Renold shifts up a gear with half-year progress

Manchester-based industrial chain maker Renold reported improved sales and profits today, for the six months to September 30.

It is also considering whether to move its Stock Exchange listing to the AIM (Alternative Investment Market) platform.

Revenues rose from £95.4m to £99.7m, while pre-tax profits of £4.1m were an improvement on the £2.4m figure reported this time last year.

Based in Wythenshawe the firm, which now operates in almost 20 countries, makes chains used in power transmission, lifting, conveying and processing applications around the world.

Originally founded in 1864, then acquired by Swiss-born Hans Renold in 1879, the firm, which now employs employs around 2,500 people, is the oldest established transmission chain company still in existence in the world.

During the six month reporting period the firm said it managed a successful pass-through of raw material price increases, which it said reflects the commercial focus and differentiation of its products.

Its build programme has completed for a new Chinese factory in Jintan, in Jiangsu province, and it has commenced the phased transfer of the Chinese factory. The warehousing and distribution move is under way, and manufacturing operations will follow in the coming months.

Renold has also commenced trading in the new Chinese location on the group’s new standard ERP (enterprise resource planning) and ancillary systems.

Further capital investment in enhanced manufacturing capability of £2.3m is under way.

Meanwhile, the board is considering whether moving the group’s Stock Exchange listing to AIM would provide it with the ability to execute transactions with greater efficiency and certainty.

Chief executive Robert Purcell said: “I am pleased to report that we have made good progress in addressing the short-term issues encountered last year.

“As a result, adjusted operating profit has improved significantly and adjusted EBITDA of £11.9m is the highest delivered in the first half of a year under the strategic plan.

“The improvement is most pronounced in the chain division, where we are seeing benefits from the many actions implemented.”

He added: “Our strategy is delivering a more robust, higher margin business and we look forward to continuing current momentum into the second half of the year.”

The company has also announced the appointment of Tim Cooper to the board as a non-executive director.

Hewill also be appointed to the audit committee, the remuneration committee and the nomination committee.

Tim has significant experience at senior levels of international businesses in the industrial sector.

He is currently an executive director at Victrex plc and managing director of the industrial division. Prior to joining Victrex in 2010, he held senior leadership positions at Umeco Plc, Tellermate Plc and Avery Berkel.

Following today’s announcement, a note from investment bank and stockbroker N+1 Singer said: “Renold has delivered very strong growth for H1 19, with adjusted PBT up 36.7%.

“This was driven by good organic sales growth and a significant recovery in margins from its larger chain division.

“Management has guided to FY19 results slightly ahead of current expectations.

“We anticipate increasing our forecasts modestly in line with this guidance.

“The shares remain on a valuation discount to the sector and we are happy to reiterate our Buy recommendation.”

Speaking to TheBusinessDesk.com today, Mr Purcell said the possible shift to AIM would be to facilitate future acquisitions.

He said: “We will talk to various stakeholders and see what their take on the whole idea is.

“We are considering it to facilitate acquisitions.

“It will enable us to talk to private vendors with more certainty on the outcome.

“If we are talking to private individuals to sell their businesses, one of the things they are looking for is certainty of outcome.”

He said the board will talk with stakeholders, but he doesn’t see discussions as being a drawn out process.

Referring to today’s results, he added: “We are very pleased. We have had a very good first half of the year and continued progress in the second half.

“The strategic things we are doing are starting to slot into place.”