RENOLD plc Annual Report 2006
Annual Report 2006 Product Applications
Renold Hi-Tec couplings power
some of the world’s fastest, most
technically advanced marine
diesel ships.
Renold meets the exacting standards
of the food, drink and packaging
industry.
Renold products are specified in the
oilfield industry, where compromise
is not an option.
A well established name within
the agricultural industry. Renold
supplies products to meet the
harshest of operating environments.
Heavy duty mining and quarrying
installations rely on Renold products
to ensure consistent performance.
Renold supplies products for
use in a vast range of
applications around the
world, too numerous to
mention.
Here is just a selection of
those industries where
Renold helps
customers to achieve the
important competitive edge.
Renold products are at the heart of
large scale cement plants where
durability is the key to success.
Some of the world’s largest steel
works are equipped with Renold
chain, gears and couplings.
Renold supplies products for
use in a vast range of
applications around the
world, too numerous to
mention.
Here is just a selection of
those industries where
Renold helps
customers to achieve the
important competitive edge. 1
Renold plc – Consolidated
Financial Statements
2 Financial Highlights
3 Chairman’s Statement
5 Chief Executive’s Review
7 Operations Review
10 Financial Review
13
14 Directors and Officers
15 Report of the Directors
17 Corporate Governance
20 Remuneration Report
24
Responsibilities
25 Report of the Independent
Auditors
26 Accounting Policies
31 Consolidated Income Statement
31 Consolidated Statement of
Recognised Income and Expense
32 Consolidated Balance Sheet
33 Consolidated Cash Flow Statement
34 Notes to the Consolidated
Financial Statements
64 Group Five Year Financial Review
65 Principal Subsidiary Companies
Renold plc – Company
Financial Statements
66 Report of the Independent
Auditors
67 Accounting Policies
69 Company Balance Sheet
70 Notes to the Company Financial
Statements
75 Notice of Annual General Meeting
80 Financial Calendar
Contents
Principal Activities
Renold plc is an international engineering group,
producing a wide range of precision engineering
products, and owning merchanting operations
in nineteen countries.
The Group’s principal products include
transmission and conveyor chains, gearboxes and
mechanical variable speed drives; clutches,
couplings and spindles.
Directors’ Biographies
Statement of Directors’ 2
2006 2005
£m £m
Continuing operations:
Turnover 155.0 143.2
Operating profit 5.4 0.4
Operating profit before exceptional items 6.8 4.6
Profit before tax and exceptional items 3.2 2.4
Profit/(loss) before tax 1.8 (1.8)
Discontinued operations:
(Loss)/profit from discontinued operations including
impairment charges (13.9) 0.2
Other information:
Basic and diluted (loss) per share – Group (19.6)p (0.1)p
Basic and diluted earnings/(loss) per share –
continuing operations 0.4p (0.4)p
Adjusted earnings per share
(adjusting for the after tax effects of exceptional items) 1.7p 3.8p
Dividends paid per ordinary share 4.5p
Capital expenditure 6.6 7.6
Net debt 20.7 17.0
Financial Highlights
for the financial year ended 31 March 2006
Transmission Chain
Engineered Chain
Gears & Couplings
Other
United Kingdom
Germany
Rest of Europe
Americas
Other countries
Geographical
Turnover analysis – continuing operations
Products
13%
9%
23%
37%
18%
3%
30%
45%
22% OVERVIEW
It has been a year of progress towards returning the Group
to its Power Transmission core competency and improving
profitability and future prospects for the business.
In line with the Board’s strategic direction for the Group in
targeting a more tightly focused business with a substantially
lower cost base and a reduced level of borrowings, the
Group announced the proposed sale of its Machine Tools and
Automotive businesses, the proceeds of which will be used
to reduce bank debt. In the light of these proposed sales,
the results of the Group show separately the results of the
continuing Group businesses.
There were unprecedented steel price increases in the second
half of last year and the pressures on the Group were
compounded by a continuing weakness of the US Dollar.
Where steel represents the major part of raw material costs,
a vigorous programme of sales price increases and cost
reduction was implemented and this has resulted in improved
margins and profitability of the ongoing industrial power
transmission business.
Continuing operations’ profitability improved, reaching an
operating profit before exceptional items of £6.8 million
compared with £4.6 million in 2005. This result reflected
strong sales growth in North America but with weaker market
conditions persisting in Europe until the later part of the year.
Development of the Group’s activities in China continued with
further contracts won.
Continuing operations recorded a pre-tax profit of £1.8 million
compared with a pre-tax loss of £1.8 million in 2005. All
figures take account of the new International Financial
Reporting Standards and comparative numbers have been
restated as appropriate.
After an impairment charge of £12.8 million relating to
discontinued operations, the Group loss for the year was
£13.6 million compared with a loss of £0.1 million in
2004/05.
Group net borrowings, excluding preference shares, ended
the year at £20.2 million compared with £17.0 million the
previous year. It is intended that proceeds from the sale of the
Machine Tools and Automotive businesses will substantially
reduce the level of debt going forward.
DIVIDEND
Given this year of transition the Board believes it is prudent to
recommend that no dividend be paid for the year. The Board
will consider future dividend policy in the light of results from
the re-focused business.
BOARD CHANGES
Tony Brown, Finance Director, and Geoffrey Newton, Company
Secretary, both plan to retire following the 2006 AGM. Both
are long-term employees of the Company and we thank them
for their unstinted contribution over many years.
Peter Bream joined the Board on 1 July, 2006 and will replace
Tony Brown as Finance Director effective from the 2006 AGM.
Peter Bream is an experienced accountant having been
Finance Director of Provalis plc, a UK listed company, prior
to his appointment. Keith Brown, Company Solicitor, will
replace Geoffrey Newton as Company Secretary in a new
combined role.
PROSPECTS
Overall, the economic environment continues positive
although concerns remain over the negative impact of
escalating raw material and energy costs. That said, the
refocused business, with a reduced cost base, is better
positioned to show further progress during 2006/07.
Roger Leverton,
Chairman
3
Chairman’s Statement Our customers’ experiences prove that Renold Synergy lasts longer and
provides superior value for money over all other competitors’ chains.
Renold Synergy’s success in Europe has proliferated into the USA and Australia,
with engineers around the world endorsing the outstanding wear and fatigue
resistance and exceptional working life of this revolutionary chain.
An ever increasing list of applications demonstrates the flexibility of Renold
Synergy, with successes documented from customers across a diverse range
of industries.
A leading food manufacturer in the US producing bakery and confectionery
products specified Renold Synergy on its most arduous mixer application,
extending chain life from 8 weeks to 11 months.
Renold Synergy proves its worth in the demanding environment of the
packaging industry, by reducing downtime for a major producer of glass
and plastic packaging and enabling Europe’s largest manufacturer of
metal packaging to keep their high volume capacity at its optimum level.
And it doesn’t end there. Renold Synergy also made it onto the big screen
when the famous Pinewood Studios in the UK and a studio equipment
company in Hollywood both specified Renold for use on their special effects
mechanisms, and camera dollies.
Renold Synergy – the success keeps on rolling
Renold Synergy
4 Improved trading during the second half enabled the Group to
achieve progress in the operating results for all the businesses
last year. In 2004/05 the dramatic and rapid increase in steel
prices severely impacted costs. This year steel prices have been
stable and some small reductions have been seen; however,
steel costs are still at least 40% higher than at the start of
2004/05. These increases have now been substantially offset
by increased selling prices and cost reductions. Despite the
need to pass on the increased cost of steel, sales growth was
achieved. The increases in freight, utility and other energy
related costs are a concern going forward.
The strategy of reducing our dependence on manufacturing
in the traditional areas of Europe and the US continued with
the establishment of facilities in Poland, Malaysia and China.
Increasingly these will provide the cost platform that will
protect the existing business base and allow sales penetration
into markets and countries where Renold has not traditionally
been strong. These facilities will serve both local and
international markets during the forthcoming year. Further
investment in the sales teams has also been made in these
and other growing markets.
The strategy of focusing on the core Industrial Power
Transmission business was taken forward with the
announcement in June of the proposed sale of the
Automotive and Machine Tools businesses. The Automotive
business, despite some improvement in the second half,
continued to be unprofitable and to consume cash. Renold
was a relatively small player in the automotive supply industry
compared with the size of its major competitors. Double digit
sales growth, over the past few years, driven by technical
excellence, demanded significant continued investment.
INA-Schaeffler KG, with over€5.0 billion sales in the
automotive segment and manufacturing locations in many
parts of the world, including Europe, USA and China, is in
a better position to serve this market. The Automotive
manufacturing and design facilities are based in Calais and
St Siméon in France and Morristown, Tennessee, in the US.
Automotive product manufacturing in Einbeck, Germany,
has been transferred to St Siméon.
The Machine Tools business has little overlap with the core
businesses but is cyclical and, at times, has a high demand
for cash. The business operates from self-contained sites in
Rochdale (Holroyd/Edgetek) and Leicester (Jones & Shipman).
A production cell for loose gears will transfer from the
Machine Tools business to the adjacent Renold Gears site
after completion of the proposed transaction.
Following these proposed divestitures, Renold will be a more
focused Group. Going forward it will have the ability to invest
more heavily in the Industrial Power Transmission business and
will accelerate changes to the manufacturing footprint and
development of sales, particularly in the USA, China, Eastern
Europe and South America.
Robert Davies,
Chief Executive
5
Chief Executive’s Review When Schindler Austria, one of the leading suppliers of escalators worldwide,
wanted to simplify the main drive system for their escalators, they turned to
Renold Gears to design and develop a bespoke ‘slim-line’ solution.
The moving steps of the escalator had previously been driven by a combination
of drive systems consisting of gear and chain transmissions, linked to the main
head-shaft, an extremely space consuming design. For aesthetical reasons and
ease of maintenance, Schindler required the gearbox to be shaft mounted
directly on to the head-shaft of the escalators, thereby eliminating all other
drive components.
Renold faced the challenge of designing a gearbox to fit in a space no wider
than 150mm whilst still providing sufficient torque to drive the escalator with
drive helical box, fitted with a standard first reduction worm and wheel drive
to achieve the overall ratio required.
Renold’s ability to undertake and develop complete drive solutions in short
lead times highlights our dominance in the People Movement industry.
Slimline Gearbox Solves Complex Drive Solution
6
a full load. The bespoke solution, which Renold Gears developed, was a main The Group going forward is focused on its industrial power
transmission business, which forms one business segment.
The activities of the segment include the manufacture and sale
of chain, gear and coupling products, which are sold through
the Group’s worldwide sales operations to a broad range of
original equipment manufacturers and distributors.
The key performance indicators which are used to monitor
performance are financial, including rate of sales growth,
margin, material costs (particularly steel), payroll costs,
working capital performance and net debt. The Group’s
performance against these key indicators is noted in the
comments which follow. Other non-financial performance
indicators are used but vary on a business by business basis.
CHAIN
The industrial chain business recovered well in the second half
resulting in an improved performance compared with last year.
Steel prices declined slightly but still remained 40% higher
than at the start of 2004/05. Passing these cost increases on
to customers was an essential, but time consuming, feature
of the year. This process was managed in a way that allowed
the majority of customers to be retained and it was pleasing
to see that organic sales growth was achieved during this
difficult period. The full impact of steel price increases was
not recovered by increased pricing alone but the shortfall
was substantially made up by cost reduction achievements.
EUROPE
Renold is the leading supplier of Industrial Chain in Europe
and this position was maintained during the year. Excluding
price increases, sales were relatively flat during the early part
of the year but increased towards the end of the year.
Germany in particular started to show signs of recovery
following a lengthy period of flat sales.
The first new factory for many years was established in
Goleniow, close to Szczecin, in Poland. The first chain was
assembled in November. Phase 1 of this project was to
transfer the assembly of special, low volume products from
the Einbeck and Manchester facilities. This phase is nearly
complete with over 60 new jobs already being established in
Poland. An infrastructure is now being established which
will allow the second phase to begin. This will include direct
shipments to customers and will provide products in response
to the demands of the local market. Phase 2 was originally
scheduled to start at the end of 2006/07 but is being initiated
six months ahead of plan. This facility is being managed
by the Einbeck team who have done an excellent job of
establishing the facility ahead of schedule and within budget.
The local Government in Goleniow have been particularly
supportive and have contributed to this success.
The creation of this new facility was timely as the demand on
the Einbeck facility increased at the end of the fourth quarter
and is ongoing into 2006/07. This demand has been met by
modest capital investments and efficiency improvements.
The transfer of Automotive product to the SAF factory at
St Siméon, in June 2006, will allow a further increase in
capacity with little additional investment.
The European Distribution Centres project made good
progress in the year. This project is aimed at improving
customer service by reducing lead times and increasing stock
availability. The UK and German distribution centres are now
established on a common software platform and have started
to ship direct to customers. This will be rolled out across all
European selling companies during the forthcoming year.
A total of 94 redundancies were made following the
announcement of the closure of the facility in Burton.
This work has been transferred to Poland, Manchester or
outsourced. The initial planning application for redevelopment
of the Burton site was rejected but an appeal has been lodged
which is expected to be heard before the end of 2006.
During the year 18 job losses were announced at the Seclin
manufacturing facility in France.
AMERICAS
The US achieved good growth with sales up by over 13%
compared with the previous year. This growth came from
all segments of the business but sales through distribution
were particularly strong. Sales to the two largest US Power
Transmission Distributors, Motion and AIT, increased
significantly. This increase in market share has moved Renold
into the top three Industrial Chain manufacturers in the US.
Despite the need to increase prices, following the increase in
steel costs, the OEM segment also grew. Orders increased for
new products introduced over the last few years - Synergy (the
world’s leading transmission chain), Syno (lubrication free/dry
to the touch chain) and the latest introduction XXL. This
new product allows performance features to be achieved in
chain that would normally need to be one size larger. This
innovation has the real potential for OEM’s to save size,
weight and cost.
During the coming year the manufacture of certain products,
which are sold mainly in North America, will be moved to
the manufacturing facility in Morristown, Tennessee. This
facility has progressed well with the introduction of Lean
manufacturing and has completed a number of joint Lean
events with customers during the year.
Operations Review
7 Renold Couplings is known world-wide as the primary choice for
engineered solutions in different applications. Our products service
a broad range of industries from Steel, Mining, Paper and Marine.
Building on our success by servicing some of the fastest growing
markets, including the Mass Transit Industry, we continue to
grow business in the high economic growth regions of Asia and
South America.
Across the world Renold Couplings have secured many new orders,
including a major order from Anyang Steel in China who approached
Renold to supply its steel mill with 18 Gear Spindles each weighing
8,500kg. Designed to operate under extremely high torque levels
Renold Gear Spindles provide long service life.
In the United States we have been successful in gaining the first phase
of the New York City Mass Transit Subway contract providing both the
gearbox and coupling package over a four year period.
In the Marine industry Renold Hi-Tec Rubber-In-Compression Couplings
are used on the cutter drive of the largest cutter suction dredger in the
world, the JFJ de Nul which can operate at depths of up to 35m.
Renold Couplings
8 South American sales are now led by a local Sales Manager
focused on the region. Starting from a relatively small base,
the benefits of this focus are already being seen, with orders
substantially increased. Additional resources will be added in
the forthcoming year and, to fully realise the potential of the
region, consideration will be given to adding a manufacturing
facility the following year.
ASIA PACIFIC
Progress continues to be made in China with additional sales
resources being added. All product groups are sold in China
but the largest order, at over £1.5 million, came from a steel
mill for large spindles for the Couplings business. Increasingly
Renold chain products are being recognised for their
exceptional performance and capabilities. Markets such
as power generation, metals, glass and printing machines
provided good order intake. In total, orders from China
increased by 50%, albeit from a relatively low base, and,
going forward, strong growth is again expected in the
coming year.
