|
(0.3)
|
|
(1.1)
|
Deferred tax liabilities |
|
(0.2)
|
|
(0.2)
|
|
(0.2)
|
Retirement benefit obligations |
8
|
(76.1)
|
|
(69.1)
|
|
(75.9)
|
Provisions |
|
(3.6)
|
|
(4.3)
|
|
(4.3)
|
|
|
(112.5)
|
|
(108.2)
|
|
(112.9)
|
Total liabilities |
|
(151.9)
|
|
(148.4)
|
|
(154.0)
|
|
|
|
|
|
|
|
Net assets |
|
11.3
|
|
12.7
|
|
11.6
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Issued share capital |
|
26.6
|
|
26.6
|
|
26.6
|
Share premium |
|
29.9
|
|
29.9
|
|
29.9
|
Currency translation reserve |
|
(0.7)
|
|
(1.3)
|
|
2.3
|
Other reserves |
|
1.1
|
|
1.0
|
|
1.0
|
Retained earnings |
|
(48.3)
|
|
(46.1)
|
|
(50.8)
|
Equity attributable to owners of the parent |
|
8.6
|
|
10.1
|
|
9.0
|
Non-controlling interests |
|
2.7
|
|
2.6
|
|
2.6
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
11.3
|
|
12.7
|
|
11.6
|
RENOLD PLC
Condensed Consolidated Statement of Cash
Flows
for the six months ended 30
September 2015
|
First half
|
|
Full year
|
|
2015/16
(unaudited)
£m
|
|
2014/15
(unaudited)
£m
|
|
2014/15
(audited)
£m
|
Cash flows
from operating activities (Note 9) |
|
|
|
|
|
Cash
generated by operations |
4.5
|
|
4.6
|
|
14.2
|
Income taxes paid
|
(0.5)
|
|
(0.5)
|
|
(1.4)
|
Net cash
flows from operating activities |
4.0
|
|
4.1
|
|
12.8
|
Cash flows
from investing activities |
|
|
|
|
|
Purchase of property, plant and
equipment
|
(4.5)
|
|
(1.5)
|
|
(3.8)
|
Purchase of intangible
assets
|
(0.7)
|
|
(1.2)
|
|
(1.7)
|
Net cash
flows from investing activities |
(5.2)
|
|
(2.7)
|
|
(5.5)
|
Cash flows
from financing activities |
|
|
|
|
|
Financing
costs paid |
(1.1)
|
|
(0.8)
|
|
(1.4)
|
Proceeds
from borrowings |
1.0
|
|
3.2
|
|
1.0
|
Repayment of
borrowings |
(0.5)
|
|
-
|
|
(1.1)
|
Net cash
flows from financing activities |
(0.6)
|
|
2.4
|
|
(1.5)
|
Net
(decrease)/increase in cash and cash equivalents |
(1.8)
|
|
3.8
|
|
5.8
|
Net cash and
cash equivalents at beginning of period |
12.2
|
|
6.6
|
|
6.6
|
Effects of
exchange rate changes |
(0.1)
|
|
(0.1)
|
|
(0.2)
|
Net cash and
cash equivalents at end of period |
10.3
|
|
10.3
|
|
12.2
|
|
Cash and
cash equivalents (Note 11) |
12.2
|
|
10.6
|
|
12.6
|
Overdrafts
(included in borrowings - Note 11) |
(1.9)
|
|
(0.3)
|
|
(0.4)
|
Net cash and
cash equivalents at end of period |
10.3
|
|
10.3
|
|
12.2
|
RENOLD PLC Condensed
Consolidated Statement of Changes in Equity
for the six months ended 30
September 2015
|
Share capital
£m
|
Share premium account
£m
|
Retained earnings
£m
|
Currency translation
reserve
£m
|
Other reserves
£m
|
Attributable to equity holders of
parent
£m
|
Non-controlling
interests
£m
|
Total equity
£m
|
Balance at 1 April 2014
(restated)
|
26.6
|
29.9
|
(44.6)
|
(1.7)
|
1.2
|
11.4
|
2.5
|
13.9
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
5.5
|
-
|
-
|
5.5
|
0.1
|
5.6
|
Other comprehensive
income
|
-
|
-
|
(11.7)
|
4.0
|
(0.2)
|
(7.9)
|
-
|
(7.9)
|
Total comprehensive income/(expense)
for the year
|
-
|
-
|
