TIDMRNO
RNS Number : 7158F
Renold PLC
12 July 2023
Renold plc
Final results for the year ended 31 March 2023
("Renold", the "Company" or, together with its subsidiaries, the
"Group")
Record trading performance and order book....Significant revenue
and earnings growth....Successful integration of significant
strategic acquisition
Renold (AIM: RNO), a leading international supplier of
industrial chains and related power transmission products, is
pleased to announce its audited results for the year ended 31 March
2023.
Financial highlights
Change
(constant
GBPm 2023 2022 Change currency)(1)
-------------------------------- ------ ------ -------- --------------
Revenue 247.1 195.2 +26.6% +18.8%
-------------------------------- ------ ------ -------- --------------
Adjusted operating profit(2) 24.2 15.3 +58.2% +46.4%
-------------------------------- ------ ------ -------- --------------
Return on sales(2) 9.8% 7.8% +200bps +190bps
-------------------------------- ------ ------ -------- --------------
Adjusted profit before tax(2) 18.6 11.5 +61.7%
-------------------------------- ------ ------ -------- --------------
Net debt(3) 29.8 13.8
-------------------------------- ------ ------ -------- --------------
Adjusted earnings per share(2) 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 GBP 247.1 m ( 18.8 % at constant exchange rates)
(2022: GBP195.2m)
-- Adjusted operating profit of GBP 24.2 m (2022: GBP 15.3 m), up 58.2
%; return on sales 9.8 %, up 200b ps
-- Reported operating profit up 41.4 % to GBP22.9m (2022: GBP16.2m)
-- Net debt GBP 29.8 m, GBP 16.0 m increase in the year, facilitating
successful YUK acquisition; ratio to adjusted EBITDA 0.8 x (31 March
2022: 0.5x)
-- Adjusted EPS up 51.2 % to 6.5 p (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 GBP 257.5 m (2022: GBP223.9m), up 15.0 %
-- Closing order book GBP 99.5 m, up 18.3 % against 31 March 2022
-- Significant GBP 8.9 m long-term military contract win, following a
similar contract win of GBP 11.0m in FY22
-- Acquisition of Industrias YUK S.A. ("YUK") in August 2022, for EUR24m,
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, 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 renold@investor-focus.co.uk or call Tim Metcalfe of
IFC Advisory Limited (020 3934 6632) before 8.45am to be provided
with access details.
Retail investor presentation and Q&A session
Renold management will be hosting an online presentation and
Q&A session at 5.30pm BST today, 12 July 2023. This session is
open to all existing and prospective shareholders. Those who wish
to attend should register via the following link and they will be
provided with access details:
https://us02web.zoom.us/webinar/register/WN_eNb9SaJGRC-dlORaIZPwqg
Participants will have the opportunity to submit questions
during the session, but questions are welcomed in advance and may
be submitted to: renold@investor-focus.co.uk.
Reconciliation of reported and adjusted results
Revenue Operating Earnings per
profit share
------------- ------------ ---------------
2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm pence pence
------------------------------------- ------ ----- ----- ----- ------- ------
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
------------------------------------- ------ ----- ----- ----- ------- ------
ENQUIRIES:
Renold plc IFC Advisory Limited
Robert Purcell, Chief Executive Tim Metcalfe
Jim Haughey, Group Finance Director Graham Herring
renold@investor-focus.co.uk
0161 498 4500 020 3934 6630
Nominated Adviser and Joint Broker Joint Broker
Peel Hunt LLP F innCap Limited
Mike Bell Ed Frisby (Corporate Finance)
Ed Allsopp Andrew Burdis / Harriet Ward
(ECM)
020 7418 8900 020 7220 0500
Cautionary statement regarding forward-looking statements
Some of the information in this document may contain projections
or other forward-looking statements regarding future events or the
future financial performance of Renold plc and its subsidiaries
(the Group). You can identify forward-looking statements by terms
such as "expect", "believe", "anticipate", "estimate", "intend",
"will", "could", "may" or "might", the negative of such terms or
other similar expressions. Renold plc (the Company) wishes to
caution you that these statements are only predictions and that
actual events or results may differ materially. The Company does
not intend to update these statements to reflect events and
circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events. Many factors could cause the
actual results to differ materially from those contained in
projections or forward-looking statements of the Group, including,
among others, general economic conditions, the competitive
environment as well as many other risks specifically related to the
Group and its operations. Past performance of the Group cannot be
relied on as a guide to future performance.
NOTES FOR EDITORS
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 reputation for quality that is recognised worldwide. Its products
are used in a wide variety of industries including manufacturing,
transportation, energy, metals and mining.
Further information about Renold can be found on our website at:
www.renold.com
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 GBP247.1m
(2022: GBP195.2m), and adjusted operating profit improved by 58.2%
to GBP24.2m (2022: GBP15.3m).
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 GBP257.5m was 15.0% ahead
of the equivalent prior year period, and 16.8% ahead excluding the
previously announced GBP8.9m long-term military contracts (2022:
GBP11.0m), with YUK contributing GBP10.5m or 4.5% to the increase.
The order book at 31 March 2023 of GBP99.5m was 18.3% ahead of the
prior year figure.
Net debt increased during the period to GBP29.8m (31 March 2022:
GBP13.8m) as the Group invested EUR20.0m 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 EUR24m, 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 GBP257.5m, 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 GBP8.9m long-term
military contract, and the GBP11.0m 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 GBP10.5m (or 4.5%)
of Group order intake. The resultant year end order book of
GBP99.5m gives the Group a strong foundation upon which to build in
the new financial year (31 March 2022: GBP84.1m).
The growth in Group revenue to GBP247.1m 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 GBP70.0m were
particularly strong and were GBP17.0m (32.1%) ahead of the
comparable quarter last year, with North America especially
delivering a particularly strong performance.
Group adjusted operating profit(1) at GBP24.2m (2022: GBP15.3m)
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
gearing (2) 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 GBP22.9m (2022:
GBP16.2m).
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 GBP29.8m (31 March 2022:
GBP13.8m), with the increase attributable to the GBP17.8m 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 GBP1.8m and in the second half of
the year by GBP4.2m. 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 GBP8.9m 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 GBP70.0m 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 GBP4.2m.
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 GBP202.4m; 19.3% at
constant exchange rates. In August 2022 the Group acquired YUK and
during the period of ownership YUK contributed turnover of
GBP10.5m, 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 gearing(1) 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 GBP27.2m
(2022: GBP18.9m), GBP8.3m higher than the prior year level.
2023 2022
GBPm GBPm
----------------------------------------------------- ------ -----
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
GBP60.9m (2022: GBP53.9m), 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 GBP92.3m was a record high, exceeding the GBP68.0m
record achieved in the previous financial year by 35.7%. Turnover
at GBP85.5m 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 i nitiated 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 GBP48.8m were GBP8.4m 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 GBP8.9m 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 GBP5.1m 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 2022
GBPm GBPm
----------------------------------------------------- ----- -----
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 GBP53.3m (2022:
GBP52.1m), a reduction of 3.2% at constant exchange rates.
Excluding the impact of the GBP8.9m long-term military contract,
and GBP11.0m 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
GBP0.8m, 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 GBP8.4m 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
Finance Director's review
Renold delivered a record performance during the year, with
Group revenue increasing by 26.6% to GBP247.1m. The business
produced an adjusted operating margin of 9.8% (2022: 7.8%) and,
following the acquisition of YUK in August 2022 for initial cash
consideration of EUR20.0m, achieved a significant reduction in net
debt of GBP4.2m during the second half to end the year to GBP29.8m
(31 March 2022: GBP13.8m).
Orders, revenue AND OPERATING PROFIT
2023 2022
------------------------------ ------------------------------
Order Operating Order Operating
intake Revenue profit intake Revenue profit
-------------------------------
Reconciliation of reported
to adjusted results GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- -------- ---------- -------- -------- ----------
Reported 257.5 247.1 22.9 223.9 195.2 16.2
US PPP loan forgiveness - - - - - (1.7)
New lease arrangements
on sublet properties - - - - - 0.7
Amortisation of acquired
intangible assets - - 0.7 - - 0.1
Acquisition costs - - 0.6 - - -
Adjusted 257.5 247.1 24.2 223.9 195.2 15.3
Impact of foreign exchange (16.1) (15.3) (1.8) - - -
------------------------------- -------- -------- ---------- -------- -------- ----------
Adjusted at constant exchange
rates 241.4 231.8 22.4 223.9 195.2 15.3
------------------------------- -------- -------- ---------- -------- -------- ----------
Group order intake for the year increased by 15.0% to GBP257.5m
(2022: GBP223.9m), or 7.8% at constant exchange rates, and included
an GBP8.9m long-term military contract win, following a similar
contract win of GBP11.0m in FY22.
Group revenue increased by GBP51.9m (26.6%) to GBP247.1m, or
GBP36.6m (18.8%) at constant exchange rates. Activity steadily
increased throughout the year as manufacturing facilities ramped up
production in response to the increased order intake levels. The
activity in quarter four was some 32% higher than prior year as the
Group's US operations shipped some significant orders which repeat
on a four-year cycle, and better lead times on the supply of Group
product from China resulted in a reduction in overdue order
backlog. Both divisions saw an increase in turnover, with the Chain
division recording an increase at constant exchange rates of 19.3%,
while the Torque Transmission division, which is a larger order and
longer cycle business, increased by 13.9%.
The Group generated an adjusted operating profit for the year of
GBP24.2m (2022: GBP15.3m), excluding the impact of adjusting items
as detailed below. Reported operating profit for the year was
GBP22.9m (2022: GBP16.2m). Operating profit margin, calculated on a
statutory basis, was 9.3% (2022: 8.3%) and return on sales
increased by 200 bps during the year to 9.8% (2022: 7.8%).
Adjusting items
Adjusting items for the year ended 31 March 2023 comprise
acquisition-related intangible asset amortisation of GBP0.7m (2022:
GBP0.1m), acquisition costs of GBP0.6m (2022: nil) and
re-evaluation of prior year tax positions across the Group of
GBP0.4m (2022: nil). Prior year adjusting items, which have not
been repeated in the current year, include a GBP1.7m gain from the
forgiveness of US Covid-related loans and a GBP0.7m charge from new
lease arrangements at previously closed sites, including
adjustments relating to the sublease of the closed Bredbury
facility and the termination of a lease at a site in Rainham,
Essex.
Foreign exchange rates
The majority of Renold's business is denominated in US Dollars
and Euro's. The impact of the strengthening of these currencies
against Sterling was to benefit Group revenues, profits and net
assets in FY23 when translated back into Sterling in the
consolidated financial statements.
Foreign exchange rates have remained volatile, with a 3%
weakening of Sterling against the Euro and 6% weakening of Sterling
against the US Dollar between March 2022 and March 2023.
Phasing of movements over the current and prior year mean the
weighted average exchange rate used to translate the Euro and US
Dollar varies to the movement in the closing rates. The weighted
average exchange rates were 1.20 for the US Dollar and 1.15 for the
Euro for the year ended 31 March 2023 (2022: 1.36 and 1.17
respectively).
31 Mar 31 Mar 31 Mar 2023
22 23 23 2022 Average Average 2023
FX rates (% of Group sales) FX rate FX rate Var % FX rate FX rate Var %
---------------------------- -------- -------- ------ ------------ -------- ------
GBP/Euro (30%) 1.18 1.14 -3% 1.17 1.15 -2%
GBP/US$ (37%) 1.32 1.24 -6% 1.36 1.20 -12%
GBP/C$ (5%) 1.64 1.67 2% 1.71 1.60 -6%
GBP/A$ (5%) 1.75 1.85 6% 1.84 1.77 -4%
---------------------------- -------- -------- ------ ------------ -------- ------
If the year-end exchange rates had applied throughout the year,
there would be an estimated increase of GBP3.4m to revenue and
GBP0.4m to operating profit.
FinancE costs
Total finance costs in the year were GBP5.6m (2022:
GBP3.8m).
Total loan finance costs include external interest on bank loans
and overdrafts of GBP2.3m (2022: GBP1.1m), amortisation of
arrangement fees and costs of refinancing and the transition of
banking arrangements from LIBOR to SONIA during FY22, of GBP0.3m
(2022: GBP0.3m), and GBP0.7m (2022: GBP0.5m) of interest expense on
lease liabilities.
The increase in interest payable on external bank loans and
overdrafts was driven by the acquisition of YUK for EUR24.0m during
August 2023 (cash of EUR20.0m paid in the year), together with the
impact of successive increases in the UK base rate during the
second half of the financial year.
The net IAS 19 finance charge, which is a non-cash item, was
GBP2.1m (2022: GBP1.8m).
Finance costs also include GBP0.2m (2022: GBP0.1m), resulting
from the unwind of discounts on the deferred build costs of the
Chinese factory.
During May 2023, the Group announced that it had reached
agreement with its banking syndicate for the extension of its core
banking facilities that were due to mature in March 2024, initially
for a three-year term to May 2026 but with an option to extend the
term for a further two years. The new GBP85.0m multi-currency
revolving credit facility is increased from the previous level of
GBP61.5m. There is an additional GBP20.0m accordion option which
will allow the Company to access additional funding, subject to
further bank/credit approval, in support of its acquisition
programme; a key part of the Group's STEP2 strategy. Within the
principal facility term the net debt/EBITDA covenant is improved
from the previous level of 2.5x EBITDA to 3.0x EBITDA, with other
key terms remaining unchanged.
Profit before tax
Profit before tax was GBP17.3m (2022: GBP12.4m).
Taxation
The total tax charge in the year of GBP5.5m (2022: GBP2.2m) is
made up of a current tax charge of GBP4.2m (2022: GBP2.0m) and a
deferred tax charge of GBP1.3m (2022: GBP0.2m). The increase in the
current tax charge is attributable to an increase in Group profit
generated in higher tax jurisdictions together with various
adjustments to build the Group provision held for uncertain tax
matters which reflects a best estimate of amounts to be paid in
future tax years. For further details see Note 4.
The increase in the deferred tax charge is primarily
attributable to accelerated tax loss utilisation and tax
depreciation in excess of book in overseas jurisdictions.
During the year we have re-evaluated various tax positions
across the Group for transfer pricing and deferred tax, relating to
earlier years, and details of which can be found in Note 4.
The effective tax rate for the year was 32% (2022: 18%), with
the increase attributable to the items set out above, coupled with
the impact of non-recurring items which reduce profit but are
non-taxable items. Excluding the non-recurring items, the effective
tax rate on adjusted earnings was 27% (2022: 19%).
EARNINGS PER SHARE
Profit after tax of GBP11.8m was achieved for the financial year
ended 31 March 2023 (2022: GBP10.2m). Adjusted earnings per share
were 6.5p (2022: 4.3p), which excludes one-off items in the year
noted above. Basic earnings per share were 5.7p compared to 4.7p
for the year ended 31 March 2022.
