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A n n u a l
R e p o r t
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Contents
Financial Summary
Directors and Officers
Chairman’s Statement
Chief Executive’s Review
Financial Review
Report of the Directors
Corporate Governance
Remuneration Report
Statement of Directors’ Responsibilities
Report of the Auditors
1
2
4
6
11
13
16
18
21
21
Accounting Policies
Group Profit and Loss Account
Balance Sheets
Group Cash Flow Statement
Other Group Statements
Notes on the Accounts
Principal Subsidiary Companies
Group Five Year Financial Review
Notice of Meeting
Financial Calendar
22
24
25
26
27
28
41
42
43
45
Renold manufacturing operations
Renold sales locations
Renold overseas distributors
Principal Activities
Renold plc is an international engineering group, producing a wide
range of precision engineering products, and owning manufacturing and
merchanting operations in seventeen countries.
The Group’s principal products include transmission and conveyor
chains; gearboxes and mechanical variable speed drives; clutches,
couplings and spindles; specialist machine tools and compressor rotors.
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Financial Summary
for the financial year ended 3 April 1999
Turnover
Trading profit before exceptional redundancy and restructuring costs
Profit before tax and before exceptional redundancy and restructuring costs
Profit before tax
Adjusted earnings per share
Basic earnings per share
Dividends per ordinary share, paid or proposed
Capital expenditure
Net cash
1999
£m
1998
£m
171·6
183·6
14·0
14·2
12·4
13·5p
11·1p
9·25p
11·3
10·8
22·4
22·5
22·5
25·7p
25·7p
9·0p
9·6
22·3
Turnover
£ m
Profit before tax
£m
Basic earnings / dividends
Pence per share
25
20
15
10
5
0
22.5
21.5
18.7
Basic earnings
Dividends
30
25
20
25.7
22.7
20.8
11.6
12.4
15
13.6
10
5
0
11.1
9.0
9.25
8.0
7.0
4.5
95
96
97
98
99
95
96
97
98
99
200
150
148.7
179.3
180.3
183.6
171.6
95
96
97
98
99
100
50
0
1
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Directors
for the financial year ended 29 March 1997
Standing (l to r): Tim Fortune, Ronnie Kershaw, Mark Smith, Ian Trotter. Seated (l to r): John Allan, Roger Leverton, David Cotterill
Roger Leverton (age 60)
Chairman
was appointed a non-executive Director in October 1998 and
became Chairman in December 1998. He is also Chairman of
engineering group Haden MacLellan Holdings plc, Chairman of
Betts Group Holdings Limited, a non-executive Director of
Smiths Industries plc and was previously Group Chief Executive
of Pilkington plc from 1992 to 1997.
Tim Fortune (age 60)
Non-Executive Director
was appointed to the Board in 1997. He is also Chairman and
was formerly Chief Executive of Spirax-Sarco Engineering plc.
Mark Smith (age 60)
Non-Executive Director
was appointed to the Board in 1994. He is also a Director of
The Laird Group PLC, the Bradford & Bingley Building Society
and was formerly a Director and Vice Chairman of S G Warburg
& Co Ltd.
David Cotterill (age 56)
Chief Executive
joined the Group and was appointed Chief Executive in 1992.
An MBA, he was previously an executive Director of Fenner PLC
and Senior Engineering plc. He is a non-executive Director of
British Vita PLC.
John Allan (age 58)
Finance Director
joined the Group and was appointed a Director in 1987. A
chartered accountant, he was previously Finance Director of
Mardon Packaging International Limited, an operating group of
B.A.T Industries plc.
Ronnie Kershaw (age 53)
Managing Director –
Engineering Products Businesses
joined the Group in 1962 and was appointed a Director in 1997.
A chartered engineer, he has held a number of senior
management positions within the Group including the post of
Managing Director of the Holroyd Machine Tool business 1982-
1997.
Ian Trotter (age 55)
Managing Director –
Chain Businesses
joined the Group and was appointed a Director in 1991. A
chartered engineer, he had previously held senior management
positions within ACI Limited and Trinova/Vickers Systems
Limited.
2
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Directors and Officers
for the financial year ended 29 March 1997
Chairman
R F Leverton (appointed a Director 19 October 1998 and Chairman 4 December 1998)
Executive Directors
D Cotterill Chief Executive
J H B Allan Finance Director
R B Kershaw
I R Trotter
Non-Executive Directors
T B Fortune
M A Smith
Composition of Board Committees
Nomination Committee
R F Leverton (Chairman)
D Cotterill
T B Fortune
M A Smith
Remuneration Committee
R F Leverton (Chairman)
T B Fortune
M A Smith
Merchant Bankers
J Henry Schroder & Co Limited
Stockbrokers
Warburg Dillon Read
Registrar
Northern Registrars Limited
Northern House
Penistone Road
Fenay Bridge
Huddersfield HD8 OLA
Telephone: +44 (0)1484 606664
Audit Committee
M A Smith (Chairman)
T B Fortune
R F Leverton
Company Secretary
G R Newton
Registered office
Renold House
Styal Road
Wythenshawe
Manchester M22 5WL
Registered No. 249688
Telephone: +44 (0)161 437 5221
Fax: +44 (0)161 437 7782
E-mail: enquiry@renold.com
Website: www.renold.com
Auditors
PricewaterhouseCoopers, Manchester
3
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Chairman’s Statement
for the financial year ended 29 March 1997
This is my first report
to shareholders since
I became Chairman of
Renold last
December.
It has been a
challenging year for
the Group, with
market conditions
more difficult than
have been
experienced for
several years, and this has led to lower results in line
with market expectations. Profit before tax (and before
redundancy and restructuring costs of £1·8 million) was
£14·2 million (1997/8 - £22·5 million) on a turnover of
£171·6 million (1997/8 - £183·6 million). Adjusted
earnings per share were 13·5 pence (1997/8 - 25·7
pence), after a higher tax charge than last year.
The Board is recommending the payment of a final
dividend of 6·15 pence per share, up from 5·9 pence
per share last year. Together with the interim dividend
of 3·1 pence per share paid on 29 January 1999 as a
Foreign Income Dividend (“FID”), this gives total
dividends for the year of 9·25 pence per share which
represent an increase of 2·8% compared with dividends
of 9·0 pence per share paid last year. The total dividend
is covered 1·5 times by adjusted earnings.
The Group’s effective tax rate has increased from
22% last year to 38% this year. Last year’s tax rate
benefited from a credit of £0·8 million relating to the
1996/7 final dividend, and from payment of both interim
and final dividends for 1997/8 as FIDs, and without these
benefits the rate would have been 32%. This year the
rate has increased mainly due to accelerating UK taxable
income into 1998/9 to utilise surplus Advance
Corporation Tax prior to its abolition on 6 April 1999.
This will benefit future years, and it is expected that
the underlying tax rate for the current year will fall to
around 30%.
The Group’s strategy is to develop a number of
related businesses producing a wide range of precision
engineered products, which have a strong international
market share and technological leadership, where the
barriers of entry are high for potential competitors and
where there is price leadership in the market. Emphasis
on developing these businesses in growth markets and
4
with growth customers is key to the success of the
Group. Investment will be focused continually to
reduce costs and improve products in order to
strengthen profit growth, and we shall search for new
businesses to acquire which have similar product
technology and market characteristics to our own.
In line with this strategy, the Group purchased Jones
& Shipman p.l.c. on 31 December 1998 for £12·1 million
including acquired borrowings. Jones & Shipman designs
and manufactures a wide range of precision grinding and
superabrasive machine tools for customers in the
aerospace, automotive, defence and many other
industries. It complements our existing machine tool
business, Holroyd, which supplies sophisticated milling
and thread grinding machines principally into the screw
compressor market. The combined product range of
Jones & Shipman and Holroyd provides a comprehensive
portfolio of world class grinding machines and an
international customer service network, which will allow
the Group to target a much larger market for machine
tool sales.
Performance in our main geographical regions was
mixed. In the UK, trading conditions were weak
throughout most of the year, with demand depressed by
the continued strength of the pound and the impact of
economic weakness in South East Asia. Prompt action
was taken to address all areas of cost, including
reductions in the UK workforce, mainly in the
Engineering Products businesses. Demand was
particularly weak in the third quarter exacerbated by
customer destocking, but since the turn of the year the
UK businesses have shown some signs of recovery.
Despite the general buoyancy of the American economy,
sales to our customers in the USA suffered from the
“knock-on” effects of the problems in South East Asia.
In contrast, our important businesses in mainland Europe
performed well and achieved sound growth supported
by healthy order books.
The Chain businesses achieved encouraging sales and
profit growth in the operations in mainland Europe.
Demand for automotive cam drive systems for new
engine models increased rapidly, and will continue to rise
this year, with a new system for a world engine for a
major US customer entering production. Substantial
investment is being made in additional production
capacity at Calais to satisfy this demand. The German
business achieved record sales and profits, with exports
particularly buoyant, and the merchanting businesses
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Chairman’s Statement
for the financial year ended 29 March 1997
throughout Europe performed well, with Benelux
and Switzerland outstanding. In contrast, the UK
market was depressed, as the strength of the
pound and weak economic conditions in the Far
East reduced export prospects and led to lower
domestic demand. Despite this, the UK chain
business earned sound, although lower, profits.
The Engineering Products businesses, which
are predominantly UK based, were particularly
affected by the slowdown in both home and
export markets. Rapid action was taken to reduce
costs significantly. The Holroyd machine tool and
rotor business experienced a shortage of new major
customer projects until, in March 1999, Holroyd won its
largest ever order for a machine tool package, for a
North American airconditioning manufacturer.
Immediately following their acquisition, and in line with
our initial plans, the Jones & Shipman businesses were
restructured and their cost base substantially reduced, at
a cost of £0·7 million. Since acquisition, orders have
been won for the new Dominator grinding machines for
the UK aerospace industry. The Milnrow gear box
business also suffered from the lack of large capital
projects, but the UK coupling businesses had a
satisfactory year, with Hi-Tec Couplings in Halifax again
achieving higher sales and profits.
In North America, the distribution businesses
performed well, but the large couplings manufacturing
business, after a strong first half, suffered from a
downturn in demand from the US steel industry.
Elsewhere the businesses in Australasia, the Far East
and South Africa continued to be affected by weak
economic conditions. However, during the latter part of
the year, orders for several large projects were taken in
Australia and New Zealand, and these will benefit the
current year.
Capital spending at £11·3 million was 18% up on last
year. This included additional production capacity for
the automotive systems business and further investment
at Holroyd in the dedicated rotor manufacturing cell for
a major US customer, as well as the continual updating
of production facilities in other businesses. Operating
cash flow remained healthy at £23.8 million and, despite
this substantial capital investment and the purchase of
Jones & Shipman in the year, the Group balance sheet
continues to be strong, with net cash of £10·8 million at
the year end.
5
The Group’s stand at Hannover Messe 1999 – an important meeting place for customers
from around the world
Directors
I was appointed
to the Board on
19 October 1998 and became
Chairman on 4 December 1998, following the
retirement of Peter Frost. Peter, who had been a non-
executive director of Renold since 1984 and Chairman
since 1986, took over the chairmanship at a time when
the Group was in serious difficulties, and made a
significant contribution to the resurgence of Renold as a
leading precision engineering group. Rab Telfer, who
was also appointed a non-executive director in 1984,
retired on 20 November 1998. Rab always provided
the Board with sound advice and guidance, and made a
valuable contribution to the progress of the Group.
Employees
During my visits to a number of the Group’s businesses
in the UK and Europe, I have been impressed by the
commitment and dedication of employees at all levels.
This has been a difficult year for many of them, and their
response has been admirable.
Prospects
Trading conditions continue to be mixed. Whilst the
UK market is still depressed by the strength of sterling
against the Euro, our businesses in mainland Europe
remain robust. In the current year exports to North
America are growing and there are the first signs of
recovery in Australasia and the Far East. With benefits
from the Group’s lower cost base and a clear indication
of a bottoming out in order intake, we expect to see a
steady improvement in performance as the year
progresses.
Roger Leverton
55643PRE 30/6/99 10:52 am Page 6
Chief Executive’s Review
for the financial year ended 29 March 1997
What a tough year!
Although total sales fell
by 9% on a direct
comparison with the
1997/8 financial year,
sales by the UK
businesses dropped by
20%. Unfortunately this
led to over 200
employees being made
redundant in the UK,
14% of the workforce.
The UK
manufacturing operations felt the full impact of the
strength of the pound. In addition we underestimated
the consequences of the turmoil in the Far East
economies to ourselves and also to large customers in
the UK and the USA. One by one customers cut
forward order schedules from normal to zero whilst they
re-balanced inventories or readjusted to the fall in
demand. The fall in demand was particularly noticeable
in the second and third quarters of the year and UK
orders fell year on year by over 25% for three
consecutive months. Happily, in the last quarter, there
was some recovery in orders and rebuilding of the order
book.
On the credit side, prompt action was taken to
address the situation. Cut backs were instigated quickly
and inventories reduced in proportion to the fall in sales.
Some customers attempted to stretch their payment
timings, but overall working capital fell more than the
drop in sales and cash management systems once again
proved resilient to market fluctuations. Despite the
increase in capital expenditure to £11·3 million in the
year and the purchase of the Jones & Shipman
businesses, year end net cash was nearly £11 million.
The highlight of the year was an excellent
performance from the German chain business. Whilst
domestic sales were never buoyant, exports rose
significantly, helped by the weakness of the deutschmark,
and benefits were realised from recent investment in
new automatic process, heat treatment and assembly
equipment, as well as from better work flows. The net
result has been an encouraging increase in factory
efficiency and more improvements are planned this
year, the ninetieth anniversary of the operation. Profits
were well ahead and the return on trading assets was
above 25%.
The Calais plant celebrated its centenary last year
and, one hundred years after Arthur Brampton, a
Birmingham engineer, established a cycle chain factory in
Calais, he would have been proud to have seen the
display of modern cars and automotive engines which
6
are now synchronised by sophisticated Renold
Automotive timing systems. He would have taken great
satisfaction from seeing the design engineering and
engine test facilities, as well as witnessing the skills of
enthusiastic engineers at the open day which formed the
centre piece of the celebrations. As luck would have it
the celebrations came at a time of peak demand on the
factory.
