Last checked at 14 Apr 2016 07:00
Renold plc
("Renold", "the Company" or "the Group")
Trading Statement
Renold, a leading international supplier of industrial chains and related power transmission products, today issues a trading update ahead of reporting results for the year ended 31 March 2016, on 30 May 2016.
Our Interim Results and February 2016 Trading Statement noted a high level of volatility in sales and orders. This volatility continued until the end of the year although its adverse impact moderated slightly. Underlying1 sales for the full year are therefore expected to be around 1% better than forecast in our February Trading Statement (being approximately 9% lower than the prior year). The Chain division was the driver of the improvement in underlying sales, in particular Europe and the Americas, and is expected to finish the year down approximately 7% (previous forecast 8% down).
Self-help measures continue to be delivered with a further reduction in our break-even point. Once again the Chain division was the key driver and its adjusted operating profit and return on sales will exceed the prior year.
As a result of the slightly better than expected sales and ongoing cost reductions, the Board now expects that the Group's underlying Adjusted2 Return on Sales3 will be maintained at 8.6%, the same level as the prior year. Adjusted operating profit will therefore be ahead of current market expectations of £13.5m. The benefit to Adjusted Earnings Per Share will be further enhanced by savings in financing costs and the estimated tax rate applicable in the year.
Integration of the newly acquired Aventics Tooth Chain business continues to proceed smoothly with some synergies already being delivered in the fourth quarter.
Net debt at the year end, including the impact of the acquisition, was also slightly better than market expectations and resulted in a leverage ratio4 of around 1.20x. This remains comfortably within our covenant limit of 2.5x.
Robert Purcell, Chief Executive of Renold, said:
"We continue to make good progress in delivering our STEP 2020 Strategic Plan. This has allowed us to maintain our operating margins despite a sizeable reduction in underlying sales. Whilst we remain cautious on the outlook for sales growth due to the continuing volatility in international industrial end markets, we continue to invest time and resources in projects to support the delivery of our medium term STEP 2020 strategic objective of achieving mid-teens operating margins."
There have been no other significant changes in the position of the Company since the publication of the Trading Update on 10 February 2016.
(1) The use of "underlying" excludes the impact of changes in foreign exchange rates.
(2) Adjusted items exclude exceptional items, the costs of administering closed defined benefit pension schemes, the amortization of acquired intangibles and any associated tax thereon.
(3) Return on Sales is the ratio of operating profit to sales, expressed as a percentage.
(4) Leverage ratio is calculated as Net Debt divided by Adjusted EBITDA
14 April 2016
ENQUIRIES:
Renold plc | Tel: 0161 498 4500 |
Robert Purcell, Chief Executive | |
Brian Tenner, Group Finance Director | |
Arden Partners (Broker) | Tel: 020 7614 5917 |
Chris Hardie | |
Instinctif Partners (Public Relations) | Tel: 020 7457 2020 |
Mark Garraway Helen Tarbet |
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, end users 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, steel and mining.
Further information about Renold can be found on the website at: www.renold.com