(6.2)
|
4.0
|
(0.2)
|
(2.4)
|
0.1
|
(2.3)
|
Employee Share Options:
|
|
|
|
|
|
|
|
|
- settled share
based payment transactions
|
-
|
-
|
(0.2)
|
-
|
-
|
(0.2)
|
-
|
(0.2)
|
- value of
employee services
|
-
|
-
|
0.2
|
-
|
-
|
0.2
|
-
|
0.2
|
Balance at 31 March 2015 |
26.6
|
29.9
|
(50.8)
|
2.3
|
1.0
|
9.0
|
2.6
|
11.6
|
|
|
|
|
|
|
|
|
|
Profit for the period |
-
|
-
|
3.6
|
-
|
-
|
3.6
|
0.1
|
3.7
|
Other comprehensive
income
|
-
|
-
|
(1.3)
|
(3.0)
|
0.1
|
(4.2)
|
-
|
(4.2)
|
Total comprehensive income/(expense)
for the period
|
-
|
-
|
2.3
|
(3.0)
|
0.1
|
(0.6)
|
0.1
|
(0.5)
|
Employee Share Options:
- value of employee services
|
-
|
-
|
0.2
|
-
|
-
|
0.2
|
-
|
0.2
|
Balance at 30 September 2015 |
26.6
|
29.9
|
(48.3)
|
(0.7)
|
1.1
|
8.6
|
2.7
|
11.3
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2014 (restated) |
26.6
|
29.9
|
(44.6)
|
(1.7)
|
1.2
|
11.4
|
2.5
|
13.9
|
|
|
|
|
|
|
|
|
|
Profit for the period
|
-
|
-
|
3.4
|
-
|
-
|
3.4
|
0.1
|
3.5
|
Other comprehensive
income
|
-
|
-
|
(4.9)
|
0.4
|
(0.2)
|
(4.7)
|
-
|
(4.7)
|
Total comprehensive income/(expense)
for the period
|
-
|
-
|
(1.5)
|
0.4
|
(0.2)
|
(1.3)
|
0.1
|
(1.2)
|
Balance at 30 September 2014 |
26.6
|
29.9
|
(46.1)
|
(1.3)
|
1.0
|
10.1
|
2.6
|
12.7
|
Notes to the Interim Condensed
Consolidated Financial Statements
1
Corporate information
The interim condensed consolidated
financial statements for the six months to 30 September 2015 were
approved by the Board on 16 November 2015. 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 and the performance in the half year is set out in the
Interim Management Report.
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 2015 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 2015 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 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 2015.
Except as
described below, 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 2015.
Changes in accounting
policy
The Group has adopted all
applicable amendments to standards with an effective date from 1
April 2015. Adoption of these standards
did not have any material impact on financial performance or
position of the Group.
Restatements
As explained in the Annual Report
for the year ended 31 March 2015 page 107, following a review of
the tax base of the unfunded pension scheme in Germany, it was
identified that the value of the tax base in relation to the
pension deficit that had been used in calculating the deferred tax
asset on the German pension deficit in 2014 was
understated.
The effect of this restatement has
been to reduce the closing recognised deferred tax asset by £4.2m
as at 30 September 2014. The tax credit shown in other
comprehensive income in the consolidated statement of comprehensive
income in the prior year has been reduced by the same amount. The
restatement has no impact on the current or prior year income
statement, cash flows or earnings per share.