2023 2022
GBPm GBPm
----------------------------------------------- ------ ------
Adjusted profit after taxation 13.5 9.3
Effect of adjusting items, after tax:
- US PPP loan forgiveness - 1.7
- New lease arrangements on sublet properties - (0.7)
- Amortisation of acquired intangible
assets (0.7) (0.1)
- Acquisition costs (0.6) -
- Tax adjustments relating to prior
year (0.4) -
Profit after taxation 11.8 10.2
----------------------------------------------- ------ ------
Basic adjusted earnings per share 6.5p 4.3p
Basic earnings per share 5.7p 4.7p
----------------------------------------------- ------ ------
Balance sheet
Net assets at 31 March 2023 were GBP39.1m (31 March 2022:
GBP7.0m). A net profit of GBP11.8m was delivered for the year
which, together with the impact of the favourable valuation of the
Group's pension liabilities and the retranslation of overseas
operations, resulted in an increase in net assets of GBP32.1m.
The pension deficit, on an IAS 19 basis, decreased to GBP62.2m
(31 March 2022: GBP87.1m). The net liability for pension benefit
obligations was GBP57.1m (2022: GBP76.1m) after allowing for a net
deferred tax asset of GBP5.1m (31 March 2022: GBP11.0m), largely
reflecting the significantly increased yields on corporate bonds
during the year which are used to discount future pension
liabilities to present values . At the last triennial pension
valuation, at 31 March 2022, the technical provisions deficit of
the UK scheme, which is how the trustees and regulator evaluate the
scheme, was only GBP5.9m; an improvement between triennial
valuations of GBP3.2m. This compares to the IAS 19 deficit for the
UK pension fund at the date of the triennial valuation of GBP64.1m.
The difference primarily represents the valuation of the capital
asset reserve (CAR), currently GBP44.0m, being the discounted value
of guaranteed future cash contributions to the scheme for a fixed
period of 25 years commencing in 2013.
Overseas schemes now account for GBP18.0m (28.9%) of the IAS 19
pension deficits and GBP17.7m of this is in respect of the German
scheme, which is unfunded, with payments made as pensions fall
due.
During the prior year, and as part of its long-term financial
planning, the Company reorganised its balance sheet and reserves
through the cancellation of the entire amount of its share premium
account and capital redemption reserve. The share premium account
and capital redemption reserve are non-distributable reserves and,
accordingly, the purposes for which they can be used are
restricted. The reduction of capital creates sufficient
distributable reserves to provide the Board with greater
flexibility with regard to how it manages its capital resources. An
order of the High Court confirming the capital reduction became
effective on 27 May 2021, increasing distributable reserves by
GBP45.5m in FY22.
CASH FLOW AND NET DEBT
FY23 FY22
GBPm GBPm
------------------------------------------------ ------- ------------
Adjusted operating profit 24.2 15.3
Add back depreciation and amortisation 10.4 9.4
Add back loss on disposal of property, 0.3 -
plant and equipment
Add back share-based payments 1.3 1.1
------------------------------------------------ ------- ------------
Adjusted EBITDA(1) 36.2 25.8
Movement in working capital (10.5) (0.2)
Net capital expenditure (8.4) (5.1)
------------------------------------------------ ------- ------------
Operating cash flow(1) 17.3 20.5
Income taxes (2.7) (1.7)
Pensions cash costs (5.8) (4.8)
Repayment of principal under lease liabilities (2.9) (4.2)
Finance costs paid (3.3) (1.8)
Consideration paid for acquisition (18.0) (0.5)
Own shares purchased - (4.9)
US PPP loan forgiveness - 1.7
Other movements (0.6) 0.3
------------------------------------------------ ------- ------------
Change in net debt (16.0) 4.6
------------------------------------------------ ------- ------------
Closing net debt(1) 29.8 13.8
------------------------------------------------ ------- ------------
(1) Adjusted EBITDA and operating cash flow are alternative
performance measures as defined in Note 21.
In the financial year the Group invested GBP18.0m in
acquisitions, primarily YUK. When the acquisition consideration is
excluded, the Group generated GBP2.0m of net cash during the year,
of which a reduction of GBP4.2m occurred in the second half of the
financial year. Closing net debt is GBP29.8m (31 March 2022:
GBP13.8m). Net debt at 31 March 2023 comprised cash and cash
equivalents of GBP19.3m (31 March 2022: GBP10.5m) and borrowings of
GBP49.1m (31 March 2022: GBP24.3m).
Within the balance sheet working capital movement, inventory
levels increased by GBP4.5m (2022: GBP9.5m). The increase was
attributable to the Group replenishing stock levels to ensure
increased levels of customer service despite supply chain
difficulties. Receivables also increased by GBP2.8m (2022:
GBP4.5m), in line with the increased level of turnover. Careful
overall working capital management mitigated these increases.
Net capital expenditure of GBP8.4m (2022: GBP5.1m) was increased
during the financial year, as the Group's strategic investment
programmes gathered pace. The Group sees investments in support of
our strategy, aimed at improving heat treatment facilities,
broadening manufacturing capabilities, and product assembly
automation, especially in our Indian and Chinese facilities,
gathering pace in the coming year. Additionally, the installation
of the standardised Group IT system continued as planned.
In August 2022 the Group acquired the entire share capital of
YUK, a conveyor chain manufacturer based in Valencia, Spain. The
total consideration was EUR24.0m, of which EUR4.0m is deferred and
to be paid in two tranches of EUR2.0m each, payable 12 and 24
months following completion of the acquisition. Professional fees
associated with the acquisition amounted to GBP0.6m. During the
prior financial year, the Group acquired the conveyor chain
business of Brooks Ltd, based in Manchester, UK, for a total
consideration of GBP0.7m, of which GBP0.5m was paid during FY22,
and the remaining GBP0.2m paid in the financial year.
Pension deficit recovery plan cash costs of GBP5.8m were higher
than the prior year equivalent of GBP4.8m. The increase in
contributions is a result of the agreement reached with the UK
Pension Trustee in April 2020, whereby GBP2.8m of FY21
contributions due to be paid to the UK scheme were deferred in
light of the potential impact of the Covid-19 pandemic. The
deferred contributions are being repaid over the five-year period
which commenced on 1 April 2022. In addition, the Group took the
opportunity to close the Renold New Zealand pension scheme during
the year, which resulted in a one-off pension payment of GBP0.3m.
Going forward, the Group had previously agreed to increase pension
contributions to the UK pension scheme by GBP1.0m per annum once
Group adjusted operating profit exceeded GBP16.0m; additional
contributions to the UK pension scheme commenced from 1 April
2023.
Corporation tax cash paid was GBP2.7m (2022: GBP1.7m), and was
paid in accordance with normal payment on account rules in the
countries where the Group has operations.
Net cash flow from operating activities, shown in a statutory
format, was GBP16.7m (2022: GBP19.3m).
Debt facility and capital structure
During May 2023, the Group announced that it had reached
agreement with its banking syndicate for the extension of its core
banking facilities that were due to mature in March 2024 initially
for a three-year term, to May 2026, with an option to extend the
term for a further two years. The new, GBP85.0m multi-currency
revolving credit facility will be increased from the previous level
of GBP61.5m. Additionally, there is a GBP20.0m 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 principal facility term, the net debt/EBITDA
covenant, will be improved from the previous level of 2.5 times
EBITDA to 3.0 times EBITDA, with other key terms remaining
unchanged.
At 31 March 2023, the Group had unused credit facilities
totalling GBP17.3m (31 March 2022: GBP40.1m) and cash balances of
GBP19.3m (31 March 2022: GBP10.5m). Total Group credit facilities
amounted to GBP65.9m (31 March 2022: GBP64.2m), all of which were
committed. In May 2023, following the increase in facilities under
the new banking arrangements, total committed facilities were
GBP89.7m.
The Group has operated well within agreed covenant levels
throughout the year ended 31 March 2023 and expects to continue to
operate comfortably within covenant limits going forward.
The net debt/adjusted EBITDA ratio as at 31 March 2023 was 0.9x
(31 March 2022: 0.6x), calculated in accordance with the old
banking agreement. The adjusted EBITDA/interest cover as at 31
March 2023 was 13.7x (2022: 19.6x), again calculated in accordance
with the banking agreement.
Going concern
The 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.
Further information in relation to the Group's business
activities, together with the factors likely to affect its future
development, performance and financial position, liquidity, cash
balances and borrowing facilities is set out in the Chair's
statement, the Chief Executive's review, the Finance Director's
review and in the section on principal risks and uncertainties.
Additional details of the Group's cash balances and borrowings and
facility are included in Notes 13, 14 and 17.
The key covenants attached to the Group's multi-currency
revolving credit facility at year end relate to leverage, net debt
to EBITDA, maximum 2.5x, and, following agreement of new borrowing
covenants by the Group in May 2023, net debt to EBITDA, maximum
3.0x, and interest cover (minimum 4.0x). The Group regularly
monitors its financial position to ensure that it remains within
the terms of its banking covenants, and has remained within those
covenants for the whole of the financial year.
Given the current level of macroeconomic uncertainty stemming
from inflation, global supply chain difficulties and geopolitical
risks, and being also mindful of the risks discussed in the section
on principal risks and uncertainties, the Group has performed
financial modelling of future cash flows. The Board has reviewed
the cash flow forecasts which cover a period of 12 months from the
approval of the 2023 Annual Report, and which reflect forecast
changes in revenue across the Group's business units. A reverse
stress test has been performed on the forecasts to determine the
extent of a downturn which would result in a breach of covenants.
Revenue would have to reduce by approximately 28% over the period
under review for the Group to be likely to breach the leverage
covenant under the terms of its borrowing facility. The reverse
stress test does not take into account further mitigating actions
which the Group would implement in the event of a severe and
extended revenue decline, such as reducing discretionary spend and
capital expenditure. This assessment indicates that the Group can
operate within the level of its current increased facilities, as
set out above, without the need to obtain any new facilities for a
period of not less than 12 months from the date of this report.
Following this assessment, the Board of Directors are satisfied
that the Group has sufficient resources to continue in operation
for a period of not less than 12 months from the date of this
report. Accordingly, they continue to adopt the going concern basis
in relation to this conclusion and preparing the consolidated
financial statements. There are no key sensitivities identified in
relation to this conclusion.
Treasury and financial instruments
The Group's treasury policy, approved by the Board, is to manage
its funding requirements and treasury risks without taking any
speculative risks. Treasury and financing matters are assessed
further in the section on principal risks and uncertainties.
To manage foreign currency exchange impact on the translation of
net investments, certain US Dollar denominated borrowings taken out
in the UK to finance US acquisitions are designated as a hedge of
the net investment in US subsidiaries. At 31 March 2023 this hedge
was fully effective. The carrying value of these borrowings at 31
March 2023 was GBP7.3m (31 March 2022: GBP6.8m).
At 31 March 2023, the Group had GBP0.5m (31 March 2022: GBP0.5m)
of its gross debt at fixed interest rates. Cash deposits are placed
short-term with banks where security and liquidity are the primary
objectives. The Group has no significant concentrations of credit
risk, with sales made to a wide spread of customers, industries and
geographies. Policies are in place to ensure that credit risk on
individual customers is kept to a minimum.
Pension assets and liabilities
The Group has a mix of UK (83% of gross liabilities) and
overseas (17% of gross liabilities) defined benefit pension
obligations as shown below.
2023 2022
---------------------------- ----------------------------
Assets Liabilities Deficit Assets Liabilities Deficit
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------ ----------- ------- ------ ----------- -------
UK scheme 101.6 (145.8) (44.2) 134.4 (198.5) (64.1)
Overseas schemes 12.9 (30.9) (18.0) 15.4 (38.4) (23.0)
------------------- ------ ----------- ------- ------ ----------- -------
114.5 (176.7) (62.2) 149.8 (236.9) (87.1)
Deferred tax asset 5.1 11.0
------------------- ------ ----------- ------- ------ ----------- -------
Net deficit (57.1) (76.1)
------------------- ------ ----------- ------- ------ ----------- -------
The Group's retirement benefit obligations decreased from
GBP87.1m (GBP76.1m net of deferred tax) at 31 March 2022 to
GBP62.2m (GBP57.1m net of deferred tax) at 31 March 2023. The
largest element of the decrease relates to the UK scheme where the
deficit decreased from GBP64.1m to GBP44.2m primarily due to an
increase in AA corporate bond yields, which reduces the present
value of gross liabilities under IAS 19. This was partially offset
by the impact of an increase in the UK inflation assumption . For
the purposes of determining scheme pension payments, inflation is
capped for the UK and the US schemes. The deficit of the overseas
schemes decreased by GBP5.0m to GBP18.0m, reflecting increases in
European interest rates, and changes in assumptions for discount
and inflation rates. All defined benefit schemes, with the
exception of one scheme for blue-collar workers in the US, are
closed for future accrual.
UK funded scheme
The deficit of the UK scheme decreased in the year to GBP44.2m
(31 March 2022: GBP64.1m), reflecting a number of changes in
assumptions and factors.
The decrease in gross liabilities of GBP52.7m arose primarily
from a combination of an increase in the rate used to discount the
scheme's liabilities (discount rate of 4.85% compared with 2.75% in
the prior year) and a reduction in the long-term inflation
assumption (CPI of 2.85% compared with 3.25% in the prior year).
Partially offsetting the reduction in liabilities was a GBP32.8m
decrease in the value of the scheme's assets, which was primarily
due to a reduction in value of the Scheme's investment in LDI.
The latest triennial actuarial valuation of the UK scheme, with
an effective date of 5 April 2022, was agreed in April 2023 and
identified a deficit of GBP5.9m; this compares favourably to the
GBP9.1m deficit recorded at 5 April 2019. This is significantly
lower than the IAS 19 deficit, largely as the actuarial valuation
places a value on the Group's guaranteed future cash payments to
the scheme under the central asset reserve structure established in
June 2013. The Group had previously agreed to increase pension
contributions to the UK pension scheme by GBP1.0m per annum, once
Group adjusted operating profits exceeded GBP16.0m, additional
contributions to the UK pension scheme commenced from 1 April 2023.
It is expected that the actuarial valuation deficit of GBP5.9m can
be recovered from these additional cash contributions, together
with asset outperformance, above the prudent levels assumed in the
valuation, over the remaining life of the scheme.
Contributions in the year ended 31 March 2023 were GBP4.1m
(2022: GBP3.4m). The increase in contributions compared to the
prior year follows the agreement reached with the Trustee in April
2020 such that GBP2.8m of the prior year contributions due to the
UK scheme were deferred in light of the potential impact of the
Covid-19 pandemic. The deferred contributions are being repaid over
the five-year period which commenced on 1 April 2022. The
underlying level of contributions to the UK scheme increases
annually by RPI plus 1.5% (capped at 5%).
The next triennial valuation date will be as at 5 April
2025.
Overseas schemes
The largest element of the overseas schemes is the German
unfunded scheme, with a total liability and deficit of GBP17.7m (31
March 2022: GBP22.4m). Other overseas funded schemes comprise a
number of smaller arrangements around the world, with a combined
deficit of GBP0.3m (31 March 2022: GBP0.6m). The combined deficits
of all the overseas schemes decreased by GBP5.0m. During April
2022, the Board's decision to close the New Zealand defined benefit
pension scheme was enacted by the scheme trustees.
For overseas pension schemes, the contributions in the year were
GBP1.7m (2022: GBP1.4m).