Sales of automotive systems increased by almost
40% to record levels during the year and the
manufacture of chain for the industrial market was
switched to other plants to relieve the extreme pressure
on the Calais facility. Actual demand from automotive
customers was some 50% higher than the forward
projections on which our investment plans had been
based. As a consequence profitability suffered from
excess overtime at weekends and through the holidays,
and from increased machine breakdowns. Although
investment plans were accelerated, the lead time for
new equipment is on average six months. Nearly
£3 million of new equipment was installed during the year,
but profits only started to benefit from this investment
during the last quarter. Further investment in new heat
treatment, bush curling and assembly equipment is being
made in the current year, some of which is being built in
other Group factories. This should lead to greater
production efficiencies and increased profitability.
The other much smaller “Brampton” factory at Seclin
had a more stable year. Demand for its heavy duty
conveyor chain was not strong and profits suffered
Fully automated handling systems rely on Renold chains
55643PRE 30/6/99 10:52 am Page 7
Chief Executive’s Review
slightly. Orders for industrial chain in the French market
were static, although there were one or two successes in
new market areas.
Orders for chain in the UK fell by more than 20%
during the year but, like our other UK businesses, the
greatest fall was in the second and third quarters of the
year and the order position had improved by the year
end. The factories were cushioned from the worst of
the fall in UK orders by demand from overseas,
particularly for Europe. Nevertheless employee numbers
had to be cut back to maintain efficiency. Whilst the fall
in profitability was significant, profit remained at a
healthy level.
This was not the case in our other power
transmission manufacturing plants in the UK. The Halifax
Hi-Tec coupling plant was the exception, enjoying
another excellent year following large orders won in the
previous year. £1 million has been spent on two large
machining centres which greatly improved manufacturing
efficiency. Order intake was more modest but should
lead to another satisfactory performance this year, albeit
lower than last year’s record level.
The other UK manufacturing businesses had a torrid
time. The economic problems in the Far East hit
Holroyd and the Gears businesses directly, and Holroyd’s
air conditioning OEM customers in the USA were also
severely affected by the cutback in new construction in
their Asian markets. Both Gears and Manifold suffered
from the strength of the pound in sales to “Euroland”
where either margins had to be sacrificed or business
was lost. In addition UK customers’ own activity
suffered as exporters were squeezed by the pound’s
strength, whilst distributors destocked as the UK
manufacturing economy hit the doldrums. Following the
compulsory purchase of its leased site, Manifold is being
relocated to a modern new factory at Loughton, Essex.
The Cardiff couplings business and the Bradford
hydraulics and variators business had similar tales of woe.
In total UK profits fell £8·4 million compared with the
previous financial year.
Despite the setback in demand capital investment
continued in the UK businesses and plans are in place for
further investment in the current year to improve the
quality specification of our products, and to further
improve manufacturing efficiency.
The small European resale businesses had a very
satisfactory year. In by no means buoyant market
conditions a modest increase in sales produced a 22%
increase in profits. The Austrian, Benelux and Swiss
businesses were the star performers but once again
more than useful profits were generated by the Danish
and Swedish businesses.
7
A 25-tonne Renold Hi-Tec coupling being installed at
Mannesmann’s steel works in Germany
Sales in North America fell in the year, and a
significant drop in demand in the third quarter affected
second half results. The biggest fall in orders came from
steel manufacturing customers where the impact of the
collapse of the value of Asian currencies led to greater
competition from Asian steel mills, and then to a
temporary standstill in orders. The situation eased
considerably in the fourth quarter with orders 10%
higher than in the same quarter last year.
Renold Power Transmission Corporation, the resale
business for the USA based in Cincinnati, made good
inroads into the US escalator and elevator market and,
after its rapid growth over the past four years, is being
relocated into larger premises. The Renold Ajax
coupling factory at Westfield, upper New York State,
has been modernised with virtually all its machine tools
either new or refurbished during the past four years. In
the first half of the year large sales were made to the
steel industry and in the second half orders were won
for couplings for mass transit railway systems. The
Canadian resale business produced another solid
performance to mark the retirement of the MD, Keith
Bank, after 43 years’ service with the Group. In his five
year stint as MD he produced record sales and profits,
and Renold Canada won our “Top Business of the Year”
award in two of those years. We thank Keith for his
significant contribution to the Group.
For most of the year the Australian, New Zealand,
Malaysian, Singaporean and the South African businesses
had a tough time. Orders and sales fell from the lows of
the previous year and much of the year was spent in
cost cutting and retrenchment. However, there was an
upturn in orders in Australia and New Zealand in the
55643PRE 30/6/99 10:52 am Page 8
Chief Executive’s Review
continued
second half which started to flow through into profits by
the final month of the year. Both businesses ended the
year with much healthier order books than the previous
year. There were encouraging signs, also, in Malaysia and
Singapore which produced good results in the difficult
trading environment. In South Africa, there has been a
major restructuring of the business, consolidating
operations in the facility in Johannesburg with a 40%
reduction in employee numbers.
The acquisition of Jones & Shipman p.l.c. and its
fit with Holroyd
The Holroyd machine tool business is a great strength
within the Renold Group. Holroyd has consistently
produced excellent results even when other core
businesses were struggling. Although Holroyd had a
difficult year we believe that this is an exception. It is a
niche business specialising in machine tools for volume
production of helical forms with consistent high accuracy.
Its markets are very focused - screws for pumps for air
conditioning, chilling, vacuums, and superchargers.
It has developed from high speed milling to high speed
grinding, but has not yet been able to expand its
customer base successfully into other end use
markets.
Jones & Shipman manufacture a wide range of cylindrical and creepfeed
grinding machines
Jones & Shipman, which was acquired on
31 December 1998, produces high speed grinding
machines for volume production of specialist
components for specialist markets - turbine blades,
medical instruments, high accuracy automotive
components. Holroyd’s machine tools can also be sold
8
Edgetek Machine Corporation manufacture a range of
superabrasive machining and turning systems
to Jones & Shipman’s customers, and Jones & Shipman’s
machines can be sold to Holroyd’s customer base. The
two businesses also complement each other
geographically, Holroyd is strong in the Far East whereas
Jones & Shipman is stronger in Europe - each business
has its own selling organisation in these areas.
Both have in-house sales and service facilities in the
USA. Virtually every Jones & Shipman and
Holroyd machine tool in the current range has
been developed in the past five years. Jones &
Shipman has world class products in cylindrical,
surface and superabrasive grinding. Jones &
Shipman is a strong brand, with technical
leadership and a high market share in the markets
in which it operates. Its focus on aerospace and
industrial turbine rotor manufacturing fits the
Renold strategy of focusing products on growth
customers in growth markets.
55643PRE 30/6/99 10:52 am Page 9
Chief Executive’s Review
of introducing these new systems speedily. Since then
everyone caught the train, enjoyed their first journey,
and today Renold has an impressive Group-wide Intranet
communication system, as well as a growing reputation
for an effective position on the Internet.
The Group can now communicate speedily and
exploit an ever growing amount of database information
around the world. In this respect I mentioned last year
that the Bredbury chain factory was quoted as a
reference by IBM/Lotus for the use of Lotus Notes® in a
manufacturing environment. The use of this electronic
network system is now being exploited in all areas of the
business for sharing technical information, product
development, customer trends, health and safety issues,
as well as important financial data. During the year we
received our first orders through the Internet via our
website www.renold.com and we are committed as
an organisation to develop such facilities to the ‘outside
world’, as well as to customers and suppliers.
Two major preoccupations during the year have
been the introduction of the ‘Euro’ (and making sure
systems could cope) and dealing with problems
associated with the year 2000 - the so-called millennium
bug. The introduction of the Euro has caused no real
problems. Many of our larger customers have already
insisted that they are invoiced in and pay in Euro. In
addition, benefits have been realised from our ability to
use the Euro for intra Group financing without any
currency risk exposure. Most of the new computer
systems to replace non-compliant year 2000 systems are
up and running. The remainder are due to be in place
over the next few months. As a result of all the effort
to overcome the impact of the “bug” we are benefiting
from the introduction of new state of the art computer
systems in various operations.
www.renold.com – the Group’s internet website home page
Holroyd’s new TG150E thread grinding machine with a fully
automated component loading system
Last year, Jones & Shipman experienced a downturn
in orders which exposed its fragile cash resources after a
period of heavy R&D expenditure and product launch
costs, and this presented Renold with the acquisition
opportunity. Jones & Shipman had bought a
superabrasive machine tool business, Edgetek Machine
Corporation, in the USA during a period of market
strength in the previous year, and also has an interesting
operation in Goodwin Electronics, which will strengthen
the control system technology available to the machine
tool businesses. Following acquisition the cost base of
the Jones & Shipman businesses was reduced, resulting in
20% of the workforce being made redundant. By the
end of the year the Jones & Shipman International
operation based at Leicester had made good progress,
but the smaller Edgetek operation continues to require
considerable management attention. With only a gentle
upturn in machine tool orders the Jones & Shipman
businesses should make a significant contribution to
Group profits.
“E” and “I” Communication
Until a year ago Renold’s approach to electronic
communications was fragmented. Only two or three of
our businesses had developed electronic network
communications systems, following the installation of
new computer systems. Two years ago senior
executives attended courses of telecommunications
providers and were impressed by the speed of growth
of such systems. It was clear that Renold, as a total
organisation, had to be on the “E” (electronic) and “I”
(Internet and Intranet) trains quickly. Some changes
were made in the organisation to reflect the importance
9
55643PRE 30/6/99 10:52 am Page 10
Chief Executive’s Review
continued
Installation of Renolube chain on one of Merseyrail’s public escalators
It is disappointing to have had to make such a large
number of employees redundant during a year when
trading conditions have been so difficult. Nevertheless at
the same time a great deal of investment has been made
in people, whether it be in training or in making the
working environment a better and safer place. Health
and safety issues have moved up the agenda over the
past two years, not just because of legislation, but
because of the serious commitment of employers to a
safe and healthy working environment. Capital
expenditure has underwritten this commitment. On the
training front two UK factories are being assessed for
Investors in People accreditation over the next few
months. Links have been strengthened with local
schools and colleges, and we continue to support
research programmes at a number of universities.
The investment in product development continues.
A new specialised thread grinding machine is being
developed by Holroyd. The Gears business is introducing
a new range of gearboxes. Hi-Tec Couplings has
introduced a new range of rubber to metal bonded
10
couplings for use with large diesel engines. Two new
exciting chain derivatives are currently under test. The
automotive systems business is constantly working on
new system designs for the world’s auto makers. Jones &
Shipman has just completed a massive upgrade of its total
product range and, with the superabrasive techniques
from Edgetek, offers to customers in the aerospace,
medical and automotive industries up to tenfold
productivity gains in the precision production machining
of components.
Has the strategy failed? A 9% drop in sales would
suggest so. Unfortunately recent successful growth
market sectors such as information systems, financial
services and medical care do not consume many chains
or other power transmission products. Other growth
areas like pharmaceuticals and oil which do use Renold
products have been subject to consolidation and plant
closures. Only the automotive industry has provided
significant growth opportunities, from which we have
benefited with new product launches by particular target
customers. Other target areas such as escalator,
elevators, mass transit railway systems, fork lift trucks,
automatic warehousing, packaging equipment, theme
leisure park equipment and particularly air conditioning
and chilling all suffered pauses and declines from their
strong growth patterns of the previous five years. Much
of the decline can be attributed to the problems in the
Far Eastern economies. Indeed sales to the palm oil
processing market remained at the same level as the
previous year after five years of 20% compound growth.
After the gloom of the year under review there is
more optimism running through the organisation. The
first half of last year was notable for its lack of project
orders whereas towards the end of the year significant
orders were received for new steriliser installations, major
escalator projects, and a major order for a manufacturing
cell for a US air conditioning OEM. At the same time the
pace of orders is increasing from the Far East and
Australasia. The benefit of this increase in orders should
start to be felt by the second quarter of the current year.
The strategy is intact. The growth customers have
paused and consolidated, but their long term growth will
endure, as will that of the Renold Group.
David Cotterill
55643PRE 30/6/99 10:52 am Page 11
Financial Review
Profit and loss account
Sales turnover was £171·6 million compared with £183·6
million last year. Excluding the contribution from the
Jones & Shipman businesses, which were acquired on 31
December 1998, this was 9% lower than the previous
year. In difficult market conditions lower sales by our UK
businesses, and by the operations in Australasia and the
Far East, were partly offset by the significant growth of
the Automotive Systems business in Calais, and by a
good performance from the Group’s other European
businesses. In North America, after a strong first half,
demand turned down as the US steel industry suffered
from import penetration by Asian manufacturers.
Trading profit before exceptional redundancy and
restructuring costs was £14·0 million, compared with
£22·4 million in 1997/8, including a loss of £0·3 million
by the Jones & Shipman businesses following acquisition.
Operating margins, for the ongoing businesses, were
8·5%, compared with 12·2% last year. The trading profit
by geographical region of operation, shown in Note 1 to
the Accounts, shows the impact on UK profits of the
weakness in UK domestic and export markets; demand
in the third quarter was particularly weak, but was
followed by an encouraging improvement in the final
quarter. In Germany profits rose to a new record level,
and there were gains in France and in the rest of Europe.
North America was below last year’s good performance,
and profits in the rest of the world (Australasia, Far East
and South Africa) were adversely affected by the
economic conditions. Exceptional redundancy costs of
£1·1 million were incurred in the ongoing businesses,
largely in the UK, as prompt action was taken to reduce
employment levels in line with demand. Immediately
following the acquisition of Jones & Shipman, £0·7
million was spent restructuring the organisation and
reducing the size of the workforce.
The Group’s return on average trading assets
remained healthy at 17·1%, although this was down on
the record level of 27·9% achieved last year. Net
interest receivable was £0·2 million, up from £0·1 million
in 1997/8. Profit before tax for the year, before the
redundancy and restructuring costs, was £14·2 million
compared with £22·5 million last year.
