Renold Plc (LON:RNO) has announced that the Board has declared the half yearly payment of the preference dividend in accordance with the terms of the 6 per cent. cumulative preference stock of £1.00 each, equal to 3 pence per unit.

The dividend will be paid on 2 January 2024 to preference stockholders on the register as at 1 December 2023. The ex-dividend date will be 30 November 2023.

Renold Plc 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 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.

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced its interim results for the six month period ended 30 September 2023.

Financial summary	Half year ended			Change % (Constant currency)1
£m	30 September 2023	30 September 2022	Change %
Revenue	125.3	116.3	+7.7%	+10.7%
Adjusted operating profit2	15.0	9.6	+56.3%	+59.4%
Return on sales2	12.0%	8.3%	+370bps	+360bps
Adjusted profit before tax2	11.3	7.3	+54.8%
Net debt3	28.3	34.0
Adjusted earnings per share2	3.8p	2.7p	+40.7%
Additional statutory measures
Operating profit	16.2	8.8	+84.1%
Profit before tax	12.5	6.5	+92.3%
Basic earnings per share	4.4p	2.3p	+91.3%

Financial highlights

·	Revenue up 7.7% (10.7% at constant exchange rates) to £125.3m (2022: £116.3m) driven by strong improvement in Torque Transmission (“TT”) activity levels and continued growth in Chain.
·	Adjusted operating profit up 56.3% (59.4% at constant exchange rates) to £15.0m (2022: £9.6m).
·	Return on sales increased by 370bps, (360bps at constant exchange rates) to 12.0% (2022: 8.3%).
·	Net debt as at 30 September 2023 of £28.3m (31 March 2023: £29.8m), despite acquisition of Davidson Chain Pty (“Davidson”) for £3.1m in the period and deferred payment of £1.7m for Industrias YUK S.A. (“YUK”). Net debt represented 0.7x rolling 12 months adjusted EBITDA.
·	Adjusted EPS up 40.7% to 3.8p (2022: 2.7p).
·	IAS 19 pension deficit reduced by 15.3% to £52.7m (31 March 2023: £62.2m).

Business highlights

·	Good progress on productivity improvements, cost reduction programmes and capital investment projects, accelerating the integration of Group-wide supply chain and increasing operational capabilities.
·	Strong first half sales performance, despite normalisation in order intake to £109.7m when compared to the prior H1 record order intake of £124.1m.
·	Order book at 30 September 2023 of £83.6m, compared to prior year’s record high (30 September 2022: £99.0m) as the duration of the order book shortened following normalisation of supply chains this year.
·	Acquisition of Davidson for AU$6.0m, increasing the Group’s access to the Australian conveyor and adapted transmission chain markets. The integration process is progressing well and the business is performing in line with expectations.
·	£2.2m exceptional profit from the assignment of a lease for a closed legacy site, resulting in a £0.7m per annum reduction in ongoing leased property costs.

¹ See below for reconciliation of actual rate, constant exchange rate and adjusted figures.

² See Note 12 for definitions of adjusted measures and the differences to statutory measures.

³ See Note 8 for a reconciliation of net debt which excludes lease liabilities.

Robert Purcell, Chief Executive of Renold, said:

“I’m pleased to report continued progress which builds on the momentum the Group has enjoyed in recent periods, delivering a record half year result. Sales, margins, profits and cash generation have all progressed well. Global markets continue to be uncertain and we remain vigilant for changes in patterns of demand beyond the current order book shortening. We are delighted with the purchase of Davidson in Australia, which further builds our inorganic growth strategy and we remain well positioned to continue developing through acquisition. There remains uncertainty over the implication of global economic pressures in the medium term, however the Board is increasingly confident in delivering a result for the current year ahead of previous market expectations.”

Reconciliation of reported, constant exchange rate and adjusted results

	Revenue		Operating profit		Earnings per share
	H12023/24£m	H12022/23£m	H12023/24£m	H12022/23£m	H12023/24pence	H12022/23pence
Statutory at actual exchange rates	125.3	116.3	16.2	8.8	4.4	2.3
Adjust for non-recurring items:
Assignment of lease of closed site	–	–	(2.2)	–
Acquisition and reorganisation costs	–	–	0.5	0.6
Amortisation of acquired intangible assets	–	–	0.5	0.2
Adjusted at actual exchange rates	125.3	116.3	15.0	9.6	3.8	2.7
Exchange impact	3.4	–	0.3	–
Adjusted at constant exchange rates	128.7	116.3	15.3	9.6

Investor Presentation

The Company will conduct a live presentation and Q&A session for investors at 5:30 pm GMT today, 15 November 2023. The presentation is open to all existing and potential shareholders. Those wishing to attend should register via the following link and they will be provided with log in details:

https://us02web.zoom.us/webinar/register/WN_DwsvKoYLQumb8x1YZg-klw

There will be the opportunity for participants to ask questions at the end of the presentation. Questions can also be emailed to [email protected] ahead of the presentation.

Chief Executive’s statement

The Group’s performance in the first six months of the year continued to be strong, delivering an increase in revenues of 7.7% to £125.3m (2022: £116.3m). At constant exchange rates, revenues increased 10.7%. The TT division, which saw revenue increase by 25.2%, has had an especially positive start to the year, as the benefit of the long-term military contracts within Couplings, along with increased capacity investments in Westfield, our North American TT operation, has allowed the business to capitalise on the current strong North American market.

Group adjusted operating profit increased by 56.3% to £15.0m (2022: £9.6m) as the benefits of increased sales and prior year productivity improvements translated into better financial results. Return on sales increased by 370bps, to 12.0% (2022: 8.3%), a record high for the Group, driven by increasing levels of productivity investments and projects, benefits of increased sales volumes both organic and through acquisition, passing on cost inflation and acquisition integration synergies. Statutory operating profit increased to £16.2m (2022: £8.8m), as an exceptional profit of £2.2m was recorded on the assignment of the lease of the closed Bredbury site, offset by costs associated with the acquisition of Davidson, with the statutory operating profit margin for the period increasing to 12.9% (2022: 7.6%).

Net debt reduced during the period by £1.5m to £28.3m (31 March 2023: £29.8m) despite the Group acquiring the trade and assets of Davidson for £3.1m, making a deferred consideration payment for the YUK acquisition of £1.7m, and bringing forward a UK pension scheme payment of £2.6m that was originally scheduled for the second half of the year. The accelerated pension payment will enable efficiencies in the evolution of the scheme’s investment portfolio.

Order intake for the period was £109.7m, a decrease of 11.6% (2022: £124.1m), or a 9.0% decrease at constant exchange rates. YUK contributed £6.9m to order intake in the period. The order book as at 30 September 2023 of £83.6m remains higher than historic levels. However, there has been a normalisation of order intake following an improvement in global supply chains, with improvements to delivery times, allowing customers to reduce forward order placement as certainty of lead times increase. The order book at 30 September 2023 of £83.6m represents a constant currency decrease of 11.1% over the record high position at the end of the previous financial year.

The Group has continued to successfully manage a period of sustained cost inflation and changes to the supply chain, pursued efficiency gains and projects and passed on cost adjustments both up and down. The Group expects to experience further cost pressures through the second half of the year but the Board is confident that these will continue to be managed successfully.

Renold continues to focus efforts on driving and optimising performance through identified projects, some of which require capital investment, targeting better operational efficiency, improved design and standardisation of products, better asset utilisation, more flexible working practices, and leveraging improved procurement strategies.

Acquisitions

On 1 September 2023, the Group acquired the trading assets of Davidson, based in Melbourne, Australia, for a cash consideration of AU$6.0 million, enlarging the already established Australian Chain business by 26%. The Davidson acquisition demonstrates further strategic momentum, supplementing organic growth through high quality bolt-on acquisitions which can expand our geographic presence, grow our product offering and strengthen our market position in key end markets.

The Board is pleased with the performance of Davidson in the period since completion of the acquisition and remains excited by the opportunities beginning to emerge. Davidson has traded in line with the Board’s expectations made at the time of the acquisition.

There remains an active pipeline of acquisition opportunities which the Group continues to review as part of its growth strategy. The Board adopts a disciplined approach to its acquisition strategy, with investments focussed on complementary industrial chain businesses, to supplement organic growth. Acquisitions are expected to be earnings accretive whilst leverage is maintained at conservative levels.

Business and financial review

	Revenue		Adjusted operating profit		Return on sales
Six month period	2023/24£m	2022/23£m	2023/24 £m	2022/23£m	2023/24%	2022/23%
Chain	101.5	95.1	16.0	12.5	15.8	13.1
Torque Transmission	29.8	23.0	4.7	1.5	15.8	6.5
Head office costs/Inter segment sales elimination	(2.6)	(1.8)	(5.4)	(4.4)	–	–
Total Adjusted at constant rates	128.7	116.3	15.3	9.6	11.9	8.3
Impact of foreign exchange	(3.4)	–	(0.3)	–	0.1
Total Adjusted at actual rates	125.3	116.3	15.0	9.6	12.0	8.3
Adjusting items:
Assignment of lease of closed site	–	–	2.2	–
Amortisation of acquired intangible assets	–	–	(0.5)	(0.2)
Acquisition and reorganisation costs	–	–	(0.5)	(0.6)
Statutory	125.3	116.3	16.2	8.8	12.9	7.6

Chain

The Chain division’s revenue at constant exchange rates increased by 6.7% to £101.5m, and stayed above the psychologically important £100m milestone.

