Renold plc (LON:RNO) shares moved up a gear on Tuesday as growth in its core chain division boosted operating profits.
The chain and gear maker, which is currently transitioning to AIM from the main board of the London Stock Exchange, reported that for the year ended March 31 operating profits had risen to £16.2mln from £5.6mln in the prior year, while revenues jumped £202.4mln from £190.8mln.
READ: Renold sees first-half profit rise significantly, boosted by strong performance from core chain unit; Peel Hunt starts with ‘buy’
Organic underlying revenues, meanwhile, climbed 6.1% thanks to “strong growth” in the company’s chains division where return on sales increased to 11.2% from 9.6% in 2018.
Adjusted operating profit margins were also up to 8.1% from 7.4% in the prior year.
Looking ahead, Renold’s CEO Robert Purcell said the group’s acquisition strategy would be “simplified” by its planned move to AIM and that the group’s ongoing initiatives supported its expectations that operating margins in the mid-teens could be delivered “over time”.
"Our strategy has delivered strong results and is the optimum approach to creating and maintaining a higher quality, higher margin business. Robust order books provide the basis for continued improvement in the new financial year,” he added.
Mark Harper, the group’s chairman, added that the company’s strategic plan was making “strong progress”, including the completion of a new Chinese factory in Jiangsu Province.
In a note to clients, analysts at Renold’s ‘house’ broker Peel Hunt said the “strong outturn” in the results was evidence of the benefits of the company’s strategic plan and that given current momentum the shares looked significantly undervalued. It had Renold pegged as a ‘buy’ with a target price of 50p.
Renold shares were 7.6% higher at 31.2p in early deals.