Renold lost a quarter of its value after warning in April that growth in Europe had been hampered by economic uncertainty and a strong Swiss franc. That the industrial chains and gearbox maker still doubled underlying operating profit to £14.1m last year suggests the mild recovery since has further to go.
Higher sales and a £1.5m reduction in costs at the core chain division were largely responsible for the strong performance. In fact, every extra pound of revenue generated in the period created an extra 41p of operating profit, and operating margin jumped to 6.7 per cent from 3.7 per cent. That's just 30 basis points shy of pre-recession levels and management want double-digits next year.
Back-office restructuring will save £1m this year and £1.8m annually from 2013-14. Meanwhile, operating margins at gearbox and couplings division Torque Transmission are at a record 16 per cent. The unit generated a quarter of group sales, but 47 per cent of profit, driven by demand from the metals industry and from quarrying and mining. A number of mass transit tenders in Europe and North America are also expected to convert into contracts in the coming months.
Expect adjusted pre-tax profit of £15.2m and adjusted EPS of 5.4p in 2013, says broker Arden Partners (from £9.7m and 3.6p in 2012).
RENOLD (RNO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 32p | MARKET VALUE: | £70.7m | |
| TOUCH: | 32-33p | 12-MONTH HIGH: | 42p | LOW: 22p |
| DIVIDEND YIELD: | nil | PE RATIO: | 11 | |
| NET ASSET VALUE: | 23p* | NET DEBT: | 43% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 173 | 9.3 | 11.0 | nil |
| 2009 | 195 | 2.9 | 2.8 | nil |
| 2010 | 156 | -13.6 | -8.0 | nil |
| 2011 | 191 | -1.3 | -0.4 | nil |
| 2012 | 210 | 7.6 | 2.8 | nil |
| % change | +10 | - | - | - |
*Includes intangible assets of £28m, or 13p a share | ||||