Chain Performance
	2023/24£m	2022/23£m	2023/24 ROS %	2022/23 ROS %
External revenue	98.4	94.7
Inter-segment revenue	0.5	0.4
Total revenue	98.9	95.1
Foreign exchange	2.6	–
Revenue at constant exchange rates	101.5	95.1
Operating profit	17.0	12.3	17.2	12.9
Assignment of lease of closed site	(2.2)	–
Amortisation of acquired intangible assets	0.5	–
Acquisition and reorganisation costs	0.5	0.2
Adjusted operating profit	15.8	12.5	16.0	13.1
Foreign exchange	0.2	–
Adjusted operating profit at constant exchange rates	16.0	12.5	15.8	13.1

Revenue increased across all regions:

·	Europe increased external revenue by 7.6% at constant currency rates. Excluding the impact of the YUK acquisition external revenue fell by 5.8%, as the impact of the Ukraine war, and cost inflation, was felt through the broader European economy. The integration of the YUK business has proceeded as planned with £7.2m of additional external revenue recorded, as the Group saw the benefits of substituting externally sourced products, increasing conveyor chain (“CVC”) product sales (manufactured by YUK in Spain) throughout Europe, and increasing transmission chain (“TRC”) sales in Spain.
·	The Americas increased constant currency revenues by 6.9%, with sales of Engineering chain remaining buoyant, and demand for transmission chain and leaf chain (used in Forklift trucks) remaining strong. New opportunities with distributors and strong demand was seen from end users especially for capital equipment in the food processing, ethanol and mining industries.
·	Australasian revenues increased by 6.7% at constant exchange rates, as the business continued to benefit from execution of its growth strategy, sales increased by double digit growth rates in New Zealand, and Malaysia, with Thailand also growing strongly. Sales to Indonesia were adversely impacted by continued import restrictions imposed by the Indonesian government, whilst Australia also saw the impact of a slowdown in activity.
·	External revenues in India fell in the first half of the year as the impact of slow agricultural sales were experienced, and there was an increase in competition from other local manufacturers. Capacity was utilised in supporting Group sales, especially increased demand within the US market, for larger sized Engineering chain products. Additional investment to support productivity and capacity improvements in India, have recently been initiated, and activities aimed at the expansion of the domestic dealer network and an increase in the number of local warehouses is underway, to enhance geographic coverage and service.
·	External revenues in China were up 50.1% (at constant exchange rates) as efforts aimed at growing domestic Chinese sales continue to bear fruit, the sales increase going someway to offset the softening in demand seen as a result of slower intra group demand from Europe. The transfer of externally purchased product volumes from the YUK acquisition to the Jintan factory continued with an increase in sales seen to the YUK business during the period. Significant progress has once again been made in enhancing the performance of the factory in Jintan, through a programme of standardisation and improvement projects, including the commissioning of new equipment, so the factory is increasingly able to manufacture higher specification products.

Divisional adjusted operating profit at constant exchange rates was £16.0m, £3.5m higher than the prior year. Return on sales increased by 270bps to 15.8% (2022: 13.1%).

Order intake at constant exchange rates decreased by 11.2% to £91.2m, resulting in a book to bill (ratio of orders to sales) for the first half of the year of 90.3% (2022: 105.0%).

Torque Transmission (“TT”)

TT Performance
	2023/24£m	2022/23£m	2023/24  ROS %	2022/23 ROS %
External revenue	26.9	21.6
Inter-segment revenue	1.9	1.4
Total revenue	28.8	23.0
Foreign exchange	1.0	–
Revenue at constant exchange rates	29.8	23.0
Operating profit (and adjusted operating profit)	4.6	1.5	16.0	6.5
Foreign exchange	0.1	–
Adjusted operating profit at constant exchange rates	4.7	1.5	15.8	6.5

Divisional revenues at constant exchange rates of £29.8m were £6.8m (30%) higher than in the prior year, which continued the trend seen in the second half of the last financial year. This was due to increased demand for Military Couplings in the Cardiff business, and a further strengthening in demand in North America. Additionally, the division benefited from a significant increase in capacity primarily driven by capital investments in automated machines, and efficiency improvements driven by greater visibility following the implementation of M3.

As a result of the increased sales activity, selling price rises and improved operational output, as well as a normalisation in product mix, divisional operating profit at constant currency increased by £3.2m to £4.7m.

Return on sales increased in the period to 16.0% (2022: 6.5%). This is now beyond pre COVID pandemic level rates of return.

The closing order book for the division of £34.1m should ensure that momentum will continue into the second half of the year at similar rates, however, second half comparators are significantly stronger than those in H1.

Cash flow and net debt

Half year to 30 September	2023/24£m	2022/23£m
Adjusted operating profit	15.0	9.6
Add back: Depreciation and amortisation	4.9	4.9
Share-based payments	0.7	0.5
Adjusted EBITDA	20.6	15.0
Movement in working capital	(1.4)	(7.6)
Net capital expenditure	(2.1)	(2.2)
Operating cash flow	17.1	5.2
Income taxes	(1.3)	(1.3)
Pensions cash costs	(6.0)	(3.1)
Repayment of principal under lease liabilities	(1.4)	(1.2)
Financing costs paid	(2.2)	(1.3)
Consideration paid for acquisitions1	(4.9)	(17.8)
Other movements	0.2	(0.7)
Change in net debt	1.5	(20.2)
Closing net debt	(28.3)	(34.0)

¹ Includes £1.7m deferred consideration in relation to the acquisition of Industrias YUK S.A in the prior year and £0.2m of acquisition costs for Davidson Chain Pty.

Net Debt reduced from the prior financial year end by £1.5m in the period to £28.3m. Cash collections were strong, especially in North America, where receipts from significant orders shipped at the end of the last financial year were collected in the period. Offsetting this inflow, the Group paid £3.1m in cash consideration for the Davidson acquisition, and made the initial deferred payment of £1.7m for the YUK acquisition, along with associated acquisition and reorganisation costs of £0.5m.

Working capital increased during the period, with the Group increasing inventory levels especially in North America where demand continues to be strong, particularly in the Engineered chain segment.

Net capital expenditure of £2.1m remained broadly in line with prior years. Strategic investments in production capabilities, especially in our Chinese and Indian facilities continue apace, including expansion of press capabilities, improved heat treatment and continuing the roll-out of the group’s standard business systems.

Corporation tax payments on account of £1.3m were at similar levels to the first half of last year.

Interest cash costs increased relative to the first half of last year reflecting the increase in market interest rates over the intervening period.

Pensions

The Group has a number of closed defined benefit pension schemes (accounted for in accordance with IAS 19 ‘Employee Benefits’). During the Covid-19 pandemic, the Group negotiated a £2.8m one-off deferral of contributions with the UK pension scheme trustees. Contributions have now returned to normal levels, with the second of five annual deferred payments of c.£0.6m being made. Additionally, the Group had a longstanding agreement with the UK scheme to pay an additional £1.0m of annual cash contributions, to the extent that the Group’s adjusted operating profit exceeds £16.0m; the additional cash contributions commenced in the half year. The Group took the opportunity to bring forward £2.6m of contributions to the UK pension scheme from the second half of the year, in order to increase efficiency in the evolution of the investment portfolio. Excluding these amounts, underlying pension contributions reduced following the closure of the New Zealand pension scheme in FY23, and a reduction in administration costs. The cash contributions into the UK Scheme are known and stable, though increasing with RPI capped at 5%. In FY24 this cost is expected to be £5.3m. In addition there are administration and actuarial costs, including the PPF levy, which may vary. The cost of pensions in payment in Germany (there is no scheme or fund) are expected to be £1.2m in FY24. This amount will rise with inflation but the total will fall gradually over time.

The Group’s IAS 19 deficit decreased from £61.3m at 30 September 2022 to £52.7m at 30 September 2023.

	At 30 September 2023			At 31 March 2023
	UK schemes	Overseasschemes	Total	UK schemes	Overseasschemes	Total
	£m	£m	£m	£m	£m	£m
IAS 19 retirement benefit obligations	(36.6)	(16.1)	(52.7)	(44.2)	(18.0)	(62.2)
Net deferred tax asset	1.6	1.4	3.0	3.3	1.8	5.1
Retirement benefit obligations net of deferred tax asset	(35.0)	(14.7)	(49.7)	(40.9)	(16.2)	(57.1)

The yield on corporate bonds increased further during the period. Consequently the discount rates used for the UK scheme rose from 4.85% to 5.70%, and resulted in a net reduction in UK pension liabilities of £7.6m, and overseas pension liabilities of £1.9m. The long term expectation for CPI inflation remained broadly stable at 3.35% (3.30% at September 2022). Asset values were impacted as both the value of gilts and equities fell during the period. The scheme has insurance assets linked directly to the benefits of certain scheme members. As the liability to these members reduces, for example with an increase in discount rate, so does the value of the corresponding insurance asset.

Pension liabilities in overseas schemes reduced by £1.9m to £16.1m, again due in the main to an increase in discount rates.

The net pension financing expense (a non-cash item) was £1.4m (2022: £1.0m).

Borrowing Facilities

The Group refinanced its borrowing facilities in May 2023. The new facilities consist of a £85.0m multi-currency revolving credit facility and a £20.0m accordion option which will provide the Company access to additional funding in support of its acquisition programme. The principal facility term, being the Net Debt / Adjusted EBITDA covenant, was also improved from the previous level of 2.5 times Adjusted EBITDA to 3.0 times Adjusted EBITDA, with other key terms remaining unchanged.

Dividend

In line with recent policy based on enhancing Group performance through focussed investment in new equipment and earnings enhancing acquisitions the Board has decided not to declare an interim ordinary dividend. The dividend policy will remain under review as margin and cash flow performance continues to develop.

Summary

Sales in the first half remained strong. Margins rose markedly as better volumes, good cost management, complementary acquisitions and strong execution of productivity and efficiency programmes, aided by a consistent and coherent strategy all came together. The robust Renold business with a strengthening balance sheet and growing cash generation is positioned well for tackling whatever global economic headwinds may transpire in the upcoming period.

Going concern

The interim condensed consolidated financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

The ongoing macro-economic uncertainty, and inflationary environment, together with the impact of the war in Ukraine alongside the continued improvement in the half year trading performance of the Group have been considered as part of the adoption of the going concern basis. The Group continues to closely monitor operating costs, and capital expenditure and other cash demands are being managed carefully.

As part of its assessment, the Board has considered downside scenarios that reflect the current uncertainty in the global economy, including significant material and energy supply issues and continuing inflationary pressures.

The Directors believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading performances and considering the existing banking facilities, including the available liquidity and covenant structure, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months following the date of approval of the interim financial statements. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Risks and uncertainties

The Directors have reviewed the principal risks and uncertainties of the Group. The Directors consider that the principal risks and uncertainties of the Group published in the Annual Report for the year ended 31 March 2023 remain appropriate. The risks and associated mitigation processes can be found on pages 50-57 of the 2023 Annual Report, which is available at www.renold.com.