JIM HAUGHEY
GROUP Finance Director
12 July 2023
Principal Risks and Uncertainties
We take steps at both a Group and subsidiary level to understand
and evaluate potential risks and uncertainties which could have a
material impact on our performance in order to mitigate them. We
have promoted and encouraged a risk aware culture throughout the
Group. Details of the principal risks and uncertainties are
summarised below and set out in more detail in the Annual
Report.
The Board continues to monitor potential emerging or evolving
risks on an ongoing basis. A new principal risk has been added this
year; relating to product liability. This addition reflects the
result of 'bottom up' site risk register reviews, output of the
Executive Risk Management and Monitoring Committee ("ERMMC") where
compliance with contractual sales terms is regularly flagged as a
key control, horizon scanning which identified our increasing
success of obtaining large multi-year supply contracts, and
benchmarking against our peer group. Whilst product liability has
been added as a principal risk, we believe that we have sufficient
and robust controls in place such that this risk is mitigated to an
acceptable level.
In addition, we have also combined two risks that were
previously reported separately: strategy execution and corporate
transactions/business development. This change reflects the Groups
overall strategy, of which a core element focuses on acquisitions,
and also that major restructuring exercises completed in previous
years have come to an end.
The effect of climate change is an area that has been subject to
additional focus during the year, across all levels of the
business. Renold recognises the importance of considering climate
risks and opportunities in our business decisions, and we have
undertaken specific projects over the last 12 months in order to
better and more formally understand the extent to which climate
change impacts our business. We will continue to develop these
processes over time, in order to continually aim to ensure the
completeness of our risk management processes and to identify those
topics that are most significant for our operations, such that we
prioritise our risk mitigation efforts accordingly.
Climate change truly represents both risk and opportunity for
the Group. For example, continued environmental activism around
climate change has started to influence some consumers to reduce
their carbon footprints, and there is the potential that this could
start to impact some of the sectors we operate in; however, as
Renold supports customers in achieving their own sustainability
goals through the development and supply of high specification,
durable, environmentally responsible products which ultimately
minimise the impact on the environment, this is also an opportunity
for us.
We do not believe that climate change is a stand-alone principal
risk, and instead believe that it should be assessed in an
integrated way within our existing risk management processes. We
recognise that the effect of climate change will have an impact, to
a greater or lesser extent, across all of our existing principal
risks; however, we do not believe this to have a material impact on
our principal risk assessment at this time. As with all risks, we
will continue to monitor the evolving situation over time.
1 Macroeconomic and political volatility
----------------------------------------------------------------------------------------------------------------------
DETAILED RISK POTENTIAL IMPACT
Material changes in prevailing macroeconomic or Potential touch points include:
geopolitical conditions could have a detrimental * Commodity prices which have a negative impact on
impact on business performance. We operate in 18 countries demand in the whole supply chain.
and sell to customers in over 100,
therefore we are necessarily exposed to economic and
geopolitical risks in these territories. * Changes to tariffs and import duties which can
distort customer buying decisions.
* Foreign exchange volatility can impact customer
buying patterns, leading to lower demand or the need
to rapidly switch supply chains.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* Our diversified geographic footprint inherently
exposes us to more countries where risks arise but
conversely provides some degree of resilience and
flexibility.
* Actions to lower the Group's overall break-even point
also serve to reduce the impact of any global
economic slowdown.
* A focus on 'predict and respond', e.g. sales
forecasting and raw material price monitoring,
leading to operational change such as sales price
increases or cost reductions.
* Active monitoring of stock levels and customers in
relevant geographies to identify any issues early.
* We have a good level of liquidity, with access to
sufficient multi-currency debt facilities.
The FY23 risk trend is unchanged.
Renold has demonstrated the ability to manage costs in response to revenue shocks, protecting
profitability and returns.
Rising interest rates and inflation increase the cost of borrowing, however, this is offset
with some stabilisation of the high-cost inflation previously experienced on raw material,
freight and energy prices.
Growth in the global economy, following stabilisation of the Covid-19 pandemic, presents opportunity
though this growth may not continue.
Greater geopolitical risk with the war in Ukraine, and previous supply chain disruption during
the pandemic, has resulted in customers shortening their supply chains and moving supply closer
to their main operating locations. Renold benefits from manufacturing locations across several
continents, which are often in close proximity to our customers' locations.
----------------------------------------------------------------------------------------------------------------------
2 Strategy execution
DETAILED RISK POTENTIAL IMPACT
The Group's ongoing strategy requires the co-ordinated * While these projects are designed to deliver targeted
delivery of a number of complex projects. benefits, they have the potential to negatively
Part of the Group's strategy is to grow through selective impact the Group's operations if not appropriately
acquisitions. Performance of acquired managed.
businesses may not reach expectations, impacting Group
profitability and cash flows. Similarly,
poorly managed asset sales may result in * When completing acquisitions, value can be lost
under-achievement of value. through over-paying, missing key issues in due
diligence or potential value leakage through poor
contract negotiation. Value can also be lost through
a poorly planned or executed integration phase, or
failure to deliver anticipated benefits during
'business as usual'.
--------------------------------------------------------- -----------------------------------------------------------
MITIGATION AND CONTROL
* The Strategic Plan has been developed to deliver a
sustained improvement in performance and to make that
performance more stable and less exposed to revenue
volatility.
* The Board reviews progress against the different
strategic projects in each of its meetings. This is
based on a regularly updated report from the CEO,
which groups the individual projects into themes
linked directly to our strategic objectives.
* Major projects are all managed in accordance with
best practice project management techniques.
* External advisers are utilised where special
expertise is required, where new capabilities are
required, or where insufficient capacity is available
'in house'.
* Monitoring of specific acquisition targets: Business
acquisition process incorporating concept evaluation,
business case, indicative offer/heads of terms, due
diligence (covering a range of criteria), and
integration, planning, execution and post integration
appraisal which in turn feeds back to the business
acquisition process.
The FY23 risk trend remains stable.
Stable management team, with appropriate skills and experience, are in place to deliver the
well-defined Group Strategy. This is supported by a long- term credit facility which was renewed
in May 2023.
The acquisition of YUK in August 2022 has performed ahead of expectations. This acquisition,
coupled with the successful acquisition of the Brooks Conveyor Chain business in April 2021,
demonstrates our ability to manage risk associated with our acquisition strategy well.
----------------------------------------------------------------------------------------------------------------------
3 Product liability
DETAILED RISK POTENTIAL IMPACT
A failure in one of our products results in serious injury, death, * Non-compliance with quality standards
damage to property or non-compliance
with product regulations.
The risk that products are not manufactured to contractually agreed * Financial loss
specification or additional
customers' requirements.
* Reputational damage
------------------------------------------------------------------------ --------------------------------------------
MITIGATION AND CONTROL
* Standard Terms and Conditions of Sale are utilised,
which are appropriately reviewed by in house Legal
Counsel and external advisers as appropriate. These
cap financial exposure and exclude consequential
losses.
* Non-standard Terms and Conditions of Sale must be
approved by senior executives in line with the Group
Authority Matrix, following thorough legal and
commercial review.
* Strict quality processes are adhered to, and our
manufacturing locations maintain industry-relevant
accreditations.
* Potential damages resulting from this risk are fully
or partially covered through the Group's various
insurance policies.
* Legal self-assessment checklists are completed by all
operating locations and are reviewed by in house
legal counsel, in order to identify any potential
non-standard terms and conditions.
Product Liability has been included in our principal risks during the year. This reflects
the output of our:
* 'Bottom up' site risk register reviews to identify
common themes.
* Output of the ERMMC review process; compliance with
contractual sales terms being frequently raised as a
key internal control.
* Horizon scanning, which identified our increasing
success of obtaining large multi-year supply
contracts which are conducted on non-standard terms
of sale.
* Benchmarking of risk against peer group.
Whilst the inherent impact and likelihood of this risk occurring would be high, we believe
that we have sufficient and robust controls in place, such that the risk is mitigated to an
acceptably low level.
----------------------------------------------------------------------------------------------------------------------
4 Health and safety in the workplace
DETAILED RISK POTENTIAL IMPACT
The risk of death or serious injury to employees or third Accidents caused by a lack of robust safety procedures
parties associated with Renold's could result in life-changing impacts
worldwide operations. for employees, visitors or contractors. This will always
We are proud of the progress we have made in recent years, be unacceptable. In addition, accidents
but recognise that we have more could result in civil or criminal liability for both the
to do. Group and the Directors and officers
of the Group and Group companies, leading to financial
loss or reputational damage.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* Group policies and a Group-wide management system
known as the Framework, to set control expectations,
with a support training programme for all managers.
* The Group operates a rolling programme of health and
safety audits to assess compliance against the
Framework. These audits have largely returned to 'in
person' site visits, following previous Covid-19
related travel restrictions.
* Continual hazard assessments to ensure awareness of
risks.
* Live tracking of accident rates and root cause
analysis via our Group reporting system, plus monthly
Board reporting focused on a range of KPIs.
* Specific initiatives include the BAT (Be safe; Act
safe; Think safe) safety logo and the Annual Health
and Safety Awards Scheme to recognise success.
* Proactive identification and management of emerging
risks.
The FY23 risk trend is unchanged. No matter what mitigating actions are undertaken, there
remains a risk of death or serious injury. We therefore continue to assess the risk as the
highest possible impact, but through the mitigation actions seek to reduce the likelihood.
Significantly improving our health and safety performance continues to be our number one strategic
objective.
----------------------------------------------------------------------------------------------------------------------
5 Security and effective deployment and utilisation of information technology systems
DETAILED RISK POTENTIAL IMPACT
We seek to leverage the use of IT to achieve competitive * Interruption or failure of IT systems (including the
advantage. The Group continues to impact of a cyber-attack) would negatively impact or
implement a global ERP system to replace numerous legacy prevent some business activities from occurring. If
systems which inherently brings with the interruption was long lasting, significant damag
it the risks associated with a large-scale change e
programme. could be done to the business.
The threat from cyber-attacks, and therefore security of
our IT systems, is constantly evolving.
The frequency of attacks is increasing, and the nature of * It is essential that we are able to rely on the data
such attacks are becoming more sophisticated. derived from our business system to feed routine but
The risk to our Group, our supply chains and our customers fundamental business performance monitoring.
is ever present.
* An unsuccessful implementation of the global ERP
system has the potential to materially impact that
site's, and possibly the Group's, performance.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* Short-term maintain stability of existing hardware
and legacy software platforms.
* Governance and control arrangements operating over
the Group's ERP implementation programme.
* New ERP system is successfully implemented at several
locations.
* Use of specialist external consultants and
recruitment of experienced personnel.
* Phased implementation rather than 'big bang', along
with project assurance and 'lessons learned' reviews
to continuously improve the quality of successive
rollouts.
* Steering Committee in operation with cascading
project management disciplines.
* A range of preventative and detective controls to
manage the risk of a cyber-attack, including
technical solutions in addition to employee training
programmes.
* Regular system maintenance and upgrades, including
patching, to ensure known vulnerabilities are
protected.
The overall risk for FY23 is unchanged.
Whilst we recognise that cyber threat is ever increasing, we have continued to invest in additional
capability and controls designed to defend against such threats. There is a continued focus
on managing and reducing the impact of any potential attack.
We have also successfully removed another one of our legacy ERP systems during the year.
----------------------------------------------------------------------------------------------------------------------
6 Prolonged loss of a major manufacturing site
DETAILED RISK POTENTIAL IMPACT
A catastrophic loss of the use of all or a significant * In the short and long term, a related risk event
portion of a strategic production facility. could adversely affect the Group's ability to meet
The prolonged loss of certain larger plants has the the demands of its customers.
ability to impact the viability of the
Group. This could result from an accident, a strike by
employees, a significant disease outbreak, * Specifically, this could entail significant repair
major disruption to supply chains, fire, severe weather or costs or costs of alternative supply. A significant
other causes outside of management proportion of the Group's revenue is on relatively
control. short lead times and a break in our supply chain
could result in loss of revenue. All of this
translates into lower sales and profits and reduced
cash flow.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* Preventative maintenance programmes and new
investments to reduce risk of interruption of
manufacturing.
* A Group Fire Safety Policy mandating preventative,
detective and containment controls.
* Alternative manufacturing capacity exists for a
growing portion of the Group's product range, with
this manufacturing capability spread across
geographic territories.
* Inventory maintained to absorb and flatten out
shorter-term raw material supply and production
volatility risks.
* Comprehensive insurance policies to mitigate the
impact of a number of these risks, albeit subject to
carve-out of cover for specific risks (e.g. SARS and
related disease outbreak) and claim limits.
* Amendments to operational processes, whenever and
wherever required, to mitigate emerging risks and
country-specific requirements.
The risk trend for FY23 is unchanged, largely as a result of already being classified at maximum
risk levels.
We have continued to enhance the manufacturing capabilities at a number of our manufacturing
locations through investment in equipment and additional training during the year, with the
aim of reducing reliance on single geographical locations.
This is coupled with a Group-wide programme to continually maintain, develop and enhance our
business continuity plans, such that the impact of business interruption is minimised in the
event it occurs.
----------------------------------------------------------------------------------------------------------------------
7 People and change
DETAILED RISK POTENTIAL IMPACT
The Group's operations are dependent upon the ability to * Failure to retain, attract or motivate the required
attract and retain the right people calibre of employees will negatively impact business
with an appropriate range of skills and experience. performance.
Succession planning and the ability to swiftly replace
staff retiring or leaving is also critical.
* The delivery of the Strategic Plan and our strategic
goals may also be delayed.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* Competitive reward programmes, focused training and
development, and a talent retention programme.
* Ongoing reviews of succession plans based on business
needs.
* Performance management and personal development
programmes introduced alongside training initiatives.
* Management team strengthened with new capability from
external hires and internal promotions.
* The Renold Values, launched in 2015, continue to be
embedded and are linked to recruitment processes for
new employees.
The FY23 risk trend is reducing.
The employment market remains competitive, however, we continue to attract and retain high
calibre individuals.
Whilst industrial action across a range of sectors has been increasingly publicised during
the year, we have tried to maintain positive relationships with our employees and have, where
possible, worked in partnership to achieve mutually agreeable pay awards and working arrangements.
----------------------------------------------------------------------------------------------------------------------
8 Liquidity, foreign exchange and banking arrangements
DETAILED RISK POTENTIAL IMPACT
A lack of sufficient liquidity and flexibility in banking * Potentially cause under-investment and sub-optimal
arrangements could inhibit the Group's short-term decision making.
ability to invest for the future or, in extremes, restrict
day-to-day operations.
* Limiting investment could prevent efficiency savings
and reduce competitiveness.
* In an extreme situation, the Group's ability to
operate as a going concern could also be jeopardised
.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* The Group's primary banking facility was renewed in
May 2023, with long-term financing agreed to May 2026
and an option to extend the term for a further two
years. The new facility has increased to GBP85.0m
from GBP61.5m, and the key net debt/EBITDA covenant
was improved from 2.5x to 3.0x. The facility is fully
available given current levels of profitability and
we continue to maintain a positive relationship with
our banking providers.
