Renold Regulatory News (RNO)

23 Nov 2006 07:01

Renold PLC23 November 2006 23 November 2006 Renold plc Interim results for the half year to 30 September 2006 Renold plc, a leading international supplier of industrial chains and relatedpower transmission products, today announces its interim results for the halfyear ended 30 September 2006. Summary • Results in line with Board's expectations - significant improvement in operating profit from continuing operations • Revenue from continuing operations increased by 6% at constant exchange rates • Continuing operations' operating profit increased by £2.1 million to £4.6 million, with operating margin (before exceptional items) up to 6.1% (2005: 3.4%) • Continuing operations' profit before tax was £3.6 million (2005: £0.6 million) • Basic EPS for continuing operations more than doubled to 2.4p (2005: 1.0p). Adjusted EPS 2.7p (2005: 1.2p) (adjusted for the after tax effects of exceptional items) • Disposal of Automotive operations completed in the period; discussions with potential purchasers ongoing for the disposal of Machine Tools • Strengthened leadership team focused on developing and implementing the first stages of a profit and cash enhancement plan for presentation to shareholders early in 2007 Prospects Matthew Peacock, Chairman of Renold plc, said: "With the order book higher than at the commencement of the year, increasedsales volumes and continuing actions to reduce costs, the second half yearshould see continued performance improvement. " For further information, please contact: Renold plcBob Davies, Chief Executive 23 November 2006: 020 7067 0700Peter Bream, 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 23 November 2006 Renold plc Chairman: Matthew Peacock Interim Statement for the half year ended 30 September 2006 FINANCIAL SUMMARY Half year ended 30 September 2006/2007 2005/2006 £m £mContinuing operations:Revenue 79.3 75.6Operating profit 4.6 2.5Operating profit before exceptional items 4.8 2.6Profit before tax and exceptional items 3.6 0.7Profit before tax 3.4 0.6 Discontinued operations:Loss from discontinued operations (6.4) (2.6) Other information:Basic and diluted loss per share - Group (6.8)p (2.8)pBasic and diluted earnings per share -continuing operations 2.4p 1.0pAdjusted earnings per share (adjusting for the after tax effects ofexceptional items) 2.7p 1.2p Renold plc CHAIRMAN'S STATEMENT The results for the first half to 30 September 2006 are in line with the Board'sexpectations with a significant improvement in operating profit for thecontinuing operations over the first half of 2005/06. Continuing Operations Sales for the first half to 30 September 2006 were £79.3 million (2005/06: £75.6million). At constant exchange rates sales were 6% ahead of last year. Operating profit before exceptional items was £4.8 million (2005/06: £2.6million), a 6.1% (2005/06: 3.4%) return on sales. Net financing costs of £1.2 million (2005/06: £1.9 million) were lowerprincipally because of the £0.6 million costs incurred in the renegotiation ofthe bank facilities in 2005/06. Financing included a net charge of £0.1 million(2005/06: £0.4 million) relating to pension plan balances and the fair valuegains on derivatives amounting to £nil million (2005/06: £0.2 million). The tax charge in the period was £1.7 million (2005/06: credit £0.1 million).Adjusted earnings per share from continuing operations, before exceptionalitems, were 2.7 pence (2005/06: 1.2 pence) and basic earnings per share fromcontinuing operations were 2.4 pence (2005/06: 1.0 pence). Cash Flow and Borrowings Cash generated from continuing operations was £1.1 million (2005/06: outflow£0.6 million). Capital expenditure amounted to £3.5 million (2005/06: £2.9million). Net proceeds from the disposal of the Automotive business resulted inan inflow of £3.8 million in the period. Net borrowings, including finance lease obligations and preference shares, at 30September 2006 were £27.0 million compared with £20.7 million at 31 March 2006. 