Chain and gearbox maker Renold more than doubled its first-half underlying operating profit to £6.3m, as the business benefited from lower costs and strong sales growth across all its regions.
The double-digit growth in revenue was converted to additional profit at an underlying rate of 27 per cent, which highlights the operational gearing of the company. The order intake was 7 per cent higher than at this stage last year and outpaced sales, meaning the order book is now 3 per cent higher than six months ago. Robert Davies, chief executive of Renold, said that the business has yet to experience a slowdown and is confident of hitting full-year targets. The chain business, which contributes 76 per cent of sales, is looking to gain further benefits from restructuring its European operations.
Higher sales resulted in an increase in working capital requirements and meant net debt rose to £29m, from £20m in March. The company is currently renegotiating its borrowing facilities and has agreed an extension with existing providers to June 2013. The pension deficit was hit by the fall in equity markets.
Singer Capital Markets is maintaining current year adjusted EPS forecasts at 4.1p (2p in 2011), rising to 6.6p in 2012-13.
RENOLD (RNO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 29p | MARKET VALUE: | £64m | |
| TOUCH: | 28-30p | 12-MONTH HIGH: | 45p | LOW: 25p |
| DIVIDEND YIELD: | nil | PE RATIO: | 16 | |
| NET ASSET VALUE: | 22p | NET DEBT: | 57% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 93 | 0.4 | 0.1 | nil |
| 2011 | 106 | 3.7 | 1.3 | nil |
| % change | +14 | - | - | - |
*Includes intangible assets of £28m, or 13p a share. | ||||