* Rolling foreign exchange forward contracts covering
committed future cash flows.
The Group remained, with good headroom, within banking covenants throughout the year and retains
a strong cash position.
The routine renewal of our committed debt facilities was successfully completed in May 2023,
increasing both the amount of borrowing available and headroom on the net debt/EBITDA covenant.
As a result, the likelihood of this risk crystallising is lower and hence the FY23 risk trend
is reducing.
----------------------------------------------------------------------------------------------------------------------
9 Pensions deficit
DETAILED POTENTIAL IMPACT
RISK * Given the Group's cash needs to invest in the
The business, the pace of performance improvement could
principal be slowed if cash has to be diverted to the pension
pensions schemes.
risk is that
short-term
cash funding * The balance sheet pension deficit could act as a
requirements disincentive to potential investors and could reduce
of legacy the Group's ability to raise new equity or debt
pension financing, limiting the strategic options open to th
schemes e
diverts Group.
much-needed
investment
away from
the Group's
operations.
Secondly,
the size of
the reported
balance
sheet
deficit can
operate as a
disincentive
to
potential
investors or
other
stakeholders
, limiting
the Group's
ability to
raise
financing
on capital
markets.
------------ --------------------------------------------------------------------------------------------------------------------------------------------------------------
MITIGATION AND CONTROL
* We maintain a good relationship with pension
trustees.
* Specialist professional advice is obtained to help us
manage the associated liabilities and risks.
* T he major UK pension cash flows (over 50% of all
defined benefit pension cash costs) are stable, known
and defined under the 25-year asset-backed funding
scheme put in place during 2013. A further 25% of the
annual cash flows are pensions in paym ent in Germany
in a mature scheme that has passed its peak funding
requirement.
The size of the reported balance sheet deficit has considerably lowered in the year, whilst
cash contributions have remained known and stable. As such, the FY23 risk trend is reducing.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
10 Legal, financial and regulatory compliance
DETAILED RISK POTENTIAL IMPACT
The risk of censure, fine or business prohibition as a Failure by the Group or its representatives to abide by
result of any part of the Group failing applicable laws and regulations could
to comply with regulatory or legal obligations. result in:
Risks related to regulatory and legislative changes * Administrative, civil or criminal liability.
include the inability of the Group to
comply with current, changing or new requirements.
Many of the Group's business activities are subject to * Significant fines and penalties.
increasing regulation and enforcement
by relevant authorities.
* Suspension of the Group from trading.
* Reputational damage.
---------------------------------------------------------- ----------------------------------------------------------
MITIGATION AND CONTROL
* Communication and management of a clear compliance
culture.
* Risk assessments and ongoing compliance reviews at
least annually at all major locations.
* Published up-to-date policies and procedures with
clear guidance and training issued to all employees.
* Monitoring of compliance with nominated accountable
managers in each business unit.
* Financial control assurance and legal compliance is
obtained through internal audit and a control
self-assessment process.
* Self-certification from every operating region that
internal controls have been complied with and that
legal compliance has been maintained and is reviewed
on at least an annual basis. All units and functions
in the Group are subject to internal audit on a
regular risk-b ased cycle. Any non-compliance
reported is reviewed by the Audit Committee.
The FY23 risk trend is unchanged.
----------------------------------------------------------------------------------------------------------------------
Consolidated Income Statement
for the year ended 31 March 2023
2023 2022
Note GBPm GBPm
----------------------------------------- ----- -------- --------
Revenue 1 247.1 195.2
Operating costs 2 (224.2) (179.0)
----------------------------------------- ----- -------- --------
Operating profit 22.9 16.2
Finance costs 3 ( 5.6) (3.8)
----------------------------------------- ----- -------- --------
Profit before tax 17.3 12.4
Taxation 4 (5.5) (2.2)
----------------------------------------- ----- -------- --------
Profit for the financial year 11.8 10.2
Earnings per share 5
Basic earnings per share 5.7p 4.7p
Diluted earnings per share 5.1p 4.4p
----------------------------------------- ----- -------- --------
Basic adjusted earnings per share (1) 6.5p 4.3p
Diluted adjusted earnings per share (1) 5.9p 4.0p
----------------------------------------- ----- -------- --------
(1) Definitions of adjusted measures are provided in alternative
performance measures in Note 21.
All results are from continuing operations.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2023
2023 2022
GBPm GBPm
------------------------------------------------------------ ------ ------
Profit for the financial year 11. 8 10.2
Items that may be reclassified to the income statement
in subsequent years:
Exchange differences on translation of foreign operations 2.7 3.2
Loss on hedges of the net investment in foreign operations (0.8) (0.3)
Cash flow hedges:
Gain/(loss) arising on cash flow hedges during the
year 0.3 (0.5)
Less: Cumulative gain arising on cash flow hedges
reclassified to profit and loss 0.6 0.1
Income tax relating to items that may be reclassified
subsequently to profit or loss (0.2) 0.1
------------------------------------------------------------ ------ ------
2.6 2.6
Items not to be reclassified to the income statement
in subsequent years:
Remeasurement gains/(losses) on retirement benefit
obligations 22.2 12.3
Tax on remeasurement gains/losses on retirement benefit
obligations - excluding impact of statutory rate change (5.8) (3.1)
Effect of changes in statutory tax rate on deferred
tax assets - 2.3
------------------------------------------------------------
16.4 11.5
------------------------------------------------------------ ------ ------
Other comprehensive income for the year, net of tax 19.0 14.1
------------------------------------------------------------ ------ ------
Total comprehensive income for the year, net of tax 30.8 24.3
------------------------------------------------------------ ------ ------
Consolidated Balance Sheet
as at 31 March 2023
Restated(1)
2023 2022
Note GBPm GBPm
---------------------------------- ----- -------- ------------
ASSETS
Non-current assets
Goodwill 7 28.2 22.7
Intangible assets 8 10.9 5.1
Property, plant and equipment 9 56.8 49.3
Right-of-use assets 10 16.5 8.0
Deferred tax assets 11.8 17.9
124.2 103.0
---------------------------------- ----- -------- ------------
Current assets
Inventories 11 61.8 48.4
Trade and other receivables 12 43.5 35.7
Current tax 0.6 -
Derivative financial instruments 0.3 -
Cash and cash equivalents 13 19.3 10.5
125.5 94.6
---------------------------------- ----- -------- ------------
TOTAL ASSETS 249.7 197.6
---------------------------------- ----- -------- ------------
LIABILITIES
Current liabilities
Borrowings 14 (47.3) (1.0)
Trade and other payables 15 (57.2) (48.5)
Lease liabilities 10 (2.7) (2.8)
Current tax (6.6) (4.1)
Derivative financial instruments - (0.5)
Provisions 16 (0.9) (0.2)
(114.7) (57.1)
---------------------------------- ----- -------- ------------
NET CURRENT ASSETS 10.8 37.5
---------------------------------- ----- -------- ------------
Non-current liabilities
Borrowings 14 (1.3) (22.8)
Preference stock 14 (0.5) (0.5)
Trade and other payables 15 (2.5) (4.7)
Lease liabilities 10 (17.5) (9.2)
Deferred tax liabilities (7.8) (5.4)
Retirement benefit obligations (62.2) (87.1)
Provisions (4.1) (3.8)
(95.9) (133.5)
---------------------------------- ----- -------- ------------
TOTAL LIABILITIES (210.6) (190.6)
---------------------------------- ----- -------- ------------
NET ASSETS 39.1 7.0
---------------------------------- ----- -------- ------------
EQUITY
Issued share capital 11.3 11.3
Currency translation reserve 11.5 9.8
Other reserves (4.5) (5.4)
Retained earnings 20.8 (8.7)
---------------------------------- ----- -------- ------------
TOTAL SHAREHOLDERS' FUNDS 39.1 7.0
---------------------------------- ----- -------- ------------
(1) See Note 20 for details of prior period restatement
Approved by the Board on 12 July 2023 and signed on its behalf
by:
Robert Purcell Jim Haughey
CHIEF EXECUTIVE FINANCE DIRECTOR
Consolidated Statement of Changes in Equity
for the year ended 31 March 2023
Restated(1)
Share Restated(1) Currency Capital Total
Share premium Retained translation redemption Other shareholders'
capital account earnings reserve reserve reserves funds
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- --------- ------------ ------------- ------------ ---------- ---------------
At 31 March 2021 11.3 30.1 (77.0) 6.8 15.4 (0.1) (13.5)
Profit for the year - - 10.2 - - - 10.2
Other comprehensive
income/ (expense) - - 11.5 3.0 - (0.4) 14.1
------------------------ --------- --------- ------------ ------------- ------------ ---------- ---------------
Total comprehensive
income/ (expense)
for the year - - 21.7 3.0 - (0.4) 24.3
Own shares purchased - - - - - (4.9) (4.9)
Capital reorganisation - (30.1) 45.5 - (15.4) - -
Share based payments - - 1.1 - - - 1.1
------------------------ --------- --------- ------------ ------------- ------------ ---------- ---------------
At 31 March 2022 11.3 - (8.7) 9.8 - (5.4) 7.0
Profit for the year - - 11.8 - - - 11.8
Other comprehensive
income - - 16.4 1.7 - 0.9 19.0
Total comprehensive
income for the year - - 28.2 1.7 - 0.9 30.8
Share based payments - - 1.3 - - - 1.3
At 31 March 2023 11.3 - 20.8 11.5 - (4.5) 39.1
------------------------ --------- --------- ------------ ------------- ------------ ---------- ---------------
(1) See Note 20 for details of prior period restatement
Included in retained earnings is GBP2.7m (31 March 2022:
GBP1.9m) relating to a share option reserve .
The other reserves include Renold shares held by the Renold plc
Employee Benefit Trust. The Renold Employee Benefit Trust holds
Renold plc shares and satisfies awards made under various employee
incentive schemes when issuance of new shares is not
appropriate.
At 31 March 2023 16,888,938 (31 March 2022: 18,422,509) ordinary
shares of 5p each were held by the Renold Employee Benefit Trust
and, following recommendations by the employer, are provisionally
allocated to satisfy awards under employee incentive schemes. The
market value of these shares at 31 March 2023 was GBP4.3m (31 March
2022: GBP3.7m).
Consolidated Statement of Cash Flows
for the year ended 31 March 2023
2023 2022
Note GBPm GBPm
------------------------------------------------------ ----- ------- -------
Cash flows from operating activities 17
Cash generated from operations 19.4 21.0
Income taxes paid (2.7) (1.7)
Net cash flow from operating activities 16.7 19.3
------------------------------------------------------ ----- ------- -------
Cash flows used in investing activities
Proceeds from property disposals - 0.2
Purchase of property, plant and equipment (7.0) (4.1)
Purchase of intangible assets (1.4) (1.2)
Consideration paid for acquisitions net of cash
acquired 19 (14.5) (0.5)
Net cash flow used in investing activities (22.9) (5.6)
------------------------------------------------------ ----- ------- -------
Cash flows from financing activities
Repayment of principal under lease liabilities (2.9) (4.2)
Finance costs paid (3.0) (1.5)
Own shares purchased - (4.9)
Proceeds from borrowings 28.3 4.7
Repayment of borrowings (8.3) (16.0)
Net cash flow from/(used in) financing activities 14.1 (21.9)
------------------------------------------------------ ----- ------- -------
Net increase/(decrease) in cash and cash equivalents 7.9 (8.2)
Net cash and cash equivalents at beginning of
year 9.5 17.3
Effects of exchange rate changes 0.1 0.4
------------------------------------------------------ -------
Net cash and cash equivalents at end of year 13 17.5 9.5
------------------------------------------------------ ----- ------- -------
Accounting Policies
Basis of preparation
The financial information for the year ended 31 March 2023 and
the year ended 31 March 2022 does not constitute the Company's
statutory accounts for those years but is derived from those
accounts. Statutory accounts for the year ended 31 March 2022 have
been delivered to the Registrar of Companies. The auditor's report
on those accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2023 have
been authorised for issue and signed by the Board of Directors at
the time of this announcement. They are expected to be published on
or before 4 August 2022 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
Going concern
The 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.
Further information in relation to the Group's business
activities, together with the factors likely to affect its future
development, performance and financial position, liquidity, cash
balances and borrowing facilities is set out in the Strategic
Report section of the Annual Report. In addition, the financial
statements within the Annual Report include the Group's objectives,
policies and processes for managing its capital, its financial risk
management objectives, details of its financial instruments and
hedging activities and its exposure to foreign exchange, credit and
interest rate risk. Information relating to post balance sheet
events is disclosed in Note 18.
The key covenants attached to the Group's multi-currency
revolving credit facility relate to leverage (net debt to EBITDA,
maximum 2.5x) and interest cover (minimum 4.0x), which are measured
on a pre-IFRS 16 basis. The Group regularly monitors its financial
position to ensure that it remains within the terms of its banking
covenants. Following the acquisition of Industrias YUK S.A. ("YUK")
on 3 August 2022, the Group's net debt increased by GBP16.0m to
GBP29.8m (31 March 2022: GBP13.8m). The Group has accordingly
remained within the borrowing covenant levels throughout the year
ended 31 March 2023.
Given the current level of macroeconomic uncertainty stemming
from Covid-19, inflation, the global supply chain crisis and
geopolitical risks, and being also mindful of the risk matrix
disclosed in the section on principal risks and uncertainties, the
Group has performed financial modelling of future cash flows. The
Board has reviewed the cash flow forecasts, which cover a period of
12 months from the approval of the 2023 Annual Report, and which
reflect forecasted changes in revenue across the Group's business
units. A reverse stress test has been performed on the forecasts to
determine the extent of downturn which would result in a breach of
covenants. Revenue would have to reduce by 28% over the period
under review for the Group to breach the leverage covenant under
the terms of its borrowing facility. The reverse stress test does
not take into account further mitigating actions which the Group
would implement in the event of a severe and extended revenue
decline, such as reducing discretionary spend and capital
expenditure. This assessment indicates that the Group can operate
within the level of its current facilities, as set out above,
without the need to obtain any new facilities for a period of not
less than 12 months from the date of this report.
Following this assessment, the Board of Directors are satisfied
that the Group has sufficient resources to continue in operation
for a period of not less than 12 months from the date of this
report. Accordingly, they continue to adopt the going concern basis
in relation to this conclusion and preparing the Consolidated
Financial Statements. There are no key sensitivities identified in
relation to this conclusion.
Notes to the Consolidated Financial Statements
1. Segmental information
For management purposes, the Group is organised into two
operating segments according to the nature of their products and
services and these are considered by the Directors to be the
reportable operating segments of Renold plc as shown below:
-- The Chain segment manufactures and sells power transmission
and conveyor chain and also includes sales of torque transmission
products through Chain National Sales Companies (NSCs); and
-- The Torque Transmission segment manufactures and sells torque
transmission products, such as gearboxes and couplings.
No operating segments have been aggregated to form the above
reportable segments.