To accelerate this growth the intent is to start manufacturing
products in China, primarily to serve the local market. During
the second half a lease was taken on 3,000 square metres of
manufacturing space close to Shanghai. This is currently being
refurbished and the product will be manufactured in this
location during 2006/07. In addition to this facility a new
sales office, located in the centre of Shanghai, will be opened
during the year.
In addition to China, a new manufacturing facility will be
opened in Malaysia in 2006/07. This will initially assemble
chain for the palm oil industry but is expected to expand
to satisfy the demands of other local customers.
GEARS
Gears operations have been consolidated under a single
management team. Loose gears were already sold through
the Gears sales team but the manufacturing responsibility was
transferred from the Machine Tools & Rotors Division to the
adjacent facility in Milnrow close to Manchester. The facility in
South Africa was also consolidated into this grouping. South
Africa, with sales of £4.5 million, manufactures, maintains
and overhauls gearboxes from its base in Johannesburg and
sells a range of other power transmission products.
Growth in the year came mainly from China, Germany and
the USA. This success is based on providing creative design
solutions for specific customer problems. A good example of
this is an innovative Compact Escalator Direct Drive unit for
a major European manufacturer.
The Apprentice Training School is located in the Gears Milnrow
facility. Given the importance of key technicians to the Group,
it is planned that this will be retained by Renold following the
divestiture of Machine Tools.
COUPLINGS
It was a good year for this product group with orders up
on the previous year. The growth came mainly from North
America for the power generation and marine industries and
from China for steel mills. Sales are underpinned by the large
multi-year Mass Transit contract for Alstom/New York City.
This runs until 2008 and over £2 million worth of shipments
are scheduled for 2006/07. There are further customer options
to extend the contract beyond 2008.
A licensing agreement was reached with David Brown that
permits Renold to offer both couplings and gearboxes for
Mass Transit applications. This significantly increases the
available market size for Renold products. Multi-year contracts
for over £30 million are currently being bid on.
The strong order performance and ongoing Alstom contract
positions this product group well for another strong year.
Operations Review continued
9 Financial Review   
10
OVERVIEW
The financial statements of the Group, including restated
comparatives, have been prepared in accordance with
International Financial Reporting Standards (IFRS). The
principal differences arising from the transition to IFRS 
from UK Generally Accepted Accounting Practice were set 
out in a press release dated 23 November 2005 and details
are also included in the notes to these financial statements.
As required under IFRS, the results of discontinued businesses
are reported on one line in the profit and loss account.
The financial statement of the parent company, Renold plc,
has been prepared under UK Generally Accepted Accounting
Principles (UK GAAP) and are included on pages 67 to 74.
DISCONTINUED BUSINESSES
As announced in June 2006, the Group is at an advanced
stage of negotiation for the sale of the business and certain
assets of both the Automotive and Machine Tools businesses.
Further information on these disposals is reported in the 
Chief Executive’s Review.
As a consequence the Automotive and Machine Tools
businesses are accounted for as discontinued operations 
in the financial statements.
TURNOVER
The turnover of continuing operations increased by 8% to
£155.0 million, at constant exchange rates the increase was
6%. North America exhibited strong growth, up 17%, with
Continental Europe up 4%, but the UK only 2% higher;
elsewhere growth in the Far East was partially offset by 
a reduction in Australia. Sales in the second half-year, at 
£79.1 million were 4% higher than the first half.
OPERATING PROFIT
Operating profit before exceptional items was £6.8 million up
48% on 2004/05. Operating profit in the second half-year was
£4.2 million representing a 5.3% return on sales, compared
with £2.6 million in the first half or 3.4%. This demonstrates 
a further recovery in margins resulting from the pricing and
cost actions taken following the rapid steel price increase in
2004 and early 2005, which depressed profitability particularly
in the second half of the 2004/05 year.
Exceptional costs were £1.4 million, compared with 
£4.2 million in 2004/05, and related to redundancy and
restructuring costs incurred mainly in the European chain
operations.
FINANCING COSTS
Net interest cost rose to £2.2 million (2004/05: £1.9 million),
there were costs of £0.7 million relating to the renegotiation
of banking facilities, and a fair value gain on derivatives of
£0.3 million. The net of interest costs on pension balances 
and the expected return on pension plan assets was a charge
of £1.0 million (2004/05: £0.3 million).
PROFIT BEFORE TAX
Profit before tax and before exceptional items was £3.2 million
compared with £2.4 million last year. Profit before tax after
exceptional items was £1.8 million compared with a loss of
£1.8 million in 2004/05.
TAXATION
The tax charge of £1.5 million (2004/05: £1.5 million credit)
for the year represented higher than a normal percentage 
of the profit before tax mainly due to losses, including
redundancy and restructuring costs, arising in subsidiaries
where it is considered unlikely that they will be recovered in
the foreseeable future.
DISCONTINUED OPERATIONS
As noted above the Automotive and Machine Tools businesses
have been reported as discontinued operations with a loss,
before disposal impairment charges, of £1.1 million in the year
compared with a profit of £0.2 million in 2004/05. Details of
the results of the discontinued operations are given in Note 5
to the financial statements.
RESULTS FOR THE FINANCIAL PERIOD
The loss for the year was £13.6 million (stated after disposal
impairment charges of £12.8 million) compared with 
£0.1 million in 2004/05; the basic and diluted loss per share
was 19.6p (2004/05: 0.1p loss). The basic and diluted
earnings per share from continuing operations was 0.4p
(2004/05: loss 0.4p).
BALANCE SHEET
Net assets at 31 March 2006 were £40.6 million 
(2004/05: £56.1 million) after an impairment charge of 
£12.8 million in relation to discontinued operations, details 
of which are shown in Note 13. The liability for retirement
benefit obligations was £53.9 million (2004/05: £53.2 million)
before allowing for a deferred tax asset of £12.7 million
(2004/05: £14.3 million). CASH FLOW AND BORROWINGS
Cash inflow from continuing operations was £4.7 million
(2004/05: £8.6 million); there was a net cash outflow of 
£2.7 million for redundancy and restructuring costs in the 
year (2004/05: £4.9 million inflow).
Cash inflow from discontinued operations was £1.7 million
(2004/05: £2.0 million outflow).
Payment for purchase of property, plant and equipment was
£6.7 million (2004/05: £7.7 million), of which £2.9 million
(2004/05: £3.9 million) related to discontinued activities.
Proceeds of disposals, including the sale of leasehold
improvements at the Bredbury factory site totalled 
£3.2 million.
Group net borrowings at 31 March 2006 were £20.7 million
(2005: £17.0 million) comprising cash and cash equivalents
£17.8 million (2005: £24.5 million) and borrowings of 
£38.5 million (2005: £41.5 million).
TREASURY AND FINANCIAL INSTRUMENTS
The Group treasury policy, approved by the directors, is to
manage its funding requirements and treasury risks without
undertaking any speculative risks. Note 25 to the Accounts
provides details of financial instruments. 
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 more than six months beyond the balance sheet
date, although exceptions can occur where longer-term
projects are entered into.
Interest rate swaps have been used to fix interest rates on
certain Group borrowings. At 31 March 2006 the Group had
31% of its gross debt at fixed interest rates. Cash deposits are
placed short-term with banks where security and liquidity are
the primary objectives.
Certain dollar denominated borrowings taken out in the UK 
to finance the acquisition of the Jeffrey Chain Corporation in
2000 have been designated as a hedge of the net investment
in US subsidiaries, the fair value of these borrowings was 
£5.4 million at 31 March 2006 (31 March 2005: £4.6 million).
PENSIONS
Information on the Group’s pension schemes is set out in
Note 18 to the financial statements, including the key
assumptions used by the actuary in arriving at the IAS 19
funding position. This year, for the first time, information 
has been provided in the note on the mortality assumptions
used for the main UK schemes.
The gross pension deficits before taxation are as follows:
2006 2005
Assets Liabilities Deficit Assets Liabilities Deficit
£m £m £m £m £m £m
UK Schemes 
– funded 162.7 195.6 32.9 142.4 177.2 34.8
Overseas
Schemes
– funded 15.5 17.9 2.4 12.4 12.1 (0.3)
– unfunded 18.6 18.6 18.7 18.7
178.2 232.1 53.9 154.8 208.0 53.2
During the year the assets of the funded schemes rose by
£23.4 million due mainly to the return on assets exceeding the
expected return by £16.2 million, and to UK deficit reduction
payment of £3.1 million made in the year. The funding deficit
did not materially change, however, as liabilities increased by
£21.5 million due to actuarial losses caused primarily by a
reduction in bond rates, with that used for discounting UK
liabilities falling from 5.4% to 5.0%.
The overseas deficit comprises £2.4 million in respect of
defined benefit schemes, and £18.6 million relating principally
to the unfunded German scheme which, as is common in
Germany, is a “pay as you go” scheme which does not require
to be pre-funded. There is no obligation for deficit funding
payments for this type of scheme. 
The key issues for the Group are those relating to the UK
schemes, further details of which are given below:
There are three UK defined benefit pension schemes, the main
scheme which is the Renold Group Pension Scheme (RGPS),
the Renold Supplementary Pension Scheme (RSPS), and the
Jones & Shipman Retirement Benefit Scheme (J&S).
Financial Review continued
11 Financial Review continued
12
As at 31 March 2006 RGPS RSPS J&S Total
£m £m £m £m
IAS 19 liabilities 125.9 30.9 38.8 195.6
Market value of assets 102.2 23.6 36.9 162.7
Deficit on IAS 19 basis 23.7 7.3 1.9 32.9
Annual deficit reduction 
payment (based on 
funding valuations) 2.2 0.7 0.2 3.1
Total members (approx) 6,200 120 1,080 7,400
of which active are 625 20 70 715
For the UK schemes, the sensitivity to change in bond yields
has been estimated assuming that the value of bond and
annuity assets would change in line with the change in yields,
but that the equity values would be unchanged; for a 0.5%
increase in bond yields the UK deficit would reduce by some
£12 million; for a 0.5% reduction in bond yields the UK deficit
would increase by some £14 million.
The UK schemes’ assets at 31 March 2006 were invested 
48% in equities and 52% in bonds. Using the expected 
rates of return on the different asset groups, the weighted
average rate of expected return is 6.3%. This rate is used in
determining the amount of expected return on plan assets
shown as income in the profit and loss account. If the same
6.3% rate were to be used to discount the past service
liabilities, rather than the corporate bond rate required by 
IAS 19, then the value of UK scheme liabilities would reduce
to £160.3 million compared with assets of £162.7 million.
The sensitivity of the UK schemes to change in projected
mortality has also been estimated; an increase in the post
retirement mortality rate of 15%, broadly equivalent to a
change of one year in life expectancy at age 65, would reduce
the projected deficit by £7 million; conversely, a reduction in
the post retirement mortality rate of 15% would increase the
deficit by £7 million. The mortality projections used for the
RGPS make allowance for a higher mortality rate than that 
of the standard PA92 table as a mortality review carried 
out at the time of the last valuation indicated that this would
be appropriate.
The deficits in the UK schemes are being funded over the
remaining service lives of active members at the rate of 
£3.1 million per year in total. These deficit reduction payments
were established at the most recent actuarial valuations as at
J&S scheme. Funding rates will be revised following the next
triennial valuations which will incorporate the new Scheme
Specific Funding requirements.
Finance Director
Tony Brown,
April 2004 for the RGPS and RSPS, and at April 2003 for the Directors’ Biographies
13
From left to right:
Roger Leverton FCA (age 67)
Chairman
was appointed to the Board and became Chairman in 1998.
He was formerly Chairman of Betts Group Holdings Limited,
Chairman of Infast Group plc and Group Chief Executive of
Pilkington plc.
Bob Davies BSc Hons CEng MIEE (age 52)
Chief Executive
joined the Group in March 2004 and was appointed Chief
Executive in April 2004. A Member of the Institute of
Electronic Engineers, he was previously Chief Executive of
Druck Holdings PLC and prior to that held a number of senior
management positions in the Lucas Group and at General
Electric, holding posts in the UK and USA.
Peter Bream MA ACA (age 39)
Executive Director
joined the Group on 1 July 2006. He was formerly Finance
Director of Provalis plc, a UK listed company, for three years
until March 2006. Prior to joining Provalis, Peter was a
Divisional Finance Director for API Group plc. Peter is
a chartered accountant and has an engineering degree
from Cambridge University.
Tony Brown BSc Hons ACMA (age 59)
Finance Director
joined the Group in 1990 as Chain Division Finance Director.
In 1991 he became Group Financial Controller and was
appointed Finance Director in August 2000. He was
appointed Managing Director – Chain and Power Transmission
in February 2003 and appointed Business Development
Director in November 2004. He was re-appointed Finance
Director on 1 June 2005. A chartered management
accountant, he had previously held a number of senior
financial positions at Courtaulds PLC both in the UK and
in North America.
Barbara Beckett BA Hons (age 52)
Non-Executive Director
was appointed to the Board in March 2005. She is the
Group Marketing Director of BAA plc and has extensive
experience throughout the retail/service industries and has
had operations management experience with several major
companies including BT plc.
Mark Smith FCA (age 67)
Non-Executive Director
was appointed to the Board in 1994 and is the Senior
Non-Executive Director. He was formerly a Director of The
Laird Group PLC, Bradford & Bingley plc and was a Director
and Vice Chairman of S G Warburg & Co Ltd. CHAIRMAN
R F Leverton
EXECUTIVE DIRECTORS
R J Davies Chief Executive
P E Bream Executive Director
D A Brown Finance Director
NON-EXECUTIVE DIRECTORS
B A Beckett
M A Smith
COMPOSITION OF BOARD COMMITTEES
AUDIT COMMITTEE NOMINATION COMMITTEE REMUNERATION COMMITTEE
M A Smith (Chairman) R F Leverton (Chairman) B A Beckett (Chairman)
R F Leverton M A Smith R F Leverton
B A Beckett B A Beckett M A Smith
COMPANY SECRETARY
G R Newton
Directors and Officers
14
REGISTERED OFFICE
Renold House
Styal Road
Wythenshawe
Manchester M22 5WL
Registered No. 249688
Telephone: +44 (0)161 498 4500
Fax: +44 (0)161 437 7782
e-mail: enquiry@renold.com
Website: www.renold.com
AUDITORS
PricewaterhouseCoopers LLP, Manchester
MERCHANT BANKERS
KBC Peel Hunt
STOCKBROKERS
KBC Peel Hunt
REGISTRAR
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0LA
Telephone: 0870 162 3131
e-mail: shareholder.services@capitaregistrars.com
Website: www.capitaregistrars.com Report of the Directors
for the financial year ended 31 March 2006
15
To be presented to the seventy-sixth Annual General Meeting 
of RENOLD plc to be held at Renold House, Styal Road,
Wythenshawe, Manchester M22 5WL on Tuesday, 
19 September 2006 at 11.30 a.m.
The Notice of Meeting is given, together with explanatory
notes, on pages 75 to 79.
Group results
The profit for the year before tax from continuing operations
was £1.8 million compared with a loss of £1.8 million for the
previous year. 
The announcements in June 2006, relating to the disposal of
the Group’s Automotive and Machine Tool businesses, are in
line with the Board’s strategy to focus the Group on the core
activities of the manufacture and sale of industrial power
transmission products comprising chains, gears and couplings,
and these are the principal continuing activities of the Group. 
