Renold (RNO) boss Bob Davies will retire at the end of next month. When Robert Purcell, former managing director at specialist plastics supplier Filtrona, takes over in May, he'll inherit an industrial chains and gearbox manufacturer stunned by profit warnings and with its markets in retreat.
One of his first jobs will be to restructure the highly cyclical core chain division. Revenue at constant currency fell 7 per cent there during the first half and underlying operating profit halved to just £2.2m. A strong franc had revenue from Renold's Swiss operation down 40 per cent, easily offsetting modest growth in North America. Overall, order intake was down 12 per cent. A fundamental reappraisal of the business model is under way, changing the mantra from volume to profit and margin generation. Expect to hear more in six months' time.
Business was better at the smaller Torque Transmission division. Sales there fell just 1 per cent, although orders were harder to come by here, too. Management expects the usual improvement in sales and profit during the second half, and with costs cut there could be a benefit of up to £2m. The weak order book could be a problem, though, and talk that a trio of major distributors are to begin to build stocks had better be true.
Broker Arden Partners expects adjusted pre-tax profit of £7.2m for the full year, giving adjusted EPS of 2.5p (from £9.7m and 3.6p in 2012).
RENOLD (RNO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 19p | MARKET VALUE: | £42m | |
| TOUCH: | 18-19p | 12-MONTH HIGH: | 41p | Low: 16.75p |
| DIVIDEND YIELD: | nil | PE RATIO: | 8 | |
| NET ASSET VALUE: | 21p* | NET DEBT: | 51% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 106 | 3.7 | 1.3 | nil |
| 2012 | 96.7 | 2.1 | 0.8 | nil |
| % change | -8 | -43 | -38 | - |
*Includes intangible assets of £28.6m, or 13p a share | ||||