The taxation charge amounted to £4·7 million,
representing an effective rate of 38%, compared with
22% in the previous year. Last year’s tax rate benefited
from a credit of £0·8 million relating to the 1996/7 final
dividend, and from payment of both interim and final
11
dividends for 1997/8 as FIDs, and without these benefits
the rate would have been 32%. This year the rate has
increased mainly due to the decision to accelerate UK
taxable income into 1998/9 to utilise surplus Advance
Corporation Tax prior to its abolition on 6 April 1999.
This decision will benefit the tax rate in future years, and
it is expected that the underlying tax rate for the current
year will fall to around 30%.
Reported profit after tax was £7·7 million compared
with £17·6 million last year. Adjusted for the
exceptional redundancy and restructuring costs, this
represents earnings per share of 13·5 pence, compared
with 25·7 pence earnings per share last year. The total
dividends paid and proposed of 9·25 pence per share
represent an increase of 2·8% over the dividends paid
last year, and are 1·5 times covered by adjusted earnings.
The world’s leading material handling specialists rely on Renold fork
lift truck chains
The principal funding for the Group in the UK is
through unsecured term loans and overdraft facilities
with our clearing banks, whilst overseas subsidiaries have
borrowing facilities with their local banks. The undrawn
committed borrowing facilities are more than adequate
to meet the foreseeable requirements of the Group.
The exposure to interest rate fluctuations on the UK
term loans of £5·7 million has been managed by using
interest rate swaps. The weighted average interest rate
at 3 April 1999 on these loans, after taking account of
interest rate swaps arranged in May 1995, was 9·2% per
annum. Whilst the swaps were fixed when interest
rates were substantially higher than at the present time,
these fixed rates have a weighted average period in
excess of a further seven years. Cash deposits are
placed short term with banks where security and liquidity
are the primary objectives.
A major exposure of the Group relates to currency
risk on its sales and purchases made in foreign (non-
functional) currencies, and to reduce such risks these
transactions are covered, as commitments are made,
primarily by forward foreign exchange contracts. Such
commitments generally do not extend much further than
two to three months beyond the balance sheet date,
although exceptions can occur in the machine tool
businesses and elsewhere where longer term projects
are entered into.
John Allan
55643PRE 30/6/99 10:52 am Page 12
Financial Review
continued
Balance sheet
Goodwill of £2·9 million arose on the acquisition of
Jones & Shipman p.l.c.; in accordance with Financial
Reporting Standard (FRS) 10, this has been capitalised
and will be amortised over a 20 year period.
Group Trading Assets at year end were £89·7
million, up £10·8 million from the previous year, mainly
due to the acquisition of Jones & Shipman. Fixed assets
were £7·8 million higher; capital expenditure of £11·3
million was some 1·5 times depreciation of £7·5 million
and £3·3 million of assets were acquired with Jones &
Shipman. Shareholders’ funds increased from £86·0
million to £88·7 million, due to retained profit of £1·3
million and new share issues of £0·7 million, and a £0·7
million gain on exchange translation of the net assets of
the overseas subsidiaries.
Cash flow and borrowings
Cash flow from operating activities remained strong at
£23·8 million, compared with £29·2 million in the
previous year. Tight control was maintained on working
capital which was £3·8 million down, broadly in line with
the lower level of activity. Payments for fixed assets
amounted to £11·5 million, whilst tax and dividends cost
£12·7 million. The Jones & Shipman group was
purchased for £5·7 million, financed from the Group’s
cash resources; in addition we assumed £6·4 million of
Jones & Shipman’s own borrowings. After these
substantial investments, the Group’s balance sheet still
remained healthy, with cash, net of borrowings and
finance lease liabilities, of £10·8 million at the year end,
although down on last year’s level of £22·3 million.
Treasury and financial instruments
The Company has adopted FRS 13 – Derivatives and
Other Financial Instruments, for 1998/9. Numerical
disclosures, in accordance with that standard, are set out
in Note 25 on pages 39 and 40. Additional commentary
concerned with these disclosures is made below.
The Group Treasury policy, approved by the
directors, is to manage its funding requirements and
treasury risks without undertaking any speculative risks.
The Group does not use financial derivatives to hedge
currency translation exposure on its investments in
overseas subsidiaries. Except for the arrangements
referred to below for the management of foreign
currency and interest rate risks, the Group has not made
use of financial derivatives.
12
55643PRE 30/6/99 10:52 am Page 13
Report of the Directors
for the financial year ended 3 April 1999
To be presented to the sixty-ninth Annual General Meeting of Renold plc to be held at Renold House, Styal
Road, Wythenshawe, Manchester M22 5WL on Friday, 23 July 1999 at 2.30 p.m.
The Notice of Meeting is included on pages 43 and 44.
Group results
The profit for the year on ordinary activities before tax was £12·4 million compared with £22·5 million for the previous
year. After taxation, the profit attributable to ordinary shareholders was £7·7 million compared with £17·6 million last year.
There was a retained profit of £1·3 million after charging the cost of dividends of £6·4 million. Last year there was a
retained profit of £11·4 million after dividends of £6·2 million.
The principal activities of the Group are set out on the inside front cover and a review of the development of the
business is contained in the Chief Executive’s Review on pages 6 to 10.
An indication of future developments is also given in those pages and in the Chairman’s Statement on pages 4 and 5.
In the opinion of the directors, the activities of the Group are almost wholly within the power transmission sector of
the engineering industry and therefore the results are disclosed as one class of business.
Dividends
An interim dividend of 3·1 pence per ordinary share was paid as a Foreign Income Dividend on 29 January 1999.
A final dividend of 6·15 pence per ordinary share is now recommended which would bring the total payment for the
year to 9·25 pence per share compared with 9·0 pence per share for the year 1997/8. If approved, the final dividend will
be paid on 5 August 1999 to members appearing on the register on 25 June 1999.
Preference dividend payments were made on 1 July 1998 and 1 January 1999.
Acquisition
On 31 December 1998, the Group acquired the whole of the ordinary shares of Jones & Shipman p.l.c. for a cash
consideration, including costs, of £5·6 million. Subsequently, the Group has acquired the whole of the preference shares of
Jones & Shipman p.l.c. for £0·1 million in cash. Details of the acquisition are given on page 38.
Directors
The present constitution of the Board and of the Audit, Nomination and Remuneration Committees at the date of this
Report is set out on page 3.
Dr R G J Telfer resigned as a director on 20 November 1998 and Mr J P Frost resigned as Chairman and as a director
on 3 December 1998.
Mr R F Leverton was appointed a director on 19 October 1998 and as Chairman on 4 December 1998. Having been
appointed since the last Annual General Meeting and, being eligible, he offers himself for election at the Annual General
Meeting. He does not have a service contract with the Company.
Mr D Cotterill and Mr J H B Allan retire by rotation and, being eligible, offer themselves for re-election. Mr Cotterill
has a service contract which can be terminated by the Company giving three years’ notice, and Mr Allan has a service
contract which can be terminated by the Company giving two years’ notice
Biographical details of the directors are on page 2.
Directors’ interests
The interests of the directors and their families in the ordinary shares of Renold plc and in options held under share option
schemes are given in the Remuneration Report on pages 18 to 20. No director had any interests in contracts of
significance in relation to the Company’s business during the year.
13
55643PRE 30/6/99 10:52 am Page 14
Report of the Directors
continued
Special business – Annual General Meeting
Amendment to Articles – Variation to 6% cumulative preference stock of 580,482 £1 units
At the forthcoming Annual General Meeting the directors will propose an amendment to the Company’s Articles of
Association which refer to payment of the dividend on the 6% cumulative preference stock at a rate of 4·2% pursuant to
provisions of the Finance Acts 1972 and 1976. Following the abolition of advance corporation tax from 6 April 1999,
holders of the cumulative preference stock will be paid dividends at the rate of 6% per annum.
Power to allot shares and disapplication of pre-emption rights
The directors consider it desirable to renew the general authorities granted at the last Annual General Meeting with regard
to the allotment of shares in the Company and which will lapse on the date of the next Annual General Meeting or
22 October 2000, whichever is the earlier.
Firstly, the general authority, pursuant to Section 80 of the Companies Act 1985, enabling the directors to allot unissued
ordinary shares up to a nominal amount of £5,765,995 representing 33·33% of the current issued ordinary share capital
of the Company. Secondly, the authority to disapply Section 89(1) of the said Act, which gives pre-emption rights to
shareholders, to the allotment of shares for cash in connection with a rights issue, the Company’s share schemes (under
the limits of the above general authority) and otherwise up to a nominal amount of £864,899 representing 5% of the
current issued ordinary share capital of the Company. Except for the issue of shares pursuant to the Company’s employee
share schemes the directors have no present intention of issuing any part of the unissued share capital. Resolutions 7 and
8 will be proposed to give effect to these measures.
Share capital
Changes in share capital during the year are set out in Note 15 to the Accounts on page 35.
As at 4 June 1999, the Company had been notified, pursuant to the Companies Act 1985, as amended, of the following
interests in its issued ordinary share capital:
(i)
(ii)
Interests equal to or more than 10%
(which may include "material interests" notified to the Company under (ii) below)
Prudential Corporation plc
"Material interests" equal to or more than 3%
The Equitable Life Assurance Society
Britannic Assurance plc
Scottish Equitable plc
%
24·60
5·28
4·80
3·62
Employee share schemes
The profit sharing allocation of £340,000 set aside out of the profit on ordinary activities attributable to the UK companies
for 1997/8 was utilised to issue 185,058 ordinary shares under the Renold Employee Share Scheme. Each of 1,341 eligible
participants was allocated 138 ordinary shares in August 1998 at an initial market value of 183·1 pence per share.
The number of shares reserved for issue under the three employee share schemes is currently 6,919,195 being such
number of ordinary shares of 25 pence each as represents 10% of the ordinary share capital in issue from time to time.
Employment policies
Arrangements for consulting and involving employees on matters affecting their interests at work, and informing them of
the performance of their employing business and the Group, are developed in ways appropriate to each business. A variety
of approaches is adopted aimed at encouraging the involvement of employees in effective communication and
consultation, and the contribution of productive ideas at all levels.
The policy of the Company and its UK subsidiaries is to ensure that disabled applicants for employment are given full
and fair consideration, and that existing disabled employees are given equal access to training, career development and
promotion opportunities. In the event of employees becoming disabled whilst in the employment of the Company, all
reasonable means are explored to achieve retention in employment in the same or an alternative capacity.
14
55643PRE 30/6/99 10:52 am Page 15
Report of the Directors
Employees
At 3 April 1999 the Renold Group employed 2,881 people, including 1,551 in the UK and 839 in the rest of Europe.
Research and development
The research and development activities of the Group continue to be principally directed towards the development of
new products and manufacturing methods, and the improvement of performance and cost effectiveness of existing
products.
Expenditure on research and development in the year 1998/9 amounted to £1·9 million.
Policy on payment of suppliers
Individual operating businesses are responsible for agreeing the terms and conditions under which transactions with their
suppliers are conducted, including the terms of payment. It is the Group’s policy that payments to suppliers are made in
accordance with these terms, provided that the supplier complies with all relevant terms and conditions.
At 3 April 1999 trade creditors of the Group’s businesses in the UK and overseas represented 67 days’ purchases,
compared with 72 last year.
Donations
During the year contributions to UK organisations for charitable purposes amounted to £500 (1997/8 - £7,500).
There were no contributions made to political parties.
Auditors
Following the merger of Price Waterhouse and Coopers & Lybrand on 1 July 1998, Price Waterhouse resigned as auditors
in favour of the new firm, PricewaterhouseCoopers, and the directors appointed PricewaterhouseCoopers to fill the casual
vacancy created by the resignation. A resolution to reappoint PricewaterhouseCoopers as auditors of the Company will
be proposed at the Annual General Meeting.
Year 2000
The Group’s programme to address the Year 2000 issue has continued throughout the year. Considerable progress has
been made in replacing non-compliant computer systems and in verifying the compliance of machinery and other
equipment which could potentially be at risk. Communications are being maintained with key suppliers and customers to
assess their Year 2000 capability.
A limited amount of work remains to be done and it is intended that the Group will complete this in good time to
achieve an acceptable state of readiness. However, given the complex and pervasive nature of the problem, it is not
possible for any organisation to guarantee that no Year 2000 problems will occur.
The capital cost of new computer hardware and software purchased during the year to replace non-compliant systems
was £1·5 million, bringing the total over the last two years to £2·5 million; a further £0·3 million is budgeted for 1999/2000.
Other work to implement action plans is, in the main, being carried out by in-house personnel, the cost of which is not
separately identifiable.
By order of the Board
G R Newton
Secretary
14 June 1999
15
55643PRE 30/6/99 10:52 am Page 16
Corporate Governance
for the financial year ended 28 March 1998
The Combined Code
The Principles of Good Governance and Code of Best Practice prepared by the Hampel Committee (the "Combined
Code") was issued in June 1998 and has been appended to the Listing Rules of the London Stock Exchange ("the Listing
Rules"). The Company is required, under the Listing Rules, to include in its accounts statements as to how it has applied
the principles set out in the Combined Code and whether or not it has complied with the Code provisions throughout
the accounting year. The ways in which the Company applies relevant principles of corporate governance contained in the
Combined Code are described below and in the appropriate parts of this report.
Statement of Compliance
The Company has complied throughout the year ended 3 April 1999 with the provisions set out in Section 1 of the
Combined Code, with the following exceptions:
– the appointment of Mr M A Smith as senior independent director was made on 12 November 1998;
– the Remuneration Report on pages 18 to 20 draws attention to executive directors’ service contracts which are
subject to two years’ notice by either party and the service contract of Mr D Cotterill, Chief Executive, which is subject
to three years’ notice.
Board
The Board comprises a non-executive Chairman, two other independent non-executive directors and four executive
directors. The roles of Chairman and Chief Executive are held by separate directors. Biographies of the directors appear
on page 2.