A review of the development of the business and of the
business divestments since the year end is contained in the Chief
Executive’s Review on page 5 and in the Operations Review on
pages 7 and 9.
An indication of future developments and prospects is also
given in those pages and in the Chairman’s Statement on 
page 3.
Dividends
No final dividend per ordinary share is recommended.
Preference dividend payments were made on 1 July 2005 and 
1 January 2006.
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 14. All these directors were directors
throughout the year except for Mr S R Mole who resigned as a
director on 1 June 2005 and Mr T B Fortune who retired on 
21 July 2005. Mr P E Bream was appointed on 1 July 2006 
and will be standing for election at the forthcoming Annual
General Meeting.
Mr R J Davies retires by rotation and, being eligible, offers
himself for re-election. Mr M A Smith has served for longer than
nine years and under the Combined Code offers himself for re-
election a year after he was last elected. Mr Smith does not have
a service contract with the Company or any of its subsidiaries.
Mr D A Brown will retire following the Company’s Annual
General Meeting in September 2006 and Mr P E Bream will take
over as Finance Director from that date.
The Company maintained liability insurance for its directors and
officers throughout the year. It is proposed to extend this cover
as permitted by recent changes to the Companies Act 1985 and
details are given in the Notice of the Annual General Meeting
which accompanies this report.
Biographical details of the directors are on page 13.
Directors’ interests
The interests of the directors and their families in the share
capital of Renold plc and in options held under share option
schemes are given in the Remuneration Report on pages 20 to
23. No director had any interests in contracts of significance in
relation to the Company’s business during the year.
Share capital 
Changes in share capital during the year are set out in note 19
to the financial statements on page 52.
Major shareholders
As at 6 July 2006, the Company had been notified of the
following interests in its issued ordinary share capital:
(i) Interests equal to or more than 10% (which may include
“material interests” notified to the Company under (ii)
below)
%
Henderson Global Investors Ltd 16.35
Prudential plc 12.83 
(ii) “Material interests” equal to or more than 3% 
Platinum Fund Managers Ltd 8.73 
Steel Partners II LP 7.54 
Lowland Investment Company Plc 6.84 
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.
Employment policies are designed to provide equal
opportunities irrespective of race, caste, national origin,
religion, age, disability, gender, marital status, sexual orientation
or political affiliation. Further information is published on the
Company’s website.
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.
Environmental policy
The Board has overall responsibility for the environmental policy
and the Chief Executive is the director with specific responsibility
for health, safety and environmental matters. The Group’s
environmental policy is published on the Company’s website. Report of the Directors continued
for the financial year ended 31 March 2006
16
The Company is committed to managing its activities so as to
provide proper levels of care and safety for the environment,
and for its customers and employees. In line with this policy,
local management is responsible for ensuring that appropriate
systems and organisations are implemented, maintained and
monitored in the areas for which they are responsible. Each
business has issued a local environmental statement which
complies with Group policy and local legislation.
During the year the principal chain manufacturing locations in
Germany and at Bredbury UK successfully renewed their
ISO14001 certifications which cover environmental systems. 
A Group Health, Safety and Environment Executive was
appointed during the year to co-ordinate Group actions 
and compliance.
Employees
At 31 March 2006 the Renold Group employed 2,863 people,
including 1,021 in the UK and 1,140 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 2006
amounted to £1.8 million.
Financial instruments
An explanation of the Group policies on the use of financial
instruments and the Group’s financial risk management
objectives and its exposure to risks are contained in the Financial
Review on pages 10 to 12 and in the notes to the financial
statements.
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 31 March 2006 trade creditors of the Group’s businesses in
the UK and overseas represented 72 days’ purchases, compared
with 67 last year.
Donations
During the year there were no contributions to UK organisations
for charitable purposes nor any contributions made to 
political parties.
Auditors
A resolution will be proposed at the Annual General Meeting 
to re-appoint PricewaterhouseCoopers LLP as auditors and to
authorise the directors to fix their remuneration.
By order of the Board
G R Newton,
Secretary
19 July 2006 The Combined Code and Statement of Compliance
The Company remains committed to high standards of
corporate governance. This statement describes how the
principles of corporate governance, contained in the Combined
Code issued by the Financial Services Authority as an appendix
to its Listing Rules, have been applied by the Company.
The Board considers that the Company has complied
throughout the year ended 31 March 2006 with the provisions
of the Combined Code.
Board
The Board presently comprises a non-executive Chairman, two
independent non-executive directors and three executive
directors. The roles of Chairman and Chief Executive are
separated with a clear division of responsibilities agreed by 
the Board. The Chairman’s primary role is to ensure the
effectiveness of the Board in setting the direction of the
Company. The Chief Executive has the responsibility for
managing the business and implementing the strategy agreed
by the Board. Biographical details of the directors appear on
page 13.
New directors are provided with an appropriate induction
programme. A formal process for evaluating the performance
of the Board has been conducted internally by means of a
detailed questionnaire completed by each director with the
Board considering the outcome. 
The Board considers that each of the non-executive directors is
independent and free from any business or other relationship
that could interfere with the exercise of their independent
judgement. In particular, the Board considers that this remains
true for the Senior Independent Director, Mr M A Smith, who
has served on the Board since 1994 and brings a wealth of
relevant financial experience and independence to the Group.
The Board is pleased that he has agreed to remain a member 
of the Board and, in accordance with best practice, will seek 
re-election at the Annual General Meeting in September 2006.
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.
The Board initially appoints all new directors upon
recommendation from the Nomination Committee. All directors
are subject to election by shareholders at the first opportunity
following their appointment and to re-election thereafter at
intervals of no more than three years.
The Board meets on a regular basis with an agenda and
necessary papers for discussion distributed in advance of each
meeting. The following table shows the number of meetings of
the Board and its committees during the year and individual
attendance by Board and committee members at those meetings.
Board Audit Nomination Remuneration Risk
Number held 9 3 1 4 3
Number attended
R F Leverton 9 3 1 4
R J Davies 9 3
B A Beckett 9 3 1 4
D A Brown 9 3
T B Fortune 3 1 1 2
S R Mole 1
M A Smith 9 3 1 4
All directors in office at the time of the Annual General Meeting
held on 21 July 2005 were in attendance for the meeting.
Mr S R Mole and Mr T B Fortune attended all meetings they
were eligible to attend during their time as directors.
Board Committees
The Board delegates specific responsibility to Committees, all of
which have written terms of reference and these are available
on the Company’s website. The Company Secretary acts as
secretary to all these Committees. The principal Board
Committees are described below.
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 normally meets three times a year. Mr Smith
and Mr Leverton are qualified accountants and have
considerable experience on audit committees in other listed
companies. The Chief Executive, Finance Director and other
Managers 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 financial control systems and
internal audit reports and the conduct of the external audit. The
external auditors, who attend by invitation, are invited by the
Committee to advise them of any matters which they consider
should be brought to the Committee’s attention in the absence
of executive management.
The Committee reviews the independence of the external
auditors on an annual basis and, to safeguard the
independence and objectivity of the auditors, has approved
a policy on non-audit services provided by the auditors in
line with professional practice.
The Committee has a formal process for evaluating the
effectiveness of the Audit Committee, the internal audit
function and the external audit process.
Corporate Governance 
17 Corporate Governance continued
18
Nomination Committee
The Nomination Committee is a committee of the Board
comprised of the non-executive directors and 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 to the Board any new appointments of either
executive or non-executive directors. The meeting in 2005/06
was to consider the reconstitution of the Board following the
resignation of Mr S R Mole.
Remuneration Committee
The Remuneration Committee is a committee of the Board
comprised of the non-executive directors and has been chaired
by Ms B A Beckett following Mr T B Fortune’s retirement from
the Board in July 2005. The Chief Executive attends meetings at
the request of the Committee. This Committee determines the
terms and conditions of employment including remuneration
and benefits of the executive directors as well as performance
related bonus schemes and pension rights. The main Board
determines the remuneration of the non-executive directors and
individual non-executive directors are not present when their
own remuneration is being discussed.
During the year the Committee, in conjunction with Monks
Partnership, conducted a comparative pension’s market practice
review and as a result has made a number of recommendations
to the Pension Trustees in order to continue ongoing liabilities.
The Remuneration Report is set out on pages 20 to 23.
Risk Monitoring Committee
The Risk Monitoring Committee is a committee of the Board
comprised of the executive directors and is chaired by the Chief
Executive. Its role is to oversee risk management and to ensure
that appropriate internal controls are in place.
Internal control
The directors have the overall responsibility for the Group’s
system of internal control and for reviewing its effectiveness.
Management is accountable to the directors for implementing
Board policies on risk and control and for monitoring and
reporting to the Board that it has done so. The review of the
system of internal controls by the directors has been completed
for the year ended 31 March 2006, as required by the UK Listing
Authority and in accordance with the guidance issued by the
Turnbull Committee.
Internal controls are designed to manage rather than eliminate
the risk of failure to achieve business objectives and can provide
only reasonable and not absolute assurance against material
misstatement or loss.
The key features of the Group’s internal control system are:
● the Risk Monitoring Committee which meets regularly to
review how business risks, as identified by the Board, are
being managed and to ensure that policies are in place and
are being applied. The minutes of this Committee are
circulated to Board members so that any significant control
issues are brought to their attention and a formal report is
made at least annually to the Board so that it can review
how business risks have and are being managed;
● risk assessments completed by senior management at each
operating unit as part of a continuous process and
reporting of these which is reviewed by the Risk Monitoring
Committee;
● 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 profit plans covering
profit and cash flow, which are approved by the Board; the
review of detailed monthly reports comparing actual
performance with plans, and of updated financial
forecasts;
● procedures for the appraisal, approval and control of
capital investment proposals including acquisitions and
disposals;
● monitoring procedures which include a system of key
financial controls questionnaires supported by internal
audit reviews. The results of this work are reported to the
Audit Committee.
UK pension schemes
The UK pension schemes are largely defined benefit 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.
In April 2002 the Renold Group Pension Scheme and the Jones
& Shipman plc Retirement Benefits Plan (1971) were closed to
new entrants subject to appropriate transitional arrangements
for existing eligible employees and a defined contribution
scheme was established as from that date.  Neither the Chairman nor the Chief Executive is a Trustee of 
the defined benefit or the defined contribution schemes. Since
the year end an independent Trustee Company has been
appointed to provide a Chairman of the Board of Trustees of 
the principal schemes.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing 
the financial statements.
Relations with shareholders
Meetings between directors of the Company and major
institutional shareholders and fund managers are held at
regular intervals including presentations after the Company’s
announcements of interim and preliminary results. These
presentations are also available on the Company’s website. The
Chairman invites major institutional shareholders, should they
wish, to meet with the Chairman and Senior Independent
Director. Reports of any dialogue between shareholders and
directors are given to all directors at the next Board meeting and
all directors receive copies of analysts’ reports of which the
Company is made aware.
All shareholders are invited to participate in the Annual General
Meeting where the Chairman of the Board and of the Audit,
Remuneration and Nomination Committees, together with the
executive directors, are available to answer questions. Notice of
the Annual General Meeting is sent to shareholders at least 20
working days before the meeting. Details of the proxy votes
lodged on each resolution are available after the result of the
votes of the members present. Shareholders are invited to talk
informally to the Directors after the formal proceedings.
The Company’s website at www.renold.com presents additional
information about the Group, is regularly updated and includes
the posting of the interim and final preliminary results on the
day they are announced.
Corporate Governance continued
19 Remuneration Report
20
The Remuneration Report sets out the remuneration policies
operated by the Company in respect of the directors and
complies with the Companies Act 1985, amended by the Listing
Rules of the Financial Services Authority.
This report is submitted to shareholders by the Board for
approval at the forthcoming Annual General Meeting on 
19 September 2006 although the vote is advisory only and no
entitlement of a person to remuneration is made conditional on
the resolution being passed. 
Remuneration Committee
The Committee is comprised of the independent non-executive
directors and the Chairman of the Company and has been
chaired by Ms B A Beckett since 21 July 2005. The Committee
operates under the terms of reference agreed by the Board.
The members of the Committee during the year were 
Mr T B Fortune (Chairman of the Committee until his retirement
from the Board on 21 July 2005), Ms B A Beckett, 
Mr R F Leverton and Mr M A Smith. The Chief Executive attends
meetings at the request of the Chairman to assist the
Committee in their deliberations but does not take part in the
Committee’s 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 determination of the
remuneration of non-executive directors is the responsibility of
the whole Board.
The Committee determines the terms and conditions of
employment, including remuneration, for the executive
directors. Monks Partnership (part of PricewaterhouseCoopers
LLP) have been appointed by the Committee to provide
independent advice on matters relating to directors’
remuneration. Over a number of years the total remuneration
package of the directors has been reviewed annually with the
help of salary survey information provided by Monks Partnership.
The Committee is also responsible for the allocation of options
under the Company’s Executive Share Option Scheme. 
Executive directors’ remuneration policy
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. 
Base salary and benefits
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 for
manufacturing companies of a similar size and international
complexity and the aim for executive directors’ pay is for basic
salary to reflect the relevant market median and for benefits to
reflect market practice. Above median levels of pay may be
agreed for outstanding performance or to attract executives of
the right calibre.
Benefits in kind incorporate all assessable tax benefits from each
director’s employment and comprise mainly the provision of a
fully expensed company car or an equivalent cash allowance
and private medical insurance. Neither the benefits in kind nor
bonus payments are pensionable.
Performance related pay
The Company operates incentive arrangements for the Executive
Directors as approved at the Annual General Meeting in July
2004. These comprise the following:
● A discretionary performance related annual bonus scheme
which has a maximum of 60% of basic salary. A proportion
of this bonus is based on group profit targets and the
balance on personal objectives. A bonus of approximately
20% was awarded for 2005/06.
● A deferred annual bonus scheme (“DABS”) invites directors
to use all or part of their performance related cash bonus
(net of tax) for the preceding financial year to purchase
shares in the Company which must be held as “Lodged
Shares” i.e. cannot be sold during the three year vesting
period. In return the executive directors receive a
conditional award of matching shares up to a maximum of
150% of the bonus invested. The matching shares are only
receivable if performance targets are met. The performance
targets require growth in the Company’s adjusted earnings
per share over the three year period from the
commencement of the financial year in which the DABS
award is made to exceed the percentage growth in the
Consumer Price Index (“CPI”) over the same period by a
minimum of 3% per annum compounded which will trigger
40% of the matching shares to vest and increasing to 100%
on a straight line basis until the percentage growth in the
CPI is exceeded by 6% per annum compounded. No re-
testing of the performance criteria will occur. 
● An annual Performance Share Plan (“PSP”) provides
conditional awards to acquire free shares up to a maximum
of 60% of basic salary. At the time of grant of a PSP
performance conditions and target levels will be set which
are stretching and will use measures the participants can,
by their actions, influence, in order to provide effective
motivation. The performance target will be set such that
40% of the award will vest if the total shareholder return
(“TSR”) performance over a three year period from the
commencement of the financial year in which the award is
made is equal to the median TSR of a group of companies
in the engineering and machinery index. If the Company’s
TSR performance would place it in the upper quartile of the
TSR of the comparator group of companies, 100% of the
award will vest. The award will vest proportionately
between 40% and 100%. No PSP award will vest below
median performance and no re-testing of the performance
criteria will occur. No award was made in 2005/06. Share option schemes
The Committee believes that share options remain 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 Company operates a discretionary executive share option
scheme (“the Executive Scheme”) under which 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 has been reviewed from time to
time by the Committee and options granted under this scheme
prior to June 2001 require 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. Options granted from June 2001 have a performance
condition that requires the Group’s earnings per share, before
exceptional items, to increase from the year preceding the date
of grant, over three or more financial years, at a rate greater
than the percentage increase in the UK Retail Prices Index over
the same period plus 3% per annum. Under the Renold plc
2004 Inland Revenue Approved Company Share Option Plan
and the Renold plc 2004 Non Inland Revenue Approved
Company Share Option Plan (together “the 2004 Executive
Scheme”) the maximum annual value of shares that may be
awarded cannot normally exceed 100% of the participant’s
basic salary. However, in exceptional circumstances this limit can
be raised to 200% at the discretion of the Remuneration
Committee.
