Renold PLC (LON:RNO) shares rose on Wednesday after the engineering group saw its first-half profit rise significantly, helped by a strong performance from its core chain unit, and as broker Peel Hunt started coverage on the stock with a ‘buy’ rating.
The FTSE Fledgling power transmission products maker said its pre-tax profit jumped by 71% to £4.1mln in the six months to September 30, up from £2.4mln a year earlier, as revenue rose by 4.5% to £99.7mln, up from £95.4mln.
READ: Renold shares rise as it reports organic revenue growth for "first time in a number of years”
The group said its adjusted operating profit had "improved significantly" to £8.2mln, up 37% from £6.0mln the year before.
It added that its core chain unit saw underlying operating profit increase by 56% to £9.5mln, on revenue up 6.8% to £80.0mln.
Renold is currently undertaking a strategic plan which has seen it build a new factory in the Jiangsu province of China.
Renold’s chief executive officer Robert Purcell said: "Our strategy is delivering a more robust, higher-margin business and we look forward to continuing current momentum into the second half of the year."
Move to AIM considered
The firm also said it is considering a move to the AIM market of the London Stock Exchange to enhance its "ability to execute transactions with greater efficiency and certainty." It currently trades in the premium main market in London.
In a separate announcement, the group also announced the appointment of Tim Cooper - currently managing director of Victrex PLC’s (LON:VCT) industrial division - as a non-executive director.
Shares up, Peel Hunt targets 50p
In late morning trading, Renold shares were 5.2% higher at 36.4p.
Meanwhile, in a note to clients, analysts at Peel Hunt initiated coverage on Renold with a 12-month price target of 50p but said they “envisage further upside as the Group delivers its medium-term margin targets.”
The analysts said: “After five years of heavy lifting, and with the restructuring phase of the STEP 2020 plan largely complete, the Group is now moving onto the front foot, as the emphasis shifts towards business improvement, organic growth and acquisitions.”