Attempts by Renold’s (RNO) management to nurse the engineering group back to health have previously been thwarted by raw material price increases and machine breakdowns at a German manufacturing facility. However, with adjusted half-year operating profit up 36.7 per cent to £8.2m on the back of a 180-basis point increase in the underlying margin, it appears as if the remedial initiatives undertaken are having the desired effect.
After protracted delays – or what seemed like protracted delays – the problems in Germany have now been resolved, evidenced by a 56 per cent increase in profits at the core chain unit. Financial performance was also aided by an improved cost pass-through. Presented with compelling evidence of a turnaround, shareholders might realistically expect further benefits from the restructuring phase of the STEP 2020 plan to crystallise throughout the second half.
Net debt increased by £6.7m during the period to £31m, though a net debt/cash profit (EBITDA) multiple of 1.3 ratio was broadly static. It’s conceivable that it might narrow appreciably given the surge in cash profit during the period under review.
Peel Hunt expects adjusted pre-tax profit of £13.9m for the March 2019 year-end, leading to EPS of 4.7p, rising to £15.5m and 5.3p in FY2020.
| RENOLD (RNO) | ||||
| ORD PRICE: | 38p | MARKET VALUE: | £ 85.7m | |
| TOUCH: | 36.1-38p | 12-MONTH HIGH: | 55p | LOW: 22p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 2.3p* | NET DEBT: | £31m | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 95.4 | 2.4 | 0.8 | nil |
| 2018 | 99.7 | 4.1 | 1.2 | nil |
| % change | +5 | +71 | +50 | - |
| Ex-div: | - | |||
| Payment: | - | |||
| *Negative shareholder funds, including intangible assets of £30.4m, or 13p a share | ||||