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. Industrial Power Transmission The business operated in an environment of stable, albeit relatively high, rawmaterial prices, but with increased utility and freight costs. At constantexchange rates sales grew by 6% over the first half of 2005/06 with good growthin Europe, the USA and China. Margins have been improved through sales price andvolume increases plus continued reductions in the cost base across the business.The new Polish facility and outsourcing have been contributors to the costreductions. The business has begun to benefit in the last few weeks from new members to thesenior executive team, including Peter Bream as the Finance Director and two newnon-executives of which I am one and Rod Powell the other. The new leadershipteam is focused on developing and implementing the first stages of a profit andcash enhancement plan ('PACE') which will run through to the end of March 2008.This will accelerate the commitment to our low cost manufacturing sites inPoland and China, as a principal driver of profitability. Additionally inventoryreduction projects are in progress as part of a general review of our balancesheet management and cash generation. The PACE plan will enhance return oncapital employed, which has improved to 14% but remains below our expectations. Discontinued Operations Automotive The sale of the automotive business was completed on 3 August. £3.8 million wasreceived on completion and a further amount is expected to be received subjectto agreement of the net working capital balance. It was announced at the AnnualGeneral Meeting that investigations were ongoing into a potential qualityproblem with deliveries of chain for one engine system. The net costs incurredin relation to this matter are now not expected to be material to the Group. Machine Tools Following the Board's rejection of an offer for this business, negotiations areno longer taking place with VPE/Ferranti. Discussions are however ongoing withother potential buyers. Burton Site The initial planning application for redevelopment of the Burton site wasrejected, but discussions are continuing on a revised submission with a planningdecision expected by fiscal year end. Pensions The gross pension deficit shows an increase of £2.5 million from 31 March 2006.This is principally due to lower than expected asset returns over the period,particularly in the quarter to June 2006. Auditors The Company has appointed Ernst & Young LLP as auditors to the Group for theyear ending 31 March 2007. Board I should like to conclude by recording the Company's thanks to my predecessor,Roger Leverton, and to Mark Smith, for their long service to the Board. Outlook With the order book higher than at the commencement of the year, increased salesvolumes and continuing actions to reduce costs, the second half year should seecontinued performance improvement. Release of Interim Statement The Interim Statement will be posted to shareholders on 29 November 2006. Copieswill be available for the public from that date at the Company's registeredoffice, Renold House, Styal Road, Wythenshawe, Manchester M22 5WL. RENOLD PLCConsolidated Income Statementfor the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 £m £m £mContinuing operations:Revenue (Note 2) 79.3 75.6 155.0Operating costs (74.7) (73.1) (149.6) -------- -------- --------Operating profit 4.6 2.5 5.4 -------- -------- -------- ______________________________________Operating profit before exceptional | |items | 4.8 2.6 6.8 |Exceptional items | (0.2) (0.1) (1.4) | | -------- -------- -------- |Operating profit | 4.6 2.5 5.4 | | -------- -------- -------- | |______________________________________| Financial expenses (6.9) (7.4) (14.1)Financial income 5.7 5.5 10.5 -------- -------- --------Net financing costs (Note 3) (1.2) (1.9) (3.6) -------- -------- -------- Profit before tax 3.4 0.6 1.8Taxation (Note 4) (1.7) 0.1 (1.5) -------- -------- --------Profit for the period from continuingoperations 1.7 0.7 0.3 -------- -------- -------- Discontinued operationsLoss for the financial period fromdiscontinued operations (Note 5) (6.4) (2.6) (13.9) -------- -------- --------Loss