Renold Regulatory News (RNO)

12 Dec 2005 07:01

Renold PLC12 December 2005 12 December 2005 RENOLD plc Interim results for the half year ended 30 September 2005 Precision engineering group, Renold plc, a leading international manufacturerand supplier of industrial chains and related power transmission products,automotive cam drive systems and machine tools and rotors, today announces itsinterim results for the half year ended 30 September 2005. Summary • Results in line with Board's expectations reflecting impact of continuing high raw material prices and increased utility costs • Turnover increased by 12% to £106.9 million (2004: £95.3 million) • Operating profit, before exceptional items, was marginally ahead of previous six months at £0.2 million • Loss before tax was £2.0 million (2004: £2.1 million profit) • Strong forward order book • Actions to reduce costs on going - Further shift of manufacturing to lower cost countries • Sale of Burton site contracted for at least £7.7 million (£3.5 million carrying value). Outlook Roger Leverton, Chairman of Renold plc, said today: "With the order book substantially higher than at the commencement of the year,and with the actions taken to mitigate cost increases, the second halfperformance should see an improvement. However, any further significantescalation of raw material and energy costs will continue to depress results." 12 December 2005 RENOLD plc Chairman: Roger Leverton Interim Statement for the half year ended 30 September 2005 FINANCIAL SUMMARY Half year ended 30 September 2005/06 2004/05 £m (restated) £mRevenue 106.9 95.3 Operating profit before exceptional items 0.2 3.8 (Loss)/profit before tax and exceptional items (1.8) 2.4 (Loss)/profit before tax (2.0) 2.1 Earnings per ordinary share - basic and diluted (loss)/earnings per share (2.8)p 2.2p - adjusted (loss)/earnings per share (adjusting for the after tax effects of exceptional items) (2.6)p 2.4p Net debt (22.3) (26.9) Chairman's Statement The results for the first half to 30 September 2005 are in line with the Board'sexpectations with a marginal improvement in operating profit before exceptionalitems over the second half of 2004/05, in the face of continuing high rawmaterial prices, coupled with increased utility costs. Group results This is the first time Renold has published results in accordance with therecognition and measurement criteria of International Financial ReportingStandards (IFRS) and hence comparative numbers have been restated asappropriate. A full reconciliation of the changes from UK GAAP to IFRS isavailable on the Group's website at www.renold.com. The most significant changeis the increase in Shareholders' Equity as at 31 March 2005 of £15.8 millionwhich is principally due to the revaluation of freehold properties. Sales for the half year to 30 September 2005 were £106.9 million (2004/05: £95.3million). This includes a £3.4 million contribution from Renold SAF which wasacquired in March 2005. At constant exchange rates, on a like for like basis,sales were 7% ahead of last year. Operating profit before exceptional items was £0.2 million (2004/05: £3.8million profit). Loss before tax was £2.0 million (2004/05: £2.1 millionprofit). Net financing costs of £2.0 million (2004/05: £1.4 million) included costsassociated with the renegotiation of banking facilities of £0.6 million,interest expense relating to pension plan balances of £0.4 million (2004/05:£0.2 million) and the fair value gains on derivatives amounting to £0.2 million. The tax credit in the period was £0.1 million (2004/05: £0.6 million charge).Adjusted (loss)/earnings per share, before exceptional items, were (2.6) pence(2004/05: 2.4 pence) and basic (loss)/earnings per share were (2.8) pence (2004/05: 2.2 pence). Cash flow and borrowings Operating cash flow, net of capital spending and disposal proceeds was anoutflow of £4.1 million (2004/05: £5.4 million outflow). This included anoutflow of £3.2 million relating to the restructuring of Renold SAF, theconversion of the Burton chain factory to a service centre and an inventoryincrease particularly, in the Machine Tool and Rotor business, as a result ofthe large order intake during the first half. Net borrowings, including finance leases, at 30 September 2005 were £21.7million compared with £17.0 million at 31 March 2005 (before the inclusion of£0.6m preference shares under IFRS). Gearing was 43% of total equity comparedwith 47% a year ago. As announced in October 2005, the Group has entered into a contract for the saleof the Burton site for gross proceeds of at least £7.7 million with a potentialof up to £8.65 million subject to satisfactory site survey