The performance targets under the 2004 Executive Scheme are
the same as for the DABS award set out above. No re-testing of
the performance criteria will occur and, in addition, no option
will be granted under the 2004 Executive Scheme in the same
year an award is made under the Renold plc 2004 Performance
Share Plan. No options were granted under the 2004 Executive
Scheme in 2005/06.
In addition, the Company operates a savings-related Share
Option Scheme (“SAYE Scheme”) in which the executive
directors are eligible to participate on the same terms as all UK
employees. Options granted under this scheme have been
exercisable on completion of either a three-year or five-year
savings contract. The options granted during the year under the
SAYE Scheme were made under a three-year savings contract at
a discount of 10%.
Details of directors’ interests in shares including options granted
to executive directors under the 1995 and 2004 Executive
Schemes and the SAYE Schemes are set out below. 
Directors’ pensions
Mr D A Brown participates in the Renold Supplementary
Pension Scheme 1967, which is a contributory defined benefits
plan. Members’ contributions are 7
1
/
2% of pensionable pay 
up to the earnings cap (£105,600 in 2005/06 with a shadow
earnings cap to be applied for future years). This provides for a
pension at age 62 of two-thirds of final pensionable salary up
to the earnings cap, where applicable, 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 until age 60 and actuarial adjustment where
appropriate. A member’s accrued pension is available from age
60 without any actuarial reduction. 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, an additional
benefit is provided. The Company accumulates 25% of the
shortfall between projected final pensionable salary and the
earnings cap. This amount is payable from the Company’s own
resources on retirement and approximates to the cost to the
Company of providing an uncapped pension under the
applicable defined benefit scheme.
Only basic salary is pensionable.
Mr R J Davies is not a member of a Company pension scheme
and has made his own independent pension arrangements into
which the Company made payments of £26,400 in 2005/06.
The Company has no liability beyond making these annual
contributions. On death in service a lump sum of four times
salary is payable.
Service contracts
The policy is for executive directors to have rolling notice
periods no greater than one year in line with current corporate
governance best practice.
The executive directors have service contracts as follows:
Date of Contract Notice Period 
by Company
R J Davies 2 March 2004 12 months
D A Brown 26 February 1990 12 months
P E Bream 29 June 2006 12 months
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. None of the service contracts provide for
compensation payable on early termination of the contract.
Remuneration Report continued
21 Remuneration Report continued
22
Rebased to 100 on 31 March 2001
0
50
100
150
200
250
Mar 01 Mar 02 Mar 03 Mar 04 Mar 05 Mar 06
Renold plc FTSE Engineering & Machinery
External appointments
The Board recognises that invitations to executive directors to become non-executive directors of other companies can broaden their
knowledge and benefit the Group. The policy is to allow executive directors, if so authorised by the Board, to accept one such
appointment with fees normally paid to the Company unless otherwise approved by the Committee.
Directors’ interests
The beneficial interests of the directors, who held office at 31 March 2006, in the ordinary shares of the Company, as appearing in
the Register of Directors’ Interests maintained under the Companies Act 1985, were as follows:
31 March 2006 31 March 2005
Shares Options Shares Options
R F Leverton 8,000 8,000
R J Davies 85,000 610,744 85,000 600,000
B A Beckett
D A Brown 65,502 181,594 65,502 170,850
M A Smith 20,000 20,000
There were no non-beneficial interests held by the directors in the ordinary shares of Renold plc at the end of the year or at 6 July 2006.
At 31 March 2006 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 6 July 2006.
Performance graph
The graph illustrates the performance of a hypothetical holding
of ordinary shares in the Company measured by total
shareholder return (share price growth plus dividends) against
a “broad equity market index” over the past five years. As the
Company has been within the FTSE Engineering and Machinery
sectoral index over this period, the directors consider that this
is the most appropriate index against which the total
shareholder return of the Company should be measured.
The auditors are required to report on the information contained in the remaining sections of this report.
Directors’ emoluments
2006 2005
Salaries Annual Benefits
& fees bonus Cash Non-cash Total Total
£000 £000 £000 £000 £000 £000
Executive directors
R J Davies 265 50 30 345 278
D A Brown 170 35 10 3 218 183
S R Mole (resigned 1.6.05) 21 2 23 137
I R Trotter (retired 6.4.04) 9
456 85 12 33 586 607
Non-executive directors
R F Leverton – Chairman 85 85 85
B A Beckett (from 1.3.05) 29 29 2
M A Smith 32 32 27
T B Fortune (retired 21.7.05)99 26
611 85 12 33 741 747 Directors’ pension entitlements
Details of pension benefits earned in respect of each director in office at 31 March 2006 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:
Amounts
Increase Transfer Accumulated Increased provided in the
Years’ in accrued value of total accrued Transfer Transfer transfer year but not
service pension in the increase pension at value at value at value in paid in respect
at year the year in accrued year end 31.3.06 31.3.05 the year of unfunded
end (a) pension (b) (c) (c) (d) obligations
£000 £000 £000 £000 £000 £000 £000
D A Brown 16 5 58 56 932 754 171 117
(a) the increase in accrued pension during the year, including inflation.
(b) the accumulated total accrued pension at year end is the pension that would be paid annually on retirement based on service to the end of the
year but before any adjustment for actuarial reduction for early retirement.
(c) transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GNII. The transfer value
represents a liability of the pension fund and not a sum due to the director and cannot therefore meaningfully be added to annual remuneration.
(d) the increase in the transfer value of the accrued benefits during the year is after deducting the director’s personal contributions to the scheme.
Mr R J Davies is not a member of a Company pension scheme and has made his own independent pension arrangements into which
the Company made payments of £26,400 in 2005/06.
Share options
Number of share options Option Date
price from
At Granted Lapsed At (pence which Expiry
31.3.05 31.3.06 per share) exercisable date
R J Davies
Executive scheme (a)475,000 475,000 88.00 2.9.07 1.9.14
125,000 125,000 76.50 11.3.07 10.3.14
Savings related scheme 10,744 10,744 54.30 1.3.09 31.8.09
D A Brown
Executive  scheme 30,000 30,000 83.50 27.11.06 26.11.13
45,000 45,000 58.50 27.11.05 26.11.12
45,000 45,000 67.34 28.11.04 27.11.11
20,000 20,000 118.50 19.7.03 18.7.10
10,000 10,000 137.83 16.7.02 15.7.09
10,000 10,000 237.33 17.7.01 16.7.08
6,115 6,115 293.83 16.7.99 15.7.06
Savings related  scheme 4,735 4,735 55.08 1.2.06 31.7.06
10,744 10,744 54.30 1.3.09 31.8.09
No options were exercised during the year.
(a) Options granted under the Renold plc 2004 Inland Revenue Approved and Non Inland Revenue Approved Company Share
Option Plans. All other Executive Scheme options were granted under the Renold (1995) Executive Share Option Scheme.
The middle market price of ordinary shares at 31 March 2006 was 57 pence and the range of prices during the year was 39.5 pence
to 62 pence.
On behalf of the Board
B A Beckett
Chairman of Remuneration Committee
19 July 2006
Remuneration Report continued
23 The following statement, which should be read in conjunction
with the Independent Auditors’ Reports, shown on page 25 and
page 66, is made with a view to distinguishing for shareholders
the respective responsibilities of the directors and of the
auditors in relation to the financial statements of both the
Group and the Company.
Company law requires the directors to prepare financial
statements for each financial year which give a true and fair
view of the state of affairs of the Company and of the Group 
as at the end of the financial year and of the profit or loss of 
the Group for the financial year. In preparing those financial
statements, the directors are required to:
(1) select appropriate accounting policies and apply them
consistently;
(2) make judgements and estimates that are reasonable and
prudent;
(3) state whether applicable accounting standards have been
followed, subject to any material departures being
disclosed and explained; and
(4) prepare those financial statements on the going concern
basis, unless they consider that to be inappropriate.
The directors confirm that they have complied with the above
requirements in preparing the financial statements.
The applicable accounting standards referred to in (3) above
are: (a) UK Generally Accepted Accounting Principles (UK GAAP)
for the Company; and (b) International Financial Reporting
Standards (IFRS), as adopted by the European Union and
implemented in the UK, for the Group.
The directors are responsible for ensuring that the Company
keeps sufficient accounting records to disclose with reasonable
accuracy the financial position of the Company and to enable
them to ensure that the financial statements comply with the
Companies Act 1985. They are also responsible for taking
reasonable steps to safeguard the assets of the Company 
and the Group and, in that context, to have proper regard to
the establishment of the appropriate systems of internal 
control with a view to the prevention and detection of fraud
and other irregularities.
The directors are required to prepare financial statements and
to provide the auditors with every opportunity to take whatever
steps and undertake whatever inspections the auditors consider
to be appropriate for the purpose of enabling them to give their
audit report.
The directors confirm that, so far as they are aware, there is no
relevant audit information of which the auditors are unaware
and that each director has taken all reasonable steps to make
themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
The directors intend to publish the financial statements on 
the Group’s website, www.renold.com. The directors are
responsible for the maintenance and integrity of the website in
accordance with UK legislation governing the preparation and
dissemination of financial statements. Access to the website is
available from outside the UK, where comparable legislation
may be different.
Statement of Directors’ Responsibilities
24 To the members of Renold plc
We have audited the Group financial statements of Renold plc
for the year ended 31 March 2006 which comprise the Group
Income Statement, the Group Balance Sheet, the Group 
Cash Flow Statement, the Group Statement of Change in
Shareholders’ Equity and the related notes. These Group
financial statements have been prepared under the accounting
policies set out therein. 
We have reported separately on the Parent Company financial
statements of Renold plc for the year ended 31 March 2006,
and on the information in the directors’ Remuneration Report
that is described as having been audited.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report
and the Group financial statements in accordance with
applicable law and International Financial Reporting Standards
(IFRSs) as adopted for use in the European Union are set out in
the Statement of Directors’ Responsibilities.
Our responsibility is to audit the Group financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This
report, including the opinion, has been prepared for and only
for the Company’s members as a body in accordance with
Section 235 of the Companies Act 1985 and for no other
purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the Group financial
statements give a true and fair view and whether the Group
financial statements have been properly prepared in accordance
with the Companies Act 1985 and Article 4 of the IAS
Regulation. We also report to you whether in our opinion the
information given in the Report of the Directors is consistent
with the Group financial statements.  We also report to you if,
in our opinion, we have not received all the information and
explanations we require for our audit, or if information specified
by law regarding directors’ remuneration and other transactions
is not disclosed.
We review whether the Corporate Governance Statement
reflects the Company’s compliance with the nine provisions of
the 2003 FRC Combined Code specified for our review by the
Listing Rules of the Financial Services Authority, and we report 
if it does not. We are not required to consider whether 
the Board’s statements on internal control cover all risks 
and controls, or form an opinion on the effectiveness of 
the Group’s corporate governance procedures or its risk and
control procedures.
We read other information contained in the Annual Report and
consider whether it is consistent with the audited Group
financial statements. The other information comprises only the
Report of the Directors, the directors’ Remuneration Report, the
Chairman’s Statement, the Chief Executive's Review, the
Financial Review, the Operations Review and the Corporate
Governance Statement.  We consider the implications for our
report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
Group financial statements. It also includes an assessment of
the significant estimates and judgements made by the directors
in the preparation of the Group financial statements, and of
whether the accounting policies are appropriate to 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 Group financial statements 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
Group financial statements.
Opinion
In our opinion:
● the Group financial statements give a true and fair view, in
accordance with IFRSs as adopted for use in the European
Union, of the state of the Group’s affairs as at 31 March
2006 and of its loss and cash flows for the year then ended;
● the Group financial statements have been properly prepared
in accordance with the Companies Act 1985 and Article 4
of the IAS Regulation; and
● the information given in the Report of the Directors is
consistent with the Group financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
101 Barbirolli Square
Manchester M2 3PW
19 July 2006
Report of the Independent Auditors
25 Basis of preparation – The consolidated financial statements
for the year ended 31 March 2006 have been prepared in
accordance with International Financial Reporting Standards
(IFRS), and International Financial Reporting Interpretations
Committee (IFRIC) interpretations. These include standards and
interpretations endorsed by the European Union (EU). In
addition, the financial statements have been prepared in
accordance with those parts of the Companies Act 1985
applicable to groups reporting under IFRS. The financial
statements have been prepared using historical cost principles
except that certain items, including derivatives, are measured 
at fair value.
The 31 March 2006 financial statements are the Group’s first
consolidated financial statements prepared under IFRS. The
Renold Group adopted IFRS from 4 April 2004. Consequently,
the comparative figures for the year to 31 March 2005 have
been restated to comply with IFRS, with the exception of IAS 32
and IAS 39, the standards on financial instruments, which have
been applied from 1 April 2005, under the transitional
arrangements. As required by IFRS 1 (“First-time Adoption of
International Financial Reporting Standards”) note 27 provides
an explanation of how the transition from UK GAAP to IFRS 
has affected the Group’s reported financial statements.
Furthermore, the exemptions permitted under IFRS 1 and
adopted by the Group, are explained in note 27 and, where
appropriate, in the Accounting Policies.
The impact of IFRSs issued but not yet effective at the balance
sheet date would not have a significant effect on these financial
statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on
management’s best knowledge of current events and actions,
actual results ultimately may differ from those estimates.
Basis of consolidation – The consolidated financial
statements incorporate the financial statements of Renold plc
(“the Company”) and enterprises controlled by the Company (its
subsidiaries). Subsidiaries, which are those entities in which the
Group has an interest of more than one half of the voting rights
or otherwise has power to govern the financial and operating
policies, are consolidated. Under the transitional options of 
IFRS 1 business combinations that occurred prior to the
transition date have not been restated.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and are no longer consolidated from
the date that control ceases. The purchase method of
accounting is used to account for the acquisition of subsidiaries
by the Group. The cost of an acquisition is measured as the fair
value of the assets given up, shares issued or liabilities
undertaken at the date of acquisition plus costs directly
attributable to the acquisition. The excess of the cost of
acquisition over the fair value of the net assets of the subsidiary
acquired is recorded as goodwill. Inter-company transactions,
balances and unrealised gains on transactions between Group
companies are eliminated; unrealised losses are also eliminated
unless the cost cannot be recovered. 
Foreign currency translation – Items included in the financial
statements of each entity in the Group are measured using the
currency that best reflects the economic substance of the
underlying events and circumstances relevant to that entity
(“the functional currency”). The consolidated financial
statements are presented in sterling, which is the functional and
presentation currency of the parent.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transaction or average rates where applicable. Foreign exchange
gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies, are recognised in the income statement.
Assets and liabilities of overseas subsidiaries are translated into
sterling at the exchange rates ruling at the end of the financial
year. Income statements and cash flows are translated at the
appropriate average rates of exchange for the year. Differences
on exchange arising on the retranslation of net assets in overseas
subsidiaries at the beginning of the year, borrowings used to
finance or provide a hedge against those investments and from
the translation of the results at average rates are taken directly
to reserves. When a foreign entity is sold related exchange
differences previously taken to reserves, are recognised in the
income statement as part of the gain or loss on sale.
