LONDON (ShareCast) - (Sharecast News) - Renold's shares rose more than 15% on Tuesday morning as the maker of industrial chains, gears and couplings predicted stronger margins after business improved in the second half of its financial year.


Reporting results for the year to the end of March, Renold also said it achieved underlying organic revenue growth for the first time in several years.

Adjusted annual operating profit edged down to £14.2m from £14.5m as underlying revenue rose to £191.6m from £184.6m.

The company said profit was disappointing but that it had remained broadly stable as the cost of materials, and steel in particular, rose. Renold was also affected by machine breakdowns at a factory in Germany, resulting in reduced capacity and higher shipping costs.

Fully listed Renold said it had been too slow to pass on rising raw materials costs to customers but that it was now making good progress in doing so. With market conditions picking up, profit margins should continue to improve as they did in the second half, Renold said. Adjusted operating profit increased in the final six months of the year to £8.2m from £7.5m.

The company's shares rose 16.2% to 26.5p at 10:01 BST.

Robert Purcell, Renold's chief executive, said: "Through a combination of strategic action and improving market conditions, we have delivered organic revenue growth for the first time in a number of years. Order intake continues to remain strong with order books meaningfully ahead year-on-year.

"For the year ahead, we expect growth to continue as improving macroeconomic conditions strengthen order intake. Those same macroeconomic conditions are resulting in inflationary pressures on raw material costs and labour rates, which have also been impacted by legislative changes in some territories.

"Despite this, we expect growth, recovery of material price increases and continued efficiencies to overcome cost pressures and deliver improved adjusted operating profit margins."

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