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(Alliance News) - Renold PLC remained resilient against macroeconomic challenges, results published on Wednesday showed, as it saw jumps in both revenue and profit.
For the 12 months ended March 31, the Derby, England-based supplier of industrial chains and power transmission products reported pretax profit of GBP17.3 million, up 40% from GBP12.4 million a year prior.
Renold said revenue increased 27% to GBP247.1 million from GBP195.2 million. Adjusted operating profit rose 58% to GBP24.2 million from GBP15.3 million year-on-year, while adjusted earnings per share rose 51% to 6.5 pence from 4.3p and basic earnings per share climbed 21% to 5.7p from 4.7p.
This increased annual return on sales was attributed, in part, to cost reduction and efficiency programmes, as well as strategic change and restructuring initiatives.
"We're not shutting factories or doing things like that," Chief Executive Officer Robert Purcell elaborated in an interview with Alliance News. "It's about the continuous...investment in our factories, improvement activities, very focused commercially-linked operational projects."
Order intake was GBP257.5 million, up 15% year-on-year. Of particular note was a GBP8.9 million long-term military contract, to be delivered over the next seven years, for the supply of flexible couplings for the Royal Australian Navy's Hunter class frigates.
"There are discussions about further contracts in other parts of the world, which we are very hopeful of progressing with. The contracts we've got in the UK and Australia are multiphase contracts, so the ones we already have, we hope and expect that we would be able to add further phases of those as we go through over time as well," Purcell told Alliance.
Purcell added that there was reason to believe that Renold's military and marine work would not only continue to develop, but be a "baseload" for decades looking forwards.
Net debt stretched to GBP29.8 million from GBP13.8 million the previous year. Renold attributed this to the GBP17.8 million of initial acquisition cash consideration paid during the year for Industrias YUK SA.
Last August, Renold paid EUR24 million in cash to buy the Valencia-based manufacturer and distributor of conveyor chain and ancillary products. It said that the acquisition would increase its access to the Iberian chain market, as well as expand the sales of its existing range of European TRC products.
Purcell said that YUK is already "performing ahead of the board's expectations" at the time of the acquisition, and contributed GBP10.5 million - or 4.5% - of the group order intake during the year.
"Since the acquisition, we've got about a hundred new customers, and the orders we've taken are about GBP1 million that we wouldn't have taken previously [without the acquisition]," Purcell added.
The board did not recommend the payment of a dividend, unchanged from the prior year.
Asked by Alliance whether there was a timeline for expected dividends, Purcell said: "We review [the dividend] on a regular basis...The board tries to weigh up the various options and look at what's best. We believe we've been using the cash well ourselves, and that up to now, that's been the best option. Clearly as we perform better, dividends get a tougher and tougher call each time we have those conversations, but at this point we still believe we can use that cash."
Looking ahead, Renold noted in its annual report the likelihood that macroeconomic pressures will remain. However, it remained broadly optimistic about its prospects in the months moving forward.
Purcell said: "We expect the current financial year to be no less challenging, but we remain vigilant in the environment within which we operate; however, we started the new financial year from a positive position with good momentum and confidence in the capabilities and fundamentals of the Renold business and the markets we serve."
Renold shares were trading 1.4% higher at 29.87 pence each in London on Thursday afternoon.
By Holly Beveridge, Alliance News reporter
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