LONDON (Alliance News) - Improved margins helped industrial chains and power transmission products company Renold PLC to increase its pretax profit in the first half against a challenging market backdrop, while the group also announced it has made an acquisition in Germany.
Renold said cost reduction actions and operational improvements in the business helped to improve its margins in the first half, leaving its pretax profit up to GBP4.6 million from GBP4.4 million a year earlier, despite revenue falling to GBP84.5 million from GBP90.7 million.
The group did say, however, that it now expects its adjusted operating profit to be at the lower end of market expectations as trading conditions continue to worsen since the end of the first half.
European revenue in the first half was hit in part by a big Swiss order the previous year not repeating, but orders were still lower amid subdued markets and destocking by distributors. North American sales were slightly higher, helped by a good performance in Canada, but Australasia sales were dragged lower by a weak Australian market.
The group decided against paying an interim dividend as it focuses on its cost cutting and operational improvement programmes. It did not pay an interim dividend a year earlier either.
"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," said Chief Executive Robert Purcell.
In a separate statement on Thursday, the company said it has signed a deal to acquire Aventics Tooth Chain, the operating arm of Germany's Aventics Gmbh, for up to EUR6.3 million. Renold will pay EUR4.8 million upfront, followed by up to EUR1.5 million over the two years following the acquisition.
Aventics makes inverted tooth chain for industrial clients, a specialist product not currently made by Renold. It is typically used on bottling plants and other manufacturing facilities, Renold said. The deal will give Renold access to a high value-added product not currently in its portfolio and will expand its sales network.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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Renold (RNO)