Interim Results - Half Year to 2 October 1999
Renold PLC
15 November 1999
Interim results for the half year to 2 October 1999
Precision engineering group, Renold plc, the leading international
manufacturer of chains, couplings, gears and machine tools and rotors, today
announces its interim results for the half year to 2 October 1999.
- Results in line with market expectations
- Turnover £86.3 million (1998/9: £86.5 million)
- Profit before tax (and redundancy costs of £0.2 million) £4.0 million
(1998/9: £9.0 million before redundancy costs of £0.5 million)
- Unchanged dividend of 3.1 pence per share
- Operating cash flow of £3.4 million; balance sheet remains strong with
cash of £6.3 million
- Chain businesses produce another sound performance, particularly at
Automotive Systems and Germany
- Improvement at Holroyd in first half; considerable increase in sales
expected in second half
- Encouraging forecasts for world grinding machine tool market, Jones &
Shipman well placed to benefit
Roger Leverton, Chairman of Renold plc, said:
'The Group has substantially reduced the cost base and strengthened the
competitive position of the UK businesses. The major chain businesses in
mainland Europe are expected to perform satisfactorily. Benefits from
improved prospects and the actions taken by the machine tool businesses are
also now starting to be realised. Overall, although trading conditions remain
difficult, we expect to see an improvement in performance in the second half.'
RENOLD PLC
Chairman: Roger Leverton
Interim Statement for the half year
ended 2 October 1999
Financial Summary
____________________________________________________________________________
First half year
1999/2000 1998/9
£m £m
Turnover 86.3 86.5
Profit before exceptional redundancy costs 4.3 8.7
Profit before tax and before exceptional
redundancy costs 4.0 9.0
Profit before tax 3.8 8.5
Earnings per ordinary share
- based on adjusted earnings 3.8 p 9.5 p
- based on reported earnings 3.6 p 8.9 p
Interim dividend
per ordinary share 3.1 p 3.1 p
Capital expenditure 4.5 5.2
Operating cash flow 3.4 4.4
Group results and dividend
The results for the half year to 2 October 1999, whilst disappointing, are in
line with expectations when the trading statement was issued on 8 October
1999. Profit before tax (and before redundancy costs of £0.2 million) was
£4.0 million (1998/9 - £9.0 million before redundancy costs of £0.5 million)
on a turnover of £86.3 million (1998/9 - £86.5 million). Adjusted earnings
per share were 3.8 pence (1998/9 - 9.5 pence) after a higher tax charge. The
Group's effective tax rate has increased to 34% from 28% in the first half of
last year, due to the increased proportion of overseas profits taxed at higher
rates.
The Board has declared an interim dividend of 3.1 pence per share, at the same
level as last year. This dividend will be paid on 28 January 2000 to
shareholders appearing on the register on 6 January 2000.
COMMENT
The first half of 1999/2000 has been another challenging period for the Group.
The results reflect a continuation of the trading conditions in the second
half of last year, with the Group's UK businesses continuing to experience
flat domestic demand, whilst the strong pound has affected exports. The Jones
& Shipman machine tool businesses, which were acquired last December, have
suffered particularly in the North American market from the weak demand
experienced throughout the international machine tool industry. In contrast,
the Group's major chain businesses in mainland Europe performed satisfactorily
and there have been further signs of recovery in Australasia and the Far East.
Power transmission
Within power transmission, the chain businesses again performed soundly.
Sales and profits rose at the French automotive cam drive systems business,
where output was further increased to meet the growth in customer demand.
Production commenced of a new system for a world engine for General Motors,
and substantial investment continues to be made in additional manufacturing
capacity at Calais. The German chain business achieved another good result,
although both domestic and export demand were a little easier, whilst the
merchanting operations elsewhere in Europe fell short of last year's strong
performance. The UK chain business earned profits at the same level as in the
previous half year, despite continuing weak domestic demand from distributors
and direct customers, and exports being affected by the strong pound. Sales
of new and recently introduced chain products have grown steadily, with new
applications for Coris stainless steel chain and new products for the stores
escalator and leisure ride markets.