The restatement has been made in
accordance with IAS 8, 'Accounting Policies, Changes in Accounting
Estimates and Errors'. The effect of the restatement to the
financial statements including the related impact on taxation is
summarised below:
Restatements
(continued)
|
30 September 2014
Reported
£m
|
Adjustment
£m
|
30 September 2014
Restated
£m
|
Balance Sheet
|
|
|
|
- Recognised
deferred tax assets
|
19.3
|
(4.2)
|
15.1
|
- Total
assets
|
165.3
|
(4.2)
|
161.1
|
- Net
assets
|
16.9
|
(4.2)
|
12.7
|
Significant accounting judgements,
estimates and assumptions
The preparation of these interim
condensed consolidated financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were of the
same type as those applied to the annual consolidated financial
statements for the year ended 31 March 2015, namely;
· assumptions used to evaluate potential impairment of
non-financial assets;
· recognition of deferred tax assets; and
· assumptions used in the valuation of retirement benefit
obligations.
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 2015.
3 Segment information
The Group is organised into
business units according to the nature of their products and
services. Having considered the management reporting and
organisational structure of the Group, the directors have concluded
that Renold plc has two reportable operating segments as
follows:
· 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.
No operating
segments have been aggregated to form the above reportable
segments. Management monitors the operating results of its business
units separately for the purpose of making decisions about resource
allocation and performance assessment.
The segment results for the period
ended 30 September 2015 were as follows:
Period ended 30 September
2015
|
Chain
£m
|
|
Torque
Transmission
£m
|
|
Head office costs and
eliminations
£m
|
|
Consolidated
£m
|
Revenue
|
|
|
|
|
|
|
|
External revenue
|
64.0
|
|
20.5
|
|
-
|
|
84.5
|
Inter-segment
|
0.1
|
|
1.2
|
|
(1.3)
|
|
-
|
Total revenue
|
64.1
|
|
21.7
|
|
(1.3)
|
|
84.5
|
|
|
|
|
|
|
|
|
Adjusted operating
profit/(loss)
|
7.3
|
|
3.6
|
|
(3.0)
|
|
7.9
|
Pension administration
costs
|
-
|
|
-
|
|
(0.3)
|
|
(0.3)
|
Exceptional items
|
(0.1)
|
|
(0.4)
|
|
(0.3)
|
|
(0.8)
|
Segment operating
profit/(loss)
|
7.2
|
|
3.2
|
|
(3.6)
|
|
6.8
|
Net financing costs
|
|
|
|
|
|
|
(2.2)
|
Profit before tax
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
Other disclosures
|
|
|
|
|
|
|
|
Working capital
|
26.0
|
|
9.6
|
|
(5.6)
|
|
30.0
|
Capital expenditure
|
3.1
|
|
1.2
|
|
0.9
|
|
5.2
|
Depreciation and
amortisation
|
1.6
|
|
0.5
|
|
0.7
|
|
2.8
|
|
|
|
|
|
|
|
|
The segment results for the period
ended 30 September 2014 were as follows:
Period ended 30 September
2014
|
Chain
£m
|
|
Torque
Transmission
£m
|
|
Head office costs and
eliminations
£m
|
|
Consolidated
£m
|
Revenue
|
|
|
|
|
|
|
|
External revenue
|
69.3
|
|
21.2
|
|
-
|
|
90.5
|
Inter-segment
|
0.1
|
|
2.4
|
|
(2.5)
|
|
-
|
Total revenue
|
69.4
|
|
23.6
|
|
(2.5)
|
|
90.5
|
|
|
|
|
|
|
|
|
Adjusted operating
profit/(loss)
|
7.1
