Full-year results from Renold (RNO) were littered with qualifications as the small-cap engineer sought to explain how a 3.8 per cent rise in constant-currency revenues gave way to an earnings loss. Management pointed to a marked step up in restructuring costs and it’s clear that an “improving economic backdrop” proved insufficient to mitigate the impact of “significant price inflation for basic raw materials”.
The vagaries of global steel pricing are obviously beyond management’s control, but delays in passing through the price increases resulted in a dilution of operating margins. Unit profitability also suffered due to machine breakdowns at the group’s German manufacturing facility. The result was a 14 per cent contraction in adjusted operating profit to £14.7m, reflecting a 1.8 percentage point reduction in the underlying margin.
Meanwhile, the restructuring costs were driven by events in China, specifically the relocation of its regional chain manufacturing operations to a purpose-built facility in Jiangsu province. The group is up-scaling and centralising its manufacturing while rationalising its marketing and distribution channels in Asia. China contributes a relatively small proportion of group revenues, but the end market is immense, and growth prospects were buoyed by a 13 per cent increase in orders during the period.
Arden Partners gives adjusted pre-tax profit and EPS of £13.5m and 4.8p, respectively, in FY2019, against £12.5m and 4.4p last year.
| RENOLD (RNO) | ||||
| ORD PRICE: | 26.1p | MARKET VALUE: | £58.8m | |
| TOUCH: | 26.1-26.3p | 12-MONTH HIGH: | 60p | LOW: 22p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | * | NET DEBT: | £24.3m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 184 | -5.9 | -4.9 | nil |
| 2015 | 181 | 7.7 | 2.5 | nil |
| 2016 | 165 | 7.4 | 2.4 | nil |
| 2017 | 183 | 6.7 | 2.1 | nil |
| 2018 | 192 | 1.4 | -1.0 | nil |
| % change | +5 | -79 | - | - |
| Ex-div: | - | |||
| Payment: | - | |||
| *Negative shareholder funds, including intangible assets of £29.9m, or 13p a share | ||||
