Last checked at 11 Apr 2017 07:00
11 April 2017
Renold plc
("Renold", "the Company" or "the Group")
Trading Update
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 2017, on 30 May 2017.
Reported revenue for the full year is expected to be 11.1% ahead of the reported revenue for the prior year benefitting from foreign exchange tailwinds and continued strong performance of the tooth chain business acquired in December 2015.
The Group's Adjusted Operating Profit2 for the second half of the year is expected to be slightly ahead of that reported for the first half of the year. We therefore expect to report results for the full year in line with market expectations.
Trading
Underlying1 revenue growth of approximately 3.1% for the second half of the year is a significant improvement over the 4.0% decline reported for the first half of the year. Underlying1 growth in the second half of the year reflects organic and acquisition growth in the European chain operations combined with a partial recovery of revenue in Torque Transmission. However, market conditions in the non-European chain operations, particularly in the Americas and Australasia, provided a drag to the growth experienced elsewhere. Overall, for the full year, underlying1 revenue is expected to be broadly flat.
Order intake improved through the year with a book to bill ratio3 for second half of the year at 103% compared with 101% for the first half of the year. The order book at 31 March 2017 was 9.0% higher than at the prior year end (at constant exchange rates) demonstrating the combined effect of revenue growth in the second half and the improving book to bill ratio.
Overheads increased in the year as we raised expenditure on sales and marketing, supporting the organic growth phase of our strategic plan. Self-help measures continue to be delivered, with the successful transfer of the European Distribution Centre to Germany and the consolidation of our UK couplings manufacturing facilities in the year. We expect these restructuring actions to contribute towards greater efficiency in the new financial year.
Net debt
Net debt finished the year at £17.4m (2016: £23.5m). Cash generation benefited from proceeds from the disposal of properties in France and Australia off-setting the investment in plant & equipment and the costs of restructuring incurred during the year.
Robert Purcell, Chief Executive of Renold, said:
"Whilst market conditions have remained volatile, we have not allowed this to stand in the way of our delivery of the Step2020 Strategic Plan. We continue to invest in sales and marketing to support further organic growth as part of Phase II of that plan. We are making good progress and the improving order book gives us confidence that we can continue towards our objective of delivering mid-teens operating margin.
European markets are improving, but trading conditions in North America remain challenging. Nevertheless, we continue to pursue our strategy, and, with early signs of improvement in end-customer markets, we look forward more confidently to the future."
(1) The use of "underlying" excludes the impact of changes in foreign exchange rates.
(2) Adjusted Operating Profit excludes exceptional items, the costs of administering closed defined benefit pension schemes and the amortization of acquired intangibles.
(3) The Book to Bill ratio is the ratio of order intake in the period to sales for the same period.
ENQUIRIES:
Renold plc | Tel: 0161 498 4500 |
Robert Purcell, Chief Executive |
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Ian Scapens, Group Finance Director |
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Arden Partners (Broker) | Tel: 020 7614 5917 |
Chris Hardie |
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Instinctif Partners (Public Relations) | Tel: 020 7457 2020 |
Mark Garraway Helen Tarbet Rosie Driscoll |
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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