The Board meets on a regular basis (eleven times in the last financial year) with an agenda and necessary papers for
discussion distributed in advance of each meeting.
The Board believes that the non-executive directors are independent and free from any business or other relationship
that could interfere with the exercise of their independent judgement.
Board members are able to seek independent legal or other professional advice in respect of their duties as they may
require at the Company’s expense and have access to the advice and services of the Company Secretary.
All directors are subject to election by shareholders at the first Annual General Meeting following their appointment
and to re-election thereafter at intervals of no more than three years.
Audit Committee
The Audit Committee is a committee of the Board comprised of the non-executive directors. The Committee is chaired
by Mr M A Smith and meets three times a year. The Chief Executive and Finance Director attend meetings at the request
of the Committee. Its terms of reference include the review of the Group’s financial statements, the review of internal
control systems and the conduct of the external audit.
Nomination Committee
The Nomination Committee is a committee of the Board comprised of the non-executive directors and the Chief
Executive, chaired by the Chairman of the Board, Mr R F Leverton. The Committee meets as required and its terms
of reference are to select and recommend any new appointments of either executive or non-executive directors
to the Board.
Remuneration Committee
The Remuneration Committee is a committee of the Board comprised of the non-executive directors and is chaired by
the Chairman of the Board, Mr R F Leverton. The Chief Executive attends meetings at the request of the Committee.
This Committee determines the terms and conditions of employment including remuneration of the executive directors.
The Remuneration Report is set out on pages 18 to 20.
16
55643PRE 30/6/99 10:52 am Page 17
Corporate Governance
for the financial year ended 28 March 1998
Internal financial controls
The Combined Code has introduced a requirement that the Directors review the effectiveness of the Group’s systems of
internal controls. However, formal guidance as to the review of non-financial internal controls has yet to be published and
we will report on this next year on the basis of that guidance. In the meantime, as allowed by the London Stock Exchange,
we continue to report solely on our review of internal financial controls.
The Group’s system of internal financial controls, for which the directors have overall responsibility, is designed to
safeguard the Group’s assets against unauthorised use or disposition, to ensure the maintenance of proper accounting
records and the reliability of financial information used within the business and for publication. These systems, by their
nature, can provide only reasonable, not absolute, assurance against material misstatement or loss.
The key features and procedures of the system of internal financial controls are as follows:
l
l
l
l
an organisation structure which supports clear lines of communication and tiered levels of authority;
a schedule of matters reserved for the Board’s approval to ensure it maintains control over appropriate strategic,
financial, organisational and compliance issues;
the preparation of detailed annual budgets covering profit and cash flow, which are approved by the Board; the
review of monthly detailed reports comparing actual performance with budget, and of updated financial forecasts;
procedures for the appraisal, approval and control of capital investment proposals including acquisitions and
disposals;
l monitoring procedures which include a system of key controls questionnaires supported by internal audit reviews.
The results of this work are reported to the Audit Committee.
The directors confirm that they have reviewed the effectiveness of the Group’s system of internal financial controls.
UK pension schemes
The UK pension schemes are defined benefits type schemes with assets held separately from those of the Group in trustee
administered funds, managed by independent managers. Under the terms of their management agreements the investment
managers of the schemes’ assets are not permitted to invest in the securities of Renold plc. The Boards of Trustees of the
principal schemes include employee representatives. Neither the Chairman nor the Chief Executive is a Trustee.
Going concern
After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the accounts.
Relations with shareholders
Meetings between directors of the Company and major institutional shareholders and fund managers are held at regular
intervals.
The Chairman of the Board and of the Audit, Remuneration and Nomination Committees, together with the executive
directors, are available at the Annual General Meeting to answer questions.
The Company has an Internet website on which it presents information about the Group.
17
55643PRE 30/6/99 10:52 am Page 18
Remuneration Report
continued
Remuneration Committee
The Remuneration Committee is comprised of the non-executive directors and is chaired by the Chairman of the Board.
The Chief Executive attends meetings at the request of the Chairman but does not take part in the Committee’s
deliberations or recommendations on his own remuneration.
The non-executive directors do not have service agreements and have no automatic right of re-appointment. They do
not participate in the Company pension or share option schemes and apart from their fees and expenses do not receive
any benefits from the Company.
The Committee determines the terms and conditions of employment including remuneration for the executive
directors. The Committee is also responsible for the allocation of options under the Company’s Executive Share Option
Scheme. The determination of the remuneration of non-executive directors is the responsibility of the whole Board.
Remuneration policy
Remuneration
The aim of the Committee is to ensure that the remuneration package for directors is competitive and will attract and
retain directors of the right calibre and qualifications to meet the requirements of the Company.
The basic salary of each executive director is determined by taking into account the responsibilities and performance
of the individual and having regard to the external market. Included within each salary are payments under the Company's
Inland Revenue approved Profit Related Pay Scheme.
In addition, the Company operates a performance related annual bonus scheme for the executive directors based upon
the achievement of the budgeted annual group profit before tax and exceptional items. The total potential bonus payment
is capped at 40% of basic salary but nevertheless forms a significant proportion of the total remuneration package.
Benefits in kind incorporate all assessable tax benefits from each director's employment and comprise mainly the
provision of a company car, fuel for private use and private medical insurance. Neither the benefits in kind nor bonus
payments are pensionable.
In assessing all aspects of pay and benefits the Remuneration Committee compares the packages offered by similar
companies in the engineering sector as provided by an independent sector survey.
Details of emoluments of the executive directors, and fees payable to non-executive directors are set out below.
Directors’ emoluments
Executive directors
D Cotterill
J H B Allan
R B Kershaw
I R Trotter
R L Burdett (to 9 June 1997)
Annual
Bonus
£000
Salaries
& Fees
£000
166
117
117
117
Payments
to former
directors
£000
1999
Benefits
£000
10
9
12
9
––––––
517
––––––
––––––
40
––––––
Non-executive directors
Chairman
R F Leverton (from 4 December 1998)
J P Frost (to 3 December 1998)
24
42
T B Fortune
M A Smith
R G J Telfer (to 20 November 1998)
17
18
12
––––––
630
––––––
––––––
––––––
––––––
40
––––––
30
19
––––––
49
––––––
1998
Total
£000
200
143
132
141
22
––––––
638
63
10
17
19
––––––
747
––––––
Total
£000
176
126
129
126
––––––
557
24
72
17
18
31
––––––
719
––––––
Mr R F Leverton’s director’s fees are from 19 October 1998, the date of his appointment as a non-executive director.
Mr T B Fortune’s director’s fees of £8,500 up to 1 November 1998 were paid to Spirax-Sarco Engineering plc.
The payments to former directors were made in recognition of their valuable contribution to the Group.
Note:
During the year, executive directors realised gains on exercise of share options under the Savings Related Scheme totalling
£19,310. Details are given in the table of Share Options.
18
55643PRE 30/6/99 10:52 am Page 19
Remuneration Report
Directors’ pensions
The executive directors participate in the Renold Supplementary Pension Scheme 1967, which is a contributory defined
benefits plan. This provides for a pension at age 62 of two-thirds of pensionable salary after 20 years’ service. On death
in retirement, a dependant’s pension of two-thirds of the member’s pension is payable and, on death in service, a
dependant’s pension of 50% of the member’s potential pension is payable together with a lump sum of four times salary.
Early retirement can be taken from age 50 onwards but is subject to Company consent and actuarial adjustment where
appropriate. Pensions in payment are guaranteed to increase by the lesser of 5% per annum and the rate of increase in
the Retail Price Index.
In addition, where Inland Revenue limits apply, 25% of the shortfall between pensionable salary and the earnings cap
is accumulated by the Company and will be paid from its own resources on retirement.
No element of remuneration other than salary is pensionable.
Details of pension benefits earned by directors under the defined benefits scheme, and the cost to the Company of
amounts in respect of unfunded pension obligations provided for but not paid, are set out below:
Defined Benefits Scheme
Age
at
year
end
56
58
52
55
Years’
service
at year
end
7
11
36
8
Directors’
contributions
in the year
£000
6
7
7
6
Increase in
accrued
pension during
the year
£000
3
4
2
3
Accumulated
total accrued
pension at
year end
£000
20
45
71
23
Amounts
provided in the
year but not
paid in respect of
unfunded obligations
£000
31
10
Name of
director
D Cotterill
J H B Allan
R B Kershaw
I R Trotter
The increase in accrued pension during the year excludes any increase for inflation.
Share option schemes
The Remuneration Committee believes that share options are an important motivational aspect of remuneration for
executive directors and senior executives who are encouraged to build up a holding of shares in the Company.
The Committee considers whether to invite executive directors and other senior executives to apply for executive
share options which are exercisable after the third anniversary of the date of grant. Options granted under the Renold
(1995) Executive Share Option Scheme are only exercisable if the performance condition, set by the Committee at the
time of grant, is met. This performance condition is reviewed from time to time by the Committee and currently requires
the Group's earnings per share to grow from the year preceding the date of grant, over three or more financial years, at
a rate greater than 1.5 times the percentage increase in the UK Retail Prices Index over the same period. During the
financial year executive directors and other senior executives were granted options under this scheme. In 1998, the rules
of the scheme were amended to extend the final exercisable period for unapproved options granted to an employee or
director after 5 April 1998 from seven to ten years after the date of grant, in line with approved options. This reflects the
change introduced in the Finance Act 1998.
Options are also granted to the executive directors under the Renold (1995) Savings Related Share Option Scheme
which scheme is open to all UK employees who are eligible to participate in accordance with the scheme rules. Those
options granted prior to 1996 were exercisable on completion of savings under a five-year SAYE contract. In 1996, the
rules of the scheme were amended to allow future options granted to be exercisable on completion of either a three-
year or five-year savings contract.
Details of directors’ interests in shares including options granted to executive directors under the 1985 and 1995
Executive Share Option Schemes and the 1985 and 1995 Savings Related Share Option Schemes are set out below.
Directors’ interests
The beneficial interests of the directors in the ordinary shares of the Company, as appearing in the Register of Directors’
Interests maintained under the Companies Act 1985, were as follows:
R F Leverton
D Cotterill
J H B Allan
T B Fortune
R B Kershaw
M A Smith
I R Trotter
19
3 April 1999
28 March 1998
Shares
–
233,183
151,456
2,000
21,473
5,000
108,170
Options
–
75,000
116,650
–
125,721
–
116,204
Shares
–
215,328
144,231
2,000
19,918
5,000
99,528
Options
–
72,717
103,737
–
107,138
–
104,708
55643PRE 30/6/99 10:52 am Page 20
Remuneration Report
continued
The only non-beneficial interest in the ordinary shares of Renold plc at the end of the year was 415,501 shares
(28 March 1998 - 305,400 shares) held by Mr D Cotterill and Mr J H B Allan as trustees of the Renold Employee Share
Scheme. At 4 June 1999 the number of shares held by the trustees of the scheme was 414,209.
At 3 April 1999 the only interest of the directors in the share capital of the Company was in the ordinary shares as
stated above.
There have been no other changes in the interests of directors in the share capital of the Company between the end
of the financial year and 4 June 1999.
Share options
D Cotterill
Executive scheme
Savings related scheme
J H B Allan
Executive scheme
Savings related scheme
R B Kershaw
Executive scheme
Savings related scheme
At
28.3.98
20,000
35,000
17,717
20,000
25,000
50,000
7,087
1,650
40,000
15,000
20,000
30,000
1,417
721
Number of share options
Granted
Exercised
At
3.4.99
Option
price
(pence
per
share)
Date
from
which
exercisable
Gains
on
exercise
£
20,000
20,000
20,000
20,000 (a) 237·33
20,000 (a) 242·67
35,000 (a) 293·83
97·36
17.7.01
18.7.00
16.7.99
1.2.99
17,717
20,000 (a) 237·33
20,000 (a) 242·67
25,000 (a) 293·83
120·3
50,000
97·36
200·8
1,650
20,000 (a) 237·33
40,000 (a) 242·67
15,000 (a) 293·83
120·3
20,000
52·5
30,000
97·36
200·8
721
17.7.01
18.7.00
16.7.99
30.11.96
1.2.99
1.2.00
17.7.01
18.7.00
16.7.99
30.11.96
24.11.95
1.2.99
1.2.02
7,087
1,417
8,883
3,553
994
Expiry
date
16.7.08
17.7.04
15.7.03
31.7.99
16.7.08
17.7.04
15.7.03
29.11.03
31.7.99
31.7.00
16.7.08
17.7.04
15.7.03
29.11.03
23.11.02
31.7.99
31.7.02
I R Trotter
Executive scheme
20,000
16.7.08
17.7.04
15.7.03
29.11.03
31.7.99
31.7.00
(a) only exercisable if the performance condition approved by the shareholders at the 1995 AGM and set at the time of grant is met.
20,000 (a) 237·33
20,000 (a) 242·67
25,000 (a) 293·83
120·3
50,000
97·36
200·8
17.7.01
18.7.00
16.7.99
30.11.96
1.2.99
1.2.00
20,000
25,000
50,000
8,504
1,204
Savings related scheme
8,504
5,880
1,204
The middle market price of ordinary shares at 3 April 1999 was 170.5 pence and the range of prices during the year
was 138.5 pence to 290.5 pence.
Service contracts
Mr J H B Allan, Mr R B Kershaw and Mr I R Trotter have service contracts which are subject to two years’ notice and Mr
D Cotterill, Chief Executive, has a service contract subject to three years’ notice. The Committee believes it is appropriate
to retain these notice periods for the executive directors, being the established practice at the date of their appointment.
As a result of a specific review, the Committee, recognising the subsequent change in practice, has determined that in
normal circumstances future appointments of executive directors will be on a twelve months’ notice basis.
In determining the amount of compensation payable on termination of a service contract, it is the Committee’s policy to
apply normal principles of mitigation. In these circumstances, steps would be taken to ensure that poor performance was
not rewarded.