The Chief Operating Decision Maker (CODM) for the purposes of
IFRS 8 'Operating Segments' is considered to be the Board of
Directors of Renold plc. Management monitor the results of the
separate reportable operating segments based on operating profit
and loss which is measured consistently with operating profit and
loss in the consolidated financial statements. The same segmental
basis applies to decisions about resource allocation. Disclosure
has been included in respect of working capital as opposed to
operating assets of each segment as this is the measure reported to
the CODM on a regular basis. However, Group finance costs,
retirement benefit obligations and income taxes are managed on a
Group basis and therefore are not allocated to operating segments.
Transfer prices between operating segments are on an arm's length
basis in a manner similar to transactions with third parties.
Head office
Torque costs and
Chain (2) Transmission eliminations Consolidated
Year ended 31 March 2023 GBPm GBPm GBPm GBPm
------------------------------------- ---------- -------------- -------------- -------------
Revenue
External customer - transferred
at a point in time 201.5 43.4 - 244.9
External customer - transferred
over time - 2.2 - 2.2
Inter-segment(1) 0.9 3.2 (4.1) -
-------------------------------------
Total revenue 202.4 48.8 (4.1) 247.1
------------------------------------- ---------- -------------- -------------- -------------
Operating profit/(loss) 26.5 5.4 (9.0) 22.9
Finance costs (5.6)
-------------------------------------
Profit before tax 17.3
Taxation (5.5)
---------- -------------- -------------- -------------
Profit after tax 11.8
------------------------------------- ---------- -------------- -------------- -------------
Other disclosures
Working capital(3) 44.0 10.9 (6.8) 48.1
Capital expenditure(4) 5.6 2.2 1.2 9.0
Total depreciation and amortisation 6.9 1.6 2.6 11.1
------------------------------------- ---------- -------------- -------------- -------------
1. Segmental information (continued)
Head office
costs and
Chain(2) Torque Transmission eliminations Consolidated
Year ended 31 March 2022 GBPm GBPm GBPm GBPm
---------------------------------------- --------- -------------------- -------------- ----------------
Revenue
External customer - transferred
at a point in time 158.2 35.6 - 193.8
External customer - transferred
over time - 1.4 - 1.4
Inter-segment(1) 1.0 3.4 (4.4) -
----------------------------------------
Total revenue 159.2 40.4 (4.4) 195.2
---------------------------------------- --------- -------------------- -------------- ----------------
Operating profit/(loss) 20.5 4.1 (8.4) 16.2
Finance costs (3.8)
----------------------------------------
Profit before tax 12.4
Taxation (2.2)
Profit after tax 10.2
---------------------------------------- --------- -------------------- -------------- ----------------
Other disclosures
Working capital(3) 30.0 9.0 (3.4) 35.6
Capital expenditure(4) 3.4 2.0 0.9 6.3
Total depreciation and amortisation 6.2 1.9 1.4 9.5
---------------------------------------- --------- -------------------- -------------- ----------------
1 Inter-segment revenues are eliminated on consolidation.
2 Included in Chain external sales is GBP5.2m (2022: GBP4.2m) of Torque
Transmission product sold through the Chain NSCs, usually in countries
where Torque Transmission does not have its own presence.
3 The measure of segment assets reviewed by the CODM is total working
capital, defined as inventories and trade and other receivables, less
trade and other payables. Working capital is also measured as a ratio
of rolling annual sales.
4 Capital expenditure consists of additions to property, plant and equipment
and intangible assets.
In addition to statutory reporting, the Group reports certain
financial metrics on an adjusted basis (alternative performance
measures, APMs). Definitions of adjusted measures, and information
about the differences to statutory metrics are provided in Note 21.
Current year adjusting items include a GBP0.7m (2022: GBP0.1m) of
amortisation of acquired intangibles (Chain segment) and GBP0.6m
(2022: GBPnil) of acquisition costs.
Constant exchange rate results are current period results
retranslated using prior year exchange rates. A reconciliation is
provided below and in Note 21.
Future performance obligations
The transaction price allocated to performance obligations that
are unsatisfied or partially unsatisfied at 31 March 2023 is
GBP99.5m (2022: GBP84.1m). This mostly comprises of the obligation
to manufacture and supply standard Group products. The majority of
this revenue is recognised at a point in time.
An amount of GBP17.0m (2022: GBP11.7m) relates to revenue from a
small number of large customer contracts, for which revenue is
recognised over time in line with progress against performance
obligations. This revenue is expected to be recognised over the
next eight years (2022: over the next eight years).
Head office
Torque costs and
Chain Transmission eliminations Consolidated
Year ended 31 March 2023 GBPm GBPm GBPm GBPm
------------------------------------- ------- -------------- -------------- -------------
Revenue
External customer - transferred
at a point in time 201.5 43.4 - 244.9
External customer - transferred
over time - 2.2 - 2.2
Inter-segment 0.9 3.2 (4.1) -
Foreign exchange retranslation (12.5) (2.8) - (15.3)
Total revenue at constant exchange
rates 189.9 46.0 (4.1) 231.8
------------------------------------- ------- -------------- -------------- -------------
Operating profit/(loss) 26.5 5.4 (9.0) 22.9
Foreign exchange retranslation (1.6) (0.3) 0.1 (1.8)
Operating profit/(loss) at constant
exchange rates 24.9 5.1 (8.9) 21.1
------------------------------------- ------- -------------- -------------- -------------
1. Segmental information (continued)
Geographical analysis of external sales by destination,
non-current asset location and average employee numbers
The UK is the home country of the parent company, Renold plc.
The principal operating territories, the proportions of Group
external revenue generated (customer location), external revenues,
non-current assets (asset location) and average employee numbers in
each are as follows:
Revenue ratio External revenues Non-current Average
assets employee numbers
---------------- -------------------- -------------- --------------------
2023 2022 2023 2022 2023 2022 2023 2022
% % GBPm GBPm GBPm GBPm
----------------- ------- ------- --------- --------- ------- ----- --------- ---------
United
Kingdom 7.7 8.4 19.1 16.4 13.3 13.9 280 282
Rest of
Europe 29.6 31.2 73.2 60.9 42.1 17.2 585 499
US & Canada 42.1 39.1 103.9 76.4 33.5 30.5 282 279
Australasia 10.2 10.5 25.3 20.5 4.7 4.8 125 133
China 5.0 4.9 12.4 9.5 14.3 14.3 247 259
India 3.8 4.2 9.3 8.2 4.5 4.4 335 362
Other countries 1.6 1.7 3.9 3.3 - - - -
----------------- ------- ------- --------- --------- ------- ----- --------- ---------
100.0 100.0 247.1 195.2 112.4 85.1 1,854 1,814
----------------- ------- ------- --------- --------- ------- ----- --------- ---------
All revenue relates to the sale of goods and services. No
individual customer, or group of customers, represents more than
10% of Group revenue (2022: None more than 10%).
Non-current assets consist of goodwill, other intangible assets
and property, plant and equipment. Deferred tax assets and
right-of-use assets are not included above.
Employees are categorised as direct or indirect. The split of
average employee numbers are direct 1,038 (2022: 1,063) and
indirect 816 (2022: 751).
2. Operating costs
Operating profit is stated after charging/(crediting):
2023 2022
GBPm GBPm GBPm GBPm
-------------------------------------------------- ----- ------ ----- ------
Change in finished goods and work in progress (3.0) (8.2)
Raw materials and consumables 88.3 73.6
Other external charges 44.1 32.3
Employee costs
Gross wages and salaries 67.9 60.0
Social security costs 8.8 7.3
Pension costs
- defined benefit 0.1 0.1
- defined contribution 1.2 1.1
Share-based incentive plans (including related
social security costs) 1.5 1.3
-------------------------------------------------- ----- ------ ----- ------
79.5 69.8
Depreciation of property, plant and equipment
- owned assets 6.1 5.3
- right-of-use assets 2.5 2.6
Amortisation of intangible assets 1.8 1.5
Amortisation of acquired intangible assets 0.7 0.1
Acquisition costs 0.6 -
Short-term leases and leases of low-value
assets - plant and machinery 0.2 0.1
Income from sub-leasing right-of-use assets - (0.2)
Loss on disposal of owned property, plant
and equipment 0.3 -
Loss on disposal of right-of-use assets - 0.2
Research and development expenditure 0.7 0.6
Auditor's remuneration 0.8 0.8
Impairment losses and gains (including reversals
of impairment losses) on financial assets
- impairment of right-of-use asset - 1.7
- trade receivables impairment 0.4 0.2
Net foreign exchange losses 0.5 0.7
Pension administration costs 0.7 0.7
Government assistance support received - (1.7)
Non-recurring profit on disposal of right-of-use
asset and associated lease liability - (1.1)
-------------------------------------------------- ----- ------ ----- ------
Total operating costs 224.2 179.0
-------------------------------------------------- ----- ------ ----- ------
3. Finance costs
2023 2022
GBPm GBPm
--------------------------------------------------------- ----- -----
Finance costs:
Interest payable on bank loans and overdrafts(1) 2.3 1.1
Interest expense on lease liabilities(1) 0.7 0.5
Amortised financing costs(1) 0.3 0.3
----- -----
Loan finance costs 3.3 1.9
Net IAS 19 finance costs 2.1 1.8
Discount unwind on non-current trade and other payables 0.2 0.1
----- -----
Finance costs 5.6 3.8
--------------------------------------------------------- ----- -----
(1) Amounts arising on financial liabilities measured at
amortised cost.
4. Taxation
Analysis of tax charge in the year
2023 2022
GBPm GBPm
-------------------------------------------------------------- ------ ------
United Kingdom
UK corporation tax at 19% (2022: 19%) (0.1) (0.1)
Overseas taxes
Corporation taxes 2.6 1.9
Movement in uncertain tax positions 0.7 (0.3)
Adjustments in respect of prior periods 0.7 0.3
Withholding taxes 0.3 0.2
Current income tax charge 4.2 2.0
-------------------------------------------------------------- ------ ------
Deferred tax
UK - origination and reversal of temporary differences 0.2 0.1
Overseas - origination and reversal of temporary differences 1.5 0.1
Effect of changes in corporate tax rates - (0.5)
Adjustments in respect of prior periods (0.4) 0.5
Total deferred tax charge 1.3 0.2
Tax charge on profit on ordinary activities 5.5 2.2
-------------------------------------------------------------- ------ ------
2023 2022
GBPm GBPm
----------------------------------------------------- ----- ------
Tax on items taken to other comprehensive income
Deferred tax on changes in net pension deficits 5.8 3.1
Effect of changes in statutory tax rate on deferred
tax assets - (2.3)
Tax on fair value of derivatives direct to reserves 0.2 (0.1)
Tax charge in the statement of other comprehensive
income 6.0 0.7
----------------------------------------------------- ----- ------
Factors affecting the Group tax charge for the year
The increase in the current tax charge is attributable to
increased taxable profits in jurisdictions where the headline
statutory tax rate is higher than the prevailing UK tax rate. The
deferred tax charge in the year primarily relates to the continued
utilisation of tax losses in jurisdictions for which deferred tax
is recognised. At 31 March 2023, the provision for open tax matters
totalled GBP1.8m (31 March 2022: GBP1.9m). Adjustments to tax in
respect of prior period profit on ordinary activities has not been
restated due to the net impact on the current and deferred tax
charge being not material.
The Group's tax charge in future years will be affected by the
profit mix, effective tax rates in the different countries where
the Group operates and utilisation of tax losses. No deferred tax
is recognised on the unremitted earnings of overseas subsidiaries
in accordance with IAS 12.39.
The actual tax on the Group's profit before tax differs from the
theoretical amount using the UK corporation tax rate as
follows:
2023 2022
GBPm GBPm
---------------------------------------------------- ------ ------
Profit on ordinary activities before tax 17.3 12.4
---------------------------------------------------- ------ ------
Tax charge at UK statutory rate of 19% (2022: 19%) 3.3 2.4
Effects of:
Non-taxable income - (1.2)
Non-deductible expenditure 0.7 0.3
Other taxable income - 0.8
Other deductible (0.1) -
Movement in uncertain tax positions 0.7 (0.4)
Overseas tax rate differences 0.9 0.9
Effect of changes in corporate tax rates - (0.3)
Adjustments in respect of prior periods (1.0) 0.5
Movement in unrecognised deferred tax 0.7 (1.0)
Withholding taxes 0.3 0.2
Total tax charge 5.5 2.2
---------------------------------------------------- ------ ------
4. Taxation (continued)
Effective tax rate
The effective tax rate of 32% (2022: 18%) is higher than the UK
tax rate of 19% (2022: 19%) due to the following factors:
-- Permanent differences including items that are non-deductible from a tax perspective.
-- Prior year adjustments arising as tax submissions are
finalised and agreed in specific jurisdictions.
-- Increased taxable profits in overseas jurisdictions for which
the statutory tax rate is higher than the headline UK rate.
Tax payments
Cash tax paid in the year was GBP2.7m (2022: GBP1.7m). The year
on year increase is attributable to higher taxable profits in full
cash tax paying territories, including the closure of an historical
tax enquiry.
5. Earnings per share
Earnings per share (EPS) is calculated by reference to the
earnings for the year and the weighted average number of shares in
issue during the year as follows:
2023 2022
----------------------------------- -----------------------------------
Per share Per share
Earnings Shares amount Earnings Shares amount
GBPm (thousands) (pence) GBPm (thousands) (pence)
------------------------------- --------- ------------ ---------- --------- ------------ ----------
Basic EPS - Profit attributed
to ordinary shareholders 11.8 207,242 5.7 10.2 214,795 4.7
Effect of adjusting items,
after tax:
Amortisation of acquired
intangible assets 0.7 0.3 0.1 0.1
Acquisition costs 0.6 0.3 - -
Tax adjustments relating
to prior year 0.4 0.2 - -
US PPP loan forgiveness - - (1.7) (0.8)
New lease arrangements
on sublet properties - - 0.7 0.3
Adjusted EPS 13.5 207,242 6.5 9.3 214,795 4.3
------------------------------- --------- ------------ ---------- --------- ------------ ----------
Inclusion of the dilutive securities, comprising 23,003,207
(2022: 16,908,941) additional shares due to share options, in the
calculation of basic and adjusted EPS changes the amounts shown
above to 5.1p and 5.9p respectively (2022: basic EPS 4.4p, adjusted
EPS 4.0p).
The adjusted EPS numbers have been provided in order to give a
useful indication of underlying performance by the exclusion of
adjusting items. Due to the existence of unrecognised deferred tax
assets there were no associated tax credits on some of the
adjusting items and in these instances adjusting items are added
back in full.
6. Dividends
No ordinary dividend payments were paid or proposed in either
the current or prior year.
7. Goodwill
2023 2022
GBPm GBPm
----------------------------------------- ----- -----
Cost
At 1 April 26.2 25.1
Acquisition of subsidiary (Note 19) 4.2 -
Exchange adjustment 1.3 1.1
----------------------------------------- ----- -----
At 31 March 31.7 26.2
----------------------------------------- ----- -----
Accumulated amortisation and impairment
At 1 April 3.5 3.4
Exchange adjustment - 0.1
----------------------------------------- -----
At 31 March 3.5 3.5
-----------------------------------------
Carrying amount 28.2 22.7
----------------------------------------- ----- -----
Impairment testing
The Group performed its annual impairment test of goodwill at 31
March 2023 which compares the current book value to the recoverable
amount from the continued use or sale of the related business.
