Renold posts strong first-quarter performance
By Josh White
Date: Tuesday 05 Sep 2023
(Sharecast News) - Renold reported strong financial performance in the first quarter in a trading update on Tuesday.
The AIM-traded firm, which was holding its annual general meeting, said revenue for the period totalled £85.1m, representing a year-on-year increase of 16.6% at reported rates, and 18.7% when adjusted for constant exchange rates.
That included a £5.4 million contribution from YUK, a company acquired in August last year.
Despite the promising revenue growth, Renold's order intake for the period experienced a slight decline.
It amounted to £74.2m, down 2.7% from £76.3m in the same period last year, or a 1% decrease when considering constant exchange rates.
YUK contributed £4.9m to the order intake.
Although the current order book of £86m remained robust, it had decreased by 13.6% from the record high at the end of the last financial year.
The company attributed the decline to an improvement in global supply chains and shorter delivery times, allowing customers to place fewer forward orders.
Renold announced the acquisition of the trading assets of Davidson Chain, based in Melbourne, Australia, on 1 September.
The acquisition was expected to enlarge Renold's Australian chain business by 26%, and was in line with its strategy to expand its geographic presence and market share through high-quality bolt-on acquisitions.
It reported net debt of £23.3m as of 31 July - a 21.8% reduction from £29.8m on 31 March as a result of robust cash generation during the reported period.
However, net debt was expected to increase slightly at the half-year mark, due to the payment of £1.7m of deferred consideration for the YUK acquisition and the £3.1m purchase consideration for Davidson.
In addition, the group said it was planning to bring forward a £2.6m second-half pension contribution to achieve efficiency gains in its investment portfolio.
"Global markets continue to be uncertain, with ongoing labour cost inflation and material costs remaining high when compared to historic levels," the board said in its statement.
"Whilst there is a normalisation of demand in some of the group's end markets, the group retains strong order books which remain high by historical standards, despite a shortening of lead times, reducing the overall quantum.
"As a result of the continued positive trading momentum, and an increase in activity from the recently announced Davidson acquisition, the board now anticipates achieving results for the year ending 31 March higher than previously expected."
At 0914 BST, shares in Renold were up 1.12% at 31.09p.
Reporting by Josh White for Sharecast.com.
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