and planningpermission being obtained. The carrying value of the site at 30 September 2005is £3.5 million and it is the intention that the net proceeds will be used toreduce Group borrowings. Dividend The Board has decided to recommend that no interim dividend be paid but it willconsider the payment of a dividend in the light of results for the year as awhole. Comment Industrial Power Transmission The division's performance in the first half continued to reflect similartrading conditions to those experienced during the second half of last year. Rawmaterial prices have remained high and utility and freight costs have shownsubstantial increases during the last few months. As much as possible, priceincreases have been introduced to offset higher input costs but this is takingtime to flow through into the results. Actions to reduce costs have beenimplemented throughout the business including the restructuring of the Burtonactivities. These initiatives gave rise to an increase in operating profitcompared with the second half of last year, although margins have yet to recoverto the levels of the first half of 2004/05. North American orders for chain products were strong with double digit increasesin distribution and OEM orders. European orders increased overall, reflectingprice increases with stable volumes. China continued to develop with good demandfor gear products. Orders for coupling products remained strong. Further actions to reduce costs, including the establishment of a factory inPoland and increased outsourcing of components, should increasingly benefit thedivision's performance going forward. Negotiations continue over theestablishment of manufacturing operations in China. Automotive Systems Sales were 40% higher than the first half of last year including the Renold SAFbusiness acquired in March 2005. On a like for like basis, at constant exchangerates, sales were 18% higher driven by a new programme at Peugeot and growth indemand from other manufacturers. The US facility has commenced assembly ofchain; the restructuring of the acquired Renold SAF operation, which recorded abreakeven at the operating level, is virtually complete. Higher steel prices and increased freight and utility costs, with littleconsequent increase in customer pricing, continue to impact the performance ofthe Calais operation. Efficiency improvements were achieved by improved toollife, single-piece flow and automated test equipment but these only partiallyoffset the cost increases and as a result there was an operating loss for theperiod of £1.7 million compared with a loss of £1.4 million in the second halfof 2004/05. The recent strengthening of the US dollar against the Euro will, if maintained,provide benefit in the second half year, as should continuing efficiencyimprovements. Machine Tool and Rotor As indicated in the Annual Report, machine tool orders were weak in the secondhalf of 2004/05. As a result sales, were 19% lower than the first half of lastyear at constant exchange rates. However, machine tool orders have recoveredstrongly in recent months and the order book has more than doubled since March2005. This should underpin second half performance. As a result of the lowershipments in the first half, the division reported an operating loss of £0.6million compared with a profit of £0.3 million in each half of 2004/05. Outlook With the order book substantially higher than at the commencement of the year,and with the actions taken to mitigate cost increases, the second halfperformance should see an improvement. However, any further significantescalation of raw material and energy costs will continue to depress results. Release of Interim Statement The Interim Statement will be posted to shareholders on 16 December 2005. Copieswill be available for the public from that date at the Company's registeredoffice, Renold House, Styal Road, Wythenshawe, Manchester M22 5WL. For further information, please contact: Renold plcBob Davies, Chief Executive 12 December 2005: 020 7067 0700Tony Brown, Finance Director Thereafter: 0161 498 4500 Issued by:Weber Shandwick Square MileTerry Garrett/Stephanie Badjonat Telephone: 020 7067 0700 This announcement and the Analysts' Presentation can also be viewed on thewebsite http://www.renold.com Consolidated Income Statementfor the six months ended 30 September 2005 (unaudited) Half year ended 30 September Full year 2005/06 2004/05 2004/05 (restated) (restated) £m £m £m Revenue 106.9 95.3 197.0 Operating costs (excluding exceptional items) (106.7) (91.5) (193.6) ---------- ---------- ---------Operating profit before exceptional items 0.2 3.8 3.4 Exceptional items (Note 