The risks referred to and which could have a material impact on the Group’s performance for the remainder of the current financial year relate to:

·	Macroeconomic and geopolitical volatility, including continuing uncertainty over energy supply inflation and disruption, together with a weakening in the broader European economy;
·	Strategy execution;
·	Product liability;
·	Health and safety in the workplace;
·	Security and effective deployment and utilisation of IT systems;
·	Prolonged loss of a major manufacturing site;
·	People and change;
·	Liquidity, foreign exchange and banking arrangements;
·	Pension deficit; and
·	Legal, financial and regulatory compliance.

Responsibility statement

The Directors confirm that to the best of their knowledge:

·	the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;
·	the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months of the financial year and description of principal risks and uncertainties for the remaining six months of the financial year); and
·	the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

The Directors of Renold plc are listed in the Annual Report for the year ended 31 March 2023. A list of current Directors is maintained on the Group website at www.renold.com.

By order of the Board

Robert Purcell Chief Executive 15 November 2023

Jim Haughey Group Finance Director 15 November 2023

Renold plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has provided a trading update covering the four months ended 31 July 2023 ahead of the Company’s annual general meeting being held at 11.00 a.m. today.

The Board is pleased to report that the Group’s financial performance in the first four months of the new financial year has been strong. Group revenue for the Period was £85.1m (FY23 equivalent  £73.0m), a year-on-year increase of 16.6% at reported rates and 18.7% at constant exchange rates. Within this, YUK S.A. (“YUK”), acquired in August 2022, contributed £5.4m.

Order intake for the Period was £74.2m, a decrease of 2.7% (FY23 equivalent £76.3m), or a 1.0% decrease at constant exchange rates. YUK contributed £4.9m to order intake in the Period. The order book as at 31 July 2023 of £86.0m remains higher than historic levels. However there has been a normalisation of order intake following an improvement in global supply chains, with improvements to delivery times, allowing customers to reduce forward order placement as certainty of deliveries increase, leading to a reduction and shortening of the order book.  The order book at 31 July 2023 represents a decrease of 13.6% over the record high position at the end of the previous financial year.

On the 1 September 2023, Renold Plc acquired the trading assets of Davidson Chain PTY (“Davidson”), based in Melbourne, Australia, enlarging our already strong Australian Chain business by 26%. The Davidson acquisition demonstrates further strategic momentum, supplementing organic growth through high quality bolt-on acquisitions which can expand our geographic presence, grow our product offering and strengthen our market position in key end markets.

Net debt as at 31 July 2023 was £23.3m (representing 0.6x EBITDA¹), a reduction of £6.5m (21.8%) from £29.8m as at 31 March 2023, reflecting the strong underlying cash generation of the business during the Period. Net debt at the half year (period ending 30 September 2023) is expected to increase, following the payment of £1.7m of deferred consideration relating to the YUK acquisition and the purchase consideration of £3.1m (AU$6.0m) for Davidson. Additionally, the Group will bring forward the payment of the H2 pension contribution of approximately £2.6m, which enables efficiency gains in the investment portfolio.

Global markets continue to be uncertain, with ongoing labour cost inflation and material costs remaining high when compared to historic levels. Whilst there is a normalisation of demand in some of the Group’s end markets, the Group retains strong order books which remain high by historical standards, despite a shortening of lead times, reducing the overall quantum.

As a result of the continued positive trading momentum, and an increase in activity from the recently announced Davidson acquisition, the Board of Renold plc now anticipates achieving results for the year ending 31 March 2024, higher than previously expected.

¹ Calculated as Net debt as at 31 July 2023/ Ebitda for the preceding 12 months taken from the Group management accounts.

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced that it has acquired the trading assets of Davidson Chain PTY for a total cash consideration of AU$6 million.

Highlights

·      Established in Melbourne, Australia, in 1991, Davidson is a family owned manufacturer and distributor of high-quality conveyor chain (“CVC”).

·      The Acquisition increases the Group’s access to the Australian CVC market, building on Renold’s existing strong market position.

·      Opportunities exist for significant manufacturing synergies between Davidson and Renold’s current Australian operations.

·      The Davidson management team have transferred to the Group, bringing with them a wealth of industry experience and market knowledge, and will continue to lead the Davidson business, joining Renold’s Australasian management team.

·      The Acquisition is expected to immediately enhance Group earnings per share, and be accretive to the Group’s operating margin.

·      ROIC is expected to be in line with management’s targets, and above Renold’s weighted average cost of capital in the first year of ownership.

The Acquisition and financial considerations

Davidson was acquired on a cash free, debt free basis, for a total cash consideration of AU$6 million.

The Acquisition consideration represents a multiple of approximately 5.9x Davidson’s June LTM EBITDA. There are a number of identified synergy benefits, the effect of which is expected to reduce the multiple to below 5.0x in the short term.

The Acquisition is funded from the Group’s existing borrowing facilities. As at 31 March 2023, the Group’s net debt to EBITDA multiple was 0.8x and following completion of the Acquisition remains broadly similar. The Group remains well placed, with sufficient borrowing headroom, to execute on further bolt-on acquisition opportunities from an identified pipeline of targets.

Davidson delivered revenue of AU$4.2 million for the 12 months to June 2023, generating an EBITDA of AU$ 1.1 million.

Commenting on the Acquisition, Robert Purcell, Group Chief Executive of Renold plc, said:

“The Davidson acquisition demonstrates further strategic momentum, supplementing organic growth through high quality bolt-on acquisitions which can expand our geographic presence, grow our product offering and strengthen our market position in key end markets.

“We are delighted that Davidson has joined the Renold Group, and believe that not only have we acquired an excellent business, but also retained the services of a very experienced team. The Davidson business is very much aligned with Renold, including an excellent long-established track record of manufacturing and supplying high quality chain products with an entrepreneurial culture that will fit well with our own.

“We welcome the Davidson team to Renold.”

Renold Plc 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 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.

Renold plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announce that it has posted to shareholders its annual report and accounts for the year ended 31 March 2023, together with notice of annual general meeting and the associated form of proxy.

Renold’s 2023 AGM will be held at 11.00 a.m. on 5 September 2023 at the Company’s registered office at Trident 2, Trident Business Park, Styal Road, Wythenshawe, Manchester M22 5XB.

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced its audited results for the year ended 31 March 2023.

Financial highlights

£m	2023	2022	Change	Change (constant currency)1
Revenue	247.1	195.2	+26.6%	+18.8%
Adjusted operating profit2	24.2	15.3	+58.2%	+46.4%
Return on sales2	9.8%	7.8%	+200bps	+190bps
Adjusted profit before tax2	18.6	11.5	+61.7%
Net debt3	29.8	13.8
Adjusted earnings per share2	6.5p	4.3p	+51.2%
Additional statutory measures
Operating profit	22.9	16.2	+41.4%
Profit before tax	17.3	12.4	+39.5%
Basic earnings per share	5.7p	4.7p	+21.3%

•	Revenue up 26.6% to £247.1m (18.8% at constant exchange rates) (2022: £195.2m)
•	Adjusted operating profit of £24.2m (2022: £15.3m), up 58.2%; return on sales 9.8%, up 200bps
•	Reported operating profit up 41.4% to £22.9m (2022: £16.2m)
•	Net debt £29.8m, £16.0m increase in the year, facilitating successful YUK acquisition; ratio to adjusted EBITDA 0.8x (31 March 2022: 0.5x)
•	Adjusted EPS up 51.2% to 6.5p (2022: 4.3p); Basic EPS 5.7p (2022: 4.7p)

Business highlights

•	The Group delivered record results despite the difficult trading and macroeconomic backdrop, with the well-publicised inflation and global supply chain challenges
•	Order intake of £257.5m (2022: £223.9m), up 15.0%
•	Closing order book £99.5m, up 18.3% against 31 March 2022
•	Significant £8.9m long-term military contract win, following a similar contract win of £11.0m in FY22
•	Acquisition of Industrias YUK S.A. (“YUK”) in August 2022, for €24m, increases the Group’s access to the Iberian Chain and wider European Conveyor Chain markets. YUK is performing ahead of expectations
•	Successful capital investment; improving efficiency and capability of manufacturing locations

¹ See below for reconciliation of actual rate, constant exchange rate and adjusted figures

² See Note 21 for definitions of adjusted measures and the differences to statutory measures

³ See Note 17 for a reconciliation of net debt which excludes lease liabilities

Robert Purcell, Renold Plc Chief Executive, commented:

“I am delighted with the Group’s robust performance during the last financial year which delivered record results and exceeded market expectations, reflecting the benefits of the strategic programmes implemented in recent years. Throughout the reported period, the business performance has been on an improving trend and our order books continue to be healthy though order patterns have been inconsistent in the early part of the new financial year. We recognise that there are still considerable economic challenges in many parts of the world; supply chain issues, although reducing in number and severity, are still prevalent and inflation and prices remain high, for both energy and materials. However, we have entered the new financial year with good momentum and confidence in the excellent fundamentals of the Renold business, although macroeconomic trends add a note of caution. Once again, Renold employees around the world have responded magnificently to the challenges we have faced and I thank them for their dedication and commitment to the Group and our customers.”

Meeting for analysts and institutional investors

A virtual meeting for institutional investors and analysts will be held today at 9.30am BST. If you wish to attend this meeting please contact [email protected] or call Tim Metcalfe of IFC Advisory Limited (020 3934 6632) before 8.45am to be provided with access details.

Reconciliation of reported and adjusted results

	Revenue		Operating profit		Earnings per share
	2023£m	2022£m	2023£m	2022£m	2023pence	2022pence
Statutory reported	247.1	195.2	22.9	16.2	5.7	4.7
Amortisation of acquired intangible assets	–	–	0.7	0.1	0.3	0.1
Acquisition costs	–	–	0.6	–	0.3	–
Tax adjustments relating to prior year	–	–	–	–	0.2	–
US PPP loan forgiveness	–	–	–	(1.7)	–	(0.8)
New lease arrangements on sublet properties	–	–	–	0.7	–	0.3
Adjusted	247.1	195.2	24.2	15.3	6.5	4.3
Exchange impact	(15.3)	–	(1.8)	–	(0.9)	–
Adjusted at constant exchange rates	231.8	195.2	22.4	15.3	5.6	4.3

Chair’s statement

I am pleased to report that 2022/23 was an excellent year for Renold in which we delivered a record financial performance and completed a significant strategic acquisition in Europe. I have also been impressed by the flexibility and adaptability of our people across the world, who have delivered an outstanding result despite the complexities resulting from the Russian invasion of Ukraine and challenging international supply chain and trading conditions.

