Renold reports steady first-half performance

Industrial chain and power transmission specialist Renold reported a steady performance for the six months ended 30 September on Wednesday, with revenue up 0.6% at constant exchange rates to £123.4m.

The AIM-traded firm said reported revenue was slightly lower, down 1.5%, due to currency headwinds.

Both the chain and torque transmission divisions contributed to the revenue increase on a constant currency basis.

Adjusted operating profit rose 4% at constant exchange rates to £15.2m, translating to a 12.3% return on sales, up 30 basis points from 12% a year earlier.

Adjusted earnings per share climbed 10.5% to 4.2p, while net debt widened to £42.2m, from £24.9m in March, reflecting £23.3m in acquisition-related costs.

The acquisition of Mac Chain, a leading North American supplier in the conveyor and forestry chain markets, was a strategic highlight, expanding Renold’s footprint in the Americas, which now accounted for 47% of group revenue on a pro-forma basis.

Integration efforts were said to be progressing well, with the business performing in line with expectations.

Operationally, Renold said it was continuing to improve productivity, reduce costs, and invest in its supply chains, while also securing a notable £10.6m military contract with the Royal Canadian Navy.

Order intake rose 11.5% year-on-year, contributing to a robust order book of £80.8m, slightly down from £83.6m a year ago, but still historically strong.

Since the end of the period, Renold's manufacturing facility in Valencia was significantly impacted by flooding in the region, with net costs estimated at £1m.

Despite the setback, the board said it remained confident in meeting full-year market expectations, supported by resilient trading and ongoing strategic initiatives.

“Renold continues to deliver improving results in what have been variable and generally difficult markets,” said chief executive officer Robert Purcell.

“The Renold business with its diversity of customers, geography, markets and applications has shown its strength in a period of considerable economic upheaval.

“Our STEP2 strategy is being consistently executed and is delivering good results.”

Purcell said that in the first half, the company has made further progress with its inorganic growth strategy through the acquisition of Mac Chain, which he described as “another excellent addition” that would enhance its market position in a number of sectors and geographies.

“Our strong cash generation means that we can accelerate the cadence of value enhancing bolt-on acquisitions.

“The floods in Valencia were devastating for the local communities and our factory was directly impacted.

“Our colleagues are all safe, and efforts are underway to restore business as usual, and they are doing a fantastic job despite operating in a very difficult environment.”

While there would be a short term operational impact, Robert Purcell said the company was coping with the challenges.

“Whilst we see no signs of the global economic conditions significantly improving in the second half, the resilience of the group gives the board confidence in delivering underlying full year results in line with market expectations.”

At 0903 GMT, shares in Renold were down 6.3% at 50.41p.

Reporting by Josh White for Sharecast.com.