"It's been about getting the basics right", says Renold (RNO) boss Robert Purcell. By cutting costs the maker of industrial chain, gearboxes and couplings has made a success of the first of a three phase plan to turn around the business, as adjusted operating profit leapt 40 per cent to £15.5m.
Closing its Bredbury manufacturing facility and transferring production to three other sister sites was key to this progress, as was reducing overhead costs elsewhere. These measures, coupled with a stringent focus on more profitable products, saw adjusted operating margins widen by 2.3 percentage points to 8.5 per cent. That included the group's core chains division achieving double-digit margins, leaving management extremely confident of reaching its goal of mid-teen operating margins by 2020.
But top-line growth was less mouthwatering. At constant currencies, Renold posted a 2 per cent increase in sales to £181m, as rising chain sales in Europe, the Americas, China and India offset the group's exposure to troubled mining markets in Australia.
Renold generated £5.3m of free cash, which helped drive net debt down 21 per cent to £19.5m. The company also agreed a new finance package to take advantage of lower interest rates. That should prove useful when exploring acquisition opportunities - the third phase of its strategic plan.
Broker Numis Securities forecasts adjusted pre-tax profit of £13.2m for the year to March 2016, giving adjusted EPS of 5.8p.
| RENOLD (RNO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 70p | MARKET VALUE: | £156m | |
| TOUCH: | 69-70p | 12-MONTH HIGH: | 73p | LOW: 49p |
| DIVIDEND YIELD: | nil | PE RATIO: | 28 | |
| NET ASSET VALUE: | 4p* | NET DEBT: | 164% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 191 | -1.3 | -0.4 | nil |
| 2012 | 210 | 7.6 | 2.8 | nil |
| 2013 | 190 | -11.9 | -5.4 | nil |
| 2014 | 184 | -5.9 | -4.9 | nil |
| 2015 | 181 | 7.7 | 2.5 | nil |
| % change | -1 | - | - | - |
Ex-div: Payment: *Includes intangible assets of £28m, or 13p a share | ||||