Our turnover continued to grow strongly through the significant commercial and operational benefits delivered by the execution of our organic growth strategy, while the Group’s acquisition strategy bore fruit in the year, and it is pleasing to see that our new acquisition, Industrias YUK S.A. (“YUK”) performed ahead of our initial expectations.

Markets and trading performance

Over the year, Group revenue increased by 26.6% to £247.1m (2022: £195.2m), and adjusted operating profit improved by 58.2% to £24.2m (2022: £15.3m).

Return on sales improved by 200bps to 9.8% (2022: 7.8%), as the Group demonstrated its ability to successfully recover inflationary cost increases, whilst also benefiting from cost reduction and efficiency programmes, and the benefit of operational gearing.

Encouragingly, Group order intake at £257.5m was 15.0% ahead of the equivalent prior year period, and 16.8% ahead excluding the previously announced £8.9m long-term military contracts (2022: £11.0m), with YUK contributing £10.5m or 4.5% to the increase. The order book at 31 March 2023 of £99.5m was 18.3% ahead of the prior year figure.

Net debt increased during the period to £29.8m (31 March 2022: £13.8m) as the Group invested €20.0m to satisfy the initial cash consideration for the acquisition of YUK, whilst managing the impact of organic sales growth and inflation on working capital.

Strategic Developments

During the year, the Renold strategic change programmes across the Group once again delivered meaningful benefits, particularly in standardising and simplifying the business.

The completion of several major strategic restructuring initiatives, together with the relatively low level of net debt, puts the Group in a strong position to capitalise on accretive bolt-on acquisitions that augment our existing market position. This will allow us to accelerate growth in revenue, including for our existing products, adjacent sectors and by entry into under-represented applications and geographies. Most importantly, the Group will also benefit from significant production synergies by integrating acquired businesses.

The continuing review of capabilities across the Group has identified opportunities for the upgrade and development of existing manufacturing processes across our international footprint to create higher specification, higher performance products. This review will also facilitate standardisation across more product lines, which, in turn, will enable us to benefit more comprehensively from our geographic footprint and economies of scale. In addition, flexibility between manufacturing locations will aid increasing customer expectations for supply chain diversification for risk mitigation and a changing tariff environment, improving even further our value proposition.

Sustainability

During the year, the Group continued to develop a long-term sustainability strategy, including reduced energy consumption, raw material waste, packaging use and carbon dioxide emissions, whereby Renold is ensuring sustainability is one of its guiding principles. Renold is focussed on making a difference through real actions which, over a period of time, will deliver discernible benefits for the environment, our customers and the business. Our leader for sustainability is helping the Board to develop policies and strategies in this area, aimed at reducing the Group’s environmental impact and enhancing social development whilst also ensuring that the Company maintains its existing commitments to its communities and stakeholders. Renold is well positioned to contribute to a more sustainable future; our technical, product development and commercial teams are actively developing a more efficient and environmentally sustainable product offering which helps customers to reduce their carbon footprint by providing highly engineered chains that give longevity and life cycle benefits, or by being cleaner through reducing the need for product lubrication.

The Board

The Chair of the Board is primarily responsible for the composition of the Board and for ensuring high standards of governance. As Chair, I place great importance on the breadth of relevant experience, diversity and complementary skills amongst the Group’s Directors and management and on the continued development of the strategy for the Renold business. With this in mind, we welcomed Vicki Potter to the Board as a Non-Executive Director during the financial year. Vicki has broad operational and HR experience in multinational engineering and manufacturing companies. She is currently the Chief Human Resources Officer and Customer Services Director for Oxford Instruments plc; a global FTSE 250 technology and manufacturing business.

Going forward, the Board will continue to ensure that effective succession plans are in place.

Dividend

The Board fully recognises the importance of dividends as part of the overall value creation proposition for shareholders. However, the Board has carefully reviewed its capital allocation priorities, and believes that both organic and inorganic investment opportunities that are available to the Group will deliver higher levels of shareholder return over the medium term than the payment of dividends in the near term. The Board will continue to review this approach over the coming periods. As such, the Board is not recommending the payment of a dividend on the ordinary shares of the Company for the year ended 31 March 2023.

Summary

The Group has performed well in the face of significant economic and social turmoil and continuing inflationary pressures on materials, energy and labour that the war in Ukraine and the pandemic have caused. These pressures will undoubtedly remain in the new financial year. However, the strong financial performance for the year, combined with positive operating cash flow, has generated the freedom to exploit future organic and acquisition-related growth opportunities. I would like to thank all our employees around the world for their diligence and commitment, which have been key to delivering the strong results for the Group.

DAVID LANDLESS

CHAIR

12 July 2023

 

Chief Executive’s review

The strong momentum that the Group achieved in the previous financial year continued in financial year 2023, despite the economic headwinds experienced due in part to the Russian invasion of Ukraine, the subsequent impact on European energy prices and the tail-end pandemic-related economic issues.

In August 2022, the Group acquired YUK for €24m, which increases the Group’s access to the Iberian Chain and wider European Conveyor Chain markets. The business is performing ahead of the Board’s expectations at the time of the acquisition.

Group order intake during the year was £257.5m, an increase of 15.0% on a reported basis and 7.8% at constant exchange rates over the prior year. Encouragingly, the Group has now seen order intake grow for each of the last six sequential half year reporting periods. Excluding the recently announced £8.9m long-term military contract, and the £11.0m military contract announced in the prior year, order intake for the year increased by 16.8%, or 9.2% at constant exchange rates. YUK contributed £10.5m (or 4.5%) of Group order intake. The resultant year end order book of £99.5m gives the Group a strong foundation upon which to build in the new financial year (31 March 2022: £84.1m).

The growth in Group revenue to £247.1m was also encouraging, representing a year-on-year increase of 26.6% on a reported basis and 18.8% at constant exchange rates. Excluding the impact of the YUK acquisition, turnover increased by 21.2%, or 13.5% at constant exchange rates. Final quarter revenues at £70.0m were particularly strong and were £17.0m (32.1%) ahead of the comparable quarter last year, with North America especially delivering a particularly strong performance.

Group adjusted operating profit¹ at £24.2m (2022: £15.3m) was 58.2% ahead of prior year on a reported basis, and 46.4% ahead on a constant currency basis. Profitability was particularly strong in the second half of the financial year, where the Group reported a return on sales of 11.2%. The incremental operating profit gearing² was a creditable 17.1%, despite the impact of the widely reported economic headwinds, impacting raw material availability and inflation. The operating profit gearing was helped significantly by the swift action to pass on cost inflation. Statutory operating profit increased to £22.9m (2022: £16.2m).

The Group continued to benefit from the impact of the significant efforts undertaken in the year, and previous years, to lower the fixed cost base, increasing flexibility and operational leverage. The Group has successfully managed a period of significant supply chain disruption to materials and transportation, in terms of availability, lead times and increased input costs. Cost increases have been successfully recovered through selling price increases as well as cost reduction, simplification and standardisation programmes. We expect cost pressure on material, labour, energy and transportation to persist in the current financial year.

Renold continues to drive increased performance through specific projects aimed at better levels of operational efficiency and productivity, through automation, improved design and standardisation of products, better utilisation of machinery and people, including more flexible working practices, and leveraging the benefits of improved procurement strategies. The Group’s capital investments returned to more normal levels following a period of lower spend in the prior year as a result of the pandemic, and have concentrated on increased automation within all of our facilities. The Group’s operational capabilities are steadily improving as consistent levels of investment come to fruition, and we continue to develop our in-house technologies and investments, allowing us to produce higher specification and better performing chain that maintains our market leadership.

The strong focus on cash management remains a key priority for management. Closing net debt was £29.8m (31 March 2022: £13.8m), with the increase attributable to the £17.8m of initial acquisition cash consideration paid during the year for YUK. Excluding this acquisition consideration, the level of net debt reduced during the year by £1.8m and in the second half of the year by £4.2m. The resulting net debt to EBITDA ratio of 0.8x (2022: 0.5x) affords significant headroom against the Group’s banking covenants and, in turn, provides greater flexibility and funding capabilities to transact quickly on investment decisions, both organic and through acquisitions, to drive growth, efficiency and productivity.

Activity in the Chain division continues to be robust, with H2 external order intake showing a 17.4% improvement over the strong levels seen in H2 of the last financial year. Output has also continued to improve with H2 constant currency turnover increasing by 22.3% in comparison to the same period last year. In a similar vein the adjusted profitability of the Chain business in H2 has increased by 69.5% at constant rates, when again compared to the equivalent period in the last financial year, and return on sales for the year at 13.4% (2022: 11.9%) continues to show progress.

The Torque Transmission division is generally a longer lead time, later cycle business. External order intake continued to grow, with the H2 order intake some 44.7% higher than the equivalent prior year comparator. Excluding the impact of the long-term military contract of £8.9m announced in January 2023, underlying order intake improved by 14.2%. Similarly, turnover has improved, with sales in H2 30.3% up on the prior year equivalent figure, as the base load work that the military contracts provide is taken to turnover. The return on sales for the division was 11.1% (2022: 10.1%).

¹ See Note 21 for definitions of adjusted measures and the differences to statutory measures

² Operational gearing is defined as the year-on-year change in adjusted operating profit, divided by the year-on-year change in revenue.

Current operating environment

The volatile operating environment the Group has faced over recent years abated a little in financial year 2023. The effects of the Covid-19 pandemic, especially in the UK, Europe and the US, were less marked, only to be replaced with new economic uncertainties brought about by the war between Russia and Ukraine.

During the year Covid-related disruption to our Chinese facilities, located in the wider Shanghai region, delayed inventory shipments to other companies in the Group, and at times staff absenteeism in the facility approached 50% which has negatively impacted costs, productivity and service levels from the factory. At other facilities, and following government guidance, the enforcement of our Covid protocols and health measures to try to protect all our staff were relaxed.

Towards the end of the financial year, the impact of previously reported extended shipment times and increased freight costs throughout the world abated, allowing the Group to make inroads into clearing the overdue order backlog. Accordingly, the Group recorded a record turnover of some £70.0m in the final quarter of the financial year. The availability of trucks, drivers and container freight services has improved in both reliability and expense, but still remain far from pre-pandemic norms. The upward pressure on goods in transit inventory levels also abated, which together with utilisation of the buffer stocks built up in H1 ahead of potential German energy rationing, allowed the Group to achieve positive cash generation in H2 of £4.2m.