As permitted by IFRS 1 the Group has elected to deem
cumulative currency differences to be nil as at 4 April 2004.
Accordingly, the gain or loss on disposal of a foreign operation
thereafter will not include currency translation differences
arising before 4 April 2004.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquired
entity over the fair value of the Group’s share of the net
identifiable assets of the acquired entity at the date of
acquisition. Goodwill arising on the acquisition of an entity
is included as an intangible asset. Goodwill is not
amortised but is tested at least annually for impairment
and carried at cost less accumulated impairment losses.
Any impairment charge is recognised immediately in the
income statement.
Accounting Policies
26 In circumstances where the fair value of the interest
acquired in an entity’s assets, liabilities and contingent
liabilities exceeds the consideration paid (“negative
goodwill”), the excess is recognised immediately as a gain
in the income statement.
As permitted by IFRS 1, the Group elected not to apply 
IFRS 3 “Business Combinations” to business acquisitions
that occurred before 4 April 2004. Therefore, the carrying
amount of goodwill (being cost less accumulated
amortisation) included under UK GAAP forms the “cost” of
goodwill recognised under IFRS at the date of transition.
Goodwill that was written-off directly to reserves under
former UK GAAP will not be taken into account when
determining the gain or loss on disposal of previously
acquired businesses after 4 April 2004.
(b) Computer software
Computer software that is not integral to an item of plant
and equipment is recognised separately as an intangible
asset. Amortisation is charged on a straight line basis so as
to charge the cost of software to the income statement
over its expected useful life which is between three and five
years. Costs associated with developing or maintaining
computer software programmes are recognised as an
expense as incurred.
(c) Research and development
Research expenditure is recognised as an expense as
incurred. Costs incurred on development projects (relating
to the design and testing of new or improved products) are
only recognised as intangible assets in circumstances
where certain strict criteria are satisfied. These include the
expectation that it is probable that the project will be a
success, considering its commercial and technological
feasibility, and that all associated costs can be measured
reliably. Otherwise development expenditure is recognised
as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in
a subsequent period. Development costs that have been
capitalised are amortised from the commencement of the
commercial production of the product on a straight-line
basis over the period of its expected benefit, not exceeding
five years.
Property, plant and equipment are stated at cost, being
purchase cost plus any incidental costs of acquisition, less
accumulated depreciation.
Depreciation is calculated on a straight-line basis so as to
charge the depreciable amount of the respective asset to the
income statement over its expected useful life. The useful lives
Freehold buildings – 50 years
Leasehold properties – 50 years or the period of the lease 
if less
Plant and equipment – 3 to 25 years according to type of asset
Where the carrying amount of an asset is greater than its
estimated recoverable amount, it is written down immediately
to its recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount and are included in operating
profit.
As permitted by IFRS 1, at 4 April 2004, the Group has
measured its freehold properties on a fair value basis and used
that value as deemed cost at the transition date.
Asset impairment – Intangible assets and property, plant and
equipment are reviewed, at least annually, to ensure that assets
are not carried above their recoverable amounts. Where some
indication of impairment exists, calculations are made of the
discounted cash flows resulting from continued use of the
assets (value in use) or from their disposal (fair value less costs
to sell). Where these values are less than the carrying amount 
of the assets, an impairment loss is charged to the 
income statement.
Leases – Tangible assets held under finance leases, which are
those where substantially all the risks and rewards of ownership
of the asset have passed to the Group, are capitalised in the
balance sheet at the lower of the fair value of the leased asset
or the present value of the minimum lease payments. Assets
acquired under finance leases are depreciated over the shorter
of the useful life of the asset or the lease term. The
corresponding liability to the leasing company, net of finance
charges, is included as an obligation under finance leases in
creditors. The interest element of the lease payment is charged
to the income statement on a basis which produces a consistent
rate of charge over the period of the liability. 
Leases where a significant portion of the risk and reward of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
statement on a straight-line basis over the period of the lease.
Government grants in respect of capital expenditure are
treated as deferred income in the balance sheet. An annual
transfer is made to the profit and loss account reflecting the
benefit over the expected useful lives of the assets concerned.
Accounting Policies continued
27
of assets are as follows: Inventories are stated at the lower of cost and estimated 
net realisable value, after due allowance for obsolete or slow
moving items. Cost includes all direct expenditure and
attributable overhead expenditure incurred in bringing goods to
their current state under normal operating conditions. The first
in, first out or an average method of valuation is used. Net
realisable value is the estimated selling price in the ordinary
course of business, less the costs of completion and selling
expenses. 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 financial statements, unrealised
profit on sales within the Group is deducted from inventories.
Taxation – The tax charge comprises current tax payable and
deferred tax.
The Group is subject to taxes in numerous jurisdictions.  The
current tax charge represents an estimate of the amounts
payable to tax authorities in respect of taxable profits.  It is
based on tax rates and laws that have been enacted, or
substantially enacted, by the balance sheet date.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in 
the consolidated financial statements. Currently enacted, or
substantially enacted, tax rates as at the balance sheet date are
used in the determination of deferred income tax.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised or taxable profit
will be available against which unused tax losses can be utilised
before they expire.
Deferred income tax is provided on temporary differences
arising on investments in subsidiaries except where the timing
of the reversal of the temporary difference can be controlled by
the Group and it is probable that the temporary difference will
not reverse in the foreseeable future.
Revenue comprises the fair value of goods and services
provided to external customers after deducting value added tax
or other sales related taxes and trade discounts. Revenue from
the sale of goods is recognised when significant risks and
rewards of ownership of goods are transferred to the buyer.
Turnover also includes 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 estimated reliably.
At, and from this point, an appropriate portion of the
anticipated contract profit is recognised in the profit and loss
account following a percentage-of-completion method. If
losses are envisaged then these are provided as soon as the
potential loss is identified.
Trade receivables are recognised and carried at the original
invoice amount less an allowance for any identified impairment.
The impairment allowance is established when there is objective
evidence that the Group will not collect all amounts due under
the original terms of the transaction. The impairment is charged
to the income statement and represents the difference between
the carrying amount and the recoverable amount.
Employee benefits
(a) Pension obligations
Group companies have various pensions scheme
arrangements matching the local conditions and practices
in the countries in which they operate. 
The Group operates a number of defined benefit schemes
around the world. The cost is calculated by independent
actuaries using the projected unit credit method. Any past
service costs resulting from enhanced benefits are
recognised immediately in income, unless the changes are
conditional on the employees remaining in service for a
specified period of time (the “vesting period”). In this case,
the past service costs are amortised on a straight-line basis
over the vesting period.
Actuarial gains and losses, which represent differences
between the expected and actual returns on scheme assets
and the effect of changes in actuarial assumptions, are
recognised in the Statement of Recognised Income and
Expense in the period in which they occur.
The defined benefit liability or asset recognised in the
balance sheet represents the net total for each scheme of
the present value of the benefit obligation at the balance
sheet date, less any past service costs not yet recognised,
less the fair value of plan assets (for funded schemes) at the
balance sheet date. If a scheme records a surplus, the asset
recognised is limited to the amount of any unrecognised
past service cost and the present value of any amount
expected to be recoverable by the Group by way of refunds
or reduction in future contributions.
For defined contribution schemes, the Group’s
contributions are charged to the income statement in the
period in which they fall due. Once the contributions have
been paid the Group has no further payment obligation.
(b) Share-based compensation
The Group operates equity-settled, share-based
compensation plans. The fair value of the employee
services received in exchange for the grant of the options is
recognised as an expense in the income statement, with
the corresponding amount being recognised in equity. The
total amount to be expensed over the vesting period is
determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting
Accounting Policies continued
28 conditions, using a Black-Scholes pricing model. Non-
market vesting conditions are included in assumptions
about the number of options that are expected to become
exercisable. At each balance sheet date, the Group revises
its estimates of the number of options that are expected to
become exercisable. It recognises the impact of the revision
of original estimates, if any, in the income statement, and
a corresponding adjustment to equity over the remaining
vesting period.
As permitted by IFRS 1 the Group has applied IFRS 2 
“Share-based Payment” only to equity-settled awards granted
after 7 November 2002 and which vested after 1 January 2005.
Exceptional items are items in the profit from operations
which individually or, if of a similar type, in aggregate, are
relevant to an understanding of the Group's financial
performance. These items are separately disclosed as
memorandum information on the face of the Income Statement
with additional information provided in the notes to the
financial statements.
Financial instruments – In accordance with the options
available under IFRS 1 the Group has elected to apply IAS 32
“Financial Instruments: Disclosure and Presentation” and IAS 39
“Financial Instruments: Recognition and Measurement”
prospectively from 1 April 2005. Consequently, the relevant
comparative information prior to that date remains stated in
accordance with UK GAAP . The accounting policy for periods up
to 31 March 2005 is as set out in the 31 March 2005 Annual
Report. Under UK GAAP derivative financial instruments were
not recognised as assets or liabilities on the balance sheet and
gains and losses arising on them were not recognised until the
hedged transaction occurred. The accounting policy of 
the Group for financial instruments, following the adoption 
The principal derivative financial instruments used by the Group
are forward foreign currency exchange contracts and interest
rate swaps, used to manage the exposure to exchange rate and
interest rate movements. Derivative financial instruments are
recognised as assets and liabilities measured at their fair values
at the balance sheet date. Changes in their fair values are
recognised in the income statement.
Hedge accounting, as specified by IAS 39, is not generally
applied to transactional hedging relationships, such as hedges
on forecast or committed transactions. However, if it is deemed
appropriate for one-off material transactions, the Group retains
the option to apply hedge accounting and take the necessary
steps to satisfy the specific requirements of IAS 39. 
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of 
the host contract and the host contract is not stated at its 
fair value with changes in its fair value recognised in the 
income statement.
From 1 April 2005 the Group’s Preference Shares have been
classified as liabilities. Dividends payable on the Preference
shares are included within net finance costs. Under UK GAAP
the shares were included as part of Shareholders’ funds and the
dividends payable on the shares were regarded as an
appropriation of profit.
Financial risk management
The principal financial risks to which the Group is exposed relate
to:
(a) Foreign exchange risk
Transactional foreign currency exposures are managed
principally by the use of forward foreign exchange
contracts to avoid fluctuations in earnings and cash 
flows relating to these exposures.  Foreign currency
exchange risk on the translation of net investments 
is managed partly through borrowings denominated in 
the local currency.
(b) Interest rate risk
Borrowings issued at variable rates expose the Group to
cash flow interest rate risk and borrowings issued at fixed
rates expose the Group to fair value interest rate risk. The
Group reviews the mix of fixed and floating debt and has
interest rate swaps to manage part of this exposure.
(c) Liquidity risk
The Group maintains a mix of short and medium term
facilities to ensure that it has sufficient available funds for
ongoing operations.
(d) Credit risk
The Group has no significant concentrations of credit risk
with sales made to a wide spread of customers, industries
and geographies. Individual businesses have a greater
concentration of credit risk to major customers.  Policies
are in place to ensure that credit risk on individual
customers is kept to a minimum.
Cash and cash equivalents are carried in the balance sheet at
cost. For the purposes of the cash flow statement, cash and
cash equivalents comprise cash on hand, deposits held at call
with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are included within borrowings in current
liabilities on the balance sheet to the extent that there is no
right of offset with cash balances.
Borrowing costs are recognised in the income statement in
the period in which they are incurred. 
Accounting Policies continued
29
of IAS 32 and IAS 39 is as follows: Provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events; it is more
likely than not that an outflow of resources will be required to
settle the obligation; and a reliable estimate of the amount can
be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement
is virtually certain.
Costs related to ongoing activities of the Group are not provided
in advance.
Assets held for sale and discontinued operations – Assets
are classified as held for sale if their carrying amount will be
recovered by sale rather than by continuing use in the business.
For this to be the case, the asset must be available for immediate
sale in its present condition, management must be committed to
and have initiated a plan to sell the asset which, when initiated,
was expected to result in a completed sale within a year. Assets
that are classified as held for sale are measured at the lower of
their carrying amount or fair value less costs to sell.
A discontinued operation is a component of the business that
has either been disposed of, or satisfies the criteria to be
classified as held for sale, and represents a separate major line of
business or geographical area of operations (“disposal group”)
and is part of a single co-ordinated plan to achieve such a
disposal. The post-tax profit or loss on a discontinued operation
is shown as a single amount on the face of the Group Income
Statement, separate from the continuing results of the Group;
prior year amounts are restated on a comparable basis. In the
Balance Sheet the assets relevant to the “disposal group” are
reported as a separate line item within current assets; liabilities
associated with the disposal group are similarly disclosed as a line
item below current liabilities. Comparative balance sheet
amounts are not restated.
Dividend distribution to the Company’s shareholders is
recognised as a liability in the Group’s financial statements in the
period in which the dividends are paid or approved by the
Company’s shareholders.
Accounting Policies continued
30 2006 2005
Note £m £m
Continuing operations:
Revenue 1 155.0 143.2
Operating costs 2 (149.6) (142.8)
Operating profit 5.4 0.4
Operating profit before exceptional items 6.8 4.6
Exceptional items 2 (1.4) (4.2)
Operating profit 5.4 0.4
Financial expenses (14.1) (11.8)
Financial income 10.5 9.6
Net financing costs 3 (3.6) (2.2)
Profit/(loss) before tax 1.8 (1.8)
Taxation 4 (1.5) 1.5
Profit/(loss) for the financial year from continuing operations 0.3 (0.3)
Discontinued operations:
(Loss)/profit for the financial year from discontinued operations 5 (13.9) 0.2
(Loss) for the financial year (13.6) (0.1)
Earnings per share 6
Basic and diluted (loss) per share (19.6)p (0.1)p
Basic and diluted earnings/(loss) per share from continuing operations 0.4p (0.4)p
2006 2005
£m £m
(Loss) for the year (13.6) (0.1)
Net income/(expense) recognised directly in equity:
Foreign exchange translation differences 1.1 0.1
Gains on fair value of hedging net investments in foreign operations 1.1
Actuarial (losses) on retirement benefit obligations (5.3) (15.9)
Tax on items taken directly to equity 1.7 4.6
Total expense recognised directly in equity (1.4) (11.2)
Total recognised income and expense for the year (15.0) (11.3)
Change in equity following adoption of IAS 39 (0.2)
Total recognised income and expense (15.2) (11.3)
The notes on pages 34 to 63 form part of these financial statements.
Consolidated Income Statement
for the year ended 31 March 2006
31
Consolidated Statement of Recognised Income and Expense
for the year ended 31 March 2006 2006 2005
Note £m £m
Assets
Non-current assets
Goodwill 8 17.1 15.7
Other intangible fixed assets 8 0.2 0.5
Property, plant and equipment 9 38.2 64.2
Other non-current assets 11 0.3 0.4
Deferred tax assets 17 18.4 17.0
74.2 97.8
Current assets
Inventories 10 36.5 47.3
Trade and other receivables 11 25.8 41.7
Derivative financial instruments 25 0.2
Cash and cash equivalents 12 17.8 24.5
80.3 113.5
Asset held for sale 13 3.4
Assets of discontinued operations 13 37.1
120.8 113.5
Total assets 195.0 211.3
Liabilities
Current liabilities
Borrowings 14 (12.4) (28.5)
Trade and other payables 15 (31.3) (45.5)
Provisions 16 (0.4) (11.7)
Current tax liabilities (0.7) (1.0)
(44.8) (86.7)
Liabilities directly associated with discontinued operations 13 (28.1)
(72.9) (86.7)
Net current assets 47.9 26.8
Non-current liabilities
Borrowings 14 (25.6) (13.0)
Derivative financial instruments 25 (0.1)
Preference shares 14 (0.5)
Trade and other payables 15 (0.7) (0.9)
Deferred tax liabilities 17 (0.7) (1.4)
Retirement benefit obligations 18 (53.9) (53.2)
(81.5) (68.5)
Total liabilities (154.4) (155.2)
Net assets 40.6 56.1
Equity
Issued share capital 19 17.4 17.9
Share premium 21 6.0 6.0
Other reserves 21 2.7 0.5
Retained earnings 21 14.5 31.7
Total shareholders’ equity 40.6 56.1
The notes on pages 34 to 63 form part of these financial statements.