|
|
3.4
|
|
(3.0)
|
|
7.5
|
Pension administration
costs
|
-
|
|
-
|
|
(0.3)
|
|
(0.3)
|
Exceptional items
|
(0.5)
|
|
(0.1)
|
|
-
|
|
(0.6)
|
Segment operating
profit/(loss)
|
6.6
|
|
3.3
|
|
(3.3)
|
|
6.6
|
Net financing costs
|
|
|
|
|
|
|
(2.2)
|
Profit before tax
|
|
|
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
Other disclosures
|
|
|
|
|
|
|
|
Working capital
|
27.4
|
|
9.2
|
|
(5.7)
|
|
30.9
|
Capital expenditure
|
1.3
|
|
0.3
|
|
1.1
|
|
2.7
|
Depreciation and
amortisation
|
1.4
|
|
0.6
|
|
0.6
|
|
2.6
|
|
|
|
|
|
|
|
|
The Board also reviews the
performance of the business using information presented at
consistent exchange rates. The prior year results have been
restated using this year's exchange rates as follows:
Period ended 30 September
2014
|
Chain
£m
|
|
Torque
Transmission
£m
|
|
Head office costs and
eliminations
£m
|
|
Consolidated
£m
|
Revenue
|
|
|
|
|
|
|
|
External revenue
|
69.3
|
|
21.2
|
|
-
|
|
90.5
|
Foreign exchange
|
(0.5)
|
|
0.7
|
|
-
|
|
0.2
|
Underlying external
sales
|
68.8
|
|
21.9
|
|
-
|
|
90.7
|
Operating profit/(loss) before
pension administration costs and exceptional items
|
7.1
|
|
3.4
|
|
(3.0)
|
|
7.5
|
Foreign exchange
|
0.1
|
|
0.1
|
|
-
|
|
0.2
|
Underlying profit/(loss) before
pension administration costs and exceptional items
|
7.2
|
|
3.5
|
|
(3.0)
|
|
7.7
|
The segment results for the year
ended 31 March 2015 were as follows:
Year ended 31 March
2015
|
Chain
£m
|
|
Torque
Transmission
£m
|
|
Head office costs and
eliminations
£m
|
|
Consolidated
£m
|
Revenue
|
|
|
|
|
|
|
|
External revenue
|
138.3
|
|
43.1
|
|
-
|
|
181.4
|
Inter-segment
|
-
|
|
4.6
|
|
(4.6)
|
|
-
|
Total revenue
|
138.3
|
|
47.7
|
|
(4.6)
|
|
181.4
|
|
|
|
|
|
|
|
|
Operating profit/(loss) before
pension administration costs and exceptional items
|
14.2
|
|
6.9
|
|
(5.6)
|
|
15.5
|
Pension administration
costs
|
-
|
|
-
|
|
(0.5)
|
|
(0.5)
|
Exceptional items
|
(2.1)
|
|
(0.2)
|
|
(0.6)
|
|
(2.9)
|
Operating profit/(loss)
|
12.1
|
|
6.7
|
|
(6.7)
|
|
12.1
|
Net financing costs
|
|
|
|
|
|
|
(4.4)
|
Profit before tax
|
|
|
|
|
|
|
7.7
|
|
|
|
|
|
|
|
|
Other disclosures
|
|
|
|
|
|
|
|
Working capital
|
22.3
|
|
9.3
|
|
(3.0)
|
|
28.6
|
Capital expenditure
|
4.4
|
|
0.9
|
|
1.3
|
|
6.6
|
Depreciation and
amortisation
|
3.0
|
|
1.1
|
|
1.2
|
|
5.3
|
|
|
|
|
|
|
|
|
The Board also reviews the
performance of the business using information presented at
consistent exchange rates. The prior year results have been
restated using this year's exchange rates as follows:
Year ended 31 March
2015
|
Chain
£m
|
|
Torque
Transmission
£m
|
|
Head office costs and
eliminations
£m
|
|
Consolidated
£m
|
Revenue
|
|
|
|
|
|
|
|
External sales
|
138.3
|
|
43.1
|
|
-
|
|
181.4
|
Foreign exchange
|
(2.2)
|
|
0.6
|
|
-
|
|
(1.6)
|
Underlying external
sales
|
136.1
|
|
43.7
|
|
-
|
|
179.8
|
Operating profit/(loss) before
pension administration costs and exceptional items
|
14.2
|
|
6.9
|
|
(5.6)
|
|
15.5
|
Foreign exchange
|
(0.3)
|
|
0.2
|
|
-
|
|
(0.1)
|
Underlying adjusted operating
profit/(loss)
|
13.9
|
|
7.1
|
|