As reported in the previous financial year, whilst recognising the human tragedy unfolding during the war between Russia and Ukraine, ceasing trading with sanctioned regions has little direct impact on the Group; sales to Russia and Ukraine during FY22 were low at c.0.5% of Group turnover. The Group continued to support our agents and distributors in the non-sanctioned parts of Ukraine, but obviously maintained close scrutiny on the levels of credit risk to which the Group is exposed.

Chain performance review

Turnover grew markedly during the year, with total Chain turnover increasing 27.1% year-on-year to £202.4m; 19.3% at constant exchange rates. In August 2022 the Group acquired YUK and during the period of ownership YUK contributed turnover of £10.5m, representing 5.2% of Chain turnover at actual exchange rates and 5.4% at constant exchange rates. The final quarter of the year saw a further step-up in activity for the Chain division, with Q4 turnover some 23.5% higher than the prior year comparator at constant exchange rates, as the impact of extended shipment times abated and both the US and European businesses were able to clear order backlogs. The increased revenue resulted in return on sales improving by 150 basis points, to 13.4% (2022: 11.9%). The operational gearing¹ on the increased activity at constant exchange rates was a creditable 21.8%, as the impact of increased prices, volumes and significant operational efficiency gains fell through to the bottom line. Adjusted operating profit was £27.2m (2022: £18.9m), £8.3m higher than the prior year level.

	2023£m	2022£m
External revenue	201.5	158.2
Inter-segment revenue	0.9	1.0
Total revenue	202.4	159.2
Foreign exchange	(12.5)	–
Revenue at constant exchange rates	189.9	159.2
Operating profit	26.5	20.5
US PPP loan forgiveness	–	(1.7)
Amortisation of acquired intangibles	0.7	0.1
Adjusted operating profit	27.2	18.9
Foreign exchange	(1.6)	–
Adjusted operating profit at constant exchange rates	25.6	18.9

¹ Operational gearing is defined as the year-on-year change in adjusted operating profit, divided by the year-on-year change in revenue.

Order intake in the Chain division increased by 18.6% year on year, with activity in both the US (+35.8%) and Australasia (+16.2%) showing a marked increase, especially during the final quarter of the year. External order intake in Europe grew by a headline rate of 5.8%, however, this is flattered by the YUK acquisition. Excluding the impact of YUK, underlying order intake in Europe fell 8.0% year-on-year, as the economic disruption of the Ukraine / Russia conflict was felt through the broader European economy, whilst European distributors destocked. In China, despite the Covid-related disruption during the year, external order intake grew by 33.6%, albeit from a low base. Order intake in India fell year-on-year by 6.3%, following a poor year in the agricultural market, coupled with a very tough comparator period.

Closing order books for the division finished the year at £60.9m (2022: £53.9m), some 13% ahead of last year which positions the Group well for the current financial year.

Chain Europe, which is our largest Chain business, saw a sharp increase in external revenues, which increased 25.0% over the prior year. Excluding the impact of the YUK acquisition, underlying revenues increased by 9.2%. Book and ship sales were depressed in H1, but recovered through the second half of the year due to distributor restocking, with Q4 sales 28.6% above the same prior year period and 26.1% above the average of the first nine months of the year. Targeted sales activity in key sectors saw both our OEM and End User business develop strongly, growing 13.5% and 29.8% respectively, with particularly strong growth in the areas of materials handling increasing 22.4% and manufactured products up 15.3%. Revenue progressively strengthened from the outset of the year, a trend which continued throughout each subsequent quarter.

The increased activity, together with the benefit of cost reduction activities, both in the current year and in the prior year, and new commercial initiatives, resulted in a substantial increase in underlying adjusted constant currency operating profit. Plans are in place to expand the Renold Service Centre footprint through the opening of a location in Turkey, close to Istanbul. The introduction of this new stock-holding location, together with the utilisation of the newly acquired YUK warehouse, should allow reduced delivery times and increased customer service, and hence sales, throughout the southern European region.

In the Americas, activity again increased markedly. External order intake at £92.3m was a record high, exceeding the £68.0m record achieved in the previous financial year by 35.7%. Turnover at £85.5m was 35.8% higher than the prior year comparator, driven by both significant input cost recovery work and an increase in projects related to the marine, food machinery, theme parks and utilities sectors. Sales to OEM customers grew steadily, especially in the escalator and forklift truck market, while increased sales of transmission chain products sold through distributors steadily increased. New business opportunities, especially in the ethanol, grain handling and forestry markets, were enhanced by the introduction of new products. Production capabilities were continually enhanced with further investment in automated equipment and development projects, and a large infrastructure project is being undertaken to see that the Morristown facility is positioned to take advantage of future growth opportunities. Underlying constant currency operating profit increased to a new record high.

In Australasia we continued to deliver revenue growth with the region being less impacted than our other markets by the commercial impacts of the pandemic and recorded revenue growth of 20.8%. Australia itself had a good year with revenue up 19.6%, with continued improvement seen in a number of sectors including mining and sugar. The recent trend of customers increasingly buying more domestically produced goods appears to be continuing, even though ongoing supply chain disruption to imported products appears to be reducing. Customers are increasingly seeing the benefits of our product-enhancing engineering capabilities that deliver real value through better performance and longer chain life. We continue to invest in the production capabilities of our Melbourne factory, with the recent purchase of further CNC equipment. Sales in New Zealand continued to grow strongly during the year, showing a 10.4% increase. Malaysia and Indonesia reversed the decline seen in the last financial year, recording growth rates of 35.3% and 24.5% respectively. Thailand was the only country in the region which recorded a decline in activity, showing a reduction in excess of 10%. We are continuing to expand our sales into more industries in South East Asia, with an initial assessment of commercial potential in Vietnam being undertaken.

Revenue in India grew by 13.1% during the year, helped in part by the opening of the first of a series of regional distribution warehouses in Nagpur to offer our customers and distributors much better and quicker supply. Plans are in place for a further three regional distribution centres to help give significantly improved delivery times to all parts of India over the coming years. Investment plans for the Indian operation include the introduction of state-of-the-art technology used elsewhere in the Group for the manufacture of many component types and assembly. Plans are also taking major steps forward for the introduction of the Group ERP platform, M3, which is expected to provide significant operational benefits within the current year.

Revenues in China grew by 7.9% during the year, driven primarily by a significant 12.9% improvement in domestic Chinese demand. Growth in intra-group demand from Europe and the US also increased significantly in the first half of the financial year, but slowed in the latter part of the year as intra-group order patterns were adjusted to take into account the improving delivery times to Western markets. Activities to correct stock holding patterns in our European and US warehouses, and the Covid-related disruption in the Chinese factory also subdued activity in the second half of the year. Efforts and investments to continue to improve the quality and specification of products manufactured in China bore fruit during the year, as product quality in the Chinese factory improved sufficiently to allow the transfer of the manufacture of several mid-tier Renold standard products and components to China. Manufacture of premium and high specification products will continue in our US and European facilities. During the year, our Chinese team initiated a project to upgrade certain component manufacturing processes to use state-of-the-art technology, while making significant investment in automated assembly lines to facilitate high volume sales growth in both domestic and overseas markets.

The Chain division continues to develop and evolve through investment in equipment, processes, training and development of our people, engineering and sales, and this provides us with an excellent base from which to build benefits derived from the many opportunities in this market.

Torque Transmission performance review

Divisional revenues of £48.8m were £8.4m higher than in the prior year (+20.8%) due to a recovery in demand in our North American markets. Our North American manufacturing and distribution business, based in Westfield NY, saw turnover grow by 35.8% year-on-year. In January 2023, the Group announced it had secured an £8.9m long-term agreement to supply large Hi-Tec couplings for the initial phase of a military contract for the Royal Australian Navy, an agreement which followed a similar military contract to supply the second phase of a contract for the Royal Navy in FY22. Progress on both these contracts was recorded during the year, and contributed to a 7.1% increase in the Renold couplings business.

Divisional adjusted operating profit at constant exchange rates increased by 24.4% to £5.1m in the year. Return on sales for the division was 11.1% (2022: 10.1%), an increase of 100bps during the year.

Momentum in this division, which has a later trading cycle and generally larger orders than our Chain business, continues to be positive and improving.

	2023£m	2022£m
External revenue	45.6	37.0
Inter-segment revenue	3.2	3.4
Total revenue	48.8	40.4
Foreign exchange	(2.8)	–
Revenue at constant exchange rates	46.0	40.4
Operating profit (and adjusted operating profit)	5.4	4.1
Foreign exchange	(0.3)	–
Adjusted operating profit at constant exchange rates	5.1	4.1

Order intake for the year increased 2.1% to £53.3m (2022: £52.1m), a reduction of 3.2% at constant exchange rates. Excluding the impact of the £8.9m long-term military contract, and £11.0m military contract announced in FY22, order intake increased by 7.8% or 1.1% at constant exchange rates.

The North American business unit benefitted from a significant increase in demand for gears and couplings supplied intra group from the UK, but also experienced a significant uptick in demand for own manufactured gear spindles and shakers, both in the US domestic market and internationally. Demand for gear couplings to the US mass transit market also strengthened significantly. Demand for group-supplied products in both the Chinese and Australian distribution and service centres also grew by 44.6% and 32.5% respectively, as supply chain issues encountered in the last financial year were resolved.

The Couplings business delivered a 6.7% increase in turnover year-on-year. As expected, turnover in the marine business, which manages the long-term military contracts, increased year-on-year by £0.8m, as work commenced on the second phase of the UK military contract, as well as the initial phase of the Australian military contract. Product mix improved markedly in the second half of the year as the lower margin initial phase of the contract was completed, and the higher margin phase of the work commenced. Product development in the couplings division continued with new designs for couplings that expand the performance envelope of current products whilst adding new features and benefits, while sales of the RBI rubber in compression product continued apace.

The Gears business made good progress in order intake, turnover and margin despite facing significant material and energy cost increases. Notable product developments during the year include new products aimed at the escalator market, especially relating to metro systems, and a number of specialist niche products aimed at the water treatment market. Demand from OEM customers, particularly for larger projects in the US and UK which are our key geographic markets, remained strong during the year.

The broad strength of the Torque Transmission division sales and margin performance reflects the later cycle nature of the division in comparison to Chain.

Sustainability

Renold intensified its focus on Group projects during the year and significant efforts were made to collate energy and carbon-related statistics from throughout the Group to gain a proper base line from which to measure progress in both energy and carbon reduction projects. A full inventory of the Group’s energy intensive fleet of heat treatment facilities was undertaken, and the Group’s technical and operational management have started to formulate a strategy, working with the Group’s equipment suppliers, to reduce the environmental footprint of our heat treatment processes as the age of equipment approaches the point where replacement is required. This exercise has already had initial success as our German facilities adopted more energy-efficient working practices during the year, which allowed the number of furnaces continually operating at the plant to be reduced by 25%.

The Group Sustainability Committee drove a packaging project which is aimed at producing new standard transmission chain packaging designs which are made from recycled material and are themselves fully recyclable. All adhesives, inks and labels used in these new designs, which will be common across the world, are also recyclable. The new designs have been produced in such a way that they have significantly reduced the amount of packaging lines that individual plants are required to keep in stock.

At a regional level, our businesses across the world have been asked to develop their own sustainability project roadmaps, seeking to ensure that our efforts are relevant to the highly diverse regions within which we operate. We will continue to build on the considerable momentum we have gained, delivering ever more local successes.

Finally, our technical, product development and commercial teams are actively developing a more efficient and environmentally sustainable product offering for our customers, whether that be in terms of product life and replacement cycle, or through being cleaner by reducing the need for product lubrication. More information on our progress and plans can be found in the Sustainability section of the Annual Report.

Strategic Plan – STEP2 progress

Having created a stronger operational platform for the Group, and with the significant strengthening of our financial position, we have increased our focus on how we can accelerate performance through value-enhancing acquisitions which will allow us to benefit from both increased geographical and product coverage, but also leverage synergies from increasing the throughput of our existing facilities. As a result, we have developed a pipeline of acquisition opportunities which we believe have the ability to meet our financial and operational criteria. Such acquisitions will allow us to expand our product and service offering as well as our customer base, further expand our already diverse product portfolio into adjacent market sectors, and allow us to capitalise on our ability to provide customers with high specification products that deliver real benefits for their own business performance.

The Board is observing disciplined criteria when executing the new acquisition strategy, ensuring that potential targets will enhance the Group’s wider strategy and earnings. Additionally, the Board is mindful of retaining a conservative capital structure, especially in light of the current economic backdrop, and will ensure that the long-term net debt to EBITDA ratio is maintained at an acceptable level.

During the year, Renold took the first significant step in the acquisitive growth phase of our strategy. In August 2022, Renold acquired the business of YUK, a Valencia-based manufacturer and distributor of high quality conveyor chain (“CVC”) and ancillary products. The acquisition not only provides the Group with high quality European-based CVC manufacturing capability, but also substantially increases the Group’s access to the Iberian market where historically we have been under represented. The acquisition will allow Renold to leverage YUK’s strong CVC market position in Spain and Portugal to expand sales of the Group’s existing range of premium European transmission chain (“TRC”) products, and enable sales of YUK products throughout Renold’s extensive European sales network beyond Iberia.

Organic growth and business improvement is a fundamental driver in the Group strategy moving forward. Renold is consistently enhancing its operational capabilities through upgrading equipment and processes across the world. Capital expenditure was £8.4m in the period, a considerable increase on the prior year and we expect it to rise again in the new year. We have made good progress in difficult circumstances, as supply chain issues have affected our equipment suppliers as much as ourselves.

We have a clear vision of where our Chinese factory fits into our global supply chain and our expectations for growth in the Chinese market itself. External order intake in China grew by 33.6% year on year, while external sales revenue increased by 12.9%. We are constantly upgrading capabilities in the facility and we will be offering higher specification Chinese-made product into the domestic market as well as across the world.

In our Indian business, efforts continue to fully integrate the business into the Group supply chain. Investments in production capabilities, including new press equipment equivalent to the equipment available in our US and European factories, is providing improvements in product quality and uniformity. India offers a very attractive market in its own right and an interesting and effective alternative to our Chinese chain manufacturing site. India provides the Group with an alternative supply base as customers’ supply chains flex, driven by an increasing level of concern about international trade tariffs and the concentration of supply from a single region.

These projects highlight the intention in our capital allocation decisions for the Group. With the large infrastructure projects complete, capital allocation decisions are now less frequently limited purely by a site’s domestic requirements but are focused on customer service, upgrading product specification capabilities and optimising profitability for the Group. For the Chain division especially, this allows us to access economies of scale and offer a truly global service with increasing relevance to large OEM customers. Renold is increasingly an integrated international supplier and less a series of regional businesses.

The strategic progress made by the Group over recent years has been significant. Investments in both our production capabilities and our IT environment have resulted in significant benefits, with:

•	Improvements in productivity and operational efficiency as evidenced by growing sales per employee;
•	Greater insight into the performance and opportunities in the business due to better and more complete data;
•	Improvements in the specification and quality of products we are able to make across our multiple manufacturing sites; and
•	Greater flexibility in the cost base as we start to reduce the correlation between revenue and direct labour.

With the ongoing recovery of our markets, the financial benefits of these improvements will increasingly come to the fore. Renold is well positioned to capitalise on these developments in the years ahead.

Macroeconomic landscape and business positioning

The underlying fundamentals of the Group and the markets we serve provide confidence that Renold is well placed to continue to develop and deliver sustainable profitable growth. Many of these intrinsic qualities have remained consistent over many years but we are now proactively building on these fundamentals. They include:

•	Valued and recognised brand with well-respected engineering expertise
	The Renold brand has been built up over our 150-year history and is trusted by customers to deliver exceptional products due to our world-class engineering and product knowledge.
•	Global market position and unique geographical manufacturing capability
	The global market position of Renold has existed for many years, but following significant strategic investments in the Chain division the geographic manufacturing footprint and capabilities we have are unique, permitting us to service customer demand with increasing levels of flexibility – a critical factor in a rapidly changing market environment.
•	Relatively low cost, but business critical products
	Chain and Torque Transmission products are fundamental elements of the systems into which they are incorporated. Our products are often a small proportion of the cost of the entire system, but critical to its operation.
•	Broad base of customers and end-user markets
	Renold products are used in an extremely diverse range of end applications, sectors, markets and geographies, resulting in a huge spread of customers and industries served. Markets and applications will change and vary in the ever-altering environment we operate in but, with its wide spread of products, geographies, applications and customers, Renold is well positioned.
•	High specification products delivering environmental benefits for our customers
	Renold products have always been high specification premium products which deliver exceptional benefits to customers. Whether through greater efficiency leading to lower power usage, longer life providing lower lifetime usage of materials and energy in their manufacture and logistics, or lower lubrication requirements, Renold products are well placed for an increasingly environmentally aware marketplace. Our products are capable of helping our customers meet their sustainability objectives whilst saving them money.

Outlook

I am pleased with the Group’s strong performance over the year, which reflects the benefits of the strategic developments completed over prior years and the hard work that all our employees across the world have contributed during a most difficult period. Our employees have responded excellently to the challenges we have faced, and I thank them for their dedication and commitment to the Group and our customers during these extraordinary times.

Throughout the reported period the business performance has been on an improving trend and finished particularly strongly as supply chains eased in the last quarter. We expect the current financial year to be no less challenging, but we remain vigilant in the environment within which we operate; however, we started the new financial year from a positive position with good momentum and confidence in the capabilities and fundamentals of the Renold business and the markets we serve.

ROBERT PURCELL

CHIEF EXECUTIVE

12 July 2023

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced that the Company will conduct a live presentation and Q&A session for investors on the same day as its results for the year ended 31 March 2023 are released, 12 July 2023, at 5:30 pm BST.

The presentation is open to all existing and potential shareholders. Those wishing to attend should register using the following link and they will be provided with log in details:

https://us02web.zoom.us/webinar/register/WN_eNb9SaJGRC-dlORaIZPwqg

There will be the opportunity for participants to ask questions at the end of the presentation. Questions can also be emailed to [email protected] ahead of the presentation.

Renold plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced it has reach agreement for the extension of its core banking facilities that were due to mature in April 2024.

The new, £85.0m multi-currency revolving credit facility, will be increased from the previous level of £61.5m. Additionally there is a £20.0m accordion option which will allow the Company to access additional funding in support of its acquisition programme as part of the Group’s STEP2 strategy.

The new facilities will be provided by our existing banks HSBC, Allied Irish Bank (GB) and Citibank with the addition of Santander and are initially for a three year term, to May 2026, but contain an option to extend the term for a further two years.  

The principal facility term, the Net Debt / EBITDA covenant, will be extended from the previous level of 2.5 times EBITDA to 3.0 times EBITDA, with other key terms remaining unchanged.

Commenting, Robert Purcell, Chief Executive of Renold, said:

“We are delighted to announce we have reached agreement to extend our banking facilities, which will provide a stable financing platform to support the continued strategic development of the Group over the next few years.

“As part of the facility extension, we welcome a new lending partner to the syndicate which complements Renold’s extensive geographic reach and can help support our operations across the world.”

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has provided a trading update covering the year ended 31 March 2023, ahead of the announcement of the Company’s preliminary results for the Year.

Trading update

The strong momentum in the Company’s performance experienced in the first nine months of the Year continued through the final quarter.  Revenue for the Year was £247.1m, a year-on-year increase of 26.6% on a reported basis and 18.8% at constant exchange rates. Excluding the impact of the Industrias YUK S.A. (“YUK”) acquisition, completed in August 2022, turnover increased by 21.1%, or 13.4% at constant exchange rates.

Group order intake during FY23 was £260.3m. This represents a year-on-year increase of 16.3% on a reported basis and 9.1% at constant exchange rates. Excluding the recently announced £8.9m long term military contract, and the £11.0m military contract announced in the prior year, order intake for the Year increased by 18.1%, or 10.6% at constant exchange rates. YUK contributed £12.7m (or 4.9%) of Group order intake. The order book finished FY23 at £99.5m (31 March 2022: £84.1m).

As a result of the stronger sales, the impact of the YUK acquisition, benefits of cost reduction and efficiency programmes, and the successful implementation of inflation cost recovery programmes, the Board now expects underlying trading profit and margin for FY23 to be materially ahead of the previous upwardly revised market expectations¹.

Despite the impact of cost inflation, careful management of working capital has resulted in net debt at the end of FY23 of £29.8m (30 September 2022: £34.0m), a reduction of £4.2m in H2.

The Group has strengthened its financial position significantly over the last three years, providing funding capacity to support its strategic growth objectives. These include both investment in further operational capabilities as well as value-accretive acquisitions, with a developing pipeline of opportunities.

Note: All figures used in this announcement relating to the financial year ended 31 March 2023 remain subject to audit.

¹ Company compiled market consensus for 2023 revenue, underlying operating profit, and underlying PBT is £238.3m, £19.8m and £14.3m respectively.

Notice of results

Renold Plc expects to announce its results for FY23 on 12 July 2023.

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced that it will be hosting a Capital Markets Day for institutional investors and analysts between 2pm and 4pm on Wednesday 10 May 2023 at the offices of Peel Hunt LLP, 100 Liverpool Street, London, EC2M 2AT.

During the event, Robert Purcell, CEO, and members of the Group’s executive team will present on Renold’s Chain division, Step2 strategy, the recent YUK acquisition, the Group’s ESG and sustainability programme, as well as wider opportunities available to the Group.

To register your interest in attending, please contact: [email protected]

A recording of the event will be made available on the Renold Plc website the following day.

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 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.

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, today issued a trading update covering the 10 month period ended 31 January 2023.

Trading update

The Group has traded strongly since announcing its interim results in November 2022, with order intake running ahead of sales. Supported by the positive market outlook, the Board now anticipates that underlying operating profit for the full year will be above current market forecasts.

Turnover for the 10 months to 31 January 2023 totalled £199.0m (10 months to 31 January 2022: £158.7m), 25.4% higher than the prior year comparator on a reported basis, and 17.3% at constant exchange rates.

Group order intake for the 10 month period was £216.5m, representing a year-on-year increase of 19.2% on a reported basis, and 11.6% at constant exchange rates. Excluding the impact of long term military contracts, order intake increased by 21.8% or 13.7% at constant exchange rates, with North America being particularly strong, although ordering patterns have started to normalise in Europe and India from the elevated levels experienced earlier in the financial year. The current order book of £104.1m is a further record high for the Group (30 September 2022: £99.0m) providing good visibility beyond the financial year end.

The integration of Industrias YUK S.A. continues in line with management’s expectations at the time of the acquisition, with early progress made in realising identified cost synergies. Net debt at the financial year end is still expected to be comfortably below 1.5x EBITDA.

Given the continued sales growth, a strong orderbook, benefits of the cost reduction and efficiency programmes, and the successful recovery of cost inflation on raw material and energy, the Board of Renold Plc is confident the current trading momentum will deliver revenues and underlying operating profit for the full year in excess of market expectations.

Renold Plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced that Renold Couplings, part of the Company’s Torque Transmission division, has been awarded a contract worth £8.7 million.

The award, to be delivered over the next seven years, is for the supply of flexible couplings for the Royal Australian Navy’s Hunter class frigates. The flexible couplings, which are an important component of a ship’s propulsion system, are part of Renold’s Hi-Tec range of couplings, which are supplied worldwide for large marine and industrial projects.

The Hunter class frigates will be built by BAE Systems Australia in the Osborne Shipyard, South Australia. The contract award represents a significant extension of the Group’s collaboration with BAE Systems for the supply of flexible couplings for naval vessels. Production of the couplings is expected to commence in early 2023, and will be machined on a new machining centre which was installed in Renold’s Cardiff facility in 2022, specifically for naval programmes. The first manufacturing programme is scheduled to complete in 2030.

Renold Plc CEO, Robert Purcell, commented:

“I am delighted that Renold will continue to work with BAE Systems Australia to deliver couplings for the next generation frigates. The award of the Hunter class contract is reflective of the quality of the service and product we have provided to other naval programmes and continues to underpin our belief in the Renold Hi-Tec product range.

“This excellent long-term contract will further underpin our Couplings business performance and shows the continued benefits of product development together with manufacturing and engineering excellence.”

Renold plc (LON:RNO), a leading international supplier of industrial chains and related power transmission products, has announced its interim results for the six month period ended 30 September 2022.

Financial summary	Half year ended
£m	30 September 2022	Restated1 30 September 2021	Change %	Change % (Constant currency)
Revenue	116.3	95.3	+22.0%	+14.3%
Adjusted operating profit2	9.6	7.2	+33.3%	+20.8%
Return on sales3	8.3%	7.5%	+80bps	+50bps
Adjusted profit before tax3	7.3	5.2	+40.4%
Net debt4	34.0	13.9
Adjusted earnings per share	2.7p	1.9p	+42.1%
Additional statutory measures
Operating profit	8.8	8.7	+1.1%
Profit before tax	6.5	6.7	(3.0)%
Basic earnings per share	2.3p	2.6p	(11.5)%

Financial highlights

·      Revenue up 22.0% (14.3% at constant exchange rates) to £116.3m driven by strong growth in Chain (2021: £95.3m)

·      Adjusted operating profit up 33.3% (20.8% at constant exchange rates) to £9.6m (2021: £7.2m)

·      Return on sales increased by 80bps, (50bps at constant exchange rates) to 8.3% (2021: 7.5%). Price increases offset input cost and supply chain challenges

·      Net debt as at 30 September 2022 £34.0m (1.2x rolling 12 month EBITDA), higher primarily due to €20.0m initial cash consideration for the acquisition of Industrias YUK, S.A.

·      Adjusted EPS up 42.1% to 2.7p (2021: 1.9p)

·      IAS 19 pension deficit reduced by 29.6% to £61.3m (31 March 2022: £87.1m)

Business highlights

·      Strong first half performance as markets continued to recover, despite cost inflation, economic uncertainty and global supply chain disruption

·      Group order intake in the period £121.3m, up 18.9%, excluding prior year long term military contract (11.0% at constant exchange rates)

·      Order book at 30 September 2022 £99.0m, continues at record high (30 September 2021: £72.1m)

·      Acquisition of Industrias YUK, S.A. (“YUK”) for €24m, increases the Group’s access to the Iberian Chain and wider European CVC markets. The integration process is well progressed and the business is performing ahead of expectations

·      Good progress on capital investment, productivity improvements and cost reduction programmes, accelerating the integration of Group-wide supply chain and increasing capabilities

¹ See Note 12 for details of the prior period restatements.

² See below for reconciliation of actual rate, constant exchange rate and adjusted figures.

³ See Note 11 for definitions of adjusted measures and the differences to statutory measures.

⁴ See Note 8 for a reconciliation of net debt which excludes lease liabilities.

Robert Purcell, Chief Executive of Renold plc, said:

“The strong trading momentum experienced in the second half of the last financial year has continued in the first half, with the Group continuing to successfully manage significant inflation and supply chain disruption, resulting in growing sales and record orders. Whilst we are mindful that global markets continue to be uncertain, with ongoing labour and energy cost inflation and supply chain challenges, the Group’s trading momentum continues to be positive. The Group has record order books and the acquisition of YUK provides opportunities for synergies and further growth.“

Investor Presentation

The Company will conduct a live presentation and Q&A session for investors at 5:30 pm GMT today, 16 November 2022. The presentation is open to all existing and potential shareholders. Those wishing to attend should register via the following link and they will be provided with log in details:

https://us02web.zoom.us/webinar/register/WN_6WUx953NTUmetFUprlFHSA

There will be the opportunity for participants to ask questions at the end of the presentation. Questions can also be emailed to [email protected] ahead of the presentation.

Chief Executive’s statement

The Group has continued to successfully manage a period of sustained cost inflation and supply chain disruption.  Materials, energy, labour and transportation costs have all increased substantially, however, selling price increases have been implemented, and margins have been robust. The Group expects to experience further cost pressures through the second half of the year but we are confident that these will again be managed successfully.

Renold continues to focus efforts on driving and optimising performance through identified projects, some requiring capital investment, targeting better operational efficiency,  improved design and standardisation of products, better asset utilisation, more flexible working practices, and leveraging improved procurement strategies.

The Group performed well in the first half, delivering an increase in revenues of 22.0% to £116.3m (2021: £95.3m). At constant exchange rates, revenues increased 14.3%. Order intake continues to run ahead of sales, totalling £121.3m for the period. Excluding the impact of the £11.0m long term military contract announced on 13 July 2021, this represents an increase of 18.9% over the prior year equivalent period, or 11.0% at constant exchange rates.  

Order books as at 30 September 2022 of £99.0m again represent a record high for the Group, and are 37.3% higher than the prior year equivalent; 24.3% at constant exchange rates.

Adjusted operating profit increased to £9.6m (2021: £7.2m, excluding the impact of non-recurring items, notably the benefit of US PPP loan forgiveness of £1.7m and £0.2m of costs relating to closed sites) with return on sales of 8.3% (2021: 7.5%), driven by productivity enhancements and the benefit of increased volumes and pricing. Statutory operating profit increased to £8.8m (2021: £8.7m), with statutory operating profit margin for the period of 7.6% (2021: 9.1%).

Net debt increased during the period by £20.2m to 34.0m (31 March 2022: £13.8m) due to the acquisition of Industrias YUK, S.A. and an investment in inventory.

M&A

On 3 August 2022 the Group acquired Industrias YUK, S.A. (“YUK”) based in Valencia, Spain, a manufacturer and distributor of high quality conveyor chain (“CVC”) and ancillary products.

The acquisition will allow Renold to leverage YUK’s strong CVC market position in Spain and Portugal to expand sales of the Group’s existing range of premium European transmission chain (“TRC”) products, and enable sales of YUK products throughout Renold’s extensive European sales network. Opportunities exist for significant manufacturing synergies between YUK and Renold’s current international operations.

During the period in which Renold has owned YUK, which includes the August holiday period, YUK has traded ahead of our initial expectations. Since acquisition YUK recorded sales of £2.2m, operating profit of £0.2m, and an initial return on sales of 9.1%.

The initial cash consideration was €20.0 million, with two deferred cash payments of €2.0 million each, payable 12 months and 24 months from the date of acquisition.

There remains an active pipeline of acquisition opportunities which the Group continues to review as part of its growth strategy. The Board adopts a disciplined approach to M&A focussed on complementary, earnings enhancing acquisitions to supplement organic growth, whilst maintaining a conservative level of leverage.

Business and financial review

	Revenue	Adjusted operating profit	Return on sales
				Restated1		Restated1
Six month period	2022/23£m	2021/22£m	2022/23 £m	2021/22£m	2022/23%	2022/21%
Chain	89.2	76.6	11.7	9.2	13.1	12.0
Torque Transmission	21.5	20.6	1.4	1.8	6.5	8.7
Head office costs/Inter segment sales elimination	(1.8)	(1.9)	(4.4)	(3.8)	–	–
Total Adjusted at constant rates	108.9	95.3	8.7	7.2	8.0	7.5
Impact of foreign exchange	7.4	–	0.9	–
Total Adjusted at actual rates	116.3	95.3	9.6	7.2	8.3	7.5
Adjusting items:
US PPP loan forgiveness	–	–	–	1.7
Dilapidation costs for closed sites	–	–	–	(0.2)
Amortisation of acquired intangibles	–	–	(0.2)	–
Acquisition costs	–	–	(0.6)	–
Statutory	116.3	95.3	8.8	8.7	7.6	9.1

¹ See Note 12 for details of the prior period restatements

Chain

The Chain division’s revenue at constant exchange rates increased by 16.4% (£12.6m) to £89.2m.

Revenue increased across all regions:

·      Europe increased turnover 8.6% at constant currency rates. Demand was robust driven by strong OEM and end user activity. The integration of the YUK business is proceeding as planned with the Group already starting to substitute externally sourced products, sell increased CVC product throughout Europe, and increase TRC sales in Spain.

·      The Americas increased constant currency revenues by 19.2%, driven by the need to recover costs through pricing, new aftermarket business in transmission chain and strong demand for capital equipment in the food processing, ethanol and mining industries.

·      Australasian revenues increased by 27.6% at constant exchange rates, as the business continued to benefit from execution of its growth strategy, targeting the move in Australia to more domestically manufactured goods, continuing strong demand from the Australian mining sector and notable increases in activity in both Indonesia and Malaysia. A new machining centre was installed in the Melbourne factory and progress was made in the development of chains for the cement and coal industries. 

·      India achieved first half constant currency revenue growth of 13.9% as activity levels recovered. An expansion of the domestic dealer network and an increase in the number of local warehouses is underway, to enhance geographic coverage and service.

·      Revenue in China was up 15.4% (at constant exchange rates) as a result of higher demand from Europe and the USA. Significant progress continues to be made in enhancing the performance of the factory in Jintan. As a result of a programme of standardisation and improvement projects, including the commissioning of new equipment, the factory is increasingly able to manufacture higher specification products.

Divisional adjusted operating profit at constant exchange rates was £11.7m, £2.5m higher than the prior year. Return on sales increased by 110bps to 13.1% (2021: 12.0%).

Order intake at constant exchange rates increased by 12.4% to £93.7m, resulting in a book to bill (ratio of orders to sales) for the first half of the year of 105.0% (2021: 108.7%).

Torque Transmission

Divisional revenues at constant exchange rates of £21.5m were £0.9m higher than in the prior year. This was due to increased demand for couplings in Australia and further recovery in North America, along with increased activity in the Gears business.

However, timing of the long-term military contracts resulted in some temporary reduction in revenue. Additionally, a number of key customers with long term supply arrangements in Eastern Europe were impacted by the war in Ukraine.

Divisional operating profit at constant currency reduced by £0.4m to £1.4m due to the timing of the military contract, and a weaker product mix between higher margin spare parts and lower margin OEM business.

Momentum in this division is expected to improve in the second half of the year, underpinned by an increase of 27.1% in order intake compared to the prior year (at constant exchange rates), excluding the benefit of the latest military contract.

Cash flow and net debt

		Restated1
Half year to 30 September	2022/23£m	2021/22£m
Adjusted operating profit	9.6	7.2
Add back: Depreciation and amortisation	4.9	4.7
Share-based payments	0.5	0.5
Adjusted EBITDA	15.0	12.4
Movement in working capital	(7.6)	–
Net capital expenditure	(2.2)	(1.3)
Operating cash flow	5.2	11.1
Income taxes	(1.3)	(1.3)
Pensions cash costs	(3.1)	(2.4)
Repayment of principal under lease liabilities	(1.2)	(1.4)
Financing costs paid	(1.3)	(0.8)
Consideration paid for acquisition2	(17.8)	(0.3)
Own shares purchased	–	(1.8)
US PPP loan forgiveness	–	1.7
Other movements	(0.7)	(0.3)
Change in net debt	(20.2)	4.5
Closing net debt	(34.0)	(13.9)

¹ See Note 12 for details of the prior period restatements
² Includes £0.1m deferred consideration in relation to the acquisition of the conveyor chain business of Brooks Ltd in the prior year and £0.6m of acquisition costs for Industrias YUK, S.A.

Net Debt increased during the period by £20.2m to £34.0m, largely due to the acquisition of Industrias YUK, S.A. for cash consideration of €20.0m in the period, along with associated costs of £0.6m.

Working capital increased during the period. Inflation has increased inventory value, though this was partly offset by a corresponding increase in creditors. In addition, stocks of raw materials and finished goods have been temporarily increased in Germany in case energy supplies are disrupted this winter. A focus on customer terms and collections has seen debtor days improve, which largely offsets the effect of increased selling prices on receivables.

Further inflationary pressures on materials, together with a continuation of extended shipment times in supplying product between operating sites, will result in the increased levels of inventory being maintained in the second half year. This coupled with higher input prices will result in modest further increases in working capital.

Net capital expenditure was £2.2m representing an increase over the prior half year, but remained below historic levels as delays in the shipment of capital equipment continue. Strategic investments in production capabilities, including improved heat treatment and a roll-out of a standardised IT system continued and are expected to gather pace during the second half of the year.

Corporation tax payments on account (£1.3m) were at normal levels.

Cash financing costs increased in the half year, due both to the additional borrowing resulting from the YUK acquisition, and the increase in interest rates over the period. Further increases in interest rates are expected within the second half of the year.

Pensions

The Group has a number of closed defined benefit pension schemes (accounted for in accordance with IAS 19 ‘Employee Benefits’). During the pandemic, the Group negotiated a £2.8m one-off deferment in contributions with the UK pension scheme trustees. Contributions have now returned to normal levels, but in addition, the first of five annual deferred payments of c.£0.6m was made.

As a result of arrangements agreed with the UK pension scheme trustees and approved by the Pension Regulator, pension cash costs are known and stable, though increasing by RPI capped at 5%.

The Group’s IAS 19 deficit decreased from £100.3m at 30 September 2021 to £61.3m at 30 September 2022.

The yield on corporate bonds increased sharply during the period. Consequently the discount rates used for the UK scheme rose from 2.75% to 5.45%, and resulted in a net reduction in UK pension liabilities of £22.9m. The long term expectation for CPI inflation remained broadly stable at 3.20% (3.25% prior year). Asset returns fell sharply during the period as both the value of gilts and equities fell. The scheme has insurance assets linked directly to the benefits of certain scheme members. As the liability to these members reduces, for example with an increase in discount rate, so does the value of the corresponding insurance asset.

Pension liabilities in non-UK schemes reduced by £2.9m to £20.1m, due in the main to an increase in discount rates.

The net financing expense (a non-cash item) was £1.0m (2021: £0.9m).

Dividend

In line with recent policy based on enhancing Group performance through focussed investment in new equipment and earnings enhancing acquisitions the Board has decided not to declare an interim dividend. The dividend policy will remain under review as margin and cash flow performance continues to develop.

Summary

Demand in the first half was strong, showing a good recovery as the worst effects of the pandemic receded. Whilst this performance is expected to continue, supported by the record order book at the period end, the widely reported challenging global market and supply chain conditions are continuing, with significant inflationary trends being experienced, particularly with respect to materials, transport and energy costs. The Group is working to mitigate these headwinds as far as possible and it enjoys significant geographic, customer and sector diversity. With the Group benefiting from the strategic initiatives previously implemented, we are well placed for the future, with a robust business that is well positioned for the coming period.

Going concern

The interim condensed consolidated financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

The ongoing macro-economic uncertainty, together with the impact of the war in Ukraine and the ongoing impact of Covid-19, alongside the continued improvement in the half year trading performance of the Group have been considered as part of the adoption of the going concern basis. The Group continues to closely monitor operating costs, and capital expenditure and other cash demands are being managed carefully.

As part of its assessment, the Board has considered downside scenarios that reflect the current uncertainty in the global economy, including significant material and energy supply issues, transport delays, and continuing inflationary pressures.

The Directors believe that the Group is well placed to manage its business risks and, after making enquiries including a review of forecasts and predictions, taking account of reasonably possible changes in trading performances and considering the existing banking facilities, including the available liquidity and covenant structure, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the 12 months following the date of approval of the interim financial statements. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Risks and uncertainties

The Directors have reviewed the principal risks and uncertainties of the Group. The Directors consider that the principal risks and uncertainties of the Group published in the Annual Report for the year ended 31 March 2022 remain appropriate. The risks and associated mitigation processes can be found on pages 48-55 of the 2022 Annual Report, which is available at www.renold.com.

The risks referred to and which could have a material impact on the Group’s performance for the remainder of the current financial year relate to:

·      Macroeconomic and geopolitical volatility, including potential energy supply disruption in Germany;

·      Strategy execution;

·      Corporate transactions / business development;

·      Health and safety in the workplace;

·      Security and effective deployment and utilisation of IT systems;

·      Prolonged loss of a major manufacturing site;

·      People and change;

·      Liquidity, foreign exchange and banking arrangements;

·      Pension deficit; and
Legal, financial and regulatory compliance.

Responsibility statement

The Directors confirm that to the best of their knowledge:

·      the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting;

·      the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months of the financial year and description of principal risks and uncertainties for the remaining six months of the financial year); and

·      the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

The Directors of Renold plc are listed in the Annual Report for the year ended 31 March 2022. A list of current Directors is maintained on the Group website at www.renold.com.

By order of the Board

Robert Purcell                                         Jim Haughey

Chief Executive                                       Group Finance Director

16 November 2022                                 16 November 2022