Approved by the Board on 19 July 2006 and signed on its behalf by:
Roger Leverton Robert Davies
Director Director
Consolidated Balance Sheet
as at 31 March 2006
32 2006 2005
£m £m
Cash flows from operating activities (Note 24)
Cash generated from operations – continuing 4.7 8.6
Cash generated/(absorbed) by operations – discontinued 1.7 (2.0)
6.4 6.6
Income taxes paid (1.7) (1.0)
Net cash from operating activities 4.7 5.6
Cash flows from investing activities
Purchase of property, plant and equipment (6.7) (7.7)
Purchase of intangible assets (0.2) (0.3)
Proceeds on disposal of property, plant and equipment 3.2
Purchase of subsidiary (0.1)
Cash acquired on purchase of subsidiary 9.7
Interest received 0.1
Net cash from investing activities (3.7) 1.7
Cash flows from financing activities
Financing costs paid (3.3) (2.2)
Increase in borrowings 6.9 2.4
Issue of ordinary shares 0.1
Payment of finance lease liabilities (0.1) (0.1)
Equity dividends paid (3.2)
Net cash from financing activities 3.6 (3.1)
Net increase in cash and cash equivalents 4.6 4.2
Net cash and cash equivalents at beginning of year 4.8 0.6
Effects of exchange rate changes 0.2
Net cash and cash equivalents at end of year (Note 12) 9.6 4.8
The notes on pages 34 to 63 form part of these financial statements.
33
Consolidated Cash Flow Statement
for the year ended 31 March 2006 1. Segmental information
Primary reporting format – business segment
The Group’s continuing activities are in one class of business, Industrial Power Transmission. During the year the Group’s former
segments, Automotive and Machine Tools, have been classified, and accounted for, as disposal groups. The consolidated income
statement for continuing operations therefore relates wholly to the Industrial Power Transmission business.
Segment assets and liabilities
The tables shown below provide an analysis of the distribution of assets and liabilities between continuing and discontinued
activities, and how they relate to the former business segments.
Reconciliation of segment assets to consolidated total assets:
2006 2005
£m £m
Assets allocated to segments:
– Industrial Power Transmission 116.6 115.8
– Automotive 36.1
– Machine Tools 17.6
116.6 169.5
Unallocated corporate assets 1.7 0.3
Cash and cash equivalents 17.8 24.5
Deferred tax 18.4 17.0
154.5 211.3
Asset held for sale 3.4
Assets of discontinued operations 37.1
Consolidated total assets 195.0 211.3
Reconciliation of segment liabilities to consolidated total liabilities:
Liabilities allocated to segments:
– Industrial Power Transmission (86.3) (81.8)
– Automotive (25.4)
– Machine Tools (3.7)
(86.3) (110.9)
Unallocated corporate liabilities (0.4)
Preference shares (Note 19) (0.5)
Derivative financial instruments (0.1)
Borrowings (38.0) (41.5)
Current and deferred tax (1.4) (2.4)
(126.3) (155.2)
Liabilities directly associated with assets of discontinued operations (28.1)
Consolidated total liabilities (154.4) (155.2)
Notes to the Consolidated Financial Statements
34 Notes to the Consolidated Financial Statements continued
35
1. Segmental information continued
As at 31 March 2005 the following information is provided for the segments at that date:
Capital expenditure Depreciation Amortisation
Property,
plant and Computer
equipment software
£m £m £m £m
Industrial Power Transmission 3.4 0.3 (5.8) (0.2)
Automotive 6.7 (2.0)
Machine Tools 0.4 (0.8)
10.5 0.3 (8.6) (0.2)
Included in capital expenditure for Automotive in 2005 is an amount of £3.2 million in respect of tangible asset additions arising
through business combinations.
The disclosures provided for 2006 in notes 8 and 9 relate to Industrial Power Transmission, unless otherwise stated.
Secondary reporting format – geographical segments
The operations of the Group are based in six main geographical areas. The UK is the home country of the parent. The main
operations in the principal territories are as follows:
United Kingdom
Germany
France
Rest of Europe
United States and Canada
Other countries
The sales analysis in the table below is based on the location of the customer; the analysis of assets and capital expenditure is
based on the location of the assets:
Revenue Segment assets Capital expenditure
2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m
United Kingdom 20.4 20.0 29.5 50.4 1.6 2.0
Germany 14.6 14.2 19.5 18.9 1.7 2.1
France 7.4 7.5 5.9 41.2 0.1 5.7
Rest of Europe 28.2 26.7 6.7 6.0 0.1 0.1
North America 57.2 48.8 41.2 40.0 0.8 0.7
Other countries 27.2 26.0 13.8 13.0 0.2 0.2
155.0 143.2 116.6 169.5 4.5 10.8
Unallocated assets 37.9 41.8
Asset held for sale 3.4
Discontinued operations 37.1 2.1
155.0 143.2 195.0 211.3 6.6 10.8
Included within capital expenditure shown for France in 2005 is an amount of £3.2 million in respect of property, plant and
equipment additions arising through business combinations.
In accordance with IFRS 5, comparative geographical data for revenue has been restated to reflect only continuing activities of
the Group. The geographical analysis of segment assets and capital expenditure at 31 March 2005 remains as presented for the
Group at that date. 2. Operating costs and exceptional items
(a) Operating profit is stated after charging/(crediting):
2006 2005
£m £m £m £m
Change in stocks of finished goods and work in progress (1.1) (0.2)
Own work capitalised (0.1) (0.6)
Other operating income (0.8) (1.0)
Raw materials and consumables 58.8 56.1
Other external charges 21.9 17.5
Employee costs
Gross wages and salaries 52.3 48.9
Social security costs 6.2 5.7
Pension costs – Defined benefit 2.6 2.6
– Defined contribution 0.5 0.6
Cost of share-based incentive plans 0.2 0.1
61.8 57.9
Depreciation of property, plant and equipment
– owned assets 5.1 5.7
– leased assets 0.1 0.1
Amortisation of intangible assets 0.1 0.2
Other operating lease rentals payable
– plant and machinery 0.3 0.6
– property 1.6 1.2
1.9 1.8
(Profit) on disposal of property, plant and equipment (0.1)
Research and development expenditure 0.2 0.7
Remuneration of auditors for audit work 0.4 0.3
Trade receivables impairment charge 0.1
Exceptional items:
Redundancy and restructuring charges 1.4 4.2
149.6 142.8
(b) Auditors’ remuneration
In addition to audit fees of £0.4 million (2005 – £0.3 million) in relation to continuing operations, audit fees of £0.1 million
(2005 – £0.1 million) were incurred relating to discontinued operations.
During the year the Group (including its overseas subsidiaries) obtained the following non-audit services from the Group’s
auditor and network firms:
2006 2005
£000 £000
Taxation services – Compliance 78 103
– Advisory 15 9
Advisory services in relation to the adoption of IFRS 17 22
Other services 14 24
Total non-audit services 124 158
Included in the Group audit fee is an amount of £30,000 (2005 – £26,000) paid in respect of the parent company. Of the
total non-audit services provided to the Group £60,000 (2005 – £34,000) was incurred in the UK.
Notes to the Consolidated Financial Statements continued
36 Notes to the Consolidated Financial Statements continued
37
2. Operating costs and exceptional items continued
(c) Exceptional items
2006 2005
£m £m
UK Burton conveyor chain factory restructuring 0.3 3.2
Other redundancy and restructuring charges 1.1 1.0
1.4 4.2
During the year additional charges of £0.3 million were incurred in relation to the rationalisation and reorganisation of the
Burton factory, commenced in 2005. Other redundancy and restructuring costs incurred in the year in continuing operations
were principally in Germany (£0.3 million (2005 – £0.4 million)) and France (£0.5 million (2005 – £0.1 million)), with
£0.3 million (2005 – £0.5 million) being incurred in other territories.
(d) Employees and key management compensation
Employee costs, including directors, are set out in 2(a) above. Key management personnel is represented by the Board of
Directors and their aggregate emoluments were as follows:
2006 2005
£000 £000
Aggregate emoluments 741 747
Further details of the remuneration of directors are provided in the auditable part of the Remuneration Report on pages 20
to 23 under the headings “Directors’ emoluments” and “Directors’ pension entitlements”.
The average number of persons employed by the Group during the year was:
2006 2005
Continuing Discontinued Continuing Discontinued
United Kingdom 778 239 815 234
Germany 361 24 366 15
France 102 550 103 406
Rest of Europe 99 86
North America 414 16 391 7
Other countries 254 254
2,008 829 2,015 662
3. Net financing costs
2006 2005
£m £m £m £m
Financial expenses:
Interest payable on bank loans and overdrafts (2.3) (2.0)
Interest cost on pension plan balances (11.1) (9.8)
Costs associated with refinancing (0.7)
(14.1) (11.8)
Financial income:
Interest receivable on bank deposits and cash equivalents 0.1 0.1
Expected return on pension plan assets 10.1 9.5
Fair value gains on derivative instruments 0.3
10.5 9.6
Net financing costs (3.6) (2.2) 4. Taxation
Analysis of tax charge/(credit) in the year
2006 2005
£m £m
United Kingdom
UK corporation tax at 30% (2005 – 30%) 0.5 0.7
Less: double taxation relief (0.5) (0.7)
Overseas taxes
Corporation taxes 1.3 1.0
Total current tax 1.3 1.0
Deferred tax
United Kingdom 0.3 (1.6)
Overseas (0.4) (0.9)
Total deferred tax (0.1) (2.5)
Tax charge/(credit) on loss on ordinary activities 1.2 (1.5)
Analysed as:
Continuing 1.5 (1.5)
Discontinued (0.3)
1.2 (1.5)
2006 2005
£m £m
Tax on items taken directly to equity
Deferred tax on pension plan balances 1.6 4.6
Deferred tax on other direct movements on reserves 0.1
1.7 4.6
Factors affecting the Group tax charge for the year
The Group’s tax charge in future years will be affected by the profit mix and effective tax rates in the different countries where
the Group operates. No deferred tax is recognised on the unremitted earnings of overseas subsidiaries.
The tax assessed for the year is higher (2005 – higher) than the standard rate of corporation tax in the UK (30%). The differences
are explained below:
2006 2005
£m £m
Profit/(loss) on ordinary activities before tax
Continuing operations 1.8 (1.8)
Discontinued operations (1.4) 0.2
0.4 (1.6)
Tax on ordinary activities at 30% (2005 – 30%) 0.1 (0.5)
Effects of:
Permanent differences 0.1 0.6
Overseas tax rate differences 0.3 0.1
Unrelieved tax losses 1.6 0.4
Utilisation of brought forward tax losses (0.4) (0.1)
Depreciation and other timing differences (0.1) 0.4
Prior year adjustments (0.3) 0.1
Current tax charge (continuing operations) 1.3 1.0
Notes to the Consolidated Financial Statements continued
38 Notes to the Consolidated Financial Statements continued
39
5. Discontinued operations
As described in note 13, the Group has announced the proposed disposal of its Automotive and Machine Tool businesses. The
results of these discontinued businesses are set out below:
2006 2005
Machine Total Machine Total
Automotive Tools discontinued Automotive Tools discontinued
£m £m £m £m £m £m
External revenue 49.3 20.8 70.1 35.3 18.5 53.8
Operating (loss)/profit before
exceptional items (1.6) 0.1 (1.5) (1.2) (1.2)
Redundancy, restructuring and 
impairment of plant and equipment 0.7 (0.2) 0.5 (6.9) (6.9)
Negative goodwill arising on acquisition 11.3 11.3
Impairment of goodwill (2.6) (2.6)
Operating (loss)/profit (0.9) (0.1) (1.0) 3.2 (2.6) 0.6
Net financing costs (0.3) (0.1) (0.4) (0.3) (0.1) (0.4)
(Loss)/profit before tax (1.2) (0.2) (1.4) 2.9 (2.7) 0.2
Taxation 0.5 (0.2) 0.3
(Loss)/profit after tax (0.7) (0.4) (1.1) 2.9 (2.7) 0.2
Impairment on classification as
disposal groups (9.1) (3.7) (12.8)
Taxation
Net impairment on classification as
disposal groups (9.1) (3.7) (12.8)
(Loss)/profit for the year on
discontinued operations (9.8) (4.1) (13.9) 2.9 (2.7) 0.2
In 2005/2006 a gear making operation was transferred to Industrial Power Transmission. Previously the activities of this operation
had been reported as part of the Machine Tools businesses, having been physically located within the main UK Machine Tools
facility. The turnover for this operation in 2006 was £1.9 million, with an operating profit of £0.2 million. 
The cash flows attributed to discontinued operations comprise:
2006 2005
£m £m
From operating activities 1.7 (2.0)
From investing activities (2.8) 5.7
From financing activities (0.5) (0.1)
In 2005 the cash inflow from investing activities reflects cash acquired with the purchase of Sachs Automotive France SAS
(£9.7 million), offset by cash outflows arising from the purchase of property, plant and equipment in that year. 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:
2006 2005
Weighted Weighted
average average
number of Per-share number of Per-share
Earnings shares amount Earnings shares amount
£m Thousands Pence £m Thousands Pence
Basic EPS
Earnings attributed to ordinary
shareholders (13.6) 69,350 (19.6) (0.1) 69,328 (0.1)
Effect of dilutive securities:
Employee share options 63 332
Diluted EPS (13.6) 69,413 (19.6) (0.1) 69,660 (0.1)
Earnings per share from continuing operations:
Basic EPS (13.6) 69,350 (19.6) (0.1) 69,328 (0.1)
Post tax loss/(profit) from discontinued
operations (Note 5) 1.1 1.6 (0.2) (0.3)
Impairment on classification as disposal
groups (Note 5) 12.8 18.4
Basic EPS from continuing operations 0.3 69,350 0.4 (0.3) 69,328 (0.4)
Earnings per share from discontinued operations:
Post tax (loss)/profit from discontinued
operations (Note 5) (1.1) 69,350 (1.6) 0.2 69,328 0.3
Impairment on classification as disposal
groups (Note 5) (12.8) (18.4)
Basic EPS from 
discontinued operations (13.9) 69,350 (20.0) 0.2 69,328 0.3
Inclusion of the dilutive securities, shown above, does not change the amounts shown for basic EPS for both continuing and
discontinued operations.
Adjusted EPS for continuing activities:
Basic EPS from continuing operations 0.3 69,350 0.4 (0.3) 69,328 (0.4)
Effect of exceptional items, after tax:
Redundancy and restructuring costs 0.9 1.3 2.9 4.2
Adjusted EPS 1.2 69,350 1.7 2.6 69,328 3.8
Inclusion of the dilutive securities, shown above, in the calculation of adjusted EPS does not change the amounts shown of 1.7p
(2005 – 3.8p).