for the financial period (4.7) (1.9) (13.6) ======== ======== ======== Earnings per share (Note 6)Basic and diluted loss per share (6.8)p (2.8)p (19.6)pBasic and diluted earnings per sharefrom continuing operations 2.4p 1.0p 0.4p RENOLD PLC Consolidated Balance Sheetas at 30 September 2006 (unaudited) At At At 30 September 30 September 31 March 2006 2005 2006 £m £m £mAssetsNon-current assetsGoodwill 15.9 16.3 17.1Other intangible fixed assets 0.2 0.6 0.2Property, plant and equipment 36.9 61.7 38.2Other non-current assets 0.3 0.3 0.3Deferred tax assets 18.9 20.1 18.4 ---------- ---------- -------- 72.2 99.0 74.2 ---------- ---------- --------Current assetsInventories 37.4 50.0 36.5Trade and other receivables 26.0 40.2 25.8Derivative financial instruments 0.2 0.2Cash and cash equivalents 9.6 22.4 17.8 ---------- ---------- -------- 73.0 112.8 80.3Asset held for sale 3.4 3.4Assets of discontinued operations 13.4 37.1 ---------- ---------- -------- 89.8 112.8 120.8 ---------- ---------- --------Total assets 162.0 211.8 195.0 ---------- ---------- -------- LiabilitiesCurrent liabilitiesBorrowings (32.3) (35.7) (12.4)Derivative financial instruments (0.2) (0.1)Trade and other payables (27.3) (44.8) (31.3)Provisions (0.2) (8.5) (0.4)Current tax liabilities (1.3) (0.8) (0.7) ---------- ---------- -------- (61.3) (89.9) (44.8)Liabilities directly associatedwith discontinued operations (6.9) (28.1) ---------- ---------- -------- (68.2) (89.9) (72.9) ---------- ---------- --------Net current assets 21.6 22.9 47.9 ---------- ---------- -------- Non-current liabilitiesBorrowings (3.8) (8.4) (25.6)Derivative financial instruments (0.4) (0.1)Preference shares (0.5) (0.5) (0.5)Trade and other payables (1.3) (1.0) (0.7)Deferred tax liabilities (0.8) (1.5) (0.7)Retirement benefit obligations (56.4) (59.7) (53.9) ---------- ---------- -------- (62.8) (71.5) (81.5) ---------- ---------- --------Total liabilities (131.0) (161.4) (154.4) ---------- ---------- --------Net assets 31.0 50.4 40.6 ========== ========== ======== EquityIssued share capital 17.4 17.3 17.4Share premium and other reserves 7.2 6.0 8.7Retained earnings 6.4 27.1 14.5 ---------- ---------- --------Total shareholders' equity 31.0 50.4 40.6 ========== ========== ======== RENOLD PLCConsolidated Cash Flow Statementfor the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 £m £m £mCash flows from operating activities (Note7) Cash generated/(absorbed) by operations - continuing 1.1 (0.6) 4.7 Cash (absorbed)/generated by operations - discontinued (6.3) 0.4 1.7 --------- -------- -------- (5.2) (0.2) 6.4Income taxes paid (0.6) (0.8) (1.7) --------- -------- --------Net cash from operating activities (5.8) (1.0) 4.7 --------- -------- --------Cash flows from investing activitiesDisposal of businesses 3.8Purchase of property, plant and equipment (3.5) (2.9) (6.7)Purchase of intangible assets (0.1) (0.2)Proceeds on disposal of property, plantand equipment 1.5 3.2 --------- -------- --------Net cash from investing activities 0.3 (1.5) (3.7) --------- -------- --------Cash flows from financing activitiesFinancing costs paid (1.3) (1.6) (3.3)(Decrease)/increase in borrowings (0.5) 1.8 6.9Issue of ordinary shares 0.1New obligations under finance leases 0.2Payment of finance lease obligations (0.3) (0.1) --------- -------- --------Net cash from financing activities (1.9) 0.2 3.6 --------- -------- --------Net (decrease)/increase in cash and cashequivalents (7.4) (2.3) 4.6 Net cash and cash equivalents at beginningof period 9.6 4.8 4.8 Effects of exchange rate changes (0.3) 0.1 0.2 --------- -------- --------Net cash and cash equivalents at end ofperiod 1.9 2.6 9.6 ========= ======== ======== In the balance sheet net cash and cash equivalents comprised: Cash and cash equivalents 9.6 22.4 17.8Overdrafts (included in borrowings - Note 7) (7.7) (19.8) (8.2) --------- -------- -------- 1.9 2.6 9.6 ========= ======== ======== RENOLD PLCStatement of recognised income and expensefor the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 £m £m £m Loss for the period (4.7) (1.9) (13.6) --------- --------- ---------Net