(5.6)
|
|
15.4
|
4 Exceptional items
|
First half
|
|
Full year
|
|
2015/16
£m
|
|
2014/15
£m
|
|
2014/15
£m
|
Included in operating
costs:
|
|
|
|
|
|
Impairment of software
licences
|
-
|
|
0.2
|
|
0.2
|
Bredbury factory closure
costs
|
-
|
|
0.3
|
|
0.2
|
Increase in onerous lease provision
due to change in discount rate
|
-
|
|
-
|
|
0.5
|
Reorganisation and redundancy
costs
|
0.5
|
|
0.1
|
|
0.8
|
Other impairment of investment
property
|
-
|
|
-
|
|
1.2
|
Head office relocation
costs
|
0.3
|
|
-
|
|
-
|
Net exceptional costs
|
0.8
|
|
0.6
|
|
2.9
|
During the period the Group head
office was relocated to new premises. Costs of £0.3m were incurred
including dilapidations and the cost of the move itself. The final
costs were settled in cash in October and annual benefits in excess
of £0.1m per annum will now be delivered.
At the Milnrow facility, a
contract for the production of a low-margin product line was
discontinued and a restructuring of the business was announced. In
Australia, in response to continued weakness in the market, a
further restructuring was also announced. In both cases more than
10% of the workforce were impacted and as a result, charges of
£0.5m were recognised for future redundancy costs and a small
inventory write off.
During the prior year, the Board
concluded a review of the Group's Strategy for a single integrated
Enterprise Resource Planning ('ERP') system. As a result of
this review, a number of licences for the previous ERP were written
off.
Also, in the prior year, the group
recognised an impairment charge of £1.2m in relation to an
investment property located in Calais, France, writing down the
value of the property to a net book value of nil.
The Bredbury factory closure costs
incurred in the prior period primarily result from operational
decisions to upgrade to new equipment or new processes following
production transfers and these resulted in the write off of some
additional machinery and stock. Details of the exceptional Bredbury
closure and site onerous lease provision costs as reported in the
full year 2014/15 can be found in the Group's annual consolidated
financial statements for the year ended 31 March 2015.
5 Net financing costs
|
First half
|
|
Full year
|
|
2015/16
£m
|
|
2014/15
£m
|
|
2014/15
£m
|
Financing costs:
|
|
|
|
|
|
Interest payable on bank loans and
overdrafts
|
0.7
|
|
0.8
|
|
1.4
|
Amortised financing costs
|
0.1
|
|
0.1
|
|
0.3
|
Discount on provisions
|
0.1
|
|
0.1
|
|
0.2
|
Total financing costs
|
0.9
|
|
1.0
|
|
1.9
|
|
|
|
|
|
|
IAS 19 financing costs
|
1.3
|
|
1.2
|
|
2.5
|
Net financing
costs |
2.2
|
|
2.2
|
|
4.4
|
6 Taxation
|
First half
|
|
Full year
|
|
2015/16
£m
|
|
2014/15
£m
|
|
2014/15
£m
|
Current tax:
|
|
|
|
|
|
- UK
|
-
|
|
-
|
|
-
|
- Overseas
|
0.7
|
|
0.7
|
|
1.4
|
|
0.7
|
|
0.7
|
|
1.4
|
Deferred tax:
|
|
|
|
|
|
- UK
|
(0.1)
|
|
(0.1)
|
|
(0.3)
|
- Overseas
|
0.3
|
|
0.3
|
|
1.0
|
|
0.2
|
|
0.2
|
|
0.7
|
Income tax expense
|
0.9
|
|
0.9
|
|
2.1
|
Changes to the UK corporation tax
rates were announced in the Chancellor's Budget on 8 July 2015.