The adjusted earnings per share numbers have been provided in order to give a useful indication of underlying performance by
the exclusion of exceptional items.
Notes to the Consolidated Financial Statements continued
40 Notes to the Consolidated Financial Statements continued
41
7. Dividends paid
2006 2005
£m £m
Ordinary shares
Final dividend paid of Nil (3.0p) 2.1
Interim dividend paid of Nil (1.5p) 1.1
3.2
The final dividend payment recorded above, under 2005, was that proposed in respect of the year ended 31 March 2004.
8. Intangible assets
Computer
Goodwill software Total
£m £m £m
Cost
At 1 April 2005 18.3 2.4 20.7
Exchange adjustment 1.4 1.4
Additions
(1)
0.2 0.2
Relating to disposal groups (2.6) (0.8) (3.4)
At 31 March 2006 17.1 1.8 18.9
Accumulated amortisation and impairment
1 April 2005 2.6 1.9 4.5
Amortisation charge
(2)
0.3 0.3
Relating to disposal groups (2.6) (0.6) (3.2)
At 31 March 2006 1.6 1.6
Net book amount at 31 March 2006 17.1 0.2 17.3
Net book amount at 31 March 2005 15.7 0.5 16.2
(1)
“Additions” includes £nil (2005 – £0.2 million) in respect of discontinued operations.
(2)
“Amortisation charge” includes £0.2 million (2005 – £nil) in respect of discontinued operations.
Computer
Goodwill software Total
£m £m £m
Cost
At 3 April 2004 18.8 2.1 20.9
Exchange adjustment (0.5) (0.5)
Additions 0.3 0.3
At 31 March 2005 18.3 2.4 20.7
Accumulated amortisation and impairment
3 April 2004 1.7 1.7
Impairment charge 2.6 2.6
Amortisation charge 0.2 0.2
At 31 March 2005 2.6 1.9 4.5
Net book amount at 31 March 2005 15.7 0.5 16.2
Net book amount at 2 April 2004 18.8 0.4 19.2 8. Intangible assets continued
As at 31 March 2006 the amount of goodwill retained in the balance sheet as an intangible asset relates to the acquisition of
Jeffrey Chain. This business is defined as a cash generating unit (CGU) for impairment testing purposes. Goodwill is tested for
impairment at least annually and following that exercise in 2005/06 no impairment charge has been recognised in the period
(2005 – an impairment charge of £2.6 million was made to eliminate the goodwill remaining in relation to the Jones & Shipman
acquisition).
The recoverable amount of the CGU has been determined on a value in use basis. Value in use is calculated as the net present
value of post tax cash flows derived from detailed financial plans. The most significant assumptions relevant to the determination
of the recoverable amount are the growth rate and discount rate. The cash flows are extrapolated from the approved plans at a
nominal growth rate of 3.1%. A discount rate of 10.2% has been used.
9. Tangible assets
Property, plant and equipment Land and Plant and
buildings equipment Total
£m £m £m
Cost
At 1 April 2005 30.9 134.8 165.7
Exchange adjustment 0.4 2.0 2.4
Additions
(1)
0.2 6.2 6.4
Disposals (3.1) (8.9) (12.0)
Reclassified as asset held for sale (3.5) (3.5)
Relating to disposal groups (3.9) (44.9) (48.8)
At 31 March 2006 21.0 89.2 110.2
Aggregate depreciation
At 1 April 2005 3.5 98.0 101.5
Exchange adjustment 1.5 1.5
Charge for the year
(2)
0.4 7.8 8.2
Disposals (1.9) (7.0) (8.9)
Reclassified as asset held for sale (0.1) (0.1)
Relating to disposal groups (0.1) (30.1) (30.2)
At 31 March 2006 1.8 70.2 72.0
Impairment
Impairment at 1 April 2005
Impairment losses recognised in the period 0.8 0.8
Relating to disposal groups (0.8) (0.8)
At 31 March 2006
Total depreciation and impairment:
At 31 March 2006 1.8 70.2 72.0
At 31 March 2005 3.5 98.0 101.5
Net book amount at 31 March 2006 19.2 19.0 38.2
Net book amount at 31 March 2005 27.4 36.8 64.2
(1)
“Additions” includes £2.0 million (2005 – £3.9 million) in respect of discontinued operations.
(2)
“Charge for the year” includes £3.0 million (2005 – £2.8 million) in respect of discontinued operations.
Notes to the Consolidated Financial Statements continued
42 Notes to the Consolidated Financial Statements continued
43
9. Tangible assets continued
Net book amount for plant and equipment includes £0.5 million (2005 – £0.6 million) in respect of assets acquired under
finance leases.
Included within the land and buildings net book amount at 31 March 2006 is an amount of £1.7 million representing the carrying
value of the Automotive factory in Calais, France. Although the business at Calais forms part of the discontinued operations, the
ownership of this site will remain with the Renold Group post-disposal and the facility will be made available to the purchaser
under a short-term rental arrangement until alternative facilities are completed. The asset has been retained within fixed assets
and classified as a corporate asset in note 1.
The impairment recognised in the period relates to plant and equipment that is identified to be in excess of capacity requirements
and is carried at its fair value less costs to sell.
Land and Plant and
buildings equipment Total
£m £m £m
Cost
At 3 April 2004 28.4 126.6 155.0
Exchange adjustment 0.1 1.3 1.4
Acquisitions 1.9 1.3 3.2
Additions 0.5 6.8 7.3
Disposals (1.2) (1.2)
At 31 March 2005 30.9 134.8 165.7
Aggregate depreciation
At 3 April 2004 3.0 90.2 93.2
Exchange adjustment 0.9 0.9
Charge for the year 0.5 8.1 8.6
Disposals (1.2) (1.2)
At 31 March 2005 3.5 98.0 101.5
Net book amount at 31 March 2005 27.4 36.8 64.2
Net book amount at 2 April 2004 25.4 36.4 61.8
Under the options available within IFRS 1 (“First-time adoption of IFRS”), the Group chose to measure its freehold land and
buildings on a fair value basis and has adopted this valuation as deemed cost as at the date of transition, 4 April 2004. The
valuation was undertaken by Colliers CRE, Chartered Surveyors, and resulted in an uplift of £15.2 million against the previous
carrying value.
Future capital expenditure
At 31 March 2006 capital expenditure contracted for but not provided for in these financial statements amounted to 
£0.1 million (2005 – £0.5 million).
10. Inventories
2006 2005
£m £m
Materials 6.6 9.5
Work in progress 8.1 12.4
Finished products 21.8 25.4
36.5 47.3
Inventories pledged as security for liabilities amounted to £21.3 million (2005 – £16.9 million).
Write-offs taken to the income statement amount to £0.5 million (2005 – £0.2 million). 11. Trade and other receivables
2006 2005
Current Non-current Current Non-current
£m £m £m £m
Trade receivables 24.6 38.6
Less: provision for impairment of receivables (0.6) (1.3)
Trade receivables – net 24.0 37.3
Other receivables 0.8 0.2 3.4 0.3
Prepayments and accrued income 1.0 0.1 1.0 0.1
25.8 0.3 41.7 0.4
The Group has recognised a loss of £0.1 million (2005 – £0.1 million) for the impairment of its trade receivables during the year.
Where appropriate the non-current receivables have been fair valued using an effective interest rate of 5.7%. The Group has no
significant concentration of credit risk.
12. Cash and cash equivalents
2006 2005
£m £m
Cash at bank and in hand 8.7 13.6
Short-term bank deposits 4.8 10.9
Cash equivalents 4.3
Cash and cash equivalents 17.8 24.5
Cash equivalents comprise highly liquid investments with maturities of three months or less.
In the Group cash flow statement, net cash and cash equivalents are shown after deducting bank overdrafts, as follows:
2006 2005
£m £m
Cash and cash equivalents (as shown above) 17.8 24.5
Less: Overdrafts (Note 14) (8.2) (19.7)
Net cash and cash equivalents 9.6 4.8
13. Assets classified as held for sale and associated liabilities
(a) Assets held for sale
2006 2005
£m £m
Property 3.4
As announced during the second half-year, the Group is in the process of selling the former Burton-on-Trent factory site in the
United Kingdom and accordingly the asset has been reclassified from property, plant and equipment.
Notes to the Consolidated Financial Statements continued
44 Notes to the Consolidated Financial Statements continued
45
13. Assets classified as held for sale and associated liabilities continued
(b) Discontinued operations
As announced on 6 June 2006, the Board is in advanced negotiations to dispose of the Automotive business. It was also
announced on 26 June 2006 that Renold was at an advanced stage of negotiation for the disposal of the Machine Tool business.
These announcements are in line with the Board’s strategy to focus on the Group’s core activity of the manufacture and the sale
of Industrial Power Transmission products.
Further details on the background leading to the negotiations for the disposal of these businesses is set out in the Chief
The Automotive and Machine Tools business segments have been accordingly accounted for as disposal groups and balance sheet
assets and liabilities have been reclassified and disclosed separately on the balance sheet as discontinued operations. A summary
of the trading results of the disposal groups is shown in note 5.
Set out below is a summary of the net assets of the disposal groups as at 31 March 2006:
Automotive Machine Tools Carrying value
Carrying value Carrying value of disposal
before before groups after
impairment Impairment impairment Impairment impairment
£m £m £m £m £m
Non-current assets
Intangible assets 0.2 (0.2)
Property, plant and equipment 13.8 (9.1) 4.0 (3.5) 5.2
Current assets
Inventory 7.2 7.4 14.6
Trade and other receivables 10.7 6.6 17.3
31.7 (9.1) 18.2 (3.7) 37.1
Following the classification as discontinued operations, the net assets have been re-evaluated on a “fair value less costs to sell”
basis and, as shown in the table above, an impairment of the assets has been recognised. In accordance with IFRS 5, the
impairment has been allocated on a pro rata basis to the non-current assets. This allocation is solely for the purposes of preparing
the financial statements in accordance with relevant international accounting standards. It should not be interpreted as being
representative of values assigned to the assets by the vendor or purchaser in the context of a sale and purchase agreement.
In assessing the fair value, less costs to sell, it was not considered appropriate to take into account any consideration that could
be contingent on future performance and incorporated in current negotiations by way of deferred consideration.
The net liabilities directly associated with assets of the disposal groups are as follows:
Automotive Machine
Tools Total
£m £m £m
Current liabilities
Trade and other payables (16.2) (6.7) (22.9)
Provisions (2.9) (2.9)
Non-current liabilities
Trade and other payables (0.4) (0.4)
Retirement benefit obligations (1.7) (1.7)
Deferred tax liabilities (0.2) (0.2)
(21.2) (6.9) (28.1)
Executive’s Review on page 5. 14. Borrowings
2006 2005
£m £m
Amounts falling due within one year
Overdrafts 8.2 19.7
Bank loans 4.1 8.7
Obligations under finance leases 0.1 0.1
12.4 28.5
Amounts falling due after more than one year
Bank loans 25.2 12.7
Obligations under finance leases 0.4 0.3
25.6 13.0
Preference shares 0.5
26.1 13.0
Total borrowings 38.5 41.5
Secured borrowings:
Included in Group borrowings are secured borrowings of £31.6 million (2005 – £25.6 million). Security is provided by fixed and
floating charges over UK assets and the assets of certain overseas subsidiaries.
Finance leases: 2006 2005
£m £m
Obligations under finance lease
Minimum payments under finance leases are as follows:
Amounts payable within one year 0.1 0.1
Amounts payable between two and five years 0.5 0.3
Amounts payable after five years 0.1
Total gross payments 0.6 0.5
Less: Finance charges allocated to future periods (0.1) (0.1)
0.5 0.4
Allocated as:
Current obligations 0.1 0.1
Non-current obligations 0.4 0.3
0.5 0.4
Preference shares:
All payments of dividends on the 6% cumulative preference shares have been paid on the due dates. The preference shares have
the following rights:
(i) a fixed cumulative preferential dividend at the rate of 6% per annum payable half yearly on 1 January and 1 July in
each year;
(ii) 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;
(iii) 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 arrears for six calendar months;
(iv) there is no redemption entitlement.
Notes to the Consolidated Financial Statements continued
46 Notes to the Consolidated Financial Statements continued
47
15. Trade and other payables
2006 2005
Current Non-current Current Non-current
£m £m £m £m
Trade payables 17.8 29.1
Other tax and social security 2.9 5.8
Other payables 3.5 3.5
Accruals and deferred income 7.1 0.7 7.1 0.9
31.3 0.7 45.5 0.9
16. Provisions
Business
restructuring
provision
£m
At beginning of year 11.7
Exchange adjustments 0.1
Net (credit) to income statement
(1)
(1.4)
Utilised in year
(2)
(7.1)
Relating to disposal groups (2.9)
At end of year 0.4
(1)
“Net (credit) to income statement” includes an amount of £1.7 million relating to discontinued operations.
(2)
“Utilised in year” includes £3.9 million relating to discontinued operations.
Business restructuring provision
This provision relates mainly to the restructuring of the SAF business, together with amounts provided for reorganisation and
restructuring of a UK based business. 17. Deferred tax
Assets Liabilities Net
2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m
Continuing operations
Accelerated capital allowances 2.3 2.7 (0.9) (2.7) 1.4
Pension plans 12.6 13.5 0.1 0.8 12.7 14.3
Tax losses 3.2 2.3 0.2 0.5 3.4 2.8
Other timing differences 0.3 (1.5) (0.1) 0.2 (1.5)
Tax asset/(liabilities) 18.4 17.0 (0.7) (1.4) 17.7 15.6
Net off (liabilities)/assets (0.7) (1.4) 0.7 1.4
Net tax assets 17.7 15.6 17.7 15.6
Discontinued operations
Other timing differences (0.2) (0.2)
Tax liabilities (0.2) (0.2)
Net tax liabilities (0.2) (0.2)
Total net tax assets 17.7 15.6 (0.2) 17.5 15.6
The net deferred tax asset recoverable after more than one year is £17.5 million (2005 – £15.6 million).
The movement in the net deferred tax asset in the year is as follows:
Deferred tax
arising on Recognised Recognised
Opening adoption of in income directly in Closing
balance IAS 32/39 statement equity balance
£m £m £m £m £m
Accelerated capital allowances 2.7 (0.4) 2.3
Pension plans 13.5 (2.5) 1.6 12.6
Tax losses 2.3 0.9 3.2
Other timing differences (1.5) 0.1 1.6 0.1 0.3
17.0 0.1 (0.4) 1.7 18.4
The movement in the net deferred tax liability in the year is as follows:
Recognised
Opening in income Closing
balance statement balance
£m £m £m
Accelerated capital allowances (2.7) 1.8 (0.9)
Pension plans 0.8 (0.7) 0.1
Tax losses 0.5 (0.3) 0.2
Other timing differences (0.3) (0.3)
(1.4) 0.5 (0.9)
During the year the Group has reported an operating profit of £6.8 million before exceptional items from continuing operations.
The businesses in all jurisdictions where deferred tax assets have been recognised will, more likely than not, generate suitable
profits from which the future reversal of the underlying timing differences can be deducted.
A deferred tax asset amounting to £6.1 million (2005 – £5.7 million) has not been recognised in respect of losses in certain
subsidiaries where, based on available evidence, it is considered unlikely that the losses will be recovered within the foreseeable
future.
Notes to the Consolidated Financial Statements continued
48 Notes to the Consolidated Financial Statements continued
49
18. Pensions
The Group operates a number of pension schemes throughout the world covering many of its employees. The principal funds are
those in the United Kingdom: the Renold Group Pension Scheme (‘RGPS’); the Jones & Shipman plc Retirement Benefits Plan
(1971) and the Renold Supplementary Pension Scheme 1967 (‘RSPS’). These three schemes are funded schemes of the defined
benefit type with assets held in separate trustee administered funds. The Renold Group Money Purchase Pension Scheme is a
defined contribution type scheme and membership is available to all new employees, the main defined benefit schemes having
been closed to new employees in 2002. As a result of the Schemes’ closure the age profile of the active membership is increasing,
and consequently current service cost is likely to increase, as members of the Schemes approach retirement.
Overseas employees participate in a variety of different pension arrangements of the defined contribution or defined benefit type,
funded in accordance with local practice.
The most recent actuarial valuations of the Renold Group Pension Scheme and the Renold Supplementary Pension Scheme 1967
were at 5 April 2004. The valuations of both schemes used the projected unit method and were carried out by Barnett
Waddingham, professionally qualified actuaries. The last valuation of the Jones & Shipman plc Retirement Benefits Plan (1971)
was in April 2003, by William M Mercer Limited, who were the former actuarial advisors to the Group.
For all defined benefit schemes operated by the Group the disclosures in the financial statements are based on the most recent
actuarial valuations. Where material, these have been updated to the balance sheet date by qualified independent actuaries. The
disclosures provided below are presented on a weighted average basis where appropriate.
The principal financial assumptions used to calculate scheme liabilities as at 31 March 2006 are presented below. The
assumptions adopted by the schemes’ actuaries represent the best estimates chosen from a range of possible actuarial
assumptions which, due to the timescale covered, may not necessarily be borne out in practice.
UK Overseas
2006 2005 2006 2005
Rate of increase in pensionable salaries 3.4% 3.3% 2.9% 2.8%
Rate of increase in pensions in payment and deferred pensions 2.8% 2.6% 1.8% 1.8%
Discount rate 5.0% 5.4% 5.2% 5.6%
Inflation assumption 2.9% 2.8% 2.2% 2.2%
Expected return on plan assets 6.3% 6.5% 8.0% 8.5%
The predominant defined benefit obligation for funded schemes within the Group resides in the UK (£195.6 million of the 
£213.5 million Group obligation for funded schemes). In addition to the assumptions shown above, mortality assumptions have
a significant bearing on the calculated obligation. In the determination of the UK defined benefit obligation, as at 31 March
2006, the post-retirement mortality assumptions are based on the PA92 series tables published by the UK Actuarial Profession.
The post-retirement mortality rates used for the Renold Group Pension Scheme (which represents the principal defined benefit
obligation) are based on projections to calendar year 2020 for non-pensioners and 2004 for current pensioners reduced by 10%
for non-pensioners and female pensioners and 20% for male pensioners. This reduction to mortality rates reflects the results of
mortality experience carried out by the actuary as part of the actuarial valuation as at 5 April 2004.
The expected long-term rates of return and market values of assets of the principal defined benefit schemes of the Group,
together with the present value of scheme liabilities, are shown below. It should be noted that the market values of the schemes’
assets are stated as at the Group’s year end. It is not intended to realise the assets in the short-term and the value may therefore
be subject to significant change before being realised. The present values of the schemes’ liabilities are derived from cash flow
projections over long periods and are thus inherently uncertain. 18. Pensions continued
The fair values of plan assets were:
UK Overseas Total
2006 2005 2006 2005 2006 2005
£m £m £m £m £m £m
Equities 78.2 71.6 9.2 7.0 87.4 78.6
Bonds 84.5 70.8 3.8 4.2 88.3 75.0
Other 2.5 1.2 2.5 1.2
Total market value of assets 162.7 142.4 15.5 12.4 178.2 154.8
Present value of scheme liabilities (195.6) (177.2) (36.5) (30.8) (232.1) (208.0)
Deficits in schemes (32.9) (34.8) (21.0) (18.4) (53.9) (53.2)
Pension commitments
Pension obligations:
The movement in the present value of the defined benefit obligation is as follows:
2006 2005
UK Overseas Total UK Overseas Total
£m £m £m £m £m £m
Opening obligation (177.2) (30.8) (208.0) (154.0) (28.6) (182.6)
Current service cost (2.1) (0.7) (2.8) (2.0) (0.7) (2.7)
Interest cost
(1)
(9.5) (1.7) (11.2) (8.2) (1.7) (9.9)
Contributions by plan participants (0.8) (0.2) (1.0) (0.9) (0.1) (1.0)
Actuarial gains and losses (15.2) (6.3) (21.5) (20.4) (20.4)
Gains on curtailments 0.1 0.3 0.4
Liabilities extinguished on settlements 1.0 1.0
Benefits paid 8.1 2.3 10.4 8.3 1.5 9.8
Business combination (0.8) (0.8)
Exchange adjustment (1.1) (1.1) (0.4) (0.4)
Relating to disposal groups 1.7 1.7
Closing obligation (195.6) (36.5) (232.1) (177.2) (30.8) (208.0)
(1)
“Interest cost” includes £0.1 million (2005 – £0.1 million) in respect of discontinued operations.
The total defined benefit obligation can be analysed as follows:
Obligations related to funded 
pension plans (195.6) (17.9) (213.5) (177.2) (12.1) (189.3)
Obligations related to unfunded 
pension plans (18.6) (18.6) (18.7) (18.7)
(195.6) (36.5) (232.1) (177.2) (30.8) (208.0)
Notes to the Consolidated Financial Statements continued
50 Notes to the Consolidated Financial Statements continued
51
18. Pensions continued
Pension assets:
The movement in the present value of the defined benefit plan assets is as follows:
2006 2005
UK Overseas Total UK Overseas Total
£m £m £m £m £m £m
Opening assets 142.4 12.4 154.8 133.0 10.6 143.6
Expected return on plan assets 9.1 1.0 10.1 8.7 0.8 9.5
Actuarial gains and losses 14.5 1.7 16.2 3.3 1.2 4.5
Assets distributed on settlement (0.9) (0.9)
Contributions by the employer 4.9 0.6 5.5 4.8 0.3 5.1
Contributions by plan participants 0.8 0.2 1.0 0.9 0.1 1.0
Benefits paid (8.1) (1.3) (9.4) (8.3) (0.5) (8.8)
Exchange adjustment 0.9 0.9 (0.1) (0.1)
Closing assets 162.7 15.5 178.2 142.4 12.4 154.8
Balance sheet reconciliation:
Plan obligations (195.6) (36.5) (232.1) (177.2) (30.8) (208.0)
Plan assets 162.7 15.5 178.2 142.4 12.4 154.8
Retirement benefit obligation (32.9) (21.0) (53.9) (34.8) (18.4) (53.2)
The net amount of actuarial gains and losses taken to the statement of recognised income and expense is as follows:
2006 2005
£m £m
Actuarial gains and losses arising on scheme obligations
(1)
(21.5) (20.4)
Actuarial gains and losses arising on scheme assets 16.2 4.5
Net actuarial gains and losses (5.3) (15.9)
(1)
“Actuarial gains and losses arising on scheme obligations” includes a gain of £0.1 million (2005 – nil) relating to discontinued
operations.
An analysis of amounts charged to operating costs is set out below:
2006 2005
£m £m
Operating costs – continuing
Current service cost (2.8) (2.6)
Gains on curtailments 0.1
Liabilities extinguished on settlements 1.0
Assets distributed on settlements (0.9)
(2.6) (2.6)
Amounts relating to discontinued operations
Current service cost (0.1)
Gains on curtailments 0.3
Total cost of retirement benefits (2.3) (2.7) 18. Pensions continued
The cumulative amount of actuarial losses recognised in equity since 4 April 2004 was £21.2 million (2005 – £15.9 million). 
Of this amount £nil (2005 – loss £0.1 million) related to discontinued operations. The Group expects to contribute approximately
£5.7 million to defined benefit schemes in the year to 31 March 2007.
As a result of the deficits in the main UK schemes, it has been agreed with the actuaries and trustees that, under existing
arrangements, annual lump sum payments of £2.2 million will be paid to the RGPS scheme, £0.7 million to the RSPS scheme and 
£0.2 million to the Jones & Shipman scheme over the average remaining service lives of members, being fifteen, twelve and
fifteen years respectively.
The Group operates a number of defined contribution schemes. The cost for the period was £0.5 million (2005 – £0.6 million).
There were outstanding contributions in creditors of £nil (2005 – £0.1 million) at the balance sheet date.
19. Called up share capital
Authorised Issued
2006 2005 2006 2005
£m £m £m £m
Equity interests
Ordinary shares of 25p each 23.1 23.1 17.4 17.3
Non-equity interests
6% Cumulative Preference Stock (£1 units) 0.6 0.6
23.7 17.9
Following the adoption of IAS 32 and IAS 39 on 1 April 2005, the preference shares have been reclassified from that date and
are recorded as a component of borrowings (Note 14). In addition, in accordance with IAS 39, the preference shares were
assessed on a fair value basis at an amount of £0.5 million, resulting in an adjustment of £0.1 million to the carrying amount.
This adjustment was taken to retained earnings as part of the adjustment made upon adoption of IAS 32 and IAS 39.
At 31 March 2006 the issued Ordinary Share Capital comprised 69,429,220 (2005 – 69,335,410) ordinary shares of 25p each.
During the year the Company issued ordinary shares of 25p each for a cash consideration of £51,671 (2005 – £13,648) by the
exercise of options under the Renold (1995) Executive, and Savings Related, Share Option Schemes.
Notes to the Consolidated Financial Statements continued
52 Notes to the Consolidated Financial Statements continued
53
20. Share-based payments
Details of the share-based payment arrangements are provided in the Remuneration Report on pages 20 to 23.
Share options have been granted under the Executive Share Option Schemes and the Savings Related Share Option Schemes. 
At 31 March 2006 unexercised options for ordinary shares amounted to 3,591,299 (2005 – 3,326,272) made up as follows:
Option price Number Number
(pence per share) of shares of shares
2006 2005
Date normally exercisable
Executive Share Option Schemes
Within seven years from:
16 July 1999 (1995 Scheme) 293.83 52,307 56,636
18 July 2000 (1995 Scheme) 242.67 19,042 19,042
17 July 2001 (1995 Scheme) 237.33 145,000 175,000
16 July 2002 (1995 Scheme) 137.83 155,000 195,000
19 July 2003 (1995 Scheme) 118.50 97,500 125,000
22 December 2003 (1995 Scheme) 94.50 10,000 20,000
18 June 2004 (1995 Scheme) 102.00 125,000
28 November 2004 (1995 Scheme) 67.34 297,000 474,000
27 November 2005 (1995 Scheme) 58.50 381,000 404,000
28 July 2006 (1995 Scheme) 80.84 50,000 50,000
27 November 2006 (1995 Scheme) 83.50 245,000 275,000
11 March 2007 (1995 Scheme) 76.50 125,000 125,000
2 September 2007 (2004 Scheme) 88.00 475,000 475,000
22 November 2007 (2004 Scheme) 74.30 135,000 135,000
2,186,849 2,653,678
Savings Related Share Option Schemes
Within six months from:
1 February 2005 (1995 Scheme) 89.36 122,324
1 February 2006 (1995 Scheme) 55.08 238,473 359,094
1 February 2008 (1995 Scheme) 55.08 167,919 191,176
1 March 2009 (2004 Scheme) 54.30 998,058
1,404,450 672,594 20. Share-based payments continued
The fair value per option granted in the period and the assumptions used in the calculation are as follows:
2006 2005
Savings Related Executive Share 
Scheme Option Scheme
Grant date 24.1.2006 22.11.2004 2.9.2004
Share price at date of grant 62.0p 74.3p 88p
Exercise price 54.3p 74.3p 88p
Number of employees 198 71
Shares under option 999,779 135,000 475,000
Vesting period (years) 3 33
Expected volatility 29.9% 35.0% 41.1%
Option life (years) 3.5 10 10
Expected life (years) 3.1 66
Risk free interest rate 4.2% 4.5% 4.9%
Assumed dividends expressed as a dividend yield 4.0% 6.1% 5.1%
Possibility of ceasing employment before vesting 3% Zero Zero
Fair value per option 14.6p 15.5p 24.7p
The expected volatility is based on historical volatility over the last three years. The expected life is the average expected period
to exercise. The risk free rate of return is the yield on zero-coupon UK government bonds of a term consistent with the assumed
option life. Dividend yields indicated above are an expression of assumed dividends over the respective periods included in the
calculation. These assumptions may not be borne out in practice. A reconciliation of option movements over the year to 31 March
2006 is shown below:
Executive share option scheme
2006 2005
Weighted Weighted
average average
exercise exercise
Number price Number price
Outstanding at 1 April 2,653,678 99.14p 2,412,178 118.17p
Granted 610,000 84.97p
Lapsed (466,829) 99.88p (351,500) 206.94p
Exercised (17,000) 63.70p
Outstanding at 31 March 2,186,849 98.98p 2,653,678 99.14p
Exercisable at 31 March 90,000 62.67p 473,829 97.35p
Savings related share option scheme
Weighted Weighted
average average
exercise exercise
Number price Number price
Outstanding at 1 April 672,594 61.31p 717,893 61.61p
Granted 999,779 54.30p
Lapsed (174,113) 79.16p (40,181) 67.45p
Exercised (93,810) 55.08p (5,118) 55.08p
Outstanding at 31 March 1,404,450 54.53p 672,594 61.31p
Exercisable at 31 March 238,473 55.08p 3,554 60.17p
Notes to the Consolidated Financial Statements continued
54 Notes to the Consolidated Financial Statements continued
55
20. Share-based payments continued
Executive share option scheme
2006 2005
Weighted Weighted
Range of average average
exercise exercise Number of Weighted average exercise Number of Weighted average
prices price shares remaining life price shares remaining life
Expected Contractual Expected Contractual
58.5p to 101p 75.16p 1,718,000 3.5 7.5 76.18p 1,958,000 4.3 8.3
101p to 293.83p 186.24p 468,849 0.1 2.8 193.02p 695,678 0.7 7.2
Savings related share option scheme
2006 2005
Weighted Weighted
Range of average average
exercise exercise Number of Weighted average exercise Number of Weighted average
prices price shares remaining life price shares remaining life
Expected Contractual Expected Contractual
54.3p to 89.36p 54.53p 1,404,450 2.4 2.6 61.31p 672,594 1.4 1.6
The weighted average share price during the period for options exercised over the year was 59.14p (2005: 79.26p). The total
charge for the year relating to employee share based payment plans was £158,000 (2005: £51,000), all of which related to
equity-settled share-based transactions. After deferred tax, the total charge was £180,000 (2005: £74,000).
21. Statement of changes in shareholders’ equity
Share Currency
Share premium Retained translation Hedging Total
capital account earnings reserve reserve equity
£m £m £m £m £m £m
At 3 April 2004 17.9 6.0 46.6 70.5
Loss for the year (0.1) (0.1)
Foreign exchange translation difference (0.4) 0.5 0.1
Actuarial gains and losses (15.9) (15.9)
Dividends (3.2) (3.2)
Tax on items recognised directly in equity 4.6 4.6
Employee share options:
– value of employee services 0.1 0.1
As at 31 March 2005 17.9 6.0 31.7 0.5 56.1
Effect of adoption of IAS 32 and IAS 39 (0.6) (0.2) (0.8)
At 1 April 2005 restated 17.3 6.0 31.5 0.5 55.3
Loss for the year (13.6) (13.6)
Foreign exchange translation difference 1.1 1.1
Actuarial gains and losses (5.3) (5.3)
Gains on fair value of hedging net 
investments in foreign operations 1.1 1.1
Tax on items recