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RNS Number:0611M
Renold PLC
09 June 2003
9 June 2003
RENOLD plc
2003 PRELIMINARY RESULTS
Renold plc, a leading international supplier of industrial
chains and related power transmission products, automotive
cam drive systems and machine tools and rotors, today
announces its preliminary results for the year ended 29
March 2003.
Summary
- Pre-exceptional trading profit up by 18% to #9.2
million (2002: #7.8 million).
- Profit before tax improved by #9.8 million to #4.2
million (2002: loss #5.6 million), reflecting the flow
through benefits of the actions taken to refocus the Group's
activities and reduce operating costs.
- Restructuring of the machine tool business successfully
completed in the first half; restructured business reported
a trading profit in the second half.
- Adjusted earnings per share increased by 37% to 5.2
pence (2002: 3.8 pence).
- Final dividend maintained at 3.0 pence, giving 4.5
pence for the year (2002: 4.5 pence).
- Strong cash inflow from operating activities after
capital expenditure at #12.9 million, contributing to a
reduction in gearing from 35% last year to 25% this year.
- Further reduction in borrowings post year end from the
sale of surplus property, generating net cash proceeds of
#5.2 million.
- Group operations firmly restructured and repositioned,
focused on the core chain business, to exploit growth
opportunities worldwide.
Prospects
Roger Leverton, Chairman of Renold plc, said today:
"The Group's future development is clearly focused as a
supplier of chain along with supporting niche power
transmission products into industrial applications, together
with automotive cam drive systems.
The Group's markets continue to be challenging with both
political and economic uncertainty. Although this year has
started slowly we expect the benefit of internal efficiency
and developing market positions to show through as the year
progresses. Additionally, with the balance sheet
strengthened over the last two years, the Group is well
placed to take advantage of growth opportunities."
9 June 2003
RENOLD plc
Chairman: Roger Leverton
Preliminary Results
for the Financial Year ended 29 March 2003
FINANCIAL SUMMARY 2003 2002 %
#m #m change
Turnover 187.4 190.2 -1
Trading profit before goodwill amortisation
and exceptional items 9.2 7.8 +18
Profit before tax, goodwill amortisation and
exceptional items 6.1 4.2 +45
Profit/(loss) before tax 4.2 (5.6)
Adjusted earnings per share 5.2p 3.8p +37
Basic and diluted earnings per share 3.5p (7.2)p
Dividends per ordinary share, paid or proposed 4.5p 4.5p
Capital expenditure 5.7 5.4
Gearing (net borrowings to shareholders' funds) 25% 35%
GROUP RESULTS AND DIVIDEND
I am pleased to report that Group performance for the
financial year 2003 showed considerable improvement against
a background of continuing challenging market conditions.
Within the power transmission segment, the chain based
industrial power transmission business continued to perform
well, offset by a reduced performance from the automotive
cam drive business as it struggled to meet substantially
increased demand. Also of note was the return to
profitability in the second half of the machine tool and
rotor business. As a result, pre-exceptional profit before
goodwill amortisation and tax grew by 45% compared with the
prior period on sales which were marginally lower overall.
Further actions were taken to reduce the cost base and the
benefits of these and of previous restructuring activities
are reflected in the significant progress the Group made
during the year. Furthermore, strong cash flow was achieved
resulting in a substantial reduction in net debt to #20.9
million and year end gearing of 25% (2002 - 35%).
Subsequent to the year end the sale of the former Jones &
Shipman site at Leicester was completed and the resultant
net cash proceeds of #5.2 million have been utilised to
reduce further the Company's borrowings.
The Board is recommending the payment of a final dividend of
3.0 pence per share. Together with the interim dividend of
1.5 pence per share paid on 31 January 2003, this gives
total dividends for the year of 4.5 pence, the same as last
year.
During the year the Board has been strengthened by the
appointment of Tony Brown into the new role of Managing
Director Chain and Power Transmission Products, and by Steve
Mole's appointment to the Board as Finance Director. Both
appointments were made from within the Group and will add
weight to the development and implementation of Group
strategy. I wish them both every success in their new
positions.
Finally, on behalf of the Board, I would like to thank all
Group employees for their contribution and support which has
enabled the improved result for 2003 to be achieved.
Prospects
The Group's future development is clearly focused as a
supplier of chain along with supporting niche power
transmission products into industrial applications, together
with automotive cam drive systems.
The Group's markets continue to be challenging with both
political and economic uncertainty. Although this year has
started slowly we expect the benefit of internal efficiency
and developing market positions to show through as the year
progresses. Additionally, with the balance sheet
strengthened over the last two years, the Group is well
placed to take advantage of growth opportunities.
Chief Executive's Review
Today we are firmly focused on building our future through
our core chain business. This is where Renold has strong
brand recognition, significant international market position
and is respected as a supplier of innovative products and
value added systems solutions.
POWER TRANSMISSION
Industrial chain and power transmission
The worldwide reputation of our industrial chain brands and
the international presence of Renold provides the momentum
for future development not only in our traditional markets
but into new markets and geographies. The acquisition in
2000 of Jeffrey Chain in the USA was an important first step
in furthering our international position.
During the dull economic conditions of the last two years,
significant reductions in the cost base of the chain and
power transmission businesses have been achieved,
particularly in the Gear business which has been refocused
as a supplier of units, packages and systems that complement
the market and customer connections of our mainline chain
business.
The European chain production plants have also achieved
significant savings. The UK operations "adopted" the Euro
from its introduction further stimulating cost base
reductions and improved competitiveness. In total the chain
based industrial power transmission businesses now operate
from a more cost effective base.
The focus for the future is to strengthen our leading market
position for industrial chain in Europe, to extend our
position in the USA whilst developing business in other
regions where we are currently underweight. We will shift
the emphasis of the business to ensure that all activities
are focused on fully meeting customer expectations. This
will require a new level of expertise in supply management,
and a change from a manufacturing to a supply ethos. We
will continue to drive down our supply cost base potentially
involving the relocation of some assets to take advantage of
supply sources in lower cost economies.
Our engineering and technological expertise is a key
competitive advantage and we shall continue to encourage and
resource our engineering skills in the development and
innovation of products and power transmission package
systems.
In addition, we are committed to strengthening and
developing our front line customer capabilities. Our chain
and power transmission sales professionals worldwide have
been through an assessment college, with selling skills and
training programmes carried out locally. Further modules
are to be implemented during 2003.
To ensure full effectiveness of this new direction our
worldwide industrial chain and power transmission businesses
have been drawn together as a global business unit headed by
Tony Brown, as announced on 18 February 2003. Since then we
have further strengthened the management structure and
created two new regional business units - "Renold South East
Asia" and "Renold China". These moves are designed to
promote our global market position through exploiting a
wider international presence and to transform our supply
management capabilities.
We expect this market and customer based strategy to both
strengthen our current position and broaden our geographic
market. It will drive down the cost base through reducing
over-dependency on supply from high cost Western economies
and improve supply and logistics to secure reductions in
working capital.
This strategy continues the revitalisation of Renold through
our core industrial chain and power transmission businesses.
It sets our sights clearly on exploiting growth
opportunities worldwide. We will maintain the superiority
and specification integrity of our key chain brands through
engineering development and innovation, filling product gaps
and extending market positions.
Automotive cam drive systems
Renold Automotive Systems continues to experience
substantial growth as new engine programmes come into
production. Our penetration of this market through Renold's
chain based cam drive technology and increasing customer
preference for chain based systems have contributed to a
period of unprecedented growth.
This rapid increase in demand was earlier and greater than
anticipated and the Calais facility encountered some
inefficiency in production. Despite this it continued to
maintain customer service levels and actions have been taken
to address the issue.
In addition to resourcing our commitment to technology and
engineering, we have strengthened manufacturing management
with the appointment of a business Operations Director and
added additional resources to the production management
team. Furthermore, during the course of this year we will
commission an automotive chain production facility in our
German chain plant which will expand capacity by 20% and
relieve the pressure and dependence on the Calais plant.
In spite of these short term performance issues, we have
developed new business opportunities and over the course of
the next few years we are confident of maintaining sales
growth and, more importantly, achieving our performance
targets.
Renold Automotive Systems has, in the space of the last five
years, achieved global recognition and is counted in the top
three world suppliers of chain based cam drive systems. Our
technology is regarded as "world class" and as a result we
intend to open up markets beyond Europe and North America.
We expect demand from these new markets to be supported from
our European base initially, with supply moving locally as
both management resources and business build.
In the short-term our objectives are clear; the focus is to
improve returns substantially from the current business
through improved production efficiency and technological
development. For the future we intend to expand beyond our
existing markets to become a truly global supplier of
automotive cam drive systems.
MACHINE TOOL AND ROTOR
During the last two years considerable effort has been
directed at restructuring and repositioning the Group. The
machine tool business restructuring is complete, with Jones
& Shipman relocated on schedule to its new smaller site in
Leicester operating as an engineering, design and assembly
operation with manufactured components being sourced from
low cost economies. The Edgetek machine range is now fully
integrated at Holroyd and the business as a whole has
undergone a substantial cost reduction leading to a lower
break-even position.
Summary
Now that we have successfully repositioned the Group, our
energy will be directed to growing the core chain and
automotive cam drive systems business. We have the ability
and resources necessary to achieve our goals and are
confident of success.
Operations Review
POWER TRANSMISSION
Industrial chain and power transmission
The industrial chain and power transmission businesses
performed well in a year when economic conditions in our
major markets of Europe and North America remained weak.
Overall, sales were close to the previous year on a like for
like basis, largely as a result of improvements in market
position. This, together with earlier actions to reduce
costs and restructure, resulted in improved profitability.
The UK businesses operated in a domestic market in which
manufacturing activity continued to decline throughout the
year. Despite this, sales were close to the previous year's
level, after adjusting for operations closed last year.
This was the result of improving market share within the UK
and higher exports of UK chain products to the USA as the
Bredbury chain factory increased sales of transmission chain
products into the US market through Jeffrey Chain. The
Bredbury factory operated at a high level of utilisation,
and investment in additional capacity and in process
automation is ongoing. The Burton conveyor chain factory
had a difficult year as demand remained subdued.
Encouragingly there has been an upturn in orders for
agricultural applications going into the new financial year.
The UK gears and couplings businesses produced much improved
results this year, benefiting from the substantial
restructuring carried out last year. The industrial gearbox
business at Milnrow made good progress, growing sales of the
modular ePM gearboxes and of the large Titan worm gearbox
range.
The couplings businesses at Cardiff and Halifax improved
profits; their products are sold through the Group's sales
network around the world and enhance the power transmission
product portfolio.
In continental Europe, the German manufacturing sector, a
key demand driver for power transmission products, weakened
progressively throughout the year. However, sales of
transmission chain products from the Einbeck operation
increased as deliveries into the US market were well ahead.
The German business again produced an excellent profit
performance, as the contribution from the highly automated
manufacturing facility improved as factory load increased.
The French chain business grew its share in a weaker market,
holding sales at last year's level but improving
profitability. The focused activity by the sales team
continues to succeed in building relationships with key
distributors and OEM customers.
Turnover of the sales businesses elsewhere in Europe was
lower, including in Switzerland where the market is
dominated by machinery builders, although the rate of new
order intake improved in the final quarter.
The North American operations improved their competitive
position, particularly in the US chain market. The Whitney
Renold brand of roller transmission chain, launched last
year, achieved our targets and has built up a strong market
presence through key US distributors. Although overall US
demand for roller transmission chain products fell year on
year, the Jeffrey Chain business achieved increased sales
and market share. The US factory at Morristown, Tennessee,
saw activity reduced on lower offtake of engineered chains
in products for the construction industry and other key
sectors. As we enter the new financial year there are
indications of an improvement for these products. Renold
Ajax produces specialised industrial couplings for industry
including mass transit applications. Whilst the steel
industry, a major customer, remained weak, this operation
successfully adopted and implemented "Lean Manufacturing"
techniques and performed well. The Canadian distribution
and sales business also had a good year, reflecting the
gains in the USA for roller transmission chain with sales
and profits ahead of last year.
The Australian business improved substantially with a
significantly lower cost base offsetting the effects of
severe drought which reduced demand from the agricultural
sector. New Zealand had a difficult year as the economy
slowed. South Africa achieved its best result for a number
of years reflecting increased sales of both products
imported from Group factories and gear products produced
locally.
In the Far East the businesses in Malaysia and Singapore
generated further sales growth, the UK factories in
particular benefiting from increased sales of conveyor chain
and gearboxes supplied to those markets.
Overall the year benefited from the restructuring carried
out last year and profit margins improved despite difficult
market conditions. The Group's brands are a major strength
and our new generation flagship Renold Synergy(R) transmission
chain, announced at the Hannover Fair in April, is being
launched in key markets in the first quarter. Going forward
the industrial chain and power transmission businesses are
clearly focused on growing their position in markets which,
in the short term, remain weak.
Automotive cam drive systems
Demand for Renold Automotive's chain driven cam drive
systems grew rapidly as we continued to serve many of the
world's leading automotive manufacturers. Sales were up by
21% in the first half year, and in the second half were 37%
higher than the previous year as offtake for new engine
programmes supplied by the Calais facility built up ahead of
expectations. However, the sharp acceleration in output
required from Calais caused short-term inefficiencies in the
production process. Production output ran below targeted
levels, resulting in excessive labour and transportation
costs with a consequent adverse impact on profitability.
Operational management has been strengthened, new investment
committed and work is in progress to return efficiency to
acceptable levels.
During the year there has been positive progress in securing
new contracts and broadening the customer base. New
products continue to be developed and introduced and
opportunities for this business in which we have "world
class" technology are excellent.
MACHINE TOOL AND ROTOR
The market for machine tools remained poor throughout the
year as manufacturing investment was cut back worldwide
especially in Europe and North America.
It is pleasing, therefore, that the Group's machine tool
activities were able to record a small profit in the second
half year even though sales were lower than the previous
year.
This turnaround in profitability has been achieved through
the major rationalisation programme completed in the first
half. The business now offers a strong range of Holroyd and
Jones & Shipman machines complemented by high precision
component production, and by machine service facilities.
The range of Edgetek superabrasive machine tools, now
produced at the Holroyd factory, has gained excellent new
orders for aerospace and other demanding applications.
The Holroyd and Jones & Shipman businesses have been re-
established on sound footings with tight controls on costs
and cash being maintained. In the short term there is no
sign of a recovery in machine tool markets but levels of
recent enquiries are encouraging.
------------------------------------------------------------
Annual Report to be published 17 June 2003
Annual General Meeting 17 July 2003
Dividend
- to be paid 7 August 2003
- record date for shareholders 11 July 2003
Annual Report: This preliminary announcement does not form
the Group's statutory accounts. The figures shown in this
release have been extracted from the Group's full financial
statements which, for the year ended 30 March 2002 have been
delivered, and for the year ended 29 March 2003, will be
delivered to the Registrar of Companies. Both carry an
unqualified audit report.
The financial statements for the year ended 29 March 2003
have been prepared in accordance with applicable accounting
standards, using the same accounting policies as set out in
the Annual Report for the year ended 30 March 2002.
For further information, please contact:
Ian Trotter, Chief Executive 9 June 2003 Telephone: 020 7067 0700
Steve Mole, Finance Director
Renold plc Thereafter Telephone: 0161 498 4500
Terry Garrett/Christian San Jose
Weber Shandwick Square Mile Telephone: 020 7067 0700
Group Profit and Loss Account
for the financial year ended 29 March 2003
2003 2002
#m #m
Turnover 187.4 190.2
Trading costs
- normal operating costs (178.2) (182.4)
- goodwill amortisation (1.4) (1.5)
- exceptional redundancy and restructuring costs (1.0) (3.9)
------- -------
(180.6) (187.8)
------- -------
Trading profit 6.8 2.4
Exceptional loss on termination of operation (4.4)
Exceptional gain on disposal of property 0.5
------- -------
7.3 (2.0)
Net interest payable (3.1) (3.6)
------- -------
Profit/(loss) on ordinary activities before tax 4.2 (5.6)
Taxation (1.7) 0.6
Profit/(loss) for the financial year 2.5 (5.0)
Dividends (including non-equity) (3.2) (3.2)
------- -------
Retained loss for the year (0.7) (8.2)
======= =======
Adjusted earnings per share 5.2p 3.8p
Basic and diluted earnings per share 3.5p (7.2)p
Group Balance Sheet
as at 29 March 2003
2003 2002
#m #m
Fixed assets
Intangible asset - goodwill 22.6 26.2
Tangible assets 50.0 54.6
------- -------
72.6 80.8
------- -------
Current assets
Stocks 46.1 46.9
Debtors 46.7 38.3
Cash and short term deposits 9.3 6.4
------- -------
102.1 91.6
Creditors
- amounts falling due within one year
Loans and overdrafts (10.2) (9.9)
Other creditors (48.0) (41.2)
------- -------
Net current assets 43.9 40.5
------- -------
Total assets less current liabilities 116.5 121.3
Creditors
- amounts falling due after more than one year
Loans (20.0) (25.6)
Other creditors (0.6) (0.6)
Provisions for liabilities and charges (13.8) (12.6)
------- -------
Net assets 82.1 82.5
======= =======
Capital and reserves
(including non-equity interests)
Called up share capital 17.9 17.9
Share premium 6.0 6.0
Revaluation reserve 3.8
Other reserves 0.9
Profit and loss account 58.2 53.9
------- -------
Shareholders' funds 82.1 82.5
======= =======
Extracts from the Group Cash Flow Statement
for the financial year ended 29 March 2003
2003 2002
#m #m #m #m
Net cash inflow from operating activities 17.9 16.5
Servicing of finance (2.8) (2.9)
Taxation (1.3) (3.5)
Capital expenditure and financial investment
- Purchase of tangible fixed assets (5.6) (6.0)
- Proceeds from disposal of fixed assets 0.6 0.5
------- -------
(5.0) (5.5)
Equity dividends paid (3.2) (5.4)
------- -------
Net cash inflow/(outflow) before use
of liquid resources and financing 5.6 (0.8)
Management of liquid resources
Transfers from short term deposits 3.0 0.7
Financing
Decrease in debt and lease financing (1.8)
------- -------
Increase/(decrease) in cash in the year 8.6 (1.9)
======= =======
Reconciliation of net cash flow to
movement in net debt
Increase/(decrease) in cash in the year 8.6 (1.9)
Cash flow from decrease in debt and
lease financing 1.8
Cash flow from decrease in liquid resources (3.0) (0.7)
------- -------
Change in net debt resulting from cash flows 5.6 (0.8)
Exchange translation difference 2.6
------- -------
Movement in net debt in the year 8.2 (0.8)
Net debt at beginning of year (29.1) (28.3)
------- -------
Net debt at end of year (20.9) (29.1)
======= =======
Note to the Financial Statements
for the financial year ended 29 March 2003
Analysis of activities
(a) Activities classified by business segment:
2003 2002
Trading Trading Trading Trading
Turnover profit assets Turnover profit assets
#m #m #m #m #m #m
Power transmission 168.3 10.0 75.2 168.0 10.8 80.9
Machine tool and rotor 20.0 (0.8) 13.6 23.6 (3.0) 16.4
------- ------- ------- ------- ------- -------
188.3 9.2 88.8 191.6 7.8 97.3
Less:
Inter activity sales (0.9) (1.4)
Goodwill amortisation (1.4) (1.5)
Exceptional
redundancy and
restructuring costs (1.0) (3.9)
------- ------- ------- ------- ------- ------
187.4 6.8 88.8 190.2 2.4 97.3
------- ------- ------- ------- ------- ------
The exceptional redundancy and restructuring cost of #1.0
million is attributed #0.3 million to the power transmission
segment (2002 - #1.2 million) and #0.7 million to the
machine tool and rotor segment (2002 - #2.7 million). Of
the total goodwill charge of #1.4 million, #1.2 million
(2002 - #1.3 million) relates to the power transmission
businesses and #0.2 million (2002 - #0.2 million) to the
machine tool and rotor businesses.
(b) Activities classified by geographical region of operation:
2003 2002
Trading Trading Trading Trading
Turnover profit assets Turnover profit assets
#m #m #m #m #m #m
United Kingdom 69.2 1.6 38.1 74.2 (0.4) 43.7
Germany 30.4 3.0 12.5 29.0 2.4 11.5
France 43.0 0.2 10.9 35.0 1.7 10.3
Rest of Europe 16.3 0.9 4.2 16.2 1.1 4.2
North America 51.2 2.6 16.9 56.4 2.6 21.6
Other countries 17.4 0.9 6.2 16.5 0.4 6.0
------- ------- ------- ------- ------- -------
227.5 9.2 88.8 227.3 7.8 97.3
Less:
Intra Group sales (40.1) (37.1)
Goodwill amortisation (1.4) (1.5)
Exceptional
redundancy and
restructuring costs (1.0) (3.9)
------- ------- ------- ------- ------- -------
187.4 6.8 88.8 190.2 2.4 97.3
------- ------- ------- ------- ------- -------
The exceptional cost of #1.0 million arises #0.9 million in
the UK (2002 - #3.1 million) and #0.1 million in North
America (2002 - #0.6 million in North America, #0.1 million
in the Rest of Europe and #0.1 million in other countries).
The goodwill amortisation is attributed to business
acquisitions in North America.
Turnover by geographical region includes intra group sales as
follows: United Kingdom #26.5 million (2002 - #26.4
million), Germany #10.8 million (2002 - #7.9 million) and
France #1.9 million (2002 - #2.0 million).
Trading assets comprise fixed assets, current assets less
creditors but exclude goodwill, cash, borrowings, dividends,
current and deferred corporate tax, finance lease
obligations, property held for sale, pension prepayments and
other provisions for liabilities and charges.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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