The recoverable amount of each Cash Generating Unit (CGU) has
been determined on a value-in-use basis, calculated as the net
present value of cash flows derived from detailed financial plans.
All business units in the Group have submitted a budget for the
financial year ending 31 March 2024 and strategic plan forecasts
for the two financial years ending 31 March 2026. The budget and
strategic forecasts, which are subject to detailed review and
challenge, were approved by the Board. The Group prepares cash flow
forecasts based on these projections for the first three years,
with years four and five extrapolated based on known future events,
recently observable trends and management expectations. A terminal
value calculation is used to estimate the cash flows after year
five. Sensitivity analysis has been performed including a zero
revenue growth scenario (with current year revenue modelled for all
future periods of the forecast) and a reverse stress test, to
determine the extent of downturn which would result in a potential
impairment. Revenue would have to reduce by 28% in the first year
of the period under review (worse than the decline seen during the
Covid pandemic) for the first CGU containing goodwill to require
potential impairment. Under the reverse stress test the first CGU
with headroom that eliminated was India. The forecasts used for the
impairment review are consistent with those used in the Going
Concern review.
The key assumptions used in the value-in-use calculations
are:
-- Sales: Forecast sales are built up with reference to expected
sales prices and volumes from individual markets and product
categories based on past performance, projections of developments
in key markets and management's judgement;
-- Margins: Forecast margins reflect historical performance and
management's experience of each CGUs profitability at the forecast
level of sales including the impact of all completed restructuring
projects. The projections do not include the impact of future
restructuring projects to which the Group is not yet committed;
-- Discount rate: Pre-tax discount rates have been calculated
based on the Group's weighted average cost of capital and risks
specific to the CGU being tested; and
-- Long-term growth rates: As required by IAS 36, cash flows
beyond the period of projections are extrapolated using long-term
growth rates published by the Organisation for Economic
Co-operation and Development for the territory in which the CGU is
based. The discount rates applied to the cash flows of each of the
CGUs are based on the risk-free rate for long-term bonds issued by
the government in the respective market. This is then adjusted to
reflect both the increased risk of investing in equities and the
systematic risk of the specific CGU (using an average of the betas
of comparable companies). These rates do not reflect the long-term
assumptions used by the Group for investment planning.
The Directors do not consider that any reasonably possible
changes to the key assumptions would reduce the recoverable amount
to its carrying value for any CGU. No impairment charge has been
recognised in the current or prior period for any CGU. The goodwill
acquired in the year relating to YUK has been allocated to the
Europe & China CGU.
7. Goodwill (continued)
CGU discount
Growth rates
rates (pre-tax) Carrying values
------------ ---------------- ------------------
2023 2022 2023 2022 2023 2022
% % % % GBPm GBPm
----------------------------------- ----- ----- ------ -------- ------- ------------
Americas (Jeffrey Chain, USA) 2.0 1.7 15.0 16.2 21.4 20.0
Australia (Ace Chains, Australia) 2.2 2.6 12.1 12.0 0.5 0.5
India (Renold Chain, India) 6.4 6.2 20.4 20.8 1.6 1.7
Europe & China (Renold Tooth
Chain, Germany & YUK) 1.7 1.1 15.5 15.5 0.5 0.5
Europe & China (YUK) 2.0 - 14.0 - 4.2 -
-----------------------------------
28.2 22.7
----------------------------------- ----- ----- ------ -------- ------- ------------
8. Intangible assets
Customer Customer Technical Non-compete Computer
orderbook relationships know-how agreements software Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
Cost
At 1 April 2021 0.3 4.2 0.2 - 19.7 24.4
Exchange adjustment - - - - (0.1) (0.1)
Additions - - - - 1.2 1.2
Disposals - - - - (0.9) (0.9)
Acquisition of subsidiary - 0.4 - - - 0.4
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
At 31 March 2022 0.3 4.6 0.2 - 19.9 25.0
Exchange adjustment - 0.3 - - 0.1 0.4
Additions - - - - 1.4 1.4
Acquisition of subsidiary
(Note 19) - 5.1 - 1.8 - 6.9
At 31 March 2023 0.3 10.0 0.2 1.8 21.4 33.7
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
Accumulated amortisation
and impairment
At 1 April 2021 0.3 4.2 0.2 - 14.8 19.5
Exchange adjustment - (0.1) - - (0.2) (0.3)
Amortisation charge - 0.1 - - 1.5 1.6
Disposals - - - - (0.9) (0.9)
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
At 31 March 2022 0.3 4.2 0.2 - 15.2 19.9
Exchange adjustment - 0.2 - - 0.2 0.4
Amortisation charge - 0.5 - 0.2 1.8 2.5
At 31 March 2023 0.3 4.9 0.2 0.2 17.2 22.8
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
Net book amount
At 31 March 2023 - 5.1 - 1.6 4.2 10.9
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
At 31 March 2022 - 0.4 - - 4.7 5.1
--------------------------- ----------- --------------- ---------- ------------ ---------- ------
During the year amounts have been recognised in accordance with
IFRS 3 in relation customer lists and non-compete agreements as a
result of the acquisition of Industrias YUK S.A. (Note 19). The
customer relationships acquired have been valued using estimates of
useful lives and discounted cash flows of expected income, and the
non-compete agreements have been valued using the comparative
income differential method.
The prior year acquisition of the Brooks business resulted in
the recognition of amounts in relation to customer relationships.
The remaining amounts recognised for customer relationships,
customer orderbook and technical know-how were acquired with the
acquisition of the Tooth Chain (Germany) business, which are now
fully depreciated.
No brand names have been acquired in the current year
acquisition or previous acquisitions.
9. Property, plant and equipment
Land and Plant and
buildings equipment Total
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ------
Cost
At 1 April 2021 23.7 119.1 142.8
Exchange adjustment 1.1 1.9 3.0
Additions 0.3 4.8 5.1
Disposals - (2.3) (2.3)
Acquisition of subsidiary - 0.1 0.1
----------------------------------------- ----------- ----------- ------
At 31 March 2022 25.1 123.6 148.7
Exchange adjustment 0.3 3.5 3.8
Additions 0.2 7.4 7.6
Disposals - (1.8) (1.8)
Recategorisation 0.3 (0.3) -
Acquisition of subsidiary (Note 19) - 5.4 5.4
At 31 March 2023 25.9 137.8 163.7
----------------------------------------- ----------- ----------- ------
Accumulated depreciation and impairment
At 1 April 2021 7.3 87.4 94.7
Exchange adjustment 0.2 1.3 1.5
Charge for the year 0.6 4.7 5.3
Disposals - (2.1) (2.1)
----------------------------------------- ----------- ----------- ------
At 31 March 2022 8.1 91.3 99.4
Exchange adjustment 0.2 2.7 2.9
Charge for the year 0.6 5.5 6.1
Disposals - (1.5) (1.5)
At 31 March 2023 8.9 98.0 106.9
----------------------------------------- ----------- ----------- ------
Net book amount
At 31 March 2023 17.0 39.8 56.8
----------------------------------------- ----------- ----------- ------
At 31 March 2022 17.0 32.3 49.3
----------------------------------------- ----------- ----------- ------
Property, plant and equipment pledged as security for
liabilities amounted to GBP34.5m (2022: GBP32.2m).
Future capital expenditure
At 31 March 2023 capital expenditure contracted for but not
provided for in these accounts amounted to GBP2.6m (2022:
GBP2.4m).
10. Leasing and right-of-use assets
Right-of-use assets
Land and Plant and
buildings equipment Total
GBPm GBPm GBPm
----------------------------------------- ----------- ----------- ------
Cost
At 1 April 2021 11.8 3.3 15.1
Exchange adjustment 0.2 - 0.2
Additions 1.7 0.6 2.3
Disposals (1.1) (1.9) (3.0)
----------------------------------------- ----------- ----------- ------
At 31 March 2022 12.6 2.0 14.6
Exchange adjustment 0.1 - 0.1
Acquisition of subsidiary (Note 19) 9.5 0.1 9.6
Additions 1.0 0.4 1.4
Disposals (0.4) (0.8) (1.2)
At 31 March 2023 22.8 1.7 24.5
----------------------------------------- ----------- ----------- ------
Accumulated depreciation and impairment
At 1 April 2021 2.6 1.8 4.4
Exchange adjustment - 0.1 0.1
Charge for the year 1.6 1.0 2.6
Disposals (0.5) (1.7) (2.2)
Impairment 1.7 - 1.7
----------------------------------------- ----------- ----------- ------
At 31 March 2022 5.4 1.2 6.6
Exchange adjustment 0.1 - 0.1
Charge for the year 2.0 0.5 2.5
Disposals (0.4) (0.8) (1.2)
At 31 March 2023 7.1 0.9 8.0
----------------------------------------- ----------- ----------- ------
Net book amount
At 31 March 2023 15.7 0.8 16.5
----------------------------------------- ----------- ----------- ------
At 31 March 2022 7.2 0.8 8.0
----------------------------------------- ----------- ----------- ------
Lease liabilities
2023 2022
GBPm GBPm
-------------------------------------------------------- ------ ------
Maturity analysis - contractual undiscounted cash
flows
Less than one year 3.5 3.0
One to two years 3.1 2.5
Two to five years 6.6 4.9
More than five years 14.1 3.2
Total undiscounted lease liabilities at 31 March 27.3 13.6
Less: Interest allocated to future periods (7.1) (1.6)
-------------------------------------------------------- ------ ------
Lease liabilities included in the Consolidated Balance
Sheet 20.2 12.0
-------------------------------------------------------- ------ ------
Current 2.7 2.8
Non-current 17.5 9.2
-------------------------------------------------------- ------ ------
Amounts recognised in profit or loss
2023 2022
GBPm GBPm
-------------------------------------------------------- ------ ------
Interest on lease liabilities (0.7) (0.5)
Non-recurring profit on disposal of right-of-use asset
and associated lease liability - 1.1
Income from sub-leasing right-of-use assets - 0.2
Expenses relating to short-term leases and leases
of low-value assets (0.2) (0.1)
-------------------------------------------------------- ------ ------
10. Leasing and right-of-use assets (continued)
Amounts recognised in the Consolidated Statement of Cash
Flows
2023 2022
GBPm GBPm
---------------------------------------------------- ----- -----
Repayment of principal under lease liabilities 2.9 4.2
Repayment of interest on lease liabilities 0.7 0.5
Cash outflows in relation to short-term leases and
leases of low-value assets 0.2 0.1
Total cash outflows for leases 3.8 4.8
---------------------------------------------------- ----- -----
11. Inventories
2023 2022
GBPm GBPm
------------------------------------------ ----- -----
Raw materials 9.1 6.9
Work in progress 5.8 5.5
Finished products and production tooling 46.9 36.0
61.8 48.4
------------------------------------------ ----- -----
Inventories pledged as security for liabilities amounted to
GBP43.2m (2022: GBP36.9m).
The Group expensed GBP88.3m (2022: GBP73.6m) of inventories
during the period. In the year to 31 March 2023, GBP3.5m (2022:
GBP2.3m) was charged for the write-down of inventory and GBP0.2m
(2022: GBP0.5m) was released from inventory provisions no longer
required.
12. Trade and other receivables
2023 2022
GBPm GBPm
--------------------------- ------ ------
Trade receivables 39.3 31.6
Less: Loss allowance (0.8) (0.5)
--------------------------- ------ ------
Trade receivables: net(1) 38.5 31.1
Other receivables 1.9 2.8
Contract assets 0.1 -
Prepayments 3.0 1.8
---------------------------
43.5 35.7
--------------------------- ------ ------
(1) Financial assets carried at amortised cost.
The Group has no significant concentration of credit risk but
does have a concentration of translational and transactional
foreign exchange risk in both US Dollars and Euros; however, the
Group hedges against these risks. The carrying amount of trade and
other receivables approximates their fair value.
Trade receivables are non-interest bearing and are generally on
30-90 days terms. The average credit period on sales of goods is 49
days (2022: 51 days).
Other receivables largely relate to VAT and hence given that the
counterparties are governments, no provision for loss allowance has
been made.
Contract assets relate to consideration not yet received upon
the completion of the associated performance obligation. Revenue
recognised in the reporting period that was included in the
contract assets at beginning of the year totalled GBPnil (2022:
GBPnil).
The following table details the risk profile of trade
receivables based on the Group's provision matrix. As the Group's
historical credit loss experience does not show significantly
different loss patterns for different customer segments, the
provision for loss allowance based on past due status is not
further analysed:
Trade receivables - days past due
-------------------------------------------------------
Not past 30-60 60-90
At 31 March 2023 due <30 days days days >90 days Total
---------------------------- --------- --------- ------ ------ --------- ------
Trade receivables: gross 34.0 3.3 0.6 0.4 1.0 39.3
Expected credit loss rate,
% 0.2% 0.0% 1.0% 0.1% 67.7% 2.0%
Estimated gross carrying
amount at default, GBPm 0.1 - - - 0.7
Lifetime expected credit
loss, GBPm 0.8
---------------------------- --------- --------- ------ ------ --------- ------
12. Trade and other receivables (continued)
Trade receivables - days past due
-----------------------------------------------------------------
Not past 30-60 60-90
At 31 March 2022 due <30 days days days >90 days Total
------------------------------- --------- --------- ------ ------ --------- ---------------
Trade receivables: gross 27.1 3.2 0.4 0.2 0.7 31.6
Expected credit loss rate,
% 0.1% 2.0% 0.0% 16.2% 47.6% 1.5%
Estimated gross carrying
amount at default, GBPm - 0.2 - - 0.3
Lifetime expected credit
loss, GBPm 0.5
------------------------------- --------- --------- ------ ------ --------- ---------------
The following table shows the movement in the lifetime expected
credit losses; there has been no change in the estimation
techniques or significant assumptions made during the current
reporting period:
2023 2022
Loss allowance GBPm GBPm
-------------------------------------- ------ -----
At 1 April 0.5 0.4
Net remeasurement of loss allowance 0.4 0.1
Amounts written off as uncollectable (0.1) -
--------------------------------------
At 31 March 0.8 0.5
-------------------------------------- ------ -----
13. Cash and cash equivalents
In the Group cash flow statement, net cash and cash equivalents
are shown after deducting bank overdrafts as follows:
2023 2022
GBPm GBPm
------------------------------- ------ ------
Cash and cash equivalents 19.3 10.5
Less: Overdrafts (Note 14) (1.8) (1.0)
Net cash and cash equivalents 17.5 9.5
------------------------------- ------ ------
14. Borrowings
2023 2022
GBPm GBPm
------------------------- ----- -----
Current borrowings:
Overdrafts (Note 13) 1.8 1.0
Bank loans 45.5 -
Current borrowings 47.3 1.0
------------------------- ----- -----
Non-current borrowings:
Bank loans 1.3 22.8
Non-current borrowings 1.3 22.8
Preference stock 0.5 0.5
1.8 23.3
------------------------- ----- -----
Total borrowings 49.1 24.3
------------------------- ----- -----
The above loans form part of the Renold plc Group core banking
facilities, the UK banking facility matures in March 2024,
therefore is classed as current borrowings. These facilities were
subsequently renewed for 4 years in May 2023. Refer to Note 18 for
more details on the refinancing.