The UK based engineering products businesses were particularly affected by the
depressed home and export markets, and strenuous management action has been
taken to improve performance. Considerable progress has been made at the
Milnrow gear box business in broadening the product range by introducing new
helical and bevel helical gearboxes to complement its updated worm gear
products, and in carrying through a factory modernisation programme.
Management has been strengthened at Manifold, the indexing gear business,
which is being relocated to a modern new factory in December 1999. The two UK
couplings businesses, at Cardiff and Halifax, continued to trade reasonably
although below last year's levels.
In North America, the power transmission businesses reported lower profits.
Sales of large couplings by the US manufacturing operation to the steel
industry were down from last year's good performance. However, the order book
is firm which should lead to a better second half. The businesses in
Australasia and the Far East are steadily recovering as market conditions
gradually improve. Renold Australia has strengthened its position in
conveyor chain manufacturing by acquiring a competitor, Ace Chains, on 4
October 1999.
Machine tools and rotors
The Holroyd machine tools and rotors business has broadened its customer base
for rotors, and this, together with a recovery in rotor demand in the North
American airconditioning market, has resulted in improved performance compared
with the second half of last year. Delivery of the bulk of a substantial
machine tool package to an American airconditioning and refrigeration
customer, and of other machine tool orders won against European competition,
will lead to a considerable increase in Holroyd's sales in the second half.
The Jones & Shipman businesses have suffered, particularly in the North
American market, from the weak demand experienced throughout the international
machine tool industry. Enquiry levels for major projects have risen sharply
in recent months and prospects have improved. Industry forecasts for the
world grinding machine tool market are encouraging, and the combined product
range of Jones & Shipman and Holroyd is well placed to benefit. The Jones &
Shipman Leicester factory has combined with Holroyd in a number of areas,
including the integration of engineering and manufacturing resources, as well
as joint sales projects for grinding cell applications. In the USA the
management of Edgetek, the superabrasive machine tool business, and of the
Jones & Shipman US sales operation have been strengthened. Significant cost
reductions have been and continue to be achieved in both the Jones & Shipman
and Edgetek businesses.
Capital expenditure and cash
Capital expenditure in the half year was £4.5 million, with the major
investment in additional production equipment at the Calais automotive systems
plant, which will continue through the second half. Operating cash flow after
capital expenditure was £3.4 million, compared with £4.4 million in the first
half of last year, and the Group's balance sheet remains strong, with net cash
of £6.3 million, providing significant capacity for further investment.
Strategy
The Group now operates in two distinct market sectors, power transmission,
which includes our chain, couplings and gears businesses, and machine tools
and rotors. The machine tool businesses are Holroyd and Jones & Shipman.
Holroyd is a major supplier of milling and grinding machine tools and rotors
for screw compressors used in the airconditioning, chilling, refrigeration and
other industries, and has been a strong profit generator for the Group in all
but one of the last fifteen years. The acquisition of the Jones & Shipman
businesses at the end of 1998 gave us a unique opportunity to obtain
complementary and world leading technology in precision grinding machine tools
servicing a wider industrial base. It was unfortunate that early in 1999 the
important market for high precision machining of aerospace engine turbine
blades suffered a significant deterioration. Action has been taken to cut
costs and strengthen management and, when their long term growth markets
recover, the precision machine tools businesses can be expected to make a full
contribution to future Group profits.
Within power transmission, the core chain business has benefited from heavy
investment in modern manufacturing technology and, since the mid-1990s, has
established a consistent profit record. We will continue to seek
opportunities to develop the chain business both organically and through
acquisition, as well as to invest in other attractive sectors of the power
transmission industry.
Long term, your Board has confidence in the durability of the constituent
parts of the Group as major suppliers to growth industries serving the
economies of the future.