20
55643PRE 30/6/99 10:52 am Page 21
Statement of Directors’ Responsibilities
for the financial year ended 28 March 1998
The following statement, which should be read in conjunction with the Auditors’ Report, is made with a view to
distinguishing for shareholders the respective responsibilities of the directors and of the auditors in relation to the accounts.
The directors are required by the Companies Act 1985 to prepare accounts for each financial year which give a true
and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or
loss for the financial year.
The directors consider that, in preparing the accounts on pages 22 to 40, the Company has used appropriate
accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all
applicable Accounting Standards have been followed.
The directors have responsibility for ensuring that the Company keeps accounting records which disclose with
reasonable accuracy the financial position of the Company and which enable them to ensure that the accounts comply
with the Companies Act 1985.
The directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other irregularities.
Report of the Auditors
To the members of Renold plc
We have audited the accounts on pages 22 to 40 which have been prepared under the historical cost convention as
modified by the revaluation of certain fixed assets and the accounting policies set out on pages 22 and 23.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual Report, including as described above, the accounts. Our
responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of the
London Stock Exchange and our profession’s ethical guidance.
We report to you our opinion as to whether the accounts give a true and fair view and are properly prepared in
accordance with the Companies Act. We also report to you if, in our opinion, the directors’ report is not consistent with
the accounts, if the Company has not kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’
remuneration and transactions is not disclosed.
We read the other information contained in the Annual Report and consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the accounts.
We review whether the statements on pages 16 and 17 reflect the Company’s compliance with those provisions of
the Combined Code specified for our review by the London Stock Exchange, and we report if they do not. We are not
required to form an opinion on the effectiveness of the Company’s or Group’s corporate governance procedures or its
internal controls.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an
assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of
whether the accounting policies are appropriate to the Company and the Group’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the accounts.
Opinion
In our opinion the accounts give a true and fair view of the state of affairs of the Company and the Group at 3 April 1999
and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance
with the Companies Act 1985.
101 Barbirolli Square
Manchester M2 3PW
14 June 1999
21
PricewaterhouseCoopers
Chartered Accountants
and Registered Auditors
55643PRE 30/6/99 10:52 am Page 22
Accounting Policies
continued
A summary of the principal Group accounting policies is set out below. These have been applied on a consistent basis
apart from the treatment of goodwill on acquisitions where the requirements of Financial Reporting Standard (FRS)10
"Goodwill and Intangible Assets" have been adopted, with effect from 29 March 1998, as explained below.
Basis of consolidation – The Group accounts set out on pages 22 to 40, which comprise a consolidation of the Parent
Company and all its subsidiaries, have been prepared in compliance with the Companies Act 1985 and in accordance with
applicable accounting standards. They have been prepared under the historical cost convention, but include some past
revaluations of properties and equipment.
As permitted by Section 230 of the Companies Act 1985 the Parent Company has not presented its own profit and
loss account.
Acquisitions and goodwill – The results of businesses acquired and disposed of during the year are included in Group
profits from/to the effective date of acquisition or disposal. The net assets of businesses acquired are incorporated in the
Group accounts at their fair value to the Group, after making adjustments to reflect the alignment of the accounting
policies of the acquired businesses to those of the Group. Acquisitions are accounted for using the acquisition method of
accounting.
Goodwill arising on acquisitions prior to 29 March 1998 was eliminated against reserves in accordance with the
previous policy and has not been reinstated on implementation of FRS 10. Goodwill arising on acquisitions since 29 March
1998 is capitalised, classified as an asset on the balance sheet, and amortised on a straight line basis over its useful economic
life up to a presumed maximum of 20 years.
On disposal of a previously acquired business any goodwill arising on acquisition that was eliminated against reserves
or that has not been amortised through the profit and loss account is taken into account in determining the profit or loss
on disposal.
Overseas currencies – Assets and liabilities of overseas subsidiaries are translated into sterling at the exchange rates
ruling at the end of the financial year. Trading results are translated at the appropriate average rates of exchange for the
year. Differences on exchange arising on the retranslation of net assets at the beginning of the year and from the translation
of the results at average rates are taken direct to reserves.
Tangible assets represented by properties and equipment are stated at cost or valuation, less depreciation. Where
revaluations are included the valuation of properties is based on the advice of professional valuers having regard to
estimated realisable values and the valuation of equipment is based on replacement costs and the remaining estimated
useful lives of the relevant assets. Depreciation is calculated by reference to original cost or valuation at fixed percentages
assuming effective useful lives as follows:-
Freehold properties – 80 years; land is not depreciated
Leasehold properties – 80 years or the period of the lease if less
Equipment (including plant and machinery) – 5 to 25 years according to type of asset
Motor vehicles – 25% per annum for 3 years leaving 25% residual value
Tangible assets financed by leasing agreements that give rights approximating to ownership (finance leases) are treated
as if they had been purchased outright and the corresponding liability to the leasing company is included as an obligation
under finance leases in creditors. Finance lease costs are charged as interest based on a constant periodic rate as applied
to the outstanding liabilities. Depreciation on leased assets is charged to the profit and loss account on the same basis as
shown above.
Annual rentals in respect of operating leases are charged against the profit of the year in which they are incurred.
22
55643PRE 30/6/99 10:52 am Page 23
Accounting Policies
Government grants in respect of capital expenditure are treated as deferred credits in the balance sheet. An annual
transfer is made to profit and loss account reflecting the benefit over the expected useful lives of the assets concerned.
Stocks are stated at the lower of cost, including full manufacturing overheads, and estimated net realisable value. Long
term contract work in progress is valued at cost, less amounts transferred to cost of sales and provisions for foreseeable
losses. In the Group accounts, unrealised profit on sales within the Group is deducted from stocks.
Deferred taxation – Provision is not made for deferred taxation unless there is a reasonable probability that a liability
will arise within the foreseeable future. Advance corporation tax on dividends paid and proposed, where applicable, is
charged in the Group profit and loss account except to the extent that it can be recovered against current taxation.
Turnover comprises the invoiced value of goods and services on ordinary activities after deducting value added tax or
other sales related taxes, trade discounts and transactions between Group companies. Also included in turnover is the
value of work done on long term contracts which are substantially completed by the balance sheet date and for which the
outcome can be assessed with reasonable certainty. An appropriate portion of the anticipated contract profit is recognised
in the profit and loss account. The amount by which recorded turnover exceeds payments received on account is classified
separately as contract debtors.
Pensions – The costs of providing pensions for employees are charged in the profit and loss account over the average
working life of employees in accordance with the recommendations of qualified actuaries. Funding surpluses or deficits that
may arise from time to time are amortised over the average remaining working life of employees.
Research and development – Expenditure other than that on tangible assets is charged against the profit of the year
in which it is incurred.
23
55643PRE 30/6/99 10:52 am Page 24
Group Profit and Loss Account
for the financial year ended 3 April 1999
Turnover
Trading costs
- normal operating costs
- exceptional redundancy and
- restructuring costs
Trading profit
Interest receivable
Profit on ordinary activities
before tax
Taxation
Profit for the financial year
Dividends (including non-equity)
Note
1
2
3
4
5
Retained profit for the year
16
Adjusted earnings per share
Basic earnings per share
Diluted earnings per share
6
6
6
1999
Continuing Operations
Acquisition
£m
Ongoing
£m
167·4
153·1
1·1
–––––
154·2
–––––
13·2
–––––
4·2
4·5
0·7
–––––
5·2
–––––
(1·0)
–––––
1998
£m
183·6
£m
171·6
157·6
161·2
1·8
–––––
159·4
–––––
12·2
0·2
–––––
12·4
4·7
–––––
7·7
6·4
–––––
1·3
–––––
13·5p
11·1p
11·1p
–––––
161·2
–––––
22·4
0·1
–––––
22·5
4·9
–––––
17·6
6·2
–––––
11·4
–––––
25·7p
25·7p
25·5p
The profit and loss account should be read in conjunction with the notes on pages 28 to 40.
24
55643PRE 30/6/99 10:52 am Page 25
Balance Sheets
as at 3 April 1999
Fixed assets
Intangible asset - goodwill
Tangible assets
Investments
Current assets
Stocks
Debtors
Cash and short term deposits
Note
8
9
10
11
12
13
12
13
14
15
16
16
16
16
Creditors – amounts falling due
within one year
Loans and overdrafts
Other creditors
Net current assets
Total assets less current liabilities
Creditors – amounts falling due
after more than one year
Loans
Other creditors
Provisions for pensions
Net assets
Capital and reserves
(including non-equity interests)
Called up share capital
Share premium
Revaluation reserve
Other reserves
Profit and loss account
Shareholders’ funds
Group
Renold plc
1999
£m
2·9
53·6
–––––
56·5
–––––
46·6
36·7
22·6
–––––
105·9
(5·8)
(49·0)
–––––
51·1
–––––
107·6
(5·5)
(0·8)
(12·6)
–––––
88·7
–––––
17·9
5·9
6·3
1·3
57·3
–––––
88·7
–––––
1998
£m
45·8
–––––
45·8
–––––
39·8
36·3
32·7
–––––
108·8
(3·9)
(46·3)
–––––
58·6
–––––
104·4
(5·8)
(0·9)
(11·7)
–––––
86·0
–––––
17·7
5·4
5·0
1·8
56·1
–––––
86·0
–––––
1999
£m
0·3
89·1
–––––
89·4
–––––
8·9
4·3
–––––
13·2
(0·2)
(5·7)
–––––
7·3
–––––
96·7
(5·5)
(2·5)
–––––
88·7
–––––
17·9
5·9
21·5
43·4
–––––
88·7
–––––
1998
£m
0·2
75·5
–––––
75·7
–––––
11·4
13·4
–––––
24·8
(0·2)
(6·1)
–––––
18·5
–––––
94·2
(5·8)
(2·4)
–––––
86·0
–––––
17·7
5·4
19·7
43·2
–––––
86·0
–––––
Approved by the Board on 14 June 1999 and signed on its behalf by:
Roger Leverton
David Cotterill } Directors
The balance sheets should be read in conjunction with the notes on pages 28 to 40.
25
55643PRE 30/6/99 10:52 am Page 26
Group Cash Flow Statement
for the financial year ended 3 April 1999
Note
£m
1999
21
22
Cash flow from operating activities
Servicing of finance
Taxation
Capital expenditure
- purchase of tangible fixed assets
Acquisition
- purchase consideration including costs
- net overdrafts acquired with subsidiary
Equity dividends paid
Cash (outflow)/inflow before use of liquid
resources and financing
Management of liquid resources
Transfers from/(to) short term deposits
Financing
Issue of shares
Decrease in debt and lease financing
22
Decrease in cash in the year
Reconciliation of net cash flow to
movement in net funds
23
Decrease in cash in the year
Cash outflow from decrease in debt and
lease financing
Cash flow from (decrease)/increase in
liquid resources
Change in net funds resulting from cash flows
Loans and finance leases acquired with subsidiary
Exchange translation difference
Movement in net funds in the year
Net funds at beginning of year
Net funds at end of year
(5·7)
(1·7)
–––––
0·7
(5·6)
–––––
(1·5)
5·6
(11·2)
–––––
£m
23·8
(6·5)
(11·5)
(7·4)
(6·2)
–––––
(7·8)
11·2
(4·9)
–––––
(1·5)
–––––
(7·1)
(4·7)
0·3
–––––
(11·5)
22·3
–––––
10·8
–––––
1998
£m
0·4
(0·6)
–––––
(6·1)
0·6
15·8
–––––
£m
29·2
0·3
(5·5)
(8·4)
(5·7)
–––––
9·9
(15·8)
(0·2)
–––––
(6·1)
–––––
10·3
(0·8)
–––––
9·5
12·8
–––––
22·3
–––––
The cash flow statement should be read in conjunction with the notes on page 37.
26
55643PRE 30/6/99 10:52 am Page 27
Other Group Statements
for the financial year ended 3 April 1999
Statement of total recognised gains and losses
Profit for the financial year
Exchange translation differences on net assets of overseas subsidiaries
Total recognised gains relating to the financial year
Reconciliation of movements in shareholders’ funds
Profit for the financial year
Dividends
Retained profit for the year
Issue of ordinary shares
Exchange translation differences on net assets of overseas subsidiaries
Goodwill arising on acquisition
Net addition to shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
1999
£m
7·7
0·7
–––––
8·4
–––––
1999
£m
7·7
(6·4)
–––––
1·3
0·7
0·7
–––––
2·7
86·0
–––––
88·7
–––––
1998
£m
17·6
(3·4)
–––––
14·2
–––––
1998
£m
17·6
(6·2)
–––––
11·4
0·4
(3·4)
0·1
–––––
8·5
77·5
–––––
86·0
–––––
Historical cost profits and losses
There is no material difference between the result as disclosed in the profit and loss account and the result on an
unmodified historical cost basis.
27
55643NOTES 30/6/99 10:54 am Page 28
Notes on the Accounts
for the financial year ended 28 March 1999
1. Analysis of activities
Activities classified by geographical region of operation:
United Kingdom
Germany
France
Rest of Europe
North America
Other countries
Less: Intra Group sales
Less: Exceptional redundancy and
restructuring costs
Turnover
£m
81·4
36·7
31·0
17·9
30·7
16·1
–––––––
213·8
42·2
–––––––
171·6
–––––––
1999
Trading
profit
£m
4·8
3·7
2·0
1·7
1·7
0·1
–––––––
14·0
1·8
–––––––
12·2
–––––––
Trading
assets
£m
52·3
10·9
7·5
4·1
9·5
5·4
–––––––
89·7
–––––––
89·7
–––––––
Turnover
£m
96·4
35·9
24·9
17·1
32·0
22·0
–––––––
228·3
44·7
–––––––
183·6
–––––––
1998
Trading
profit
£m
13·2
2·8
1·6
1·4
2·7
0·7
–––––––
22·4
Trading
assets
£m
43·7
10·9
6·4
3·7
8·0
6·2
–––––––
78·9
–––––––
22·4
–––––––
–––––––
78·9
–––––––
Turnover by geographical region includes intra group sales as follows: United Kingdom £28·2 million (1997/8 - £30·1 million), Germany
£9·8 million (1997/8 - £9·6 million) and France £3·3 million (1997/8 - £4·1 million).