All financial liabilities above are carried at amortised
cost.
Core banking facilities
On 29 March 2019 the Group renewed its GBP61.5m Multi-Currency
Revolving Facility banking facilities with HSBC UK, Allied Irish
Bank (GB), and Citibank. The facility matures in March 2024 and is
fully committed and available until maturity.
At the year end, the undrawn core banking facility was GBP16.1m
(2022: GBP37.8m). The Group also benefits from a UK overdraft and a
number of overseas facilities totalling GBP4.4m (2022: GBP2.7m)
with availability at year end of GBP1.2m. The Group pays interest
at SONIA (or LIBOR prior to 20 December 2021) plus a variable
margin in respect of the core banking facility. The average rate of
interest paid in the year was SONIA (20 December 2021 onwards) or
LIBOR (prior to 20 December 2021) plus 1.85% for Sterling, Euro and
US Dollar denominated facilities (2022: plus 1.6% for Sterling,
Euro and US Dollar denominated facilities).
14. Borrowings (continued)
The core banking facility is subject to two covenants, which are
tested semi-annually: net debt to EBITDA (leverage, maximum ratio
2.5 times) and EBITDA to net finance charges (interest cover,
minimum ratio 4.0 times).
Secured borrowings
Included in Group borrowings are secured borrowings of GBP48.6m
(2022: GBP24.1m). Security is provided by fixed and floating
charges over assets (including certain property, plant and
equipment and inventory) primarily in the UK, USA, Germany and
Australia. Certain Group companies have provided cross-guarantees
in respect of these borrowings
Preference stock
At 31 March 2023, there were 580,482 units of preference stock
in issue (2022: 580,482).
All payments of dividends on the preference stock have been paid
on the due dates. The preference stock has the following
rights:
i. a fixed cumulative preferential dividend at the rate of 6%
per annum payable half yearly on 1 January and 1 July in each
year;
ii. rank both with regard to dividend (including any arrears on
the commencement of a winding up) and return of capital in priority
to all other stock or shares in the Company, but with no further
right to participate in profits or assets;
iii. no right to attend or vote, either in person or by proxy,
at any general meeting of the Company or to have notice of any such
meeting, unless the dividend on the preference stock is in arrears
for six calendar months; and
iv. no redemption entitlement and no fixed repayment date.
There is no significant difference between the carrying value of
financial liabilities and their equivalent fair value.
15. Trade and other payables
2023 2022
---------------------- ----------------------
Current Non-current Current Non-current
GBPm GBPm GBPm GBPm
--------------------------------------- -------- ------------ -------- ------------
Trade payables(1) 22.1 - 23.4 -
Other taxation and social security(1) 2.5 - 2.2 -
Other payables(1) 8.9 2.5 3.6 4.7
Contract liabilities 0.3 - - -
Accruals(1) 23.4 - 19.3 -
57.2 2.5 48.5 4.7
--------------------------------------- -------- ------------ -------- ------------
(1) Financial liabilities carried at amortised cost.
Trade payables are non-interest bearing and are normally settled
within 60-day terms. The Group does have a concentration of
translational foreign exchange risk in both US Dollars and Euros;
however, the Group hedges against this risk. The non-current other
payable is the deferred element of the construction costs for the
Chinese factory in Jintan.
The Group did not operate supplier financing or reverse
factoring programmes during the current or prior financial
year.
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
Contract liabilities relate to consideration received in advance
of the completion of the associated performance obligation. Revenue
recognised in the reporting period that was included in the
contract liability at beginning of the year totalled GBPnil (2022:
GBPnil).
16. Provisions
Business Environmental
Restructuring(1) Dilapidations Provisions(1) Total provisions
GBPm GBPm GBPm GBPm
------------------------- ------------------ ---------------- --------------- -----------------
At 1 April 2022 - 2.8 1.2 4.0
Arising during the year 0.8 0.3 - 1.1
Utilised in the year - (0.1) - (0.1)
At 31 March 2023 0.8 3.0 1.2 5.0
------------------------- ------------------ ---------------- --------------- -----------------
2023 2022
Allocated as: GBPm GBPm
------------------------ ----- -----
Current provisions 0.9 0.2
Non-current provisions 4.1 3.8
------------------------
5.0 4.0
------------------------ ----- -----
(1) The business restructuring and environmental provision were
combined in the prior year, this year we have disaggregated the two
amounts to provide greater clarity.
Business restructuring
At the year ended 31 March 2023, a provision is recognised for
legal and redundancy costs in relation to the reduction of
headcounts within group sites. Substantially all of the provision
is recorded as current.
Environmental
At the year ended 31 March 2023, a provision continues to be
recognised in relation to site environmental costs in France.
Substantially all of the provision is recorded as non-current.
Dilapidations
Provisions are recognised in relation to contractual obligations
to reinstate leasehold properties to the state of repair specified
in the property lease. The provision includes costs, as required
within the lease, to rectify or reinstate modifications to the
property and to remediate general wear and tear incurred to the
balance sheet date. The provision to rectify or reinstate
modifications is recognised on inception, with a corresponding
fixed asset that is depreciated in line with the underlying asset.
The provision to rectify general wear and tear is recognised as it
is incurred over the life of the lease.
The provision is assessed based on the expected cost at the
balance sheet date, using recent cost estimates from suitably
qualified property professionals. These estimates are adjusted to
reflect the impact of inflation between the date of assessment and
the expected timing of the payments, and are then discounted back
to present value. A range of inflation and discount rates have been
used in order to best reflect the circumstances of the lease to
which the dilapidation obligation relates. The inflation rate
applied ranges from 2.9% to 4.5% and the discount rate ranges from
1.6% to 5.0%. These rates are most notably impacted by the country
of lease and length of lease.
The majority of the dilapidation provision relates to cash
outflows which are expected to take place at the end of each
respective lease term; none of which are expected to end within the
next 12 months. The associated outflows are estimated to arise over
a period of up to 21 years from the balance sheet date. As a result
substantially all of the provision is classed as non-current
(GBP3.1m).
17. Additional cash flow information
Reconciliation of operating profit to net cash flows from
operations:
2023 2022
GBPm GBPm
-------------------------------------------------------------- ------ ------
Cash generated from operations:
Operating profit from continuing operations 22.9 16.2
Depreciation of property, plant and equipment - owned
assets 6.1 5.3
Depreciation of property, plant and equipment - right-of-use
assets 2.5 2.6
Amortisation of intangible assets 2.5 1.6
Loss/(profit) on disposals of plant and equipment 0.3 (0.9)
Impairment of right-of-use asset - 1.7
US Government assistance - PPP covid support - (1.7)
Equity share plans 1.3 1.1
Increase in inventories (4.5) (9.5)
Increase in receivables (2.8) (4.5)
(Decrease)/increase in payables (4.2) 13.7
Increase in provisions 1.0 0.1
Cash contribution to pension schemes (5.8) (4.8)
Pension current service cost (non-cash) 0.1 0.1
Cash generated from operations 19.4 21.0
-------------------------------------------------------------- ------ ------
Reconciliation of net change in cash and cash equivalents to
movement in net debt:
2023 2022
GBPm GBPm
---------------------------------------------------------------- ------- -------
Increase/(decrease) in cash and cash equivalents (Consolidated
Statement of Cash Flows) 7.9 (8.2)
Change in net debt resulting from cash flows
- Proceeds from borrowings (28.3) (4.7)
- Repayment of borrowings 8.3 16.0
US Government assistance - PPP covid support - 1.7
Foreign currency translation differences (0.7) 0.1
Non-cash movement on capitalised finance costs (0.3) (0.3)
Net debt acquired as part of the business combination (2.9) -
----------------------------------------------------------------
Change in net debt during the period (16.0) 4.6
Net debt at start of year (13.8) (18.4)
----------------------------------------------------------------
Net debt at end of year (29.8) (13.8)
---------------------------------------------------------------- ------- -------
Net debt comprises:
Cash and cash equivalents (Note 13) 19.3 10.5
Total borrowings (Note 14) (49.1) (24.3)
----------------------------------------------------------------
(29.8) (13.8)
---------------------------------------------------------------- ------- -------
17. Additional cash flow information (continued )
The table below details changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated cash flow statement as cash flows from
financing activities.
Financing Net Other
Opening Accrued cash New Lease debt non-cash Closing
balance interest flows leases disposal acquired changes(1) balance
2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------ --------- ---------- ---------- -------- ---------- ---------- ------------ ---------
Bank loans (Note 14) 22.8 2.3 17.7 - - 2.9 1.1 46.8
Capitalised costs (Note
14) - - - - - - - -
Preference stock (Note
14) 0.5 - - - - - - 0.5
Lease liabilities (Note
10) 12.0 0.8 (3.6) 11.0 - - - 20.2
------------------------ --------- ---------- ---------- -------- ---------- ---------- ------------ ---------
Total liabilities from
financing activities 35.3 3.1 14.1 11.0 - 2.9 1.1 67.5
Overdrafts (Note 14) 1.0 1.8
Less: Lease liabilities
(Note 10) (12.0) (20.2)
------------------------ --------- ---------- ---------- -------- ---------- ---------- ------------ ---------
Total borrowings (Note
14) 24.3 49.1
Add: Cash and cash
equivalents
(Note 13) (10.5) (19.3)
Net debt 13.8 29.8
------------------------ --------- ---------- ---------- -------- ---------- ---------- ------------ ---------
(1) Non-cash changes include the amortisation of capitalised
finance costs and foreign exchange translation.
US Government
assistance
Financing - PPP Other
Opening Accrued cash New Lease covid non-cash Closing
balance interest flows leases disposal support changes(1) balance
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ --------- ---------- ---------- -------- ---------- -------------- -------------- ---------
Bank loans (Note
14) 35.7 1.1 (12.2) - - (1.7) (0.1) 22.8
Capitalised costs
(Note
14) (0.5) - (0.1) - - - 0.6 -
Preference stock
(Note
14) 0.5 - - - - - - 0.5
Lease liabilities
(Note
10) 15.4 0.5 (4.7) 2.3 (1.7) - 0.2 12.0
------------------ --------- ---------- ---------- -------- ---------- -------------- -------------- ---------
Total liabilities
from
financing
activities 51.1 1.6 (17.0) 2.3 (1.7) (1.7) 0.7 35.3
Overdrafts (Note
14) 2.6 1.0
Less: Lease
liabilities
(Note 10) (15.4) (12.0)
------------------ --------- ---------- ---------- -------- ---------- -------------- -------------- ---------
Total borrowings
(Note
14) 38.3 24.3
Add: Cash and
cash equivalents
(Note 13) (19.9) (10.5)
Net debt 18.4 13.8
------------------ --------- ---------- ---------- -------- ---------- ------------------ ---------- ---------
(1) Non-cash changes includes the amortisation of capitalised
finance costs and foreign exchange translation.
18. Post balance sheet events
On 9 May 2023, the Group reached an agreement to refinance its
core banking facility to a GBP85m multi-currency revolving credit
facility. Additionally there is a GBP20m accordion option which
will allow the company to access additional funding in support of
its acquisition programme. The new facility will be provided by our
existing banks: HSBC UK, Allied Irish Bank (GB), Citibank and with
the addition of Santander. The duration of the facility is a three
year term to May 2026 (contains an option to extend the term for a
further two years) and is fully committed and available until
maturity.
The core banking facility is subject to two covenants, which are
tested semi-annually: net debt to EBITDA (leverage, maximum ratio
3.0 times) and EBITDA to net finance charges (interest cover,
minimum ratio 4.0 times).
19. Business combinations
During the year the Group completed the acquisition of 100% of
the ordinary share capital of Industrias YUK S.A. for the total
consideration of EUR24.0m (GBP20.8m), of which EUR20.0m (GBP17.3m)
was paid on the date of the acquisition with the remaining EUR4.0m
(GBP3.5m) being deferred, EUR2.0m (GBP1.8m) to be paid on 3 August
2023 and EUR2.0m (GBP1.7m) on 3 August 2024. YUK is a
Valencia-based, manufacturer and distributor of high quality
conveyor chain ("CVC") and ancillary products.
The transaction has been accounted for as a business combination
under IFRS 3 and is summarised below:
Recognised
values
on acquisition
GBPm
------------------------------------------------------------- ----------------
Fair value of net assets acquired:
Intangible assets 6.9
Property, plant and equipment 5.4
Right-of-use-assets 9.6
Inventories 7.6
Trade and other receivables 4.2
Deferred tax asset 0.5
Trade and other payables (6.4)
Lease liabilities (9.6)
Cash and cash equivalents 3.0
Borrowings (2.9)
Deferred tax liabilities (1.7)
------------------------------------------------------------- ----------------
Net identifiable assets and liabilities 16.6
Goodwill 4.2
------------------------------------------------------------- ----------------
Total consideration 20.8
------------------------------------------------------------- ----------------
Consideration:
Cash consideration 17.3
Deferred consideration 3.5
------------------------------------------------------------- ----------------
Total consideration transferred/to be transferred 20.8
------------------------------------------------------------- ----------------
Net cash outflow arising on acquisition:
Cash consideration paid (17.3)
Add: cash and cash equivalents acquired 3.0
------------------------------------------------------------- ----------------
(14.3)
------------------------------------------------------------- ----------------
Increase in net debt arising on acquisition:
Net cash outflow arising on acquisition (14.3)
Less: Borrowings acquired (2.9)
Less: Acquisition costs (0.6)
------------------------------------------------------------- ------------------
(17.8)
------------------------------------------------------------- ------------------
Acquisition related costs amounted to GBP0.6m and have been
included in the Income Statement.
The gross contractual value of the trade and other receivables
was GBP4.2m. The best estimate at the acquisition date of the
contractual cash flows not expected to be collected was GBPnil.
Deferred consideration of EUR4.0m is payable within 2 years.
The goodwill arising on acquisition has been allocated to the
Europe and China CGU and is expected to be deductible for tax
purposes. The goodwill is attributable to:
-- the anticipated profitability of the distribution of the
Group's services in new markets; and
-- the synergies that can be achieved in the business
combination including management, processes and maximising site
capacities.
The business was acquired on 3 August 2022 and contributed
GBP10.5m revenue and GBP1.8m headline operating profit for the
period between the date of acquisition and the balance sheet
date.
19. Business combinations (continued)
If the acquisition had been completed on the first day of the
financial period, the acquisition would have contributed GBP15.9m
to Group revenue, GBP2.7m to Group operating profit and GBP4.0m
adjusted operating profit (after adding back GBP0.7m for
amortisation of acquired intangibles and GBP0.6m acquisition
costs).
During the year deferred consideration of GBP0.2m was also paid
in relation to the acquisition of the conveyor chain business of
Brooks Ltd in the prior year.
