RENK : Q1 statement / Q1 financial report 2024 (670.93 KB)

Total order backlog underscores the promising business prospects, strong increase in revenue compared to the same quarter in the previous year

• Total order backlog of € 4.7 billion remains strong showing strong dynamics in defense business
• Operational improvements at the Augsburg location are beginning to take effect, leading to substantial revenue growth
• Refinancing of long-term debt completed after successful IPO
• Financial outlook for 2024 confirmed: €1.0 - €1.1 billion in revenue and 16-18% adjusted EBIT margin (approx. € 160 million to € 180 million)

RENK Group AG | Earnings release Q1 FY 2024

Business performance in the first quarter of 2024

Growth

• Contrary to the challenging macroeconomic environment, RENK was able to record incoming orders of
• • 208,230 thousand in the first quarter of 2024. Defense applications continue to dominate this positive development. At the end of the first quarter, the total order backlog amounted to € 4.7 billion.
• Thanks to the ongoing optimization of production processes, primarily at the Augsburg site, revenue increased by
• • 43,732 thousand to € 237,673 thousand compared to € 193,941 thousand in the previous year. All segments contributed to this, with Vehicle Mobility Solutions ("VMS") and Marine & Industry ("M&I") making the largest nominal share.

Profitability

• In addition to the positive contribution from the sharp rise in sales volume, an improved operating performance in Augsburg in particular led to a significant increase in EBIT of € 5,164 thousand, to € 11,884 thousand. Adjusted EBIT showed a disproportionately higher increase of € 8,715 thousand to € 27,829 thousand. The adjustments particularly include depreciation and amortization of revalued assets as a result of purchase price allocations (PPA effects) as well as consulting services in connection with the IPO of RENK, which was successfully completed on February 7, 2024.
• The adjusted EBIT margin as of the end of the quarter amounts to 11.7 % after 9.9 % in the same quarter of the previous year. The increase in margins is essentially the result of a favorable product mix and the ongoing optimization of production processes at the Augsburg site.

Liquidity

• While a positive free cash flow of € 15,612 thousand was reported in the comparable period, this was only slightly positive in 2024, mainly due to higher interest payments of € 7,478 thousand attributable to prepayment penalties and related to the successful refinancing of long-term debt. In addition, payouts for capital expenditures increased by € 3,921 thousand, compared to the previous quarter, which more than compensated for the significant improvement in EBITDA by € 5,077 thousand to € 30,534 thousand.
• On February 18 and 19, 2024, RENK completed refinancing of the long -term debt. The € 520,000 thousand corporate bond (senior secured notes with an interest rate of 5.75% and maturity in 2025) was redeemed early on
  February 20, 2024 and replaced by a floating rate loan of € 525,000 thousand (Term Loan B ("TLB")) from a consortium of banks. The TLB has a term of 5 years and is secured by a € 450,000 thousand multi-currency guarantee facility and a € 75,000 thousand revolving credit facility, which will remain unused until further notice. This was accompanied by the termination of the existing guarantee facilities under the Super Senior Facilities Agreement ("SSFA") from 2020. The variable interest rate of the term loan was fixed for a large part of the corresponding volume for 3 years by entering into an interest rate swap.

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RENK Group AG | Earnings release Q1 FY 2024

RENK Group AG

		Q1			Change
in € thousands	2023			2024		in €	in %
Order intake	458,099			208,230	(249,869)			(54.5)
Revenue	193,941			237,673	43,732			22.5
EBIT	6,720			11,884	5,164			76.8
Adjusted EBIT	19,114			27,829	8,715			45.6
Adjusted EBIT margin	9.9%			11.7%		n/a	1.9 p.p.
Profit (+) / loss (-) after tax	(1,962)			(2,772)	(810)			41.3
Adjusted net income	6,472			8,079	1,607			24.8
Basic earnings per share (€)	(0.02)			(0.03)	(0.01)			50.0

• Despite the continued positive development of the M&I and Slide Bearings ("SB") segments, which made a decisive contribution of € 208,230 thousand to the quarter's order intake, this remains below the level in the same quarter in the previous year. This was boosted by two outstanding order wins in the VMS segment amounting to
• • 270,269 thousand for defense propulsion solutions. This development, as well as postponements of incoming orders to subsequent quarters, led to a ratio of incoming orders to revenue (book -to-bill) of 0.9.
• Revenue increased significantly compared to the same quarter in the previous year, from € 193,941 thousand to
• • 237,673 thousand. The VMS and M&I segments contributed the largest shares in this regard. While the VMS segment benefited primarily from positive developments in aftermarket sales, at M&I, progress in contract manufacturing led to an increase in revenue.
• Compared to the previous quarter, EBIT and adjusted EBIT both developed very positively. In addition to the increase in sales volume, this was mainly due to the gross margins achieved in the underlying product portfolio. Furthermore, improvements in operating performance continue to have an impact.
• As a result, the adjusted EBIT margin increased significantly from 9.9 % in the first quarter of 2023 to 11.7 % in the quarter just completed.
• With € 3,795 thousand, RENK had a positive profit/loss before tax for the quarter, after a loss before taxes in the previous year's quarter of € 3,852 thousand. In addition to the increase in operating profit of € 5,164 thousand the interest expenses being € 1,233 thousand lower contributed significantly to this development. The repayment of a shareholder loan in fiscal year 2023 contributed to the reduction. However, the after-tax result of € -2,772 thousand remained significantly below the figure in the previous year's quarter, which is due to the in come tax burden of
• • 6,567 thousand. In the comparison period of the previous year, based on a relief of € 1,890 thousand from income taxes, a less negative result after taxes of € 810 thousand was achieved amounting to € -1,962 thousand.

Order backlog

						Change
in € billion	31.03.2023	31.03.2024		in €	in %
Fixed order backlog	1.7	1.8	0.1			3.7
Frame order backlog		k.A.	0.7		k.A.	k.A.
Soft order backlog		k.A.	2.1		k.A.	k.A.
Total order backlog		k.A.	4.7		k.A.	k.A.

• The order backlog increased by 3.7 % to € 1.8 billion compared to the same period in the previous year. The growth primarily relates to order intake for defense applications, in particular the positive development of order intake in the Navy sector in the M&I segment, as well as the increased demand for naval bearings and special customer applications in the SB segment.

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RENK Group AG | Earnings release Q1 FY 2024

Free cashflow

		Q1			Change
in € thousands	2023			2024		in €	in %
EBIT	6,720			11,884	5,164			76.8
Amortisation and depreciation of intangible assets and property, plant and equipment (incl.
PPA amortisation and depreciation)	18,737			18,650	(87)			(0.5)
EBITDA	25,457			30,534	5,077			19.9
Interest received1)		488			497		9			1.8
Interest payments1)		(14,851)			(25,334)		(10,483)			70.6
Income tax payments	(6,200)			(4,891)	1,309			(21.1)
Change in net working capital	18,568			3,659	(14,909)			(80.3)
Change in inventories	(22,825)			(17,569)	5,256			(23.0)
Change in trade receivables and contract assets	20,940			2,009	(18,931)			(90.4)
Change in trade payables	23,320			(20,941)	(44,261)			(189.8)
Changes in contract liabilities	(2,867)			40,160	43,027			(> 200)
Investments in property, plant and equipment and intangible assets	(3,950)			(7,871)	(3,921)			99.3
Other2)		(3,900)			3,488		7,388			(189.4)
Free cashflow	15,612			82	(15,530)			(99.5)

1. Disclosure was made on a net basis in the previous year.
2. Other reconciliation items include changes in provisions, other receivables and liabilities, insofar as these are not attributable to the NWC, as well as other cash and non-cash effects of subordinate importance.

• The increase in EBITDA by € 5,077 thousand to € 30,534 thousand is largely due to the positive EBIT development.
• Compared to the previous quarter, € 10,483 thousand higher interest payments totaling € 25,334 thousand significantly reduced free cash flow. In contrast to the reduction in interest expenses, the timing of interest payments deviating from the interest accrual is largely responsible for this. In addition, the payment of prepayment penalties due to the refinancing of long-term debt of € 7,478 thousand led to a higher burden compared to the previous quarter.
• Net working capital was reduced by € 3,659 thousand compared to the beginning of the financial year. This was achieved despite an increase in inventories by € 17,569 thousand due to higher output volumes and a decrease in trade payables by € 20,941 thousand. Both the reduction of trade receivables by € 2,009 thousand as well as the increase of contract liabilities and customer deposits received by € 40,160 thousand contributed overall to the nevertheless positive development.
• The investment payments made amounting to € 7,871 thousand relate mainly to production facilities and reflect in the first quarter of 2024 about 3.3% based on revenue.
• Overall, the free cash flow at the end of the quarter was slightly positive and amounts to € 82 thousand. The cash inflow of € 15,612 thousand in the previous year's quarter was mainly driven by lower interest payments and the positive effect of the reduction of NWC.

Vehicle Mobility Solutions (VMS)

		Q1			Change
in € thousands	2023			2024		in €	in %
Order intake	333,613			78,722	(254,891)			(76.4)
Revenue	110,174			134,456	24,282			22.0
EBIT	16,301			19,507	3,206			19.7
Adjusted EBIT	16,946			19,539	2,594			15.3
Adjusted EBIT margin	15.4%			14.5%		n/a	(0.8 p.p.)

• Incoming orders in the previous year were dominated by two major orders for defense propulsion solutions in the
  VMS segment, which in themselves led to an increase in the previous year's quarter of € 270,269 thousand. In the quarter just completed, however, expected incoming orders were postponed to subsequent quarters, resulting in orders only amounting to € 78,722 thousand.

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RENK Group AG | Earnings release Q1 FY 2024

• Higher output volumes, particularly at the German site in Augsburg, led to a strong increase in revenue at VMS of 22.0 %, to € 134,456 thousand. In addition to new business, this positive development is primarily attributable to the sale of spare parts.
• Supported by growth of revenue, the reduction in fixed costs due to higher output and a favorable margin development, EBIT improved by € 3,206 thousand to € 19,507 thousand. Adjusted EBIT amounted to
  € 19,539 thousand, compared to € 16,946 thousand in the same quarter in the previous year.
• The adjusted EBIT margin of the VMS segment of 14.5 % was moderately lower than in the previous year, as the increase in adjusted EBIT lagged behind the even stronger growth of revenue.

Marine & Industry (M&I)

		Q1			Change
in € thousands	2023			2024		in €	in %
Order intake	95,026			97,986	2,961			3.1
Revenue	59,081			78,503	19,422			32.9
EBIT	(3,695)			4,407	8,101			>200
Adjusted EBIT	(3,695)			4,822	8,517			>200
Adjusted EBIT margin	(6.3%)			6.1%		n/a	12.4 p.p.

• With an increase of € 2,961 thousand, the M&I segment was able to slightly exceed the order intake of the previous year's quarter, which had a volume of € 97,986 thousand at the end of the quarter. As in the previous year, incoming orders in the first quarter were at an above-average level.
• Based on the order backlog built up considerably in previous years, revenue of € 78,503 thousand was achieved in the first quarter, which corresponds to a strong increase of 32.9 %.
• As a result, with € 4,407 thousand, M&I achieved a positive EBIT after a quarterly loss in the previous year. Adjusted EBIT developed in a similar manner and was € 4,822 thousand at the end of the quarter. In addition to the increase in sales volume, a larger share of high-margin business in the marine sector contributed significantly to this.
• As a result, the adjusted EBIT margin changed sign and amounted to -6.3 %, compared to 6.1 % in the previous year.

Slide Bearings (SB)

		Q1			Change
in € thousands		2023			2024		in €			in %
Order intake	31,865			38,713	6,848			21.5
Revenue	25,932			28,645	2,713			10.5
EBIT	3,386			4,837	1,452			42.9
Adjusted EBIT	3,386			4,837	1,452			42.9
Adjusted EBIT margin	13.1%			16.9%		n/a	3.8 p.p.

• The segment SB was able to significantly increase the order intake by 21.5 %, which brought the total at the end of the quarter to € 38,713 thousand. The main reason for this was the demand for naval bearings and the spare parts business.
• The significant increase in revenue in the segment from € 25,932 thousand to € 28,645 thousand was mainly due to the sale of e-bearings as well as aftersales support in the form of spare parts deliveries, maintenance and similar services.
• The latter have a favorable margin, which in combination with the growth of revenue contributed to the strong increase in EBIT and adjusted EBIT to € 4,837 thousand.
• This resulted in an adjusted EBIT margin for the first quarter of 16.9 %, which corresponds to a strong increase of 3.8 p.p.

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RENK Group AG | Earnings release Q1 FY 2024

Adjustments

		Q1			Change
in € thousands	2023			2024		in €	in %
Effects of purchase price allocations	11,198			10,972	(226)			(2.0)
Capital market readiness costs	-			2,184	2,184			n/a
M&A activity related costs	686			38	(649)			(94.5)
Other adjustments	511			2,752	2,242			> 200.0
Adjustments total	12,395			15,946	3,551			28.6

• At € 10,972 thousand (previous year € 11,198 thousand), the adjustments are mainly attributable to the effects of purchase price allocations, which mainly relate to depreciation and amortization of fixed assets including PPA step- ups and are allocated to the reconciliation to consolidated financial statements.
• In fiscal year 2023, RENK began activities from the second quarter and onward to align the Group with the requirements of the capital market. In conjunction with the successful IPO in February 2024, costs of
  € 2,184 thousand were incurred in the first quarter.
• The other adjustments relate to other consulting services and costs incurred in connection with the bond refinancing.

Reconciliation of consolidated financial statements

		Q1			Change
in € thousands	2023			2024		in €	in %
Adjusted EBIT	16,637			29,199	12,562			75.5
Reconciliation consolidated financial statement	2,478			(1,370)	(3,847)			(155.3)
Adjusted EBIT margin	19,114			27,829	8,715			45.6

The reconciliation items include costs for corporate functions and their allocation within the Group.

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RENK Group AG | Earnings release Q1 FY 2024

Outlook

Forecast

In the opinion of the Management Board, the forecast assumptions as set out in Annual Report 2023 remain unchanged. Based on this, RENK continues to expect consolidated revenue of between € 1,000 million and € 1,100 million and an adjusted EBIT margin of between 16% and 18% for fiscal year 2024. This leads to the expectation of being able to achieve an adjusted EBIT of between € 160 million and € 190 million.

Notes on forward-looking statements

Recordings of the conference calls for journalists, analysts and investors will be made available afterwards. You can download the financial publications from the Internet at URL. This document contains statements that relate to our future business development and future financial performance as well as to future events or developments concerning RENK Group AG and may constitute forward-looking statements. These statements can be identified by words such as "expect," "want," "anticipate," "intend," "plan," "believe," "seek," "estimate," "will," and "predict" or similar terms. We may also make forward-looking statements in other reports, prospectuses, presentations, materials sent to shareholders and press releases. In addition, from time to time our representatives may make oral forward-looking statements.

Such statements are based on current expectations and certain assumptions made by the management of RENK Group AG, many of which are beyond the control of RENK Group AG. They are therefore subject to a variety of risks, uncertainties and other factors that are described in publications - in particular in the section entitled Report on expected developments with their significant opportunities and risks in the Annual Report and in the Half-Year Financial Report, which should be read together with the Annual Report - but are not limited to those described.

If one or more of these risks or uncertainties materialize, force majeure events such as pandemics occur, or it turns out that the underlying expectations, including future events, do not occur or occur later or assumptions have not been fulfilled, the actual results, performance and successes of RENK Group AG (both negative and positive) may differ significantly from those results that were expressly or implicitly stated in the forward-looking statement. RENK Group AG assumes no obligation and does not intend to update these forward -looking statements or to correct them if developments differ from those expected. This document contains supplementary financial measures - not precisely defined in relevant accounting frameworks - which are or may be what are known as alternative performance measures. When assessing the net assets, financial position and results of operations of RENK Gro up AG, these supplementary financial measures should not be used in isolation or as an alternative to the financial indicators presented in the consolidated financial statements and determined in accordance with the relevant accounting framework. Other companies that present or report alternative performance measures with similar titles may calculate them differently. Due to rounding, individual numbers in this and other reports may not add up exactly to the totals shown and percentages presented may not precisely reflect the absolute valuesto which they refer. This document is a quarterly statement pursuant to Section 53 of the Stock Exchange Rules of the Frankfurt Stock Exchange.

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RENK Group AG | Earnings release Q1 FY 2024

On May 15, 2024 from 2:00 p.m. CET, the conference call for analysts and investors on the financial figures for the first quarter of fiscal year 2024 will be broadcast on the Internet. It is available on our Investor Relations website: https://ir.renk.com/publications/.

Contact persons:

Ingo Schachel, Head of Investor Relations [phone]

Günther Hörbst, Group Communications [e-mail]

Financial calendar 2024:

May 15, 2024

June 26, 2024

August 13, 2024

September 10, 2024

By November 30, 2024 at the latest*

Quarterly Statement Q1 2024 Annual General Meeting, virtual Half-Year Results 2024 Capital Markets Day, Augsburg Quarterly Statement Q3 2024

* the exact date will be communicated in a timely manner

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RENK Group AG | Earnings release Q1 FY 2024

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RENK Group AG | Earnings release Q1 FY 2024

Selected key performance indicators

Growth

		Q1			Change
in € thousands	2023			2024		in €	in %
Order Intake	458,099			208,230	(249,869)			(54.5)
Revenue	193,941			237,673	43,732			22.5

Profitability

		Fiscal Year			Change
in € thousands	2023			2024		in €	in %
EBIT	6,720			11,884	5,164			76.8
Adjusted EBIT	19,114			27,829	8,715			45.6
EBIT margin	3.5%			5.0 %		n/a	1.5 p.p.
Adjusted EBIT margin	9.9%			11.7 %		n/a	1.9 p.p.
Financial result	(10,572)			(8,089)	2,483			(23.5)
Profit (+) / loss (-) before tax	(3,852)			3,795	7,647			(198.5)
Income taxes	1,890			(6,567)	(8,457)			(< 200,0)
Profit (+) / loss (-) after tax	(1,962)			(2,772)	(810)			41.3
Adjusted net income	6,472			8,079	1,607			24.8
Basic earnings per share (€)	(0.02)			(0.03)	(0.01)			50.0

Liquidity

		Q1			Change
in € thousands	2023			2024		in €	in %
Free cashflow	15,612			82	(15,530)			(99.5)
	31.12.2023			31.3.2024		in €	in %
Net debt1)		441,280			430,277		(11,003)			(2.5)
Net debt / LTM adj. EBITDA2)	2.4			2.3		n/A	(0.2 p.p.)

1. Net Debt is defined as sum of SSFA (prior year bond) and lease liabilities minus cash and cash equivalents.
2. Adjusted LTM EBITDA is defined as operating result of the last twelve months before amortization and depreciation of intangible assets and property, plant and equipment, PPA amortization and depreciation as well as profits/losses from sale of PPA assets and adjusted by certain positions which are considered one-off or recurring by the Management Board. An overview is provided in the table detailing adjustments.

Employees

						Change
	31.12.2023	31.03.2024		in €	in %
Germany	2,666	2,708	42			1.6
Except Germany	1,068	1,042	(26)			(2.4)
Group total	3,734	3,750	16			0.4

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