Trading assets comprise fixed assets, current assets less creditors but exclude goodwill, cash, property held for sale, borrowings, dividends,
corporate tax, finance lease obligations and provisions for pensions.
Geographical analysis of external turnover by market area:
United Kingdom
Germany
Rest of Europe
North and South America
Other countries
1999
£m
35·3
30·1
44·7
40·2
21·3
–––––––
171·6
–––––––
1998
£m
40·7
26·9
41·4
44·3
30·3
–––––––
183·6
–––––––
In the opinion of the directors, the activities of the Group are almost wholly within the power transmission sector of the engineering
industry and therefore the results are disclosed as one class of business.
28
55643NOTES 30/6/99 10:54 am Page 29
Notes on the Accounts
for the financial year ended 28 March 1999
2. Trading costs
Change in stocks of finished goods and work in progress
Raw materials and consumables
Own work capitalised
Staff costs
Gross wages and salaries
Social security costs
Other pension costs (Note 14)
Redundancy costs
Depreciation
Owned assets
Assets acquired under finance leases
Operating lease rentals
Equipment
Other
Remuneration of auditors for audit work
Other external charges
Other operating income
1999
£m
56·1
7·5
3·1
–––––––
7·3
0·2
–––––––
0·5
1·1
–––––––
£m
1·0
57·1
(1·4)
66·7
1·8
7·5
£m
64·3
(0·9)
66·6
6·5
1998
£m
56·5
7·3
2·8
–––––––
6·2
0·3
–––––––
0·5
1·1
–––––––
1·6
0·4
27·4
(2·7)
–––––––
159·4
–––––––
1·6
0·4
25·3
(2·6)
–––––––
161·2
–––––––
Trading costs for 1998/9 include £5·2 million for Jones & Shipman p.l.c. and subsidiary companies comprising raw materials and
consumables costs £2·2 million, staff costs £1·7 million, depreciation £0·1 million, other external charges £0·8 million and exceptional
redundancy and restructuring costs £0·7 million, offset by change in stocks of finished goods and work in progress £0·3 million.
The remuneration of the auditors for the parent company was £24,000 (1997/8 - £32,000). Remuneration of the auditors for non-audit
work amounted to £87,000 (1997/8 - £111,000) of which £38,000 (1997/8 - £73,000) related to the UK.
Expenditure on research and development charged against trading profit amounted to £1·9 million (1997/8 - £1·6 million).
The average number of persons employed by the Group during the year was:
United Kingdom
Germany
France
Rest of Europe
North America
Other countries
3. Interest receivable/(payable)
Interest receivable
Less: interest payable:
Less: On loans and overdrafts
Less: On finance leases
29
1999
1,489
415
326
91
195
302
–––––––
2,818
–––––––
1998
1,528
436
328
90
175
337
–––––––
2,894
–––––––
£m
(1·2)
–––––––
1999
£m
1·4
1998
£m
£m
1·1
(0·9)
(0·1)
–––––––
(1·2)
–––––––
0·2
–––––––
(1·0)
–––––––
0·1
–––––––
55643NOTES 30/6/99 10:54 am Page 30
Notes on the Accounts
continued
4. Taxation
1999
1998
£m
£m
£m
£m
UK corporation tax based on profit of the year at the rate of
31% (1997/8 - 31%)
Less: double taxation relief
Advance corporation tax recovered
7·6
(2·3)
–––––––
5·3
(3·5)
–––––––
Overseas taxes
5. Dividends
Ordinary shares
Interim dividend paid of 3·1p (1997/8 - 3·1p)
Final dividend proposed 6·15p (1997/8 - 5·9p)
1·8
2·9
–––––––
4·7
–––––––
5·8
(2·0)
–––––––
3·8
(3·2)
–––––––
1999
£m
2·1
4·3
–––––––
6·4
–––––––
0·6
4·3
–––––––
4·9
–––––––
1998
£m
2·1
4·1
–––––––
6·2
–––––––
The interim dividend of 3·1 pence (1997/8 - 3·1 pence) was paid as a Foreign Income Dividend. Last year the interim and final dividends
were paid as Foreign Income Dividends.
Dividends on the cumulative preference stock amounted to £27,000 (1997/8 - £24,000).
6. Earnings per share
Earnings per share is calculated by reference to the earnings for the year and the weighted average number of shares in issue during the
year as follows:
1999
£m
1998
£m
Basic and diluted earnings
Adjustment for exceptional redundancy and restructuring costs after tax relief
Adjusted earnings
Weighted average number of shares in issue - basic and adjusted
Dilutive potential of employee share options
Weighted average number of shares in issue - diluted
7. Directors’ emoluments
Aggregate emoluments
Gains made on exercise of share options
Amounts provided but not paid in respect of unfunded pension obligations
Payments to former directors
During the year, retirement benefits accrued to four directors (1997/8 - five)
under a defined benefits scheme and to two directors (1997/8 - three) under unfunded
obligations in respect of salary in excess of the earnings cap.
Highest paid director
Aggregate emoluments
Gains made on exercise of share options
Aggregate emoluments, including gains made on exercise of share options
Amounts provided but not paid in respect of unfunded pension obligations
Accrued pension at end of year under defined benefits pension scheme
7·7
1·6
–––––––
9·3
–––––––
Thousands
68,889
292
–––––––
69,181
–––––––
1999
£000
670
19
41
49
17·6
–––––––
17·6
–––––––
Thousands
68,581
503
–––––––
69,084
–––––––
1998
£000
747
40
176
9
–––––––
185
–––––––
31
20
200
–––––––
200
–––––––
27
17
The amounts included above in respect of gains made on exercise of share options take no account of whether or not the directors
concerned immediately sold the shares; the gains would be reduced by taxation and expenses.
Further details are given under the headings ‘Directors Emoluments’ and ‘Directors’ Pensions’ in the Remuneration Report on pages
18 to 20.
30
55643NOTES 30/6/99 10:54 am Page 31
Notes on the Accounts
for the financial year ended 28 March 1999
8. Intangible asset - goodwill
Arising on the acquisition of Jones & Shipman p.l.c. (see Note 24)
Properties
£m
Group
Equipment
£m
Total
£m
Properties
£m
9. Tangible assets
Cost or valuation
At beginning of year
Exchange adjustment
Additions at cost
Acquisition of subsidiary
Disposals
At end of year
Analysis of cost or valuation
Valuation made in:
1971
1974
Assets at cost
Depreciation
At beginning of year
Exchange adjustment
Depreciation for the year
Disposals
At end of year
Net book value at end of year
Net book value at beginning of year
17·1
0·3
0·3
2·4
–––––––
20·1
–––––––
4·0
16·1
–––––––
20·1
–––––––
6·6
0·2
0·4
–––––––
7·2
–––––––
12·9
–––––––
10·5
–––––––
87·4
1·7
11·0
0·9
(0·9)
–––––––
100·1
–––––––
4·7
95·4
–––––––
100·1
–––––––
52·1
1·1
7·1
(0·9)
–––––––
59·4
–––––––
40·7
–––––––
35·3
–––––––
104·5
2·0
11·3
3·3
(0·9)
–––––––
120·2
–––––––
4·0
4·7
111·5
–––––––
120·2
–––––––
58·7
1·3
7·5
(0·9)
–––––––
66·6
–––––––
53·6
–––––––
45·8
–––––––
1999
£m
2·9
–––––––
Total
£m
0·6
0·2
Renold plc
Equipment
£m
0·6
0·1
0·1
–––––––
0·1
–––––––
–––––––
0·7
–––––––
–––––––
0·8
–––––––
0·1
–––––––
0·1
–––––––
–––––––
–––––––
0·1
–––––––
–––––––
0·7
–––––––
0·7
–––––––
0·4
0·1
–––––––
0·5
–––––––
0·2
–––––––
0·2
–––––––
0·8
–––––––
0·8
–––––––
0·4
0·1
–––––––
0·5
–––––––
0·3
–––––––
0·2
–––––––
Net book value at the end of the year includes £4·5 million (1997/8 - £4·8 million) in respect of leased assets (land and buildings
£3·7 million (1997/8 - £3·7 million), equipment £0·8 million (1997/8 - £1·1 million)).
The total cost or valuation of properties at 3 April 1999 comprises £14·4 million (1997/8 - £11·7 million) for freehold land and buildings
and £5·7million (1997/8 - £5·4 million) for leasehold land and buildings which relates to short term leases where the period unexpired
is less than 50 years.
If all tangible assets had been determined under the historical cost convention, the values would not have been materially different from
the figures shown above.
Future capital expenditure
At 3 April 1999 capital expenditure contracted for but not provided for in these accounts amounted to £2·3 million (1997/8 - £2·3
million).
31
55643NOTES 30/6/99 10:54 am Page 32
Notes on the Accounts
continued
10. Investments
Renold plc
Subsidiary companies
Cost or valuation
At beginning of year
Net advances
Acquisition of Jones & Shipman p.l.c.
Surplus on revaluation
At end of year
Shares
£m
Advances
£m
Total
£m
53·5
5·7
1·8
–––––––
61·0
–––––––
22·0
6·1
–––––––
28·1
–––––––
75·5
6·1
5·7
1·8
–––––––
89·1
–––––––
Shares in subsidiary companies are stated at their net asset value at the end of the year. The directors have adopted this basis because
they consider that it more fairly represents the investment of Renold plc in subsidiary companies. The principal subsidiary companies of
Renold plc at 3 April 1999 are set out on page 41.
11. Current assets
Stocks
Materials
Work in progress
Finished products
Debtors
Trade debtors
Amounts owed by group subsidiaries
Corporate tax recoverable
Other debtors
Property held for sale
Prepayments and accrued income
Cash and short term deposits
Cash at bank
Short term deposits
Group
Renold plc
1999
£m
8·9
12·9
24·8
–––––––
46·6
–––––––
1998
£m
6·9
10·7
22·2
–––––––
39·8
–––––––
28·3
27·6
2·3
5·0
1·1
–––––––
36·7
–––––––
5·4
17·2
–––––––
22·6
–––––––
105·9
–––––––
2·5
5·0
1·2
–––––––
36·3
–––––––
4·7
28·0
–––––––
32·7
–––––––
108·8
–––––––
1999
£m
1998
£m
7·7
1·0
10·5
0·7
0·2
–––––––
8·9
–––––––
4·3
–––––––
4·3
–––––––
13·2
–––––––
0·2
–––––––
11·4
–––––––
13·4
–––––––
13·4
–––––––
24·8
–––––––
The Group figures for other debtors include £0·9 million (1997/8 - £0·7 million) of amounts falling due after more than one year.
32
55643NOTES 30/6/99 10:54 am Page 33
Notes on the Accounts
for the financial year ended 28 March 1999
12. Loans and overdrafts
Total borrowings
Less: repayable within one year or on demand
Amounts falling due after more than one year
Repayable:
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Loans comprise:
UK term loans 1998-2006
Sterling loan 1998 - UK
Bank loans - overseas
Less: repayable within one year
Group
Renold plc
1999
£m
11·3
5·8
–––––––
5·5
–––––––
0·2
4·0
1·3
–––––––
5·5
–––––––
5·7
–––––––
5·7
0·2
–––––––
5·5
–––––––
1998
£m
9·7
3·9
–––––––
5·8
–––––––
0·2
3·9
1·7
–––––––
5·8
–––––––
6·0
0·3
0·1
–––––––
6·4
0·6
–––––––
5·8
–––––––
1999
£m
5·7
0·2
–––––––
5·5
–––––––
0·2
4·0
1·3
–––––––
5·5
–––––––
1998
£m
6·0
0·2
–––––––
5·8
–––––––
0·2
3·9
1·7
–––––––
5·8
–––––––
5·7
6·0
–––––––
5·7
0·2
–––––––
5·5
–––––––
–––––––
6·0
0·2
–––––––
5·8
–––––––
Included in Group borrowings are secured borrowings of £3·1 million (1997/8 - £2·0 million). Security is provided on the assets of
certain overseas subsidiaries. Renold plc borrowings are unsecured.
Group
Renold plc
1999
£m
0·5
4·3
0·1
0·2
0·6
1998
£m
0·4
4·1
0·2
0·2
1·2
–––––––
5·7
–––––––
–––––––
6·1
–––––––
1999
£m
23·3
4·3
2·8
3·9
1·5
4·8
8·2
0·2
–––––––
49·0
–––––––
0·3
0·5
–––––––
0·8
–––––––
1998
£m
22·6
4·1
4·4
3·5
3·0
8·3
0·4
–––––––
46·3
–––––––
0·3
0·6
–––––––
0·9
–––––––
13. Creditors
Amounts falling due within one year
Trade creditors
Dividends payable
Corporate taxes
Other taxation and social security
Advance payments from customers
Other creditors
Accruals
Finance lease obligations
Amounts falling due after more than one year
Finance lease obligations
Between one and five years
Other creditors
33
55643NOTES 30/6/99 10:54 am Page 34
Notes on the Accounts
continued
14. Provisions for pensions
The Group operates a number of pension schemes throughout the world. In the UK, the schemes are defined benefits type schemes
with assets held in trustee administered funds. Overseas employees participate in a variety of different pension arrangements of the
defined contribution or defined benefits type funded in accordance with local practice. There is no material surplus or deficit in any of
the overseas schemes and actuarial valuations of these schemes are carried out at least every three years. The total pension costs for
the Group were as follows:
UK
Overseas
1999
£m
1·3
1·8
–––––––
3·1
–––––––
1998
£m
1·0
1·8
–––––––
2·8
–––––––
The UK cost for 1998/9 reflects the regular contribution rate less £0·9 million (1997/8 - £0·8 million) in respect of the actuarial surplus,
calculated on an SSAP 24 basis, which is being recognised over the average expected remaining service life of active scheme members
of approximately 15 years from 5 April 1998.