These include reductions to the main rate from 20% to 19% from 1
April 2017 and 18% from 1 April 2020. As the changes had not been
substantively enacted at the balance sheet date, their effects are
not included in these financial statements. The overall effect of
these changes, if they had applied to the deferred tax balance at
the balance sheet date, would be to reduce the deferred tax asset
by an additional £0.8m and increase the tax charge to the statement
of comprehensive income for the period by £0.8m.
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.
7
Earnings per
share
Basic earnings per share is
calculated by dividing the profit for the period by the weighted
average number of shares in issue during the period. Diluted
earnings per share takes into account the dilutive effect of the
options and awards outstanding under the Group's employee share
schemes. The calculation of earnings per share is based on the
following data:
|
First half
|
|
Full year
|
|
2015/16
Pence per share
|
|
2014/15
Pence per share
|
|
2014/15
Pence per share
|
|
|
|
|
|
|
Basic EPS
|
1.6
|
|
1.5
|
|
2.5
|
Diluted EPS
|
1.6
|
|
1.5
|
|
2.5
|
Adjusted EPS
|
2.5
|
|
2.3
|
|
5.0
|
Diluted adjusted EPS
|
2.5
|
|
2.3
|
|
5.0
|
|
|
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
Profit/(loss) for calculation of adjusted EPS |
|
|
|
|
|
Profit/(loss) for the financial period |
3.6
|
|
3.4
|
|
5.5
|
Adjusted for exceptional items, after tax: |
|
|
|
|
|
- Exceptional items in operating costs |
0.8
|
|
0.6
|
|
2.9
|
- Exceptional tax charge |
-
|
|
-
|
|
|
- Pension administration costs included in
operating costs |
0.3
|
|
0.3
|
|
0.5
|
- Discount unwind on exceptional items |
0.1
|
|
-
|
|
0.2
|
- Net pension financing costs |
0.9
|
|
0.9
|
|
2.1
|
Profit for the calculation of adjusted EPS |
5.7
|
|
5.2
|
|
11.2
|
|
|
|
|
|
|
|
Thousands
|
|
Thousands
|
|
Thousands
|
Weighted average number of ordinary shares |
|
|
|
|
|
For calculating basic earnings per share |
223,065
|
|
223,065
|
|
223,065
|
Inclusion of the dilutive
securities, comprising 3,222,000 (2014: 2,593,000 restated)
additional shares due to share options and nil (2014: nil)
additional shares due to warrants over shares, in the calculation
of adjusted EPS does not change the amount shown above (2014: no
change).
The adjusted earnings per share
numbers have been provided in order to give a useful indication of
the underlying performance of the business by the exclusion of
exceptional items. Due to the existence of unrecognised deferred
tax assets, there was no associated tax credit on some of the
exceptional charges and in these instances exceptional costs are
added back in full.
