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Renold getting back in gear

After a series of setbacks, the engineer has delivered wholly positive half-year results
Renold getting back in gear

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.

IC TIP: Buy at 38p

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:38pMARKET VALUE:£ 85.7m
TOUCH:36.1-38p12-MONTH HIGH:55pLOW: 22p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:2.3p*NET DEBT:£31m
Half-year to 30 SeptTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201795.42.40.8nil
201899.74.11.2nil
% change+5+71+50-
Ex-div:-   
Payment:-   
*Negative shareholder funds, including intangible assets of £30.4m, or 13p a share