Renold Regulatory News (RNO)

Renold plc

("Renold" or the "Group")

Interim results for the half year ended 30 September 2012 and appointment of new Chief Executive.

Renold, a leading international supplier of industrial chains and related power transmission products, today announces its interim results for the half year ended 30 September 2012 (the period).

Operational Summary

·; Underlying2 revenue down 6% to £96.7m (H1 2011: underlying revenue £102.5m), demand constrained by ongoing macro-economic weakness with some evidence of de-stocking

·; Torque Transmission underlying revenue down 1% and Chain revenue down 7%

·; Underlying adjusted operating profit of £3.6m (H1 2011: £6.1m)

·; Continued gains in working capital with average working capital to sales ratio improved from 25.7% to 21.1%

·; Cash outflow of £2.6m significantly improved on the prior period (H1 2011: £8.5m outflow)

·; Completion of new four year banking facility on improved terms to reduce cost of debt

·; Net debt: EBITDA ratio cut to 1.6x from 1.9x in prior year

·; Appointment of Robert Purcell as Chief Executive from 1 May 2013 and the retirement of Bob Davies on 31 December 2012. Mark Harper to take on the role of Executive Chairman on a temporary basis.

Prospects

Mark Harper, Chairman of Renold plc, said:

"This is my first statement to shareholders as the Chairman of your Company and is made during a difficult trading period for the Group. Global macro-economic uncertainty, particularly within Europe, dampened demand resulting in revenue weakening compared to the prior year. While disappointed with the trading performance, the Board is pleased both with the refinancing and the continued improvement in working capital management. With the macro-economic environment remaining uncertain, the Group is intensifying its cost reduction initiatives, reviewing its commercial positioning and taking measures to conserve cash.

On behalf of the Board I would like to thank Bob Davies for his significant contribution to Renold over the past eight years, and to wish him a happy and healthy retirement. I would also like to welcome Robert Purcell whose experience in the strategic development of businesses similar to Renold will prove invaluable to the Group's future progress."

20 November 2012

1 Throughout these interim results "adjusted" means after eliminating the effects of exceptional items, non-cash IAS 19 pensions charge, and any associated tax thereon.

2 "Underlying" means after eliminating the effects of foreign exchange translation.

ENQUIRIES:

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 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, metals and mining.

Further information about Renold can be found on their website at: www.renold.com

Chairman's Statement

The results for the six months to 30 September 2012 are in line with the Board's latest expectations with a 6% reduction in the Group's underlying revenue. Economic uncertainty has continued to depress demand in most regions and particularly within a number of European markets. However, demand in North America for both chain and torque transmission products has remained buoyant and this has facilitated growth in sales of locally sourced Renold products and export led growth from our German facility.

During the period, the Group completed a new 4 year banking facility on improved terms and intensified its cost reduction activities to mitigate the impact of lower sales.

Group Results

The Group experienced difficult trading conditions in the first half of 2012/13 with orders, revenue and operating profit all down on the same period last year. Underlying order intake was 12% lower than the comparable period last year. Order intake was also lower than revenue in the period with the result that the underlying order book has fallen 8% since the start of the year. The 6% fall in underlying sales for the Group reflected 7% lower revenue in the Chain division with the higher margin Torque Transmission division experiencing a more modest 1% decrease year on year.

Underlying operating profit before exceptional items in the period was £3.6m (2011: profit £6.1m).

Despite the difficult trading conditions, the business significantly improved its cash performance in the period with a much reduced cash outflow of £2.6m (2011: outflow of £8.5m) largely driven by improved operational cash flows from working capital management. The key performance indicator of working capital as a ratio of rolling 12 month revenue improved by approximately 18% to an average level of 21.1% for the period (2011: 25.7% average). This has been a major contributing factor to the £4.4m reduction in net debt since 30 September 2011.

The Group's retirement benefit obligations saw a small increase from £55.7m (£45.2m net of deferred tax) at 31 March 2012 to £59.6m (£48.1m net of deferred tax) at 30 September 2012. This reflects the lower yields on corporate bonds and hence lower discount rates being applied to value the future pension liabilities. In the UK (which account for approximately 82% of the Group's total liabilities), the discount rate has fallen from 4.9% at 31 March 2012 to 4.3% at 30 September 2012. These factors have been partly offset by lower expectations for inflation and hence lower pension increases in future. In the UK, the assumed rate of inflation (CPI) at 30 September 2012 was 1.3% (31 March 2012 2.0%). The triennial review of the Jones & Shipman Pension Scheme "J&S" is now underway with a valuation date of 5 April 2012.