Total net cash outflow arising on acquisitions:
Industrias YUK S.A. (14.3)
Brooks Ltd (0.2)
----------------------------------------------------- -------
(14.5)
----------------------------------------------------- -------
Total increase in net debt arising on acquisitions:
Industrias YUK S.A. (17.8)
Brooks Ltd (0.2)
----------------------------------------------------- -------
(18.0)
----------------------------------------------------- -------
20. Prior period adjustments
Following a review of complex tax judgments looking back over a
number of years, a prior year adjustment of GBP1.3m has been
identified relating to errors in the recognition of deferred tax on
certain intragroup and stock consolidation adjustments. Included in
this amount is the recognition of deferred tax for losses following
errors identified in the profitability forecasts for which
increased deferred tax can be ascribed. The prior year adjustment
to deferred tax is offset by an equal and opposite adjustment to
current tax arising in respect of an error identified in the
Group's historic transfer pricing calculation. A final adjustment
has been identified in relation to a deferred tax asset in respect
of interest restriction of GBP1.2m which should have been
recognised historically to the extent it offsets the deferred tax
liability in the respective tax jurisdiction. The adjustment
recognises this deferred tax asset in the opening balance and
opening reserves of the Group.
The impact, on a line-item basis for those affected, on the
Consolidated Balance Sheet as at 31 March 2022 and 31 March 2021 is
as follows:
2022 2021
---------------------------- ---------------------------------------------- -------------- ---------------- ------------
2022 2021
Deferred Deferred
Consolidated Balance sheet As previously / Current As previously / Current
as at 31 March reported tax recognition (restated) reported tax recognition (restated)
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
ASSETS
Non-current assets
Deferred tax assets 15.4 2.5 17.9 15.2 2.1 17.3
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
15.4 2.5 17.9 15.2 2.1 17.3
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
TOTAL ASSETS 195.1 2.5 197.6 188.7 2.1 190.8
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
LIABILITIES
Current liabilities
Current tax (2.8) (1.3) (4.1) (2.3) (0.9) (3.2)
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
(2.8) (1.3) (4.1) (2.3) (0.9) (3.2)
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
TOTAL LIABILITIES (189.3) (1.3) (190.6) (203.4) (0.9) (204.3)
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
NET ASSETS/(LIABILITIES) 5.8 1.2 7.0 (14.7) 1.2 (13.5)
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
EQUITY
Retained earnings (9.9) 1.2 (8.7) (78.2) 1.2 (77.0)
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
TOTAL SHAREHOLDERS' EQUITY 5.8 1.2 7.0 (14.7) 1.2 (13.5)
---------------------------- -------------- ---------------- ------------ -------------- ---------------- ------------
20. Prior period adjustments (continued)
During the year a prior adjustment was identified relating to
various taxation risks and deferred tax positions. This has been
analysed as follows:
Brought
forward 2020 2021 2022 Total
GBPm GBPm GBPm GBPm GBPm
---------------------------------------- --------- ------ ------ ------ ------
Corporation tax - 0.3 0.4 0.6 1.3
Deferred tax - tax losses - - (0.6) (0.2) (0.8)
Deferred tax - movements in provisions
and accruals - (0.2) (0.1) (0.2) (0.5)
Deferred tax - US s163(j) limitation (1.2) (0.1) 0.1 - (1.2)
Retained earnings 1.2 0.1 (0.1) - 1.2
- 0.1 (0.3) 0.2 -
---------------------------------------- --------- ------ ------ ------ ------
These proposed adjustments arose over a period of time and
individually no year is materially impacted.
The corporation tax provision relates to transfer pricing
risks.
The deferred tax balances relate to the recognition of losses in
overseas jurisdictions and a movement in provisions for centrally
recognised consolidation adjustments.
The US s163(j) limitation relates to an error on adoption of
revised deferred tax asset recognition criteria following
publication of FASB accounting standard codification (ASC)
740-10-30-2(b).
21. Alternative performance measures
In order to provide users of the accounts with a clear and
consistent presentation of the performance of the Group's ongoing
trading activity, the Group uses various alternative performance
measures (APMs), including the presentation of the income statement
in a three-column format with 'Adjusted' measures shown separately
from statutory items. Amortisation of acquired intangibles,
restructuring costs, discontinued operations and material one-off
items or remeasurements are included in a separate column as
management seek to present a measure of performance which is not
impacted by material non-recurring items or items considered
non-operational. Performance measures for the Group's ongoing
trading activity are described as 'Adjusted' and are used to
measure and monitor performance as management believe these
measures enable users of the financial statements to better assess
the trading performance of the business. In addition, the Group
reports sales and profit measures at constant exchange rates.
Constant exchange rate metrics exclude the impact of foreign
exchange translation, by retranslating the comparative to current
year exchange rates.
The APMs used by the Group include:
APM Reference Explanation of APM
----------------------------------- ---------- --------------------------------------
-- adjusted operating profit Adjusted measures are used by
the Group as a measure of underlying
business performance, adding
back items that do not relate
A to underlying performance
--------------------------------------
-- adjusted profit before taxation B
--------------------------------------
-- adjusted EPS C
-- return on sales D
-- operating profit gearing D
----------------------------------- ---------- --------------------------------------
-- revenue at constant exchange Constant exchange rate metrics
rates adjusted for constant foreign
exchange translation and are
used by the Group to better
understand year-on-year changes
E in performance
--------------------------------------
-- adjusted operating profit F
at constant exchange rates
--------------------------------------
-- adjusted return on sales G
at constant exchange rates
----------------------------------- ---------- --------------------------------------
-- EBITDA EBITDA is a widely utilised
measure of profitability, adjusting
H to remove non-cash depreciation
H and amortisation charges
--------------------------------------
-- adjusted EBITDA H
--------------------------------------
-- operating cash flow H
----------------------------------- ---------- --------------------------------------
-- net debt Net debt, leverage and gearing
are used to assess the level
of borrowings within the Group
and are widely used in capital
I markets analysis
--------------------------------------
-- leverage ratio J
--------------------------------------
-- gearing ratio K
----------------------------------- ---------- --------------------------------------
-- legacy pension cash costs L The cost of legacy pensions
is used by the Group as a measure
of the cash cost of servicing
legacy pension schemes
----------------------------------- ---------- --------------------------------------
-- average working capital ratio M Working capital as a ratio of
rolling 12-month revenue is
used to measure cash performance
and balance sheet strength
----------------------------------- ---------- --------------------------------------
21. Alternative performance measures (continued)
APMs are defined and reconciled to the IFRS statutory measure as
follows:
(A) Adjusted operating profit
Year ended 31 March 2023
-----------------------------------------------------
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
-------------------------------------- ------ -------------- -------------- -------------
Operating profit 26.5 5.4 (9.0) 22.9
Add back/(deduct):
Amortisation of acquired intangible
assets 0.7 - - 0.7
Acquisition costs - - 0.6 0.6
Adjusted operating profit 27.2 5.4 (8.4) 24.2
-------------------------------------- ------ -------------- -------------- -------------
Year ended 31 March 2022
-----------------------------------------------------
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
---------------------------------------------- ------ -------------- -------------- -------------
Operating profit 20.5 4.1 (8.4) 16.2
Add back/(deduct):
Amortisation of acquired intangible
assets 0.1 - - 0.1
US PPP loan forgiveness (1.7) - - (1.7)
New lease arrangements on sublet properties - - 0.7 0.7
Adjusted operating profit 18.9 4.1 (7.7) 15.3
---------------------------------------------- ------ -------------- -------------- -------------
(B) Adjusted profit before taxation
2023 2022
GBPm GBPm
---------------------------------------------- ----- ------
Profit before taxation 17.3 12.4
Add back/(deduct):
Amortisation of acquired intangible assets 0.7 0.1
Acquisition costs 0.6 -
US PPP loan forgiveness - (1.7)
New lease arrangements on sublet properties - 0.7
Adjusted profit before taxation 18.6 11.5
---------------------------------------------- ----- ------
(C) Adjusted earnings per share
Adjusted EPS is reconciled to statutory EPS in Note 5.
(D) Return on sales and operating profit gearing
Year ended 31 March 2023
-----------------------------------------------------
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
---------------------------------------- ------ -------------- -------------- -------------
Adjusted operating profit 27.2 5.4 (8.4) 24.2
Total revenue (including inter-segment
sales) 202.4 48.8 (4.1) 247.1
Return on sales % 13.4% 11.1% - 9.8%
---------------------------------------- ------ -------------- -------------- -------------
Year ended 31 March 2022
-----------------------------------------------------
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
---------------------------------------- ------ -------------- -------------- -------------
Adjusted operating profit 18.9 4.1 (7.7) 15.3
Total revenue (including inter-segment
sales) 159.2 40.4 (4.4) 195.2
Return on sales % 11.9% 10.1% - 7.8%
---------------------------------------- ------ -------------- -------------- -------------
21. Alternative performance measures
(continued) Year ended 31 March 2023
-----------------------------------------------------
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
------------------------------------------- ------ -------------- -------------- -------------
Adjusted operating profit - 2023 27.2 5.4 (8.4) 24.2
Adjusted operating profit - 2022 18.9 4.1 (7.7) 15.3
------------------------------------------- ------ -------------- -------------- -------------
Year-on-year change in adjusted operating
profit (a) 8.3 1.3 (0.7) 8.9
Total revenue (including inter-segment
sales) - 2023 202.4 48.8 (4.1) 247.1
Total revenue (including inter-segment
sales) - 2022 159.2 40.4 (4.4) 195.2
------------------------------------------- ------ -------------- -------------- -------------
Year-on-year change in total revenue
(b) 43.2 8.4 0.3 51.9
Adjusted operating profit gearing
% ((a)/(b)) 19% 15% n/a 17%
------------------------------------------- ------ -------------- -------------- -------------
Year ended 31 March 2022
-------------------------------------------------------
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
------------------------------------------- ------ -------------- -------------- -------------
Adjusted operating profit - 2022 18.9 4.1 (7.7) 15.3
Adjusted operating profit - 2021 13.6 5.0 (7.2) 11.4
------------------------------------------- ------ -------------- -------------- -------------
Year-on-year change in adjusted operating
profit (a) 5.3 (0.9) (0.5) 3.9
Total revenue (including inter-segment
sales) - 2022 159.2 40.4 (4.4) 195.2
Total revenue (including inter-segment
sales) - 2021 130.0 39.1 (3.8) 165.3
------------------------------------------- ------ -------------- -------------- -------------
Year-on-year change in total revenue
(b) 29.2 1.3 (0.6) 29.9
Adjusted operating profit gearing
% ((a)/(b)) 18% -69% n/a 13%
------------------------------------------- ------ -------------- -------------- -------------
(E), (F) & (G) Revenue, adjusted operating profit and
adjusted operating profit margin at constant exchange rates
Year ended 31 March 2023
Head office
Torque costs and
Chain Transmission eliminations Consolidated
GBPm GBPm GBPm GBPm
--------------------------------------- -------- -------------- -------------- ---------------
External customer - transferred at
a point in time 201.5 43.4 - 244.9
External customer - transferred over
time - 2.2 - 2.2
Inter-segment 0.9 3.2 (4.1) -
Foreign exchange retranslation (12.5) (2.8) - (15.3)
Revenue at constant exchange rates 189.9 46.0 (4.1) 231.8
--------------------------------------- -------- -------------- -------------- ---------------
Adjusted operating profit 27.2 5.4 (8.4) 24.2
Foreign exchange retranslation (1.6) (0.3) 0.1 (1.8)
Adjusted operating profit at constant
exchange rates 25.6 5.1 (8.3) 22.4
--------------------------------------- -------- -------------- -------------- ---------------
Return on sales at constant exchange
rates % 13.5% 11.1% - 9.7%
--------------------------------------- -------- -------------- -------------- ---------------
21. Alternative performance measures (continued)
(H) EBITDA, adjusted EBITDA (earnings before interest, taxation,
depreciation and amortisation) and operating cash flow
2023 2022
GBPm GBPm
---------------------------------------------------------- ------- ------
Statutory operating profit from continuing operations 22.9 16.2
Depreciation and amortisation 11.1 9.5
Share-based payments 1.3 1.1
---------------------------------------------------------- ------
EBITDA (1) 35.3 26.8
Deduct:
Loss on disposals of plant & equipment 0.3 -
Acquisition Costs 0.6 -
US PPP loan forgiveness - (1.7)
New lease arrangements on sublet properties - 0.7
Adjusted EBITDA (1) 36.2 25.8
Inventories (Note 11) (4.5) (9.5)
Trade and other receivables (Note 12) (2.8) (4.5)
Trade and other payables (Note 15) (4.2) 13.7
Provisions (Note 16) 1.0 0.1
Movement in working capital (10.5) (0.2)
Purchase of property, plant and equipment (Consolidated
Statement of Cash Flows) (7.0) (4.1)
Purchase of intangible assets (Consolidated Statement
of Cash Flows) (1.4) (1.2)
Proceeds from property disposals - 0.2
---------------------------------------------------------- ------- ------
Net capital expenditure (8.4) (5.1)
---------------------------------------------------------- ------- ------
Operating cash flow 17.3 19.4
---------------------------------------------------------- ------- ------
(1) The calculation of EBITDA, adjusted EBITDA and operating
cash flow deliberately excludes an add back for the non-cash
share-based payment charge of GBP1.3m for the year (2022: GBP1.1m).
This is done in order to ensure consistency with the metrics used
to assess performance against the annual bonus plan targets.
(I) Net debt
Net debt is reconciled to the statutory balance sheet in Note
17.
(J) Leverage ratio
2023 2022
GBPm GBPm
-------------------- ---------- ----------
Net debt (Note 17) 29.8 13.8
Adjusted EBITDA 36.2 25.8
--------------------
Leverage ratio 0.8 times 0.5 times
-------------------- ---------- ----------
(K) Gearing ratio
2023 Restated(1)
2022
GBPm GBPm GBPm GBPm
---------------------------------------- ------- ------- ------ -------
Net debt (Note 17) 29.8 13.8
Equity attributable to equity holders
of the parent 39.1 7.0
Net debt (Note 17) 29.8 13.8
Total capital plus net debt 68.9 20.8
---------------------------------------- ------- ------- ------ -------
Gearing ratio % 43% 66%
---------------------------------------- ------- ------- ------ -------
(1) The results for the year ended 31 March 2022 have been
restated. Refer to Note 20 for details of the restatements.
(L) Legacy pension cash costs
2023 2022
GBPm GBPm
------------------------------------------------- ----- -----
Cash contributions to pension schemes 4.6 3.7
Pension payments in respect of unfunded schemes 1.2 1.1
Scheme administration costs 0.7 0.7
-------------------------------------------------
6.5 5.5
------------------------------------------------- ----- -----
21. Alternative performance measures (continued)
(M) Average working capital ratio
2023 2022
GBPm GBPm
----------------------------------------- ------- -------
Inventories 61.8 48.4
Trade and other receivables 43.5 35.7
Trade and other payables (57.2) (48.5)
----------------------------------------- ------- -------
Total working capital 48.1 35.6
Average working capital(1) (a) 41.9 36.1
Revenue (b) 247.1 195.2
-----------------------------------------
Average working capital ratio ((a)/(b)) 17% 18%
----------------------------------------- ------- -------
(1) Calculated as a simple average of the opening and closing
balance sheet working capital.
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FR RBMTTMTMBTJJ
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