Prospects
For the last eighteen months the UK engineering industry has contended with
the effects of a strong pound and a depressed home market, and as yet there
are few tangible signs of the much heralded improvement in the manufacturing
economy. In addition, the economic crisis in the Far East has had a more far-
reaching impact than anticipated, not just on direct sales but also on our
customers serving this area, but there are now signs of recovery there. Over
this period, the Group has substantially reduced the cost base and
strengthened the competitive position of the UK businesses. The major chain
businesses in mainland Europe are expected to perform satisfactorily.
Benefits from improved prospects and the actions taken by the machine tool
businesses are also now starting to be realised. Overall, although trading
conditions remain difficult, we expect to see an improvement in performance in
the second half.
RELEASE OF INTERIM STATEMENT
The Interim Statement will be posted to shareholders on 19 November 1999.
Copies will be available for the public from that date at the Company's
registered office, Renold House, Styal Road, Wythenshawe, Manchester M22 5WL.
For further information, please contact
David Cotterill, Chief Executive) 15 November 1999 Telephone: 0171-329 0096
John Allan, Finance Director ) Thereafter Telephone: 0161-437 5221
Renold plc )
Issued by:
Shandwick Consultants Limited
Ben Padovan/Ben Atwell Telephone: 0171-329 0096
Group Profit and Loss Account
____________________________________________________________________________
for the half year ended 2 October 1999 (unaudited)
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Turnover 86.3 86.5 171.6
Trading costs
- normal operating costs excluding goodwill
amortisation 81.9 77.8 157.6
- goodwill amortisation 0.1 - -
- exceptional redundancy and restructuring
costs 0.2 0.5 1.8
________ ________ ________
82.2 78.3 159.4
________ ________ ________
Trading profit 4.1 8.2 12.2
Interest (payable) receivable (0.3) 0.3 0.2
________ ________ ________
Profit on ordinary activities before tax 3.8 8.5 12.4
________ ________ ________
Tax: UK - 0.4 1.8
Overseas 1.3 2.0 2.9
________ ________ ________
1.3 2.4 4.7
________ ________ ________
Profit for the period 2.5 6.1 7.7
Dividends (including non-equity) 2.1 2.1 6.4
________ ________ ________
Retained profit for the period 0.4 4.0 1.3
________ ________ ________
Adjusted earnings per ordinary share
- based on reported earnings adjusted
for exceptional redundancy and
restructuring costs after tax relief 3.8p 9.5p 13.5p
________ ________ ________
Basic earnings per ordinary share
- based on reported earnings 3.6p 8.9p 11.1p
________ ________ ________
Diluted earnings per ordinary share, in
accordance with FRS 14
- based on reported earnings 3.6p 8.9p 11.1p
________ ________ ________
Dividends per ordinary share 3.1p 3.1p 9.25p
________ ________ ________
Group Balance Sheet
____________________________________________________________________________
as at 2 October 1999 (unaudited)
At At At
2 October 3 October 3 April
1999 1998 1999
£m £m £m
Fixed assets
Intangible asset - goodwill 2.8 - 2.9
Tangible assets 53.0 47.4 53.6
________ ________ ________
55.8 47.4 56.5
________ ________ ________
Current assets
Stocks 45.2 39.8 46.6
Debtors 34.5 35.0 36.7
Cash and short term deposits 16.5 28.8 22.6
________ ________ ________
96.2 103.6 105.9
________ ________ ________
Creditors - due within one year
Loans and overdrafts (4.6) (3.3) (5.8)
Other creditors (40.5) (37.8) (49.0)
________ ________ ________
(45.1) (41.1) (54.8)
________ ________ ________
Net current assets 51.1 62.5 51.1
________ ________ ________
Total assets less current liabilities 106.9 109.9 107.6
Creditors - due after one year
Loans (5.3) (5.6) (5.5)
Other creditors (0.7) (0.7) (0.8)