New Banking Facilities

During the period, the Group completed a new banking facility agreement for a four year term, maturing in October 2016. The new facilities comprise a committed £41m Multi-Currency Revolving Credit Facility (MRCF), and an additional £8m of ancillary facilities. These facilities have been provided by a new banking group comprised of Lloyds TSB Bank plc and Svenska Handelsbanken AB.

The principal covenants are the Net Debt / Adjusted EBITDA ratio (calculated on a rolling 12 months basis), which has been set at a maximum of 2.5 times until maturity, and Adjusted EBITDA / Interest cover which is required to be greater than 4.0 times until maturity. The current Net Debt / Adjusted EBITDA ratio is 1.6 times, based on the period end net debt of £24.6m (2011: net debt £29.0m).

The new facilities bring an immediate reduction in borrowing margins of 125 - 150 basis points with scope for further savings as leverage reduces. This reduction in the margin on the new facility, combined with the benefits of rationalising our global banking arrangements, is expected to give rise to annual interest savings of approximately £0.5m.

Costs of £0.9m associated with this refinancing have been offset against borrowings and will be amortised as financing costs over the period of the loan. Costs in relation to the previous facility of £0.2m have been expensed to the income statement as exceptional refinancing costs in the period.

Business Review

Renold Chain

In Renold Chain, underlying revenue decreased by 7% with underlying order intake 12% lower than the same period last year. Weakness was seen in many territories, particularly in Europe. The European picture is itself somewhat mixed with revenue in our German business 4% ahead year on year whereas our Swiss business continues to be impacted by a strong franc and was down 40% in the half year to September 2012, accounting for half of the year on year fall in sales in Europe. Elsewhere growth of 7% was delivered in North America and 1% in South East Asia. Order intake has been lower than sales in the period and as a result the closing underlying order book is 10% lower than at the start of the year.

The decline in revenue has resulted in a fall in profitability compared to the previous year, generating an underlying operating profit before exceptional items of £2.2m (2011: profit £4.4m). This equates to a drop rate of revenue to operating profit of 40% and was lower than the Group average rate of 43% in the period. This was due to the offsetting benefits of reductions in overheads as part of the ongoing European back office restructuring. Further cost reductions were initiated in the period in response to the ongoing lower level of demand.

Torque Transmission

Torque Transmission has been more resilient to the difficult trading conditions in the period, with a modest 1% decrease in underlying revenue on the back of double-digit growth in the prior year. Order intake has been lower than revenuein the period and as a result the closing underlying order book is 5% lower than at the start of the year.

In its four key market sectors, strength and resilience was seen in Mass Transit (year on year growth of 30%) and Energy (10% growth). Demand for products within the metals sector was more subdued with a revenue fall of 21% as a result of reduced global demand for steel. Quarrying and Mining also suffered from lower global demand for extracted resources with a smaller 3% reduction in revenue. As a whole, the four key sectors grew their share of Torque Transmission revenues to 62% from 57% in the first half of the prior year and achieved overall net growth of 4%.

The decline in revenue was accompanied by a change in mix with the attractive but lower margin Mass Transit business growing substantially in the period. The significant 11% fall in revenue in South Africa could not be matched by overhead reductions and hence had a more significant impact on the operating results. These factors combined to produce an underlying operating profit before exceptional items in the period of £3.1m (2011: profit £3.9m). Exceptional income of £1.0m has also been recognised in the division in the period in relation to insurance proceeds receivable to replace a machine destroyed by a small fire.

Dividend

The Board has recommended that no interim dividend be paid. The directors will consider future dividend policy in the light of results from the business going forward.

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 Annual Report for the year ended 31 March 2012. These include macro-economic risks as well as various risks relating to Group treasury activities. In addition, key operational risks are raw material and other input cost prices and product liability claims. The on-going implementation of a Group wide ERP system is a further non-recurring risk that is currently under management.

The Group's resultshave particular exposure to the movements in steel prices and the US Dollar/GB Pound/Euro exchange rates. Both risks are managed through diverse sourcing of supply and the forward hedging of net currency cash flows. The valuation of retirement benefit obligations can be significantly impacted by changes to the market based yields on corporate bonds and inflation prospects. However, it should be noted that the cash flows to support the pension schemes are more stable and subject to long term funding plans which are reviewed every three years.