8 Retirement benefit
obligations
The Group's
retirement benefit obligations are summarised as
follows:
|
At 30
September 2015
£m
|
|
At 30 September 2014
£m
|
|
At 31
March
2015
£m
|
|
|
|
|
|
|
Funded plan obligations
|
(210.6)
|
|
(206.4)
|
|
(221.0)
|
Funded plan assets
|
157.6
|
|
162.6
|
|
171.3
|
Net funded plan
obligations
|
(53.0)
|
|
(43.8)
|
|
(49.7)
|
Unfunded obligations
|
(23.0)
|
|
(24.8)
|
|
(26.0)
|
Total retirement benefit
obligations
|
(76.0)
|
|
(68.6)
|
|
(75.7)
|
Analysed as
follows:
Non-current assets
|
|
|
|
|
|
Retirement benefit
surplus
|
0.1
|
|
0.5
|
|
0.2
|
Non-current liabilities
|
|
|
|
|
|
Retirement benefit
obligations
|
(76.1)
|
|
(69.1)
|
|
(75.9)
|
Net retirement benefit
obligation
|
(76.0)
|
|
(68.6)
|
|
(75.7)
|
|
|
|
|
|
|
Net deferred tax asset
(restated)
|
14.4
|
|
12.6
|
|
14.5
|
Retirement benefit obligation net
of deferred tax
|
(61.6)
|
|
(56.0)
|
|
(61.2)
|
The increase in the Group's
pre-tax liability from £75.7m at 31 March 2015 to £76.0m at 30
September 2015 primarily reflects asset returns being lower than
expected due to a weakening in the performance of the equity and
corporate bond markets. In addition, there was a small increase in
the assumed rate of UK inflation (CPI) at 30 September 2015 (1.9%
compared with 31 March 2015: 1.7%). This was offset by an increase
in the yield on corporate bonds that in turn led to an increase in
the discount rates being applied to the future pension liabilities.
In the UK (which represents 82% of the total liabilities), the
discount rate has risen by 0.4% from 3.3% at 31 March 2015 to 3.7%
at 30 September 2015. The increase in deficit in the UK scheme was
largely offset by a reduction in the deficit in the unfunded German
scheme driven by the increase in the German discount rate from 1.4%
at 31 March 2015 to 2.4% at 30 September 2015. The retirement
benefit surplus is all in Australia.
9 Cash generated by operations
|
First half
|
|
Full year
|
|
2015/16
£m
|
|
2014/15
£m
|
|
2014/15
£m
|
|
|
|
|
|
|
Operating profit
|
6.8
|
|
6.6
|
|
12.1
|
Depreciation and
amortisation
|
2.8
|
|
2.6
|
|
5.3
|
Impairment of intangible
assets
|
-
|
|
0.2
|
|
0.2
|
Impairment of investment
property
|
-
|
|
-
|
|
1.2
|
Proceeds from plant and equipment
disposals
|
-
|
|
0.1
|
|
-
|
Equity share plans
|
0.2
|
|
-
|
|
-
|
(Increase)/decrease in
inventories
|
(1.3)
|
|
(2.4)
|
|
0.7
|
Decrease/(increase) in
receivables
|
1.6
|
|
0.5
|
|
(0.2)
|
(Decrease)/increase in
payables
|
(2.8)
|
|
1.0
|
|
0.9
|
Decrease in provisions
|
(0.7)
|
|
(1.9)
|
|
(1.5)
|
Movement on pension plans
|
(2.0)
|
|
(2.1)
|
|
(4.4)
|
Movement on derivative financial
instruments
|
(0.1)
|
|
-
|
|
(0.1)
|
Cash generated by operations |
4.5
|
|
4.6
|
|
14.2
|
10
Reconciliation of the movement in cash and cash equivalents to
movement in net debt
|
First half
|
|
Full year
|
|
2015/16
£m
|
|
2014/15
£m
|
|
2014/15
£m
|
|
|
|
|
|
|
|
|
(Decrease)/increase in cash and cash
equivalents
|
(1.8)
|
|
3.8
|
|
5.8
|
|
Change in net debt resulting from
cash flows
|
(0.5)
|
|
(3.2)
|
|
0.1
|
|
Other non-cash movement
|
0.3
|
|
(0.2)
|
|
(0.3)
|
|
Foreign currency translation
differences
|
(0.1)
|
|
-
|
|
(0.3)
|
|
Change in net debt during the
period
|
(2.1)
|
|
0.4
|
|
5.3
|
|
Net debt at start of
period
|
(19.5)
|
|
(24.8)
|
|
(24.8)
|
|
Net debt at end of period
|
(21.6)
|
|
(24.4)
|
|
(19.5)
|
|
|
|
|
|
|
|
|
|
11 Net
Debt
|
At 30
September 2015
£m
|
|
At 30 September 2014
£m
|
|
At 31
March
2015
£m
|
|
|
|
|
|
|
Cash and cash equivalents
|
12.2
|
|
10.6
|
|
12.6
|
|
|
|
|
|
|
Borrowings:
|
|
|
|
|
|
Bank overdrafts
|
(1.9)
|
|
(0.3)
|
|
(0.4)
|
Bank loans - current
|
-
|
|
(0.4)
|
|
(0.3)
|
Sub-total - current
borrowings
|
(1.9)
|
|
(0.7)
|
|
(0.7)
|
Bank loans - non-current
|
(31.4)
|
|
(33.8)
|
|
(30.9)
|
Preference stock
|
(0.5)
|
|
(0.5)
|
|
(0.5)
|
Net debt
|
(21.6)
|
|
(24.4)
|
|
(19.5)
|
12 Post balance
sheet events
Set out below is the Regulatory
News Announcement of the Agreement to Purchase the tooth chain
business of Aventics Gmbh as published on 17 November
2015.