The majority of UK employees are eligible to join one of two schemes, the Renold Group Pension Scheme and the Renold
Supplementary Scheme 1997. The pension costs relating to these schemes are assessed in accordance with the advice of William M
Mercer Limited, the Group’s consulting actuaries, using the projected unit method. The last actuarial valuations of these schemes were
carried out as at 5 April 1998. The assumptions which have the most significant effect on the results of the valuations are those relating
to the rate of return on investments and the rates of increase in salaries and pensions. It has been assumed that the investment return
will be 8·5% per annum, that salary increases will average 6·0% per annum and that present and future pensions will increase at rates of
3% or 4% per annum. At the date of the 1998 valuations the actuarial value of the assets of these schemes totalled £84·3 million which
represented 103% of the liabilities in respect of benefits accrued to members, allowing for expected future increases in earnings.
Separate pension arrangements are operated by Jones & Shipman p.l.c., which was acquired with effect from 31 December 1998,
including a defined benefit scheme for UK employees. At the time of the last actuarial valuation in April 1997 the actuarial value of the
assets of this scheme was £22·2 million which represented 100% of the liabilities in respect of benefits accrued to members.
Overseas pension costs include £1·0 million (1997/8 - £1·0 million) in respect of Germany and Australia where the charge is determined
in accordance with SSAP 24. For other overseas countries, no adjustment has been made to the local pension costs, since any differences
from a charge calculated in accordance with SSAP 24 are not considered to be material.
A provision is included in respect of the excess of the accumulated pension cost over the amount externally funded as follows:
UK schemes
Overseas schemes
The movement in the year was as follows:
At beginning of year
Exchange translation differences
Profit and loss account
Utilised
At end of year
1998
£m
2·4
9·3
–––––––
11·7
–––––––
1999
£m
2·5
10·1
–––––––
12·6
–––––––
£m
11·7
0·6
3·1
(2·8)
–––––––
12·6
–––––––
34
55643NOTES 30/6/99 10:54 am Page 35
Notes on the Accounts
for the financial year ended 28 March 1999
15. Called up share capital
Equity interests
Ordinary shares of 25p each
Non-equity interests
6% Cumulative Preference Stock (£1 units)
Authorised
Issued
1999
£m
23·1
0·6
–––––––
23·7
–––––––
1998
£m
23·1
0·6
–––––––
23·7
–––––––
1999
£m
17·3
0·6
–––––––
17·9
–––––––
1998
£m
17·1
0·6
–––––––
17·7
–––––––
The Company issued 481,743 ordinary shares of 25p each for a cash consideration of £634,658 during the year by the exercise of
options under the 1985 Renold Executive Share Option Scheme, the 1985 Renold Savings Related Share Option Scheme and in respect
of the Renold Employee Share Scheme.
At 3 April 1999 the issued Ordinary Share Capital comprised 69,191,950 ordinary shares of 25p each.
The preference shares, which comprise the only non-equity interest in shareholders’ funds, have the following rights:
(i)
(ii)
(iii)
a fixed cumulative preferential dividend at the rate of 6% (for dividends payable prior to 6 April 1999 - 4·2% plus tax credit) per
annum payable half yearly on 1 January and 1 July in each year;
they rank both with regard to dividend (including any arrears to the commencement of a winding up) and return of capital in priority
to all other stock or shares of the Company but with no further right to participate in profits or assets;
there is no right to attend or vote, either in person or by proxy, at any General Meeting of the Company or to have notice of any
such meeting, unless the dividend on the preference stock is in arrear for six calendar months;
(iv)
there is no redemption entitlement.
16. Reserves
Group
At beginning of year
Exchange translation differences on net assets of
overseas subsidiaries
Share premium
Retained profit for the year
Reclassification of reserves
At end of year
Renold plc
At beginning of year
Share premium
Retained profit for the year
Surplus on revaluation of shares in subsidiaries
At end of year
Share
premium
account
£m
5·4
0·5
–––––––
5·9
–––––––
5·4
0·5
–––––––
5·9
–––––––
Revaluation
reserve
£m
Other
reserves
£m
5·0
1·8
(0·5)
–––––––
1·3
–––––––
1·3
–––––––
6·3
–––––––
19·7
1·8
–––––––
21·5
–––––––
Profit and
loss
account
£m
56·1
0·7
1·3
(0·8)
–––––––
57·3
–––––––
43·2
0·2
–––––––
43·4
–––––––
Total
reserves
£m
68·3
0·7
0·5
1·3
–––––––
70·8
–––––––
68·3
0·5
0·2
1·8
–––––––
70·8
–––––––
The consolidated profit for the financial year includes a profit of £6·6 million (1997/8 - £10·3 million) which is dealt with in the accounts
of the parent company.
Cumulative goodwill written off to Group reserves at 3 April 1999, subsequent to the capital reorganisation in January 1985, amounted
to £3·6 million (1997/8 - £3·6 million).
35
55643NOTES 30/6/99 10:54 am Page 36
Notes on the Accounts
continued
17. Deferred taxation
No provision has been made for deferred taxation. At 3 April 1999, there were UK fixed asset and other timing differences, at the
corporate tax rate, as follows:
1999
£m
1998
£m
Fixed assets
Other
(0·4)
(1·6)
–––––––
(2·0)
–––––––
3·4
(1·5)
–––––––
1·9
–––––––
In addition, there are tax losses in certain UK subsidiaries amounting to £2·2 million.
Surplus advance corporation tax written off amounts to £2·1 million (1997/8 - £5·6 million) which is available for future relief, subject
to the new shadow ACT rules.
Overseas timing differences amounted, at the relevant corporation tax rates, to £2·9 million (1997/8 - £2·5 million) which relate
principally to fixed asset revaluations.
Distributions by overseas companies would in most cases be subject to additional taxation.
18. Operating lease obligations
At the end of the year there were annual commitments under non-cancellable operating leases as follows:
Leases expiring:
Within one year
Between two and five years
Over five years
Total annual commitments
19. Contingent liabilities
1999
1998
Properties
£m
Equipment
£m
Properties
£m
Equipment
£m
0·1
0·2
1·0
–––––––
1·3
–––––––
0·2
0·6
–––––––
0·8
–––––––
0·1
0·4
0·8
–––––––
1·3
–––––––
0·2
0·5
–––––––
0·7
–––––––
Contingent liabilities at 3 April 1999 in respect of guarantees amounted to £1·4 million (1997/8 - £1·5 million) for the Group. In addition
Renold plc had guaranteed bank and other borrowings by subsidiaries which amounted to £Nil (1997/8 - £0·1 million).
20. Share options
Share options have been granted under the Executive Share Option Schemes and the Savings Related Share Option Schemes. At
3 April 1999 unexercised options for ordinary shares amounted to 1,829,871 (1997/8 - 1,858,162) made up as follows:
Date normally exercisable
Executive Share Option Schemes
Within seven years from:
24 November 1995
30 November 1996
1 December 1997
16 July 1999 (1995 Scheme)
18 July 2000 (1995 Scheme)
17 July 2001 (1995 Scheme)
Within four years from:
16 July 1999 (1995 Scheme)
18 July 2000 (1995 Scheme)
Savings Related Share Option Schemes
Within six months from:
1 February 1999
1 February 2000 (1995 Scheme)
1 February 2002 (1995 Scheme)
36
Option price
(pence per
share)
Number
of shares
1999
Number
of shares
1998
52·5
120·3
184·3
293·83
242·67
237·33
293·83
242·67
97·36
200·8
200·8
40,000
240,000
85,000
91,511
45,647
330,000
50,000
250,000
95,000
91,511
50,647
323,489
249,353
–––––––––
1,405,000
–––––––––
323,489
249,353
–––––––––
1,110,000
–––––––––
99,921
107,796
217,154
–––––––––
424,871
–––––––––
374,910
130,136
243,116
–––––––––
748,162
–––––––––
55643NOTES 30/6/99 10:54 am Page 37
Notes on the Accounts
for the financial year ended 28 March 1999
21. Reconciliation of trading profit to operating cash flows
Trading profit
Depreciation charges
Pension costs provision
Decrease/(increase) in stocks
Decrease in debtors
(Decrease)/increase in creditors
Net cash inflow from operating activities
1999
£m
12·2
7·5
0·3
2·4
4·1
(2·7)
–––––––
23·8
–––––––
1998
£m
22·4
6·5
(0·6)
0·6
0·3
–––––––
29·2
–––––––
Net cash flow from operating activities includes an outflow of £1·6 million which relates to exceptional redundancy and restructuring
costs; an amount of £0·2 million was retained in creditors.
22. Analysis of cash flows for headings netted in the Cash Flow Statement
1999
£m
1998
£m
Servicing of finance
Interest received
Interest paid
Interest element of finance lease rental payments
Net cash inflow for servicing of finance
Financing
Issue of ordinary share capital
Debt due within a year: (decrease)/increase in short-term borrowings
Debt due beyond a year: repayment of loans
Capital element of finance lease rental payments
Net cash outflow from financing
23. Analysis of net funds
At
beginning
of year
£m
4·7
(3·3)
–––––––
1·4
–––––––
(5·8)
(0·6)
(0·7)
–––––––
(7·1)
–––––––
28·0
–––––––
22·3
–––––––
Acquisition
(excluding
cash and
overdrafts)
£m
–––––––
–––––––
(1·0)
(3·5)
(0·2)
–––––––
(4·7)
–––––––
–––––––
(4·7)
–––––––
Cash
flow
£m
0·7
(2·2)
–––––––
(1·5)
–––––––
1·3
3·9
0·4
–––––––
5·6
–––––––
(11·2)
–––––––
(7·1)
–––––––
Cash in hand, at bank
Overdrafts
Debt due after one year
Debt due within one year
Finance leases
Short term deposits
Total
37
1·5
(1·4)
(0·1)
–––––––
–
–––––––
0·7
(3·9)
(1·3)
(0·4)
–––––––
(4·9)
–––––––
Exchange
movement
£m
(0·1)
–––––––
(0·1)
–––––––
–––––––
–––––––
0·4
–––––––
0·3
–––––––
1·1
(0·7)
(0·1)
–––––––
0·3
–––––––
0·4
0·5
(0·6)
(0·5)
–––––––
(0·2)
–––––––
At end
of year
£m
5·4
(5·6)
–––––––
(0·2)
–––––––
(5·5)
(0·2)
(0·5)
–––––––
(6·2)
–––––––
17·2
–––––––
10·8
–––––––
55643NOTES 30/6/99 10:54 am Page 38
Notes on the Accounts
continued
24. Acquisition of subsidiary
The effect of the acquisition of Jones & Shipman p.l.c. at 31 December 1998 was as follows:
Intangible asset – goodwill
Fixed assets
Stocks
Debtors
Creditors
Loans
Finance leases
Net overdrafts
Goodwill
Consideration – cash paid including costs
Book
value
£m
1·7
3·5
9·2
4·1
(6·5)
(4·5)
(0·2)
(1·7)
–––––––
5·6
–––––––
Accounting
policy
adjustment
£m
Fair value
adjustment
£m
Provisional
fair value
to the Group
£m
0·2
(0·4)
(0·2)
(1·7)
(0·4)
(0·3)
–––––––
(0·4)
–––––––
–––––––
(2·4)
–––––––
3·3
8·8
4·1
(7·0)
(4·5)
(0·2)
(1·7)
–––––––
2·8
2·9
–––––––
5·7
–––––––
Adjustments have been made to align net assets with Renold Group accounting policies; these adjustments relate mainly to machines
transferred to fixed assets from stocks and to additional stock and warranty provisions.
Intangible assets acquired have been written off, properties have been revalued to reflect current market value, and pre-acquisition
liabilities which had not been provided for have been recognised. Pension fund liabilities have not been revalued in arriving at the
provisional fair value.
Cash paid including costs
Net overdrafts acquired
Cash outflow on acquisition
Loans and finance leases acquired
Cash outflow and borrowings acquired
£m
5·7
1·7
–––––––
7·4
4·7
–––––––
12·1
–––––––
Jones & Shipman p.l.c. made a loss after taxation of £3·9 million in the period from 1 April 1998 to the date of acquisition 31 December
1998 (year to 31 March 1998 profit £0·2 million).
Jones & Shipman p.l.c. contributed a net cash outflow of £1·5 million to the Group’s net cash inflow from operating activities, and paid
£0·1 million for servicing of finance.
38
55643NOTES 30/6/99 10:54 am Page 39
Notes on the Accounts
for the financial year ended 28 March 1999
25. Financial instruments
These notes should be read in conjunction with the narrative disclosures in the Financial Review on page 12.
(a) The Group does not trade in financial instruments.
(b) Short term debtors and creditors
Short term debtors and creditors have been excluded from all the following disclosures, other than the currency risk disclosures.
(c) Currency and interest rate profile of financial liabilities at 3 April 1999
Currency
Sterling
– Financial liabilities
– Preference shares
US Dollar
Euro
Other
Weighted
average
interest
rate
%
Weighted
average
period for
which rate
is fixed
Years
9·2
6·0
7·4
*
Fixed
rate
£m
5·9
0·6
0·1
0·3
–––––––
6·9
–––––––
Floating
rate
£m
2·6
2·5
0·4
–––––––
5·5
–––––––
Total
£m
5·9
0·6
2·7
2·8
0·4
–––––––
12·4
–––––––
*Preference shares have no fixed repayment date.
The sterling fixed rate financial liabilities take into account interest rate swaps.
Floating rate financial liabilities bear interest at rates, based on relevant national base rate equivalents, which can fluctuate on a daily
basis.
(d) Currency and interest rate profile of financial assets
Currency
Sterling
Euro
Other
Cash at bank
and in hand
£m
Short term
deposits
£m
2·0
1·5
1·9
–––––––
5·4
–––––––
10·1
6·8
0·3
–––––––
17·2
–––––––
Total
£m
12·1
8·3
2·2
–––––––
22·6
–––––––
Cash balances and short-term deposits are held with the Group’s bankers. The short-term deposits are held largely in the UK and
Germany and earn interest at bank deposit interest rates for periods of up to three months.