gains/(losses) recognised directly inequity:Foreign exchange translation differences (1.5) 1.6 1.1Gains/(losses) on fair value of hedging netinvestments in foreign operations (0.9) 0.1 1.1Actuarial losses on retirement benefitobligations (3.5) (6.8) (5.3)Tax on items taken directly to equity 1.0 2.1 1.7 --------- --------- ---------Total expense recognised directly in equity (4.9) (3.0) (1.4) --------- --------- ---------Total recognised income and expense for theperiod (9.6) (4.9) (15.0) ========= ========= ========= Reconciliation of changes in consolidated shareholders' equityfor the six months ended 30 September 2006 (unaudited) First half Full year 2006/07 2005/06 2005/06 £m £m £mShareholders' equity at beginning of theperiod 40.6 56.1 56.1Adoption of IAS 32 and IAS 39 (0.8) (0.8) --------- --------- --------- 40.6 55.3 55.3Total recognised income and expense for theperiod (9.6) (4.9) (15.0)Employee share options:- value of employee services 0.2- proceeds from shares issued 0.1 --------- --------- ---------Net reduction in shareholders' equity in theperiod (9.6) (4.9) (14.7) --------- --------- ---------Shareholders' equity at the end of the period 31.0 50.4 40.6 ========= ========= ========= Notes to the Interim Financial Statements 1 Basis of preparation The unaudited interim financial statements for the six months to 30 September2006 have been prepared on the basis of the accounting policies set out in theGroup's consolidated financial statements for the year ended 31 March 2006. These interim financial statements do not constitute statutory accounts of theGroup within the meaning of Section 240 of the Companies Act 1985. The statutoryaccounts for the year ended 31 March 2006 have been filed with the Registrar ofCompanies. The Auditors' report on those accounts was unqualified and did notcontain any statement under Section 237 of the Companies Act 1985. The interimfinancial statements were approved by the Board on 23 November 2006. 2 Segment information The Group's continuing activities are in one class of business, Industrial PowerTransmission. The consolidated income statement for continuing operationstherefore relates wholly to the Industrial Power Transmission business. The geographical analysis of revenue by market areas is as follows: First half Full year 2006/07 2005/06 2005/06 £m £m £mUnited Kingdom 10.1 10.5 20.4Germany 7.8 7.2 14.6France 3.8 4.2 7.4Rest of Europe 14.6 13.8 28.2North and South America 28.9 27.3 57.2Other countries 14.1 12.6 27.2 --------- -------- --------- 79.3 75.6 155.0 ========= ======== ========= 3 Net financing costs First half Full year 2006/07 2005/06 2005/06 £m £m £m Financial expenses:Interest payable on bank loans and overdrafts (1.2) (1.1) (2.3)Interest cost on pension plan balances (5.7) (5.7) (11.1)Costs associated with refinancing (0.6) (0.7) --------- -------- --------- (6.9) (7.4) (14.1) --------- -------- ---------Financial income:Interest receivable on bank deposits and cashequivalents 0.1 0.1Expected return on pension plan assets 5.6 5.3 10.1Fair value gains on derivative instruments 0.2 0.3 --------- -------- --------- 5.7 5.5 10.5 --------- -------- ---------Net financing costs (1.2) (1.9) (3.6) ========= ======== ========= 4 Taxation First half Full year 2006/07 2005/06 2005/06 £m £m £mCurrent tax:- UK- Overseas (1.0) (0.5) (1.3) --------- -------- --------- (1.0) (0.5) (1.3)Deferred tax:- UK 0.8 (0.3) - Overseas (0.2) (0.2) 0.4 --------- -------- --------- (0.2) 0.6 0.1 --------- -------- ---------Income tax expense (1.2) 0.1 (1.2) ========= ======== ========= Attributable to:- Continuing operations (1.7) 0.1 (1.5)- Discontinued operations 0.5 0.3 --------- -------- --------- (1.2) 0.1 (1.2) ========= ======== ========= 5 Discontinued operations First half Full year 2006/07 2005/06 2005/06 £m £m £m External revenue 24.9 31.3 70.1 ========= ======== =========Operating loss before exceptional items (2.7) (2.4) (1.5)Exceptional items (0.1) 0.5 --------- -------- ---------Operating loss (2.7) (2.5) (1.0) Net financing costs (0.2) (0.1) (0.4) --------- -------- ---------Loss before