Proposed acquisition of Aventics
TC ("the Acquisition")
Renold, a leading international
supplier of industrial chains and related power transmission
products, is pleased to announce that it has signed a conditional
sale and purchase agreement to acquire the business and trading
assets of Aventics Tooth Chain ("Aventics TC"), an operating
division of Aventics Gmbh based in Germany, for up to €6.3 million
(£4.5 million) in cash.
The consideration (on a cash and
debt free basis) will be satisfied by an initial payment of €4.8
million at completion followed by further expected payments of up
to €1.5 million over the two year period following completion,
contingent on achieving certain sales targets. All payments will be
satisfied from the Group's existing banking facilities. Completion
of the Acquisition is expected to occur after the statutory 'TUPE'
consultation period with the employees in Germany and after certain
carve out activities have been completed to separate the business
from Aventics.
As a division of Aventics Gmbh,
Aventics TC does not prepare separate audited accounts. Based on
financial information obtained by Renold during the due diligence
process, third-party sales in the year to 31 December 2014 were
€7.5 million (£5.3 million). In addition, approximately €1.5
million (£1.0 million) of sales were delivered indirectly via other
Aventics group companies and plans are in place to transition this
indirect business to Renold as part of the post closing process. On
a proforma basis, Aventics TC made an operating profit before
exceptional items of €1.1 million (£0.8 million) in the year ended
31 December 2014. Gross assets at that date were €1.7 million (£1.2
million).
Renold anticipates that the
Acquisition will be broadly neutral for adjusted earnings in the
current financial year, as a result of the business separation
costs to be incurred, but should be earnings enhancing
thereafter. The Acquisition constitutes a
Class 2 transaction for the purposes of the UK Financial
Authority's Listing Rules and, as such, does not require Renold
shareholders' approval.
Aventics TC
Aventics TC is the market leader
in the manufacture of inverted tooth chain for industrial
applications. Tooth chain is a specialist product not currently
manufactured by Renold and is typically seen in applications such
as bottling plants and other manufacturing facilities and
equipment. The business employs 65 people and operates from a
self-contained rented facility in Gronau, Lower Saxony with its own
dedicated manufacturing, engineering and sales teams. Two thirds of
Aventics TC sales are currently made in Germany with the balance of
sales being made in a wide range of international territories
including other western European countries, the USA and China. The
business operates as a niche division of Aventics Gmbh which
specialises in pneumatics equipment and shares certain sales and
back office processes with the Aventics Group as a
whole.
Benefits of the
acquisition
Through the Acquisition of
Aventics TC, Renold will gain access to a high value-added product
not currently part of the Renold offering. Renold expects to expand
sales through the existing Renold global sales presence and network
which will allow access to a much wider geographical market than
currently. In addition, as the factory is close to Renold's plant
in Einbeck, Germany, the business will be able to share expertise
and some infrastructure services within the more substantial Renold
Group.
Ends