Renold (RNO) continued to deliver on its cost-cutting and margin-enhancement strategy in the six months to 30 September. Despite tepid industrial markets weighing on the top line, underlying adjusted operating profits at the chains and power transmission specialist climbed nearly 3 per cent to £7.9m. Investors reacted by sending the shares up 8 per cent on results day.
The closure of the Bredbury manufacturing facility and a greater focus on pricing over volume helped widen the underlying operating margin by 0.8 percentage points to 9.3 per cent. And while these self-help measures continue, Renold has also made progress with phase two (organic growth) and three (acquisitions) of its strategic plan, which is designed to achieve mid-teen operating margins by 2020.
Against a tough economic backdrop, management hopes to enhance the group's organic growth prospects by opening a new sales office in south-east Asia, expanding further into Europe and introducing new services and products. The recent acquisition of German tooth chain maker Aventics for up to €6.3m (£4.5m) should help. This well-received deal increases Renold's product range, offers shared infrastructure potential and cross-selling opportunities.
Broker finnCap forecasts adjusted pre-tax profit of £15.3m for the year to March 2016, giving adjusted EPS of 5.5p (up from £13m and 4.8p in FY2015).
| RENOLD (RNO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 59p | MARKET VALUE: | £132m | |
| TOUCH: | 58-60p | 12-MONTH HIGH: | 86p | LOW: 53p |
| DIVIDEND YIELD: | nil | PE RATIO: | 23 | |
| NET ASSET VALUE: | 4p* | NET DEBT: | 191% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 90.5 | 4.4 | 1.5 | nil |
| 2015 | 84.5 | 4.6 | 1.6 | nil |
| % change | -7 | +5 | +7 | - |
*Includes intangible assets of £27.9m, or 13p a share | ||||
