Renold PLC – RNO – Final Results

Renold PLC – RNO – Final Results

Renold, a leading international supplier of industrial chains and related power transmission products, today announces its preliminary results for the year ended 31 March 2020.

Financial highlights

Year ended 31 March

2020

20191

£m

£m

Revenue

189.4

199.6

Adjusted2 operating profit

13.4

14.8

Adjusted2 operating margin

7.1%

7.4%

Statutory operating profit

10.1

15.4

Basic earnings per share

1.5p

3.0p

Adjusted earnings per share

2.9p

3.1p

1.     The results for the year ended 31 March 2019 have been re-presented to reflect discontinued operations and changes to the treatment of adjusting items, see Note 19.

2.     See overleaf for reconciliation of reported and adjusted figures.

Trading and operational highlights

·      Significant disruption in the final months of the year ended 31 March 2020 from Covid-19 related factory closures

·      Continued improvement in operational efficiency, in particular at the Chinese chain facility, reflected in stable adjusted operating margin despite 5.1% revenue decline due to challenging markets and the initial impact of Covid-19

·      Strong activity in the Torque Transmission division delivering revenue growth and profit improvement

·      Completed the £1.8m purchase of JV partner’s 25% share of the Indian chain business; now a wholly owned subsidiary operating in a market with significant potential

·      Substantial, multi-year infrastructure change programme completed successfully, with significantly reduced future costs of change expected, supporting higher free cash generation

Covid-19 update

·      All sites now operational, although some at reduced capacity

·      Supply chains remain resilient with the Group able to continue to support customers

·      Cost mitigation and cash preservation actions taken swiftly, including utilisation of government support to maintain employment, temporary pay reductions, curtailment of discretionary spend, reduced capital expenditure and deferral of net UK pension scheme contributions

·      Financial position strengthened by agreement with lenders to amend banking covenants, creating increased flexibility through to September 2021

·      Focus on preserving capability to ensure a strong response as markets recover and to maintain strategic momentum

·      Cash generative and profitable in the first months of the new financial year

Robert Purcell, Chief Executive, commented:

“Prior to the Covid-19 pandemic, the Group was on track to deliver improved adjusted operating margins despite a challenging market backdrop resulting in a revenue decline. The combination of a number of strands of the strategic plan were expected to be sufficient to overcome the operational gearing effect of falling revenue.

“During the final quarter of the year, the initial impact of the Covid-19 pandemic created short-term disruption and a number of operational challenges. Renold reacted quickly to these challenges, ensuring the safety and welfare of all our employees, compliance with local restrictions and continuity of supply to customers, while at the same time taking steps to reduce costs and preserve cash flow.

“The uncertainty caused by the Covid-19 pandemic is likely to result in a period of volatile demand, preventing the Board from giving specific guidance for the year ahead at this stage. The Group’s financial position has been strengthened by the flexibility provided by our lenders and the Trustee of the UK pension scheme. Together with the cost and cash actions taken, this supports the Board’s confidence that the Group will be able to manage through the current period of disruption.

“Renold holds a leading position in many of its markets and the strategic programme that has been undertaken over the past years has delivered a business far more resilient and better placed to overcome the current challenges. Having successfully completed the substantial infrastructure change programme, we will have greater cash resources with which to accelerate our growth initiatives. As a result, the Group is well positioned to capture the significant opportunities available to it as markets stabilise and demand recovers.”

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