Provisions for pensions (12.5) (12.7) (12.6)
________ ________ ________
Net assets 88.4 90.9 88.7
________ ________ ________
Capital and reserves
(including non-equity interests)
Called up share capital 17.9 17.8 17.9
Share premium 6.0 5.7 5.9
Other reserves 64.5 67.4 64.9
________ ________ ________
Shareholders' funds 88.4 90.9 88.7
__________ ________ ________
Summarised Group Cash Flow Statement
____________________________________________________________________________
for the half year ended 2 October 1999 (unaudited)
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Cash flow from operating activities
Trading profit 4.1 8.2 12.2
Depreciation 4.0 3.6 7.5
Goodwill amortisation 0.1 - -
(Increase) decrease in working capital (0.6) (2.3) 3.8
Other 0.3 0.1 0.3
________ ________ ________
7.9 9.6 23.8
Net interest paid (0.4) - -
Taxation (3.2) (4.1) (6.5)
Capital expenditure (4.5) (5.2) (11.5)
Acquisition
- purchase consideration including costs - - (5.7)
- net overdrafts acquired with - - (1.7)
subsidiary
Equity dividends paid (4.3) (4.1) (6.2)
________ ________ ________
Cash outflow before use of liquid
resources and financing (4.5) (3.8) (7.8)
Management of liquid resources
Transfers from short term deposits 8.7 5.6 11.2
Financing
Issue of shares 0.1 0.4 0.7
Decrease in debt and lease financing (0.4) (0.9) (5.6)
________ ________ ________
Increase (decrease) in cash in the period 3.9 1.3 (1.5)
________ ________ ________
Reconciliation of net cash flow to
movement in net funds
Increase (decrease) in cash in the period 3.9 1.3 (1.5)
Cash outflow from decrease in debt and
lease financing 0.4 0.9 5.6
Cash flow from decrease in liquid
resources (8.7) (5.6) (11.2)
________ ________ ________
Change in net funds resulting from cash
flows (4.4) (3.4) (7.1)
Loans and finance leases acquired with
subsidiary - - (4.7)
Exchange translation difference (0.1) 0.5 0.3
________ ________ ________
Movement in net funds in the period (4.5) (2.9) (11.5)
Net funds at beginning of period 10.8 22.3 22.3
________ ________ ________
Net funds at end of period 6.3 19.4 10.8
________ ________ ________
Notes to the Interim Statement
____________________________________________________________________________
1. Statement of total recognised gains and losses
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Profit for the period 2.5 6.1 7.7
Exchange translation differences on net
assets of overseas subsidiaries (0.8) 0.5 0.7
________ _______ ________
Total recognised gains 1.7 6.6 8.4
________ ________ ________
2. Reconciliation of movements in shareholders' funds
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Profit for the period 2.5 6.1 7.7
Dividends (2.1) (2.1) (6.4)
________ ________ ________
Retained profit for the period 0.4 4.0 1.3
Issue of ordinary shares 0.1 0.4 0.7
Exchange translation differences on net
assets of overseas subsidiaries (0.8) 0.5 0.7
________ ________ ________
Net addition to shareholders' funds (0.3) 4.9 2.7
Opening shareholders' funds 88.7 86.0 86.0
________ ________ ________
Closing shareholders' funds 88.4 90.9 88.7
________ ________ ________
3. Analysis of activities
Activities classified by business segment:
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Turnover
Power transmission 73.0 80.1 157.0
Machine tools and rotors 14.4 6.8 15.9
________ ________ ________
87.4 86.9 172.9
Less: Inter Activity sales 1.1 0.4 1.3
________ ________ ________
86.3 86.5 171.6
________ ________ ________
Trading Profit
Power transmission 5.3 8.0 14.2
Machine tools and rotors (0.9) 0.7 (0.2)
________ ________ ________
4.4 8.7 14.0
Less:
Goodwill amortisation 0.1 - -
Exceptional redundancy and
restructuring costs 0.2 0.5 1.8
________ ________ ________
4.1 8.2 12.2
________ ________ ________
Trading Assets
Power transmission 69.2 71.6 68.4
Machine tools and rotors 20.5 12.5 21.3