On 28 September 2012, the Group agreed a new banking facility agreement for a four year period maturing in October 2016 which not only brings security for the long-term but will also bring immediate benefits to the net cost of capital. The Group operates with adequate headroom on its facilities and covenants.

Outlook

The current macro-economic uncertainty, particularly in Europe has had a significant impact on the first half results, and therefore the Group is intensifying its cost reduction initiatives to mitigate the impact of lower revenue. However, it is expected that trading will follow the normal historical seasonality with revenues and operating profit increasing in the second half of the financial year compared to the first.

Executive Directorate Change

Bob Davies has announced his intention to retire on 31 December 2012 after eight years' service with the Group. Following a formal recruitment process, Renold has appointed Robert Purcell to the position of Chief Executive with effect from 1 May 2013. Robert was until recently the Managing Director of the Protection and Finishing Products division of Filtrona plc where he presided over a period of rapid, highly profitable development. Mark Harper will now take on the role of Executive Chairman on a temporary basis until Robert's start date.

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 2012. A list of current directors is maintained on the Group website at www.renold.com.

By order of the Board

Chairman Finance Director

20 November 2012 20 November 2012

RENOLD PLC

Condensed Consolidated Income Statement

for the six months ended 30 September 2012 (unaudited)

RENOLD PLC

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 30 September 2012 (unaudited)

RENOLD PLC

Condensed Consolidated Statement of Financial Position

as at 30 September 2012 (unaudited)

RENOLD PLC

Condensed Consolidated Statement of Cash Flows

for the six months ended 30 September 2012 (unaudited)

RENOLD PLC

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 September 2012 (unaudited)

Notes to the Interim Condensed Consolidated Financial Statements

1 Corporate information

The interim condensed consolidated financial statements for the six months to 30 September 2012 were approved by the Board on 19 November 2012. 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 2012 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 2012 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 2012.

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 2012.

Changes in accounting policy

The Group has adopted all applicable mandatory amendments to standards with an effective date from 1 April 2012. Adoption of these revised standards and interpretations did not have any material impact on the financial performance or position of the Group.

The following standards and interpretations have been issued but not adopted as application was not mandatory for the period:

·; Amendments to IAS 1 "Presentation of Items of Other Comprehensive Income" effective from 1 July 2012;

·; IAS 19 "Employee Benefits (amendment)" effective from 1 January 2013;

·; * IAS 27 "Separate Financial Statements" effective from 1 January 2013;

·; * IAS 28 "Investments in Associates and Joint Ventures" effective from 1 January 2013;

·; * IAS 32 "Offsetting Financial Assets and Financial Liabilities" effective from 1 January 2014;

·; * IFRS 7 "Disclosures Offsetting Financial Assets and Financial Liabilities" effective from 1 January 2013;

·; * IFRS 9 "Financial Instruments: Classification and Measurement" effective from 1 January 2013;

·; * IFRS 10 "Consolidated Financial Statements" effective from 1 January 2013;

·; * IFRS 11 "Joint Arrangements" effective from 1 January 2013;

·; * IFRS 12 "Disclosures of Interests in Other Entities" effective from 1 January 2013; and

·; * IFRS 13 "Fair Value Measurement" effective from 1 January 2013.

* These standards not yet endorsed.

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.

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 2012.

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 2012.

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 2012 were as follows:

The segment results for the period ended 30 September 2011 were as follows:

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:

The segment results for the year ended 31 March 2012 were as follows:

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:

4 Exceptional items

5 Net financing costs

6 Taxation

At the balance sheet date, legislation has been substantively enacted which reduces the main rate of UK corporation tax from 26% to 24% with effect from 1 April 2012 and to 23% from 1 April 2013. A further reduction to the main rate of corporation tax was also announced in the March 2012 Budget Statement to reduce the rate to 22% by 1 April 2014. This is expected to be enacted in the Finance Bill for 2013.

Based on the closing deferred tax assets at the balance sheet date, the aggregate impact of the proposed reduction from 23% to 22% would reduce the deferred tax asset by approximately £0.4m.

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:

3 The adjusted earnings per share numbers have been provided in order to give a useful indication of underlying performance by the exclusion of exceptional items, the non-cash IAS19 charge and any tax thereon.

8 Retirement benefit obligations

The Group's retirement benefit obligations are summarised as follows:

Analysed as follows: