Final Results

Renold PLC 11 June 2001 11 June 2001 Renold plc 2001 PRELIMINARY RESULTS Precision engineering group, Renold plc, the leading international manufacturer and supplier of chains, gears, couplings, machine tools and rotors, today announces its preliminary results for the year ended 31 March 2001. Summary * Pre-exceptional, pre-tax profits up 20% to £12.2 million with a positive contribution from Jeffrey Chain. * Turnover up 24% to £216.7 million (1999/2000 - £174.2 million), up 8% on a like for like basis. * Operating margins improved to 7.4%, compared with 6.3% the previous year. * Adjusted earnings per share up 21% at 11.4 pence (1999/2000 - 9.4 pence). * Power Transmission businesses ahead of last year, with strong performances in Germany, North America and Automotive Systems. * Machine Tool and Rotor businesses in profit on sales 18% ahead of last year. * Cash inflow from operating activities double last year at £25.5 million. * Maintained total dividends of 9.25p. Prospects Roger Leverton, Chairman of Renold plc, said today: 'The Group derives great strength from its geographical spread and from its diverse customer base across a wide range of industries. Nevertheless we are not immune to the effects of the current slowdown in the US economy, the impact of which has made the outlook for our markets less predictable. We enter the new financial year with order intake in the UK and mainland Europe remaining steady but North American markets performing less well. Through a combination of new business initiatives and cost saving actions taken and in hand, we would expect the Group to return a satisfactory performance over the coming year.' 11 June 2001 Renold plc Chairman: Roger Leverton Preliminary Results for the Financial Year ended 31 March 2001 FINANCIAL SUMMARY 2001 2000 Change £m £m % Turnover 216.7 174.2 +24 Trading profit before goodwill amortisation and exceptional items 16.1 11.0 +46 Profit before tax, goodwill amortisation and exceptional items 12.2 10.2 +20 Profit before tax 11.1 9.6 +16 Adjusted earnings per share 11.4p 9.4p +21 Basic earnings per share 10.5p 8.6p +22 Dividends per ordinary share, paid or proposed 9.25p 9.25p Capital expenditure 9.5 10.3 -8 Gearing (net borrowings to shareholders' funds) 32% 39% GROUP RESULTS AND DIVIDEND I am pleased to report that the Group achieved a 20% increase in pre-exceptional profits in the year to 31 March 2001. This was an encouraging performance in markets which became more testing as the year progressed. Jeffrey Chain, which was acquired on 31 March 2000, has been successfully integrated into the Group and made a positive contribution. Profit before tax (and before profit on sale of land, redundancy and restructuring costs and goodwill amortisation) was £12.2 million (1999/2000 - £10.2 million) on turnover up 24% at £216.7 million (1999/2000 - £174.2 million). On a like for like basis, at constant exchange rates, turnover was 8% higher. Operating margins improved to 7.4% compared with 6.3% the previous year. Adjusted earnings per share were 11.4 pence (1999/2000 - 9.4 pence). The Board is recommending the payment of an unchanged final dividend of 6.15 pence per share. Together with the interim dividend of 3.1 pence per share paid on 26 January 2001, this gives total dividends for the year of 9.25 pence, the same level as last year. CASH FLOW AND BORROWINGS The Group achieved a cash inflow of £8.7 million in the year, with cash flow from operating activities of £25.5 million, double that of the previous year. Capital spending, mainly on new plant and equipment for the chain factories, was £10.4 million in the year (£9.5 million in 1999/2000). The former chain factory site at Burnage, Manchester was sold in October 2000 for £7.7 million net. Borrowings at 31 March 2001 were £28.3 million, compared with £33.5 million last year, and gearing at the year end was 32% compared with 39% last year. COMMENT Within the power transmission sector, the Group's chain businesses in mainland Europe performed strongly with Germany again achieving record results. Automotive Systems' sales and margins grew as the benefits of new model programmes and capital investment were realised. The North American businesses, which with the addition of Jeffrey Chain now represent a significant proportion of the Group, suffered a marked slow down in demand in the latter part of the year. However, the Ajax coupling business and the merchanting operations produced good results. The UK power transmission businesses continue to operate in an environment of weak domestic demand and of pressure on export margins. The UK chain factories have been supported by demand from Jeffrey and performed well overall. However, further action has been necessary to rationalise the UK gear and coupling businesses including provision for closure of the Bradford factory. The £2.4 million redundancy and restructuring charge relates almost wholly to this part of the Group. The machine tool and rotor business continued its recovery and achieved an operating profit on sales which were 18% up on last year. Sales by both Holroyd and Jones & Shipman were well ahead, and the new Jones & Shipman TechMaster range was launched successfully. Power Transmission The major change in the year was the positive impact of the acquisition of the Jeffrey Chain business and its beneficial effect on European factory activity. Jeffrey manufactures conveyor or 'engineering' chain (as it is known in the US market) at its factory in Morristown, Tennessee but, prior to acquisition, bought in chain for its Whitney brand power transmission chain from an outside supplier. The chain is made to Jeffrey's specification which has been further enhanced during the year as supplies were switched from the external supplier to the Renold factories in the UK and Germany. The re-sourcing process has moved forward rapidly and is on schedule to meet our target. The benefits of increased efficiency and higher utilisation of capital equipment were felt immediately but further incremental profits will be realised in the new year. Prior to acquisition, Jeffrey's export business was virtually non-existent. During the year sales of Jeffrey products through the Renold international network of sales companies have gained pace. The Renold and Jeffrey power transmission sales teams have been integrated in the USA and Renold products have been introduced to what were previously only Jeffrey product customers. Particularly important to the Group is Jeffrey's strong position in the US distributor market and with large original equipment manufacturers. Jeffrey's orders did ease in the second half of the year as the US economy slowed, and a cost reduction programme was implemented to counter this. With the increase in load from the Jeffrey transmission chain business the two transmission chain factories in the UK and Germany had a busy year and the local management teams responded speedily to introduce new tooling and working patterns to cope with these higher levels of product demand. It is particularly pleasing to report that engineering tests have shown that the performance of the Whitney brand chain has been significantly upgraded since it has been manufactured 'in-house'. The German factory had an excellent year, but profits in the UK suffered a little from margin pressures in both the local and export markets. Similar price pressures were experienced by the UK conveyor chain factory but a substantial increase in manufacturing efficiencies helped overcome the margin effects. Orders remained depressed largely as a result of continuing poor UK market activity and from the low level of business emanating from London Underground; 'next week' became 'next month' and it continues to be 'next month' as escalator suppliers await the release of long overdue refurbishment contracts. Whilst the UK chain manufacturing businesses were cushioned by the increase in factory load for Jeffrey, the other UK power transmission product factories suffered from the slackness of the UK market and margin pressure on exports. Cost reduction programmes continued and by the year end the proposed closure of the Bradford factory was announced, with the consequent transfer of mechanical variator manufacturing to the gears factory in Milnrow. This transfer will significantly improve prospects for the Milnrow factory, which together with the Manifold Indexing operation, has had a difficult time. The coupling businesses, which have been resilient in recent years, have had to introduce redundancy programmes to counter the effects of lower market demand. In France the local market conditions improved and particularly encouraging was the winning of some large original equipment orders as local business has been mainly distributor orientated in the past. The German market remained healthy and the rest of mainland Europe also enjoyed good market conditions. All of the merchanting businesses in Europe increased profits with the Swiss business producing record results. The Automotive Systems business in France had a good year. A significant increase in sales volume was matched by increasing manufacturing efficiency. As a result the business generated a good rate of return on the substantial investment in new production equipment installed over the past three years. In North America the power transmission merchanting businesses in the USA and Canada produced excellent results despite a tightening in the market. The Renold Ajax coupling business had a record year with strong sales of mass transit couplings and materials handling products. Weakening demand for spindle couplings for steel mills was more than compensated by new spindle drive maintenance contracts. The Australian business had a tough year hampered by problems in the Queensland agricultural market where a cyclone wiped out the harvest last year and therefore no replacement harvester chains were needed for the new season. There are now signs of a recovery in the Australian minerals extraction market which should result in an increase in orders. Profits from New Zealand were on budget and there was a positive impact from the successful relocation of the HQ and Distribution Centre to purpose built facilities at the Auckland factory. The Malaysian and Singapore merchanting businesses produced record profits, an excellent performance matching that of their European counterparts. Machine Tool and Rotor In March of this year the businesses of Holroyd, Jones & Shipman and Edgetek were integrated under one management team to form Renold Precision Technologies. Since the acquisition of Jones & Shipman there has been some rationalisation of manufacturing and design processes but the formation of Renold Precision Technologies will allow greater integration to take place. Good progress was made in the year. Orders increased by 17%, sales by 18% and there was an improvement of £1.7 million in trading profit from the previous year. At Holroyd, orders for both machine tools and rotors increased, with only a slight softening in the increase in rotor orders in the second half as customers commissioned their recently purchased machine tools to increase their own manufacture of rotors. Other markets showed signs of increased activity with sales of both machine tools and rotors for screw pump and vacuum pump customers. The Holroyd factory also produces precision gear sets for its own machine tools and sells these sets to other OEMs requiring high precision gears in Europe and North America. The year end order book remains strong. Jones & Shipman had a much improved year and produced a good last quarter result. Sales to the USA improved and sales via the French subsidiary increased strongly. In the UK there was an increase in sales to the aerospace component industry and greater interest in the purchase of Jones & Shipman machines as customers sought to improve productivity through new capital investment. Subcontract machining for customers was introduced during the year and, although it is in its infancy, some interesting applications have been accomplished which should lead to more business opportunities both for high precision component manufacture or additional machine tool sales. Good progress is also being made by the new re-manufacturing business which generated worthwhile sales growth in its first full year of operation. In the USA, Edgetek continued to find orders difficult to come by despite its superabrasive technology being at the forefront of high speed, high accuracy machining. Applications activity is high and the customer base in aerospace, power generation and sintered products markets is busy. The opportunities are there and customers are steadily realising the benefits of Edgetek's technology. Directors I was pleased to announce in April that Ian Trotter had been appointed as Chief Executive with effect from 1 May 2001, to succeed David Cotterill who had elected to take early retirement. Ian has been a director for ten years and has an outstanding track record in turning around and developing our Chain Businesses. His wide understanding of the business makes him well equipped to continue the Group's development. David Cotterill played an important part in re-shaping the Group in the face of challenging and rapidly changing market conditions since his appointment as Group Chief Executive nine years ago. Renold is a much stronger company as a result. The Board thanks him for what he has achieved and wishes him a long and happy retirement. Prospects Our strategic focus continues to be on growth markets and growth customers. We continue to invest, in line with this strategy, in order to enhance our capability to provide the products required and technologies to support them. The Group derives great strength from its geographical spread and from its diverse customer base across a wide range of industries. Nevertheless we are not immune to the effects of the current slowdown in the US economy, the impact of which has made the outlook for our markets less predictable. We enter the new financial year with order intake in the UK and mainland Europe remaining steady but North American markets performing less well. Through a combination of new business initiatives and cost saving actions taken and in hand, we would expect the Group to return a satisfactory performance over the coming year. _______________________________________________________________________ Annual Report to be published 19 June 2001 Annual General Meeting 19 July 2001 Dividend - to be paid 9 August 2001 - record date for shareholders 13 July 2001 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 1 April 2000 have been delivered, and for the year ended 31 March 2001, will be delivered to the Registrar of Companies. Both carry an unqualified audit report. The financial statements for the year ended 31 March 2001 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 1 April 2000. For further information, please contact: Ian Trotter, Chief Executive ) 11 June 2001 Telephone: 020 7329 0096 Tony Brown, Finance Director ) Renold plc ) Thereafter Telephone: 0161-498 4500 Ben Padovan/James Gordon Weber Shandwick Worldwide Telephone: 020 7329 0096 RENOLD PLC PRELIMINARY RESULTS Group Profit and Loss Account for the financial year ended 31 March 2001 2001 2000 £m £m Turnover 216.7 174.2 Trading costs - normal operating costs (200.6) (163.2) - goodwill amortisation (1.4) (0.2) - exceptional redundancy and restructuring (2.4) (0.4) costs - exceptional gain on disposal of asset 2.7 held for sale -------------- ---------- (201.7) (163.8) -------------- ---------- Trading profit 15.0 10.4 Net interest payable (3.9) (0.8) -------------- ---------- Profit on ordinary activities before tax 11.1 9.6 Taxation (3.8) (3.5) -------------- ---------- Profit for the financial year 7.3 6.1 Dividends (including non-equity) (6.5) (6.5) -------------- ---------- Retained profit/(loss) for the year 0.8 (0.4) ======== ======== Adjusted earnings per share 11.4p 9.4p Basic and diluted earnings per share 10.5p 8.6p RENOLD PLC PRELIMINARY RESULTS Group Balance Sheet as at 31 March 2001 2001 2000 £m £m Fixed assets Intangible asset - goodwill 27.7 26.3 Tangible assets 59.2 58.7 -------------- ------------ 86.9 85.0 Current assets Stocks 52.0 50.1 Debtors 41.7 45.7 Cash and short term deposits 7.1 14.3 -------------- ------------ 100.8 110.1 Creditors - amounts falling due within one year Loans and overdrafts (7.1) (11.4) Other creditors (51.8) (49.9) -------------- ------------ Net current assets 41.9 48.8 -------------- ------------ Total assets less current liabilities 128.8 133.8 Creditors - amounts falling due after more than one year Loans (28.2) (36.1) Other creditors (0.4) (0.5) Provisions for pensions (10.7) (10.8) -------------- ------------ Net assets 89.5 86.4 ======== ======== Capital and reserves (including non-equity interests) Called up share capital 17.9 17.9 Share premium 6.0 6.0 Revaluation reserve 7.1 4.9 Other reserves 1.2 1.1 Profit and loss account 57.3 56.5 -------------- ------------ Shareholders' funds 89.5 86.4 ======== ======== RENOLD PLC PRELIMINARY RESULTS Extracts from the Group Cash Flow Statement for the financial year ended 31 March 2001 2001 2000 £m £m £m £m Net cash flow from operating 25.5 12.7 activities Servicing of finance (4.2) (0.6) Taxation (2.5) (4.7) Capital expenditure and financial investment - Purchase of tangible fixed (10.4) (9.5) assets - Proceeds from disposal of 7.7 asset held for sale ----------- ----------- (2.7) (9.5) Acquisitions - Purchase consideration (0.9) (35.3) including costs - Cash acquired with 0.1 subsidiary ----------- ----------- (0.9) (35.2) Equity dividends paid (6.5) (6.5) ----------- ---- Net cash inflow/(outflow) before use of liquid resources and financing 8.7 (43.8) Management of liquid resources Transfers from short term 1.8 11.1 deposits Financing Issue of shares 0.1 (Decrease)/increase in debt (9.6) 32.2 and lease financing ----------- ----------- (9.6) 32.3 ----------- ------ Increase/(decrease) in cash 0.9 (0.4) in the year ====== ====== Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash 0.9 (0.4) in the year Cash flow from decrease/ (increase) in debt and lease financing 9.6 (32.2) Cash flow from decrease in (1.8) (11.1) liquid resources ----------- ----------- Change in net debt resulting 8.7 (43.7) from cash flows Exchange translation (3.5) (0.6) difference ----------- ------ Movement in net debt in the 5.2 (44.3) year Net (debt)/funds at beginning (33.5) 10.8 of year ----------- ---- Net debt at end of year (28.3) (33.5) ====== ====== RENOLD PLC PRELIMINARY RESULTS NOTE TO THE FINANCIAL STATEMENTS for the financial year ended 31 March 2001 Analysis of activities Activities classified by business segment: 2001 2000 Turnover Trading Trading Turnover Trading Trading £m profit assets £m profit assets £m £m £m £m Power transmission 182.1 15.2 87.7 145.2 11.8 83.4 Machine tool and rotor 36.7 0.9 20.2 31.2 (0.8) 21.7 ____________________________________________________ 218.8 16.1 107.9 176.4 11.0 105.1 Less: (2.1) (2.2) Inter activity sales Goodwill amortisation (1.4) (0.2) Exceptional redundancy (2.4) (0.4) and restructuring costs Add: Exceptional gain on 2.7 disposal of asset held for sale ___________________________________________________ 216.7 15.0 107.9 174.2 10.4 105.1 ___________________________________________________ Activities classified by geographical region of operation: 2001 2000 Turnover Trading Trading Turnover Trading Trading £m profit assets £m profit assets £m £m £m £m United Kingdom 91.9 2.5 49.8 85.1 3.4 52.9 Germany 33.7 4.8 11.3 32.8 4.2 9.7 France 34.3 2.5 11.2 31.5 1.4 9.9 Rest of Europe 16.5 1.3 4.4 15.4 1.0 3.9 North America 68.3 4.5 25.0 33.3 0.6 22.7 Other countries 17.4 0.5 6.2 17.5 0.4 6.0 ___________________________________________________ 262.1 16.1 107.9 215.6 11.0 105.1 Less: (45.4) (41.4) Intra Group sales Goodwill amortisation (1.4) (0.2) Exceptional redundancy (2.4) (0.4) and restructuring costs Add: Exceptional gain on 2.7 disposal of asset held for sale __________________________________________________ 216.7 15.0 107.9 174.2 10.4 105.1 __________________________________________________ The exceptional items are attributable to the Power Transmission segment and relate to the UK businesses. Turnover by geographical region includes intra group sales as follows: United Kingdom £30.2 million (1999/00 - £28.2 million), Germany £10.8 million (1999/ 00 - £9.5 million) and France £2.3 million (1999/00 - £2.8 million). Trading assets comprise fixed assets, current assets less creditors but exclude goodwill, cash, property held for sale, borrowings, dividends, corporate tax, finance lease obligations and provisions for pensions.

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