________ ________ ________
89.7 84.1 89.7
________ ________ ________
Activities classified by geographical region of operation:
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Turnover
United Kingdom 40.7 43.4 81.4
Germany 16.6 18.4 36.7
France 15.8 14.5 31.0
Rest of Europe 8.1 9.1 17.9
North America 16.7 14.9 30.7
Other countries 8.5 7.9 16.1
________ ________ ________
106.4 108.2 213.8
Less: Intra Group sales 20.1 21.7 42.2
________ ________ ________
86.3 86.5 171.6
________ ________ ________
Turnover by geographical region includes intra group sales as follows:
United Kingdom 13.5 14.7 28.2
Germany 4.6 4.9 9.8
France 1.5 1.6 3.3
Trading Profit
United Kingdom 1.3 4.0 4.8
Germany 1.5 1.7 3.7
France 0.8 1.0 2.0
Rest of Europe 0.6 0.9 1.7
North America 0.1 1.2 1.7
Other countries 0.1 (0.1) 0.1
________ ________ ________
4.4 8.7 14.0
Less:
Goodwill amortisation 0.1 - -
Exceptional redundancy and
restructuring costs 0.2 0.5 1.8
________ ________ ________
4.1 8.2 12.2
________ ________ ________
Trading Assets
United Kingdom 51.7 47.3 52.3
Germany 10.3 11.9 10.9
France 9.0 7.2 7.5
Rest of Europe 3.6 4.0 4.1
North America 9.5 8.3 9.5
Other countries 5.6 5.4 5.4
________ ________ ________
89.7 84.1 89.7
________ ________ ________
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.
First half year Full year
1999/2000 1998/9 1998/9
£m £m £m
Geographical analysis of external
turnover by market area:
United Kingdom 18.9 18.1 35.3
Germany 14.3 14.5 30.1
Rest of Europe 20.4 22.8 44.7
North and South America 21.8 20.0 40.2
Other countries 10.9 11.1 21.3
________ _______ ________
86.3 86.5 171.6
________ _______ ________
4. Year 2000
The Group's programme to address Year 2000 issues has been substantially
completed, and communication with key suppliers and customers has not
revealed any significant issues. The Group's businesses are finalising
their contingency plans to ensure a high state of readiness; however,
despite this it is not possible to guarantee that no Year 2000 problems will
arise.
The capital cost of new computer hardware and software purchased in the half
year to replace non-compliant systems was £0.3 million, bringing the total
over the last two and a half years to £2.8 million, with a further £0.3
million committed. Other work to implement action plans is, in the main,
being carried out by in-house personnel, the cost of which is not separately
identifiable.
5. The interim accounts are unaudited and do not constitute statutory
accounts. They have been prepared:
(a) under the historical cost convention, but include some past
revaluations
of properties and equipment; the book values of revalued assets have
been
retained under the transitional arrangements of FRS 15, and
(b) in accordance with applicable accounting standards, including FRS 15
'Tangible Fixed Assets' which has been adopted for the current year,
using the same accounting policies as set out in the Annual Report for
the year ended 3 April 1999.
There is no material difference between the result as disclosed in the
profit and loss account and the result on an unmodified historical cost
basis.
Following the acquisition of Jones & Shipman p.l.c. and the consequent
increase in the Group's sales of machine tools, a segmental analysis by
business activity has been included in the results for the half year
together with appropriate comparative information. With the exception of
this additional segmental analysis, the financial information for the full
year 1998/9 is taken from accounts filed with the Registrar of Companies
containing an unqualified audit report.
The Interim Statement was approved by the Board on 15 November 1999.
Latest directors dealings
- 20 minutes ago Helios Underwriting
- 41 minutes ago SSE
- 1 hour ago Judges Scientific
- 1 hour ago AB Dynamics
- 1 hour ago Henry Boot