2) (0.2) (0.3) (2.4) ---------- ---------- ---------Operating profit 3.5 1.0 ---------- ---------- ---------Net interest expense on loans and overdrafts (1.2) (1.2) (2.2) Costs associated with refinancing (0.6) Net (interest expense)/finance income arising on pension plan balances (0.4) (0.2) (0.4) Fair value gains on derivative instruments 0.2 ---------- ---------- ---------Net financing cost (2.0) (1.4) (2.6) ---------- ---------- ---------(Loss)/profit before tax (2.0) 2.1 (1.6) ---------- ---------- ---------Tax UK 0.8 (0.2) 1.6 Overseas (0.7) (0.4) (0.1) ---------- ---------- ---------(Loss)/profit for the financial period (1.9) 1.5 (0.1) ---------- ---------- ---------Earnings per share Basic and diluted (loss)/earnings per share (2.8)p 2.2p (0.2)p Consolidated Balance Sheetas at 30 September 2005 (unaudited) Half year Full year 2005/06 2004/05 2004/05 (restated) (restated) £m £m £mASSETSNon-current assetsGoodwill 16.3 18.9 15.7Other intangible fixed assets 0.6 0.4 0.3Property, plant and equipment 61.7 62.0 64.4Other non-current assets 1.0 0.9 1.1Deferred tax assets 20.1 15.5 17.0 ---------- ---------- ---------Total non-current assets 99.7 97.7 98.5 ---------- ---------- --------- Current assetsInventories 50.0 49.3 47.3Trade and other receivables 40.3 36.1 41.8Financial instruments 0.2Cash and cash equivalents 22.4 12.1 24.5 ---------- ---------- ---------Total current assets 112.9 97.5 113.6 ---------- ---------- ---------TOTAL ASSETS 212.6 195.2 212.1 ---------- ---------- --------- LIABILITIESCurrent liabilitiesBank and other loans (35.6) (21.7) 28.4)Financial instruments (0.1)Trade and other payables (45.0) (36.5) (45.7)Current tax (0.8) (1.0) (1.0)Provisions (8.5) (11.7) ---------- ---------- ---------Total current liabilities (90.0) (59.2) (86.8) ---------- ---------- ---------NET CURRENT ASSETS 22.9 38.3 26.8 ---------- ---------- --------- Non-current liabilitiesBank and other loans (8.1) (16.8) (12.7)Financial instruments (0.4)Preference shares (0.6)Trade and other payables (1.6) (1.6) (1.6)Deferred tax liabilities (1.5) (1.3) (1.4)Retirement benefit obligations (60.0) (59.0) (53.5) ---------- ---------- ---------Total non-current liabilities (72.2) (78.7) (69.2) ---------- ---------- ---------TOTAL LIABILITIES (162.2) (137.9) (156.0) ---------- ---------- ---------NET ASSETS 50.4 57.3 56.1 ========== ========== ========= EQUITYShareholders' equityIssued share capital 17.3 17.9 17.9Share premium 6.1 6.0 6.1Retained earnings and other reserves 27.0 33.4 32.1 ---------- ---------- ---------TOTAL EQUITY 50.4 57.3 56.1 ========== ========== ========= Consolidated Cash Flow Statementfor the six months ended 30 September 2005 (unaudited) Half year ended 30 September Full year 2005/06 2004/05 2004/05 (restated) (restated) £m £m £m Cash flows from operations (Note 3) (0.2) 0.1 6.6 Financing costs paid (1.6) (1.1) (2.2) Income taxes paid (0.8) (0.5) (1.0) ---------- ---------- ---------Net cash (outflow)/inflow from operating activities (2.6) (1.5) 3.4 ---------- ---------- ---------Cash flows from investing activities Purchase of property, plant and equipment (2.9) (3.9) (8.0) Purchase of intangible assets (0.1) Proceeds on disposal of property, plant and equipment 1.5 Purchase of subsidiary (0.1) Cash acquired on purchase of subsidiary 9.7 Interest received 0.1 ---------- ---------- ---------Net cash (outflow)/inflow from investing activities (1.5) (3.9) 1.7 ---------- ---------- ---------Cash flows from financing activities Increase in borrowings 1.8 4.6 2.4 Payment of finance lease liabilities (0.1) Equity dividends paid (2.1) (3.2) ---------- ---------- ---------Net cash inflow/(outflow) from financing activities 1.8 2.5 (0.9) ---------- ---------- ---------Effects of exchange rate changes 0.1 ---------- ---------- ---------Net (decrease)/increase in cash and cash equivalents (2.2) (2.9) 4.2 Net cash and cash equivalents at beginning of period 4.8 0.6 0.6 ---------- ---------- ---------Net cash and cash equivalents at end of period 2.6 (2.3) 4.8 ========== ========== =========In the balance sheet net cash and cash equivalents comprised: Cash and cash equivalents 22.4 12.1 24.5 Overdrafts (included in bank and other loans) (19.8) (14.4) (19.7) --------- --------- -------- 2.6 (2.3) 4.8 ========= ========= ======== Reconciliation of movement in net cash and cash equivalents to movement in netdebt: (Decrease)/increase in net cash and cashequivalents (2.2) (2.9) 4.2 (Increase) in debt and lease financing (1.8) (4.6) (2.3) Other non-cash movements (0.1) Foreign currency translation differences (0.7) (0.2) 0.4 --------- --------- -------- (4.7) (7.7) 2.2 Net debt at the beginning of the period (17.0) (19.2) (19.2) Restatement for reclassification of preference shares following adoption of IAS 32 (0.6) ---------Net debt at the beginning of the period (restated) (17.6) --------- --------- --------Net debt at the end of the period (22.3) (26.9) (17.0) ========== ========== =========Net debt comprised: Cash and cash equivalents 22.4 12.1 24.5 Bank overdrafts (19.8) (14.4) (19.7) Bank loans (23.9) (24.1) (21.4) Obligations under finance leases (0.4) (0.5) (0.4) Preference shares (0.6) --------- --------- -------- (22.3) (26.9) (17.0) ========= ========= ======== Consolidated Statement of Recognised Income and Expensefor the six months ended 30 September 2005 (unaudited) Half year ended 30 September Full year 2005/06 2004/05 2004/05 (restated) (restated) £m £m £m Foreign exchange translation differences 1.7 0.7 Gains on cash flow hedges 0.1 Actuarial (losses)/gains on retirement benefit obligations (6.8) (19.1) (15.9) Tax on items taken directly to equity 2.1 5.7 4.6 --------- --------- --------Expense recognised directly in equity (2.9) (12.7) (11.3) (Loss)/profit for the period (1.9) 1.5 (0.1) --------- --------- --------Total recognised income and expense for the period (4.8) (11.2) (11.4) ========= ========= ======== Consolidated Statement of Changes in Equityfor the six months ended 30 September 2005 (unaudited) Half year ended 30 September Full year 2005/06 2004/05 2004/05 (restated) (restated) £m £m £m At 1 April (as previously reported under UK GAAP) 57.9 57.9 At 1 April (as restated under IFRS) 56.1 Adjustments on adoption of IFRS from 1 April 2004 12.7 12.7 Adjustments arising on adoption of IAS 32 and IAS 39 from 1 April 2005 (0.9) --------- --------- --------At 1 April (restated) 55.2 70.6 70.6 Recognised income and expense for the period (4.8) (11.2) (11.4) Dividends paid (2.1) (3.2) Share premium - equity settled share plans 0.1 --------- --------- --------At period end 50.4 57.3 56.1 ========== ========== ========= Notes to the Interim Financial Statements 1. Basis of preparation and transition to International Financial Reporting Standards ("IFRS") The unaudited financial statements for the six months ended 30 September 2005 have been prepared for the first time in accordance with the recognition and measurement criteria of IFRS. Renold's transition date for the adoption of IFRS was 4 April 2004. The Group has prepared and published the reconciliations that fulfil the requirements of IFRS 1 (First-time adoption of International Financial Reporting Standards), explaining the adjustments made to the comparative financial statements, arising from the transition from UK GAAP to IFRS. This announcement was made to the London Stock Exchange on 23 November 2005 and a copy is available on the Group's website (www.renold.com). Alternatively a copy is obtainable from the Company Secretary at the Company's registered address. In view of the separate announcement, the detailed financial information explaining the effects of the transition to IFRS is not repeated in this interim statement. However, it is noted that the International Standards on financial instruments, IAS 32 and 39, were only adopted from 1 April 2005, as permitted under the relevant transitional arrangements. Therefore, comparative information in respect of financial instruments, for periods prior to 1 April 2005, remains presented in accordance with UK GAAP. In all other respects the financial information within the interim statement is presented on a consistent basis for all periods shown, following the recognition and measurement criteria of IFRS. The financial statements have been prepared in accordance with accounting policies that the Board expects to apply in the financial statements for the year ending 31 March 2006. (A full statement of these accounting policies is contained in the Group's announcement to the London Stock Exchange referred to above). Therefore, the interim financial statements have been prepared recognising the Standards in issue that either are endorsed by the EU and effective for 31 March 2006 or are expected to be endorsed and effective by 31 March 2006. It should be appreciated that the International Standards currently in issue and adopted by the EU are subject to interpretation issued from time to time by the International Financial Reporting Interpretations Committee (IFRIC). Further standards may be issued by the International Standards Board that will be adopted for financial years ending on or after 31 March 2006. Additionally, IFRS is currently being applied in the United Kingdom and in a large number of countries simultaneously for the first time. In an environment of new and revised