(e) Maturity of financial liabilities
The maturity profile of the carrying amount of the Group’s financial liabilities, other than short-term creditors such as trade creditors
and accruals, was as follows:
In one year or less, or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
Debt
£m
5·8
0·2
4·0
1·9
–––––––
11·9
–––––––
Finance
leases
£m
0·2
0·1
0·2
–––––––
0·5
–––––––
Total
£m
6·0
0·3
4·2
1·9
–––––––
12·4
–––––––
Debt due in more than five years includes £0·6 million (1997/8 - £0·6 million) in respect of Renold plc’s preference shares.
39
55643NOTES 30/6/99 10:54 am Page 40
Notes on the Accounts
continued
25. Financial instruments (continued)
(f) Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 3 April 1999 which are at floating rates of interest.
Expiring within one year or less, or on demand
Expiring in more than one year but not more than two years
Expiring in more than two years
£m
21·4
0·3
6·2
–––––––
27·9
–––––––
The facilities expiring in one year or less, or on demand, are annual facilities subject to review at various dates during 1999/2000.
Renold plc has a loan facility which is repayable within twelve months of the balance sheet date but, since the amount is drawn
under a committed revolving loan facility, it is classified in the table above as expiring in more than two years on the basis of the
expiry date of the facility in September 2002.
(g) Fair values of financial assets and financial liabilities
Primary financial instruments held or issued to finance the Group’s operations:
Short-term borrowings (up to one year)
Long-term borrowings
Preference shares
Short-term deposits
Cash at bank and in hand
Book value
£m
Fair value
£m
(6·1)
(5·7)
(0·6)
(6·1)
(5·7)
(0·5)
17·2
5·4
–––––––
17·2
5·4
–––––––
Derivative financial instruments held to manage the interest rate and currency profile:
Interest rate swaps
(0·7)
Under the Group’s accounting policy, foreign currency assets and liabilities that are hedged using forward foreign exchange contracts
are translated at the forward rate inherent in the contracts. Consequently, the book value of the relevant asset or liability effectively
is the fair value of the forward foreign exchange contract.
Fair values of the preference shares and interest rate swaps are based on market values at the balance sheet date.
There is no significant difference between the book and fair value of forward foreign exchange contracts held or issued to hedge
currency exposures on expected future transactions.
(h) Currency exposures
The analysis below shows the net monetary assets/liabilities of companies in the Group that are not denominated in their functional
currency. Exchange differences on these exposures will be recognised in the profit and loss account.
Functional currency of companies
Sterling
US dollars
Euro
Other currencies
Sterling
£m
US dollars
£m
(1·0)
(1·2)
(0·4)
–––––––
(2·6)
–––––––
(0·8)
0·7
–––––––
(0·1)
–––––––
Euro
£m
0·3
Other
£m
0·4
(0·1)
–––––––
0·2
–––––––
–––––––
0·4
–––––––
Total
£m
(0·1)
(1·0)
(0·5)
(0·5)
–––––––
(2·1)
–––––––
(i) Gains and losses on instruments used for hedging
There were no significant unrecognised or deferred gains and losses on hedges at 3 April 1999 and at 28 March 1998.
40
55643NOTES 30/6/99 10:54 am Page 41
Principal Subsidiary Companies
as at 3 April 1999
UNITED KINGDOM
Renold Power Transmission Limited*
FACTORIES: BRADFORD, BREDBURY, BURTON, CARDIFF, HALIFAX, LONDON, MILNROW
Renold International Holdings Limited*
Jones & Shipman p.l.c.* FACTORY: LEICESTER
– Goodwin Electronics Limited FACTORY: BROMBOROUGH
REST OF EUROPE
Austria
Belgium
Renold GmbH
Renold Continental Limited (incorporated in the United Kingdom)
Denmark
Renold A/S
France
Germany
Holland
Sweden
Brampton Renold SA FACTORIES: CALAIS, LILLE
Manifold Indexing SARL
Jones & Shipman SARL
Renold (Deutschland) GmbH
– Arnold & Stolzenberg GmbH FACTORY: EINBECK
– Renold Manifold GmbH
Renold Continental Limited (incorporated in the United Kingdom)
Renold Transmission AB
Switzerland
Renold (Switzerland) GmbH
NORTH AMERICA
Canada
USA
Renold Canada Limited
Renold Holdings Inc
– Renold Inc FACTORY: WESTFIELD, NY
– Renold Power Transmission Corporation
Jones & Shipman Inc
Edgetek Machine Corporation (80%) FACTORY: MERIDEN, CT
OTHER COUNTRIES
Australia
Renold Australia Proprietary Limited FACTORY: MELBOURNE
Malaysia
Renold (Malaysia) Sdn Bhd
New Zealand
Renold Christian Limited FACTORY: AUCKLAND
Singapore
Renold Overseas Limited (incorporated in the United Kingdom)
South Africa
Renold Crofts (Pty) Limited FACTORY: BENONI
*Direct subsidiary of Renold plc
Subsidiary companies listed above are those which, in the opinion of the directors, principally contributed to the results and assets of the Group.
Companies of minor importance are omitted by virtue of Section 231 and Schedule 5 of the Companies Act 1985.
All companies are direct or indirect wholly owned subsidiaries of Renold plc except where otherwise indicated. Renold Power Transmission
Limited and Renold International Holdings Limited are registered in England and Wales. Overseas companies are incorporated in the countries
in which they operate except where otherwise stated.
41
55643NOTES 30/6/99 10:54 am Page 42
Group Five Year Financial Review
for the financial year ended 28 March 1998
Profit and loss account
£m
Turnover
Trading profit before exceptional redundancy and
restructuring costs
Profit on ordinary activities before tax
Profit after tax for ordinary shareholders
Balance sheet
£m
Fixed assets
Stocks
Debtors
Creditors
Trading assets
Goodwill
Properties held for sale
Cash (net of borrowings including finance leases)
Dividends and tax
Provisions for pensions
Net assets
Key data
Trading return on average trading assets 1 2
Trading profit on turnover 1
Capital expenditure
Basic earnings per share
Dividends per ordinary share
Employees at year end
%
%
£m
p
p
1999
171·6
–––––
14·0
–––––
12·4
7·7
1999
53·6
46·6
31·7
(42·2)
–––––
89·7
2·9
5·0
10·8
(7·1)
(12·6)
–––––
88·7
–––––
1999
17·1
8·2
11·3
11·1
9·25
2,881
1998
183·6
–––––
22·4
–––––
22·5
17·6
1998
45·8
39·8
31·3
(38·0)
–––––
78·9
5·0
22·3
(8·5)
(11·7)
–––––
86·0
–––––
1998
27·9
12·2
9·6
25·7
9·0
2,912
1997
180·3
–––––
22·0
–––––
21·5
15·5
1997
44·4
41·8
34·0
(38·5)
–––––
81·7
5·0
12·8
(9·0)
(13·0)
–––––
77·5
–––––
1997
26·9
12·2
7·4
22·7
8·0
2,825
1996
179·3
–––––
19·9
–––––
18·7
14·0
1996
45·7
44·6
33·3
(41·9)
–––––
81·7
5·0
10·4
(8·6)
(14·8)
–––––
73·7
–––––
1996
25·6
11·1
9·7
20·8
7·0
2,848
1995
148·7
–––––
13·3
–––––
11·6
9·0
1995
41·7
38·6
29·7
(36·5)
–––––
73·5
5·6
4·4
(5·1)
(14·4)
–––––
64·0
–––––
1995
18·5
8·9
7·8
13·6
4·5
2,751
1 Based on trading profit before exceptional redundancy and restructuring costs.
2 Average trading assets are the average of opening and closing trading assets; for 1999 the average includes the assets of Jones
& Shipman p.l.c. for the period since acquisition.
42
55643NOTES 30/6/99 10:54 am Page 43
Notice of Meeting
for the financial year ended 28 March 1998
Notice is hereby given that the sixty-ninth Annual General Meeting of Renold plc will be held at Renold House, Styal Road,
Wythenshawe, Manchester M22 5WL on Friday 23 July 1999 at 2.30 pm for the following purposes:
As Ordinary Business
1.
To receive and to consider the Accounts and the Reports of the Directors and of the Auditors in respect of the financial
year ended 3 April 1999.
2.
3.
4.
5.
6.
To declare a final dividend on the issued ordinary shares.
To elect Mr R F Leverton as a director.
To re-elect Mr D Cotterill as a director.
To re-elect Mr J H B Allan as a director.
Special notice having been given of the intention to propose the resolution as an ordinary resolution: to re-appoint
PricewaterhouseCoopers as auditors of the Company (having previously been appointed by the Board to fill the casual
vacancy arising by reason of the resignation of Price Waterhouse), to hold office until the conclusion of the next general
meeting at which accounts are laid before the Company and to authorise the directors to fix their remuneration.
As Special Business
To consider and, if thought fit, pass the following resolutions of which Resolution 7 will be proposed as an Ordinary Resolution
and Resolutions 8 and 9 as Special Resolutions:-
THAT the directors be and they are hereby generally and unconditionally authorised to exercise all powers of the
Company to allot relevant securities (within the meaning of Section 80 of the Companies Act 1985) up to an aggregate
nominal amount of £5,765,995 provided that this authority shall expire on 22 October 2000 or, if earlier, on the date of
the next Annual General Meeting of the Company after the passing of this resolution save that the Company may, before
such expiry, make an offer or agreement which would or might require relevant securities to be allotted after such expiry
and the directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred hereby
had not expired.
THAT subject to the passing of the Ordinary Resolution numbered 7 above, the directors be and they are hereby
empowered pursuant to Section 95 of the Companies Act 1985 to allot equity securities (within the meaning of Section
94 of that Act) pursuant to the authority conferred by the said Ordinary Resolution as if sub-section (1) of Section 89 of
that Act did not apply to any such allotment provided that this power shall be limited to:
(a)
(b)
(c)
the allotment of equity securities in connection with or pursuant to an offer by way of rights to ordinary shareholders
and other persons entitled to participate therein, in proportion as nearly as may be to their holdings of such shares
(or, as appropriate, to the number of ordinary shares which such other persons are for these purposes deemed to
hold) subject only to such exclusions or other arrangements as the directors may feel necessary or expedient to
deal with fractional entitlements or legal or practical problems under the laws of, or the requirements of any
recognised regulatory body in any territory;
the allotment of equity securities under the Renold Employee Share Scheme, the Renold (1995) Executive Share
Option Scheme and the Renold (1995) Savings Related Share Option Scheme; and
the allotment of equity securities (otherwise than pursuant to paragraphs (a) and (b) above) up to an aggregate
nominal amount of £864,899 (being equal to approximately 5% of the aggregate nominal amount of the Company’s
ordinary share capital currently in issue at the date of passing this resolution) and shall expire on 22 October 2000
or, if earlier, on the date of the next Annual General Meeting of the Company after the passing of this resolution
save that the Company may before such expiry make an offer or agreement which would or might require equity
securities to be allotted after such expiry and the directors may allot equity securities in pursuance of such offer or
agreement as if the power conferred hereby had not expired.
7.
8.
43
55643NOTES 30/6/99 10:54 am Page 44
Notice of Meeting
for the financial year ended 28 March 1998
9.
THAT the Articles of Association set out in the document produced to the meeting (and signed by the Chairman for the
purpose of identification) be hereby amended by the deletion of the words “(by virtue of the Finance Acts 1972 and 1976
dividends payable on or after 6 April 1973 are payable at the rate of 4.2% per annum without any tax deduction).” from
the second paragraph of Article 7.1 of the Articles of Association.
By Order of the Board
G R Newton
Secretary
23 June 1999
Registered Office:
Renold House
Styal Road
Wythenshawe
Manchester M22 5WL
Only the holders of ordinary shares are entitled as members to attend or be represented at the meeting.
To be entitled to attend and vote at the meeting (and for the purpose of the determination by the Company of the number of votes they may
cast), members must be entered on the Company’s register of members at close of business on 21 July 1999 ("the specified time"). If the meeting
is adjourned to a time not more than 48 hours after the specified time applicable to the original meeting, that time will also apply for the purpose
of determining the entitlement of members to attend and vote (and for the purpose of determining the number of votes they may cast) at the
adjourned meeting. If however the meeting is adjourned for a longer period then, to be so entitled, members must be entered on the Company’s
register of members at the time which is 48 hours before the time fixed for the adjourned meeting or, if the Company gives notice of the
adjourned meeting, at the time specified in that notice.
A member entitled to attend and vote may appoint one or more proxies, who need not be members, to attend and vote instead of such
member. A proxy may vote only on a poll. To be valid the instrument appointing a proxy must be duly executed and deposited at the Registrars
of the Company not later than 48 hours before the due time of the meeting.
The dividend recommended, if approved, will be paid on 5 August 1999 to members appearing on the register on 25 June 1999.
Copies of contracts of service of directors of the Company, other than contracts expiring, or determinable by the Company without payment
of compensation, within one year, together with the existing Articles of Association and the amended Articles of Association, will be available for
inspection at the Company’s registered office and at the offices of Eversheds, Senator House, 85 Queen Victoria Street, London EC4V 4JL during
the usual business hours on any weekday (Saturdays, Sundays and public holidays excluded) from the date of this notice until the date of the
Annual General Meeting, and will be available for inspection at the place of the Annual General Meeting from 2.15 pm until close of meeting.
44
55643NOTES 30/6/99 10:54 am Page 45
Financial Calendar
for the financial year ended 28 March 1999
Annual General Meeting
Final ordinary dividend for 1998/9 - payment date
Half year end 1999/00
Half year 1999/00 results published
Interim ordinary dividend for 1999/00 payable
Year end 1999/00
Preliminary announcement of annual results 1999/00
Other dividend payments
Preference dividends:
1999
23 July
5 August
2 October
mid November
2000
end January
1 April
early June
1 July and 1 January
45
cover_new 30/6/99 1:17 pm Page 1
Renold plc, Renold House, Styal Road, Wythenshawe, Manchester M22 5WL, England.
Telephone: + 44 (0) 161 437 5221 Fax: + 44 (0) 161 437 7782
www.renold.com
e-mail: enquiry@renold.com