taxation (2.9) (2.6) (1.4)Taxation 0.5 0.3 --------- -------- ---------Loss after taxation (2.4) (2.6) (1.1) Impairment of disposal groups (4.0) (12.8) --------- -------- ---------Loss for the period on discontinuedoperations (6.4) (2.6) (13.9) ========= ======== ========= In the annual accounts to 31 March 2006 the Automotive and Machine Toolsbusinesses were treated as discontinued operations, following the Group's statedintention to dispose of these operations. On 3 August 2006 it was announced thatthe sale of certain assets and liabilities of the Automotive business had beencompleted on that date. Final Completion Accounts for that disposal arecurrently being reviewed in accordance with the terms of the respective Sale andPurchase contract. The proposed disposal of Machine Tools has been the subjectof continuing negotiation. The additional impairment charges in the half yearfinancial statements reflect the current status of these negotiations and theAutomotive Completion Accounts . 6 Earnings per share Basic earnings per share is calculated by dividing the profit for the period bythe weighted average number of shares in issue during the period. Dilutedearnings per share takes into account the dilutive effect of the options andawards outstanding under the Group's employee share schemes. First half Full year 2006/07 2005/06 2005/06 Pence per share Pence per share Pence per share Basic and diluted EPS (6.8) (2.8) (19.6)Basic and diluted EPSfrom continuingoperations 2.4 1.0 0.4Adjusted EPS fromcontinuing operations 2.7 1.2 1.7 ========= ========= ========= £m £m £mContinuing operationsProfit for the period 1.7 0.7 0.3 Discontinued operationsLoss from discontinuedoperations (6.4) (2.6) (13.9) --------- --------- ---------Continuing and discontinuedoperations (4.7) (1.9) (13.6) ========= ========= ========= £m £m £mProfit for calculationof adjusted EPS forcontinuing operationsProfit fromcontinuing operations 1.7 0.7 0.3Adjusted for the aftertax effects ofexceptional items:Redundancy andrestructuring costs 0.2 0.1 0.9 --------- --------- --------- 1.9 0.8 1.2 ========= ========= ========= Thousands Thousands ThousandsWeighted average numberof ordinary sharesFor calculating basicearnings per share 69,438 69,335 69,350Effect of dilutivesecurities - employeeshare options 109 1 63 --------- --------- ---------For calculatingdiluted earnings pershare 69,547 69,336 69,413 ========= ========= ========= 7 Cash generated by operations First half Full year 2006/07 2005/06 2005/06 £m £m £mContinuing operations:Profit before taxation 3.4 0.6 1.8Depreciation and amortisation 2.5 2.7 5.4Equity share plans 0.2Net finance costs 1.2 1.9 3.6(Increase) in inventories (2.7) (1.0) (1.8)(Increase) in receivables (1.1) (1.3) (0.4)(Decrease)/increase in payables (1.9) (1.2) 2.7(Decrease) in provisions (0.2) (3.2) (2.7)Movement on pension schemes (0.4) (3.8)Movement on derivative financial instruments 0.3 (0.3) --------- -------- ---------Cash generated/(absorbed) by continuingoperations 1.1 (1.5) 4.7 --------- -------- --------- Discontinued operations:Loss before taxation (2.9) (2.6) (1.4)Depreciation and amortisation 1.5 3.1Plant and equipment impairment 0.8Gain on plant and equipment disposals (0.1)Net finance cost 0.2 0.1 0.4(Increase) in inventories (0.5) (0.9) (0.6)Decrease in receivables 1.0 3.0 0.2(Decrease)/increase in payables (3.5) 0.2 5.3(Decrease) in provisions (0.6) (5.7)Movement on pension schemes (0.3) --------- -------- ---------Cash (absorbed)/generated by discontinuedoperations (6.3) 1.3 1.7 --------- -------- ---------Cash (absorbed)/generated by operations (5.2) (0.2) 6.4 ========= ======== ========= Net debt comprised: At At At 30 September 30 September 31 March 2006 2005 2006 Cash and cash equivalents 9.6 22.4 17.8 Borrowings:Bank overdrafts (7.7) (19.8) (8.2)Bank loans (28.0) (23.9) (29.3)Obligations under finance leases (0.4) (0.4) (0.5) Preference shares (0.5) (0.5) (0.5) --------- --------- -------- (27.0) (22.2) (20.7) ========= ========= ======== This information is provided by RNS The company news service from the London Stock Exchange