Standards, included within the body of the Standards that comprise IFRS, there is not yet a significant body of established practice on which to draw in forming options regarding interpretation and application. Accordingly, practice as it will be applied and reported on in the Group's first IFRS Financial Statements for the year ending 31 March 2006, may be subject to change. These interim financial statements do not constitute statutory accounts of the Group within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 March 2005, which were prepared under accounting practices generally accepted in the UK, have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statement under Section 237 of the Companies Act 1985. The interim financial statements were approved by the Board on 12 December 2005. Notes to the Interim Financial Statements 2. Segment reporting The Group is organised on a world wide basis into three business segments as set out below: Half year 2005/06 Half year 2004/05 Full year 2004/05 Revenue Operating Revenue Operating Revenue Operating profit profit profit £m £m £m £m £m £m Industrial power transmission 75.9 68.7 142.9Less: Inter-segment revenues (0.3) (0.3) -------- -------- -------- 75.6 2.8 68.7 3.9 142.6 4.9Machine tool and rotors 8.5 10.5 21.7 Less: Inter-segment revenues (1.1) (1.0) (2.0) -------- -------- -------- 7.4 (0.6) 9.5 0.3 19.7 0.6 Automotive 23.9 17.1 34.8 Less: Inter-segment revenues (0.1) -------- -------- -------- 23.9 (1.7) 17.1 (0.1) 34.7 (1.5) -------- -------- --------Total external revenue 106.9 95.3 197.0 ======== ======== ======== Central costs not allocated to segments (0.3) (0.3) (0.6) -------- -------- --------Operating profit before exceptional items 0.2 3.8 3.4 Exceptional items (0.2) (0.3) (2.4) -------- -------- --------Operating profit 3.5 1.0 ======== ======== ======== Central corporate costs that can be attributed to segments are reallocatedaccordingly. However, central costs that cannot be attributed to segmentactivities remain unallocated. Exceptional items Half year Half year Full year 2005/06 2004/05 2004/05 £m £m £mImpairment of goodwill (2.6)Redundancy and restructuring costs- continuing operations (0.2) (0.3) (4.3)- acquisition (6.8)Negative goodwill on acquisition 11.3 ------- ------- --------Total exceptional items (0.2) (0.3) (2.4) ======= ======= ======== The exceptional items are attributed to segments as follows: Industrial power transmission:Redundancy and restructuring - continuing operations (0.1) (4.2) ------- ------- --------Machine tool and rotor:Impairment of goodwill (2.6)Redundancy and restructuring - continuing operations (0.1) ------- ------- -------- (0.1) (2.6) ------- ------- --------Automotive:Redundancy and restructuring - continuing operations (0.3) (0.1)Redundancy and restructuring - acquisition (6.8)Negative goodwill on acquisition 11.3 ------- ------- -------- (0.3) 4.4 ------- ------- -------- ------- ------- --------Total exceptional items (0.2) (0.3) (2.4) ======= ======= ======== In the year to 31 March 2005 an impairment charge of £2.6 million was made inrespect of goodwill related to the Jones & Shipman acquisition. In March 2005the Group acquired Sachs Automotive France SAS ("SAF"). Following thistransaction a post-acquisition restructuring and integration provision wascharged of £6.8 million. Negative goodwill arising on the acquisition of SAF(£11.3 million) was credited to the income statement. Geographical analysis of external turnover by market area: First half year Full year 2005/06 2004/05 2004/05 £m £m £m United Kingdom 12.4 12.9 25.9Germany 14.7 12.0 25.1France 6.7 4.7 10.0Rest of Europe 18.7 16.7 34.4North and South America 38.4 34.7 70.9Other countries 16.0 14.3 30.7 ------- ------- -------- 106.9 95.3 197.0 ======= ======= ======== 3. Note to the consolidated cash flow statement First half year Full year 2005/06 2004/05 2004/05 (restated) (restated) £m £m £m (Loss)/profit before taxation (2.0) 2.1 (1.6) Depreciation and amortisation 4.2 4.3 8.8Goodwill impairment 2.6Negative goodwill release (11.3)Equity share plans 0.1Net finance cost 2.0 1.4 2.6 --------- --------- ---------Operating cash flows before changes in working capital and provisions 4.2 7.8 1.2 Increase in inventories (1.9) (1.6)Decrease/(increase) in trade and other receivables 1.7 (1.2) (5.9)(Decrease)/increase in trade and other payables (1.0) (4.8) 3.7(Decrease)/increase in provisions (3.2) 11.7Movement on pension schemes (0.1) (4.1) --------- --------- ---------Cash flows from operations (0.2) 0.1 6.6 ========= ========= ========= This information is provided by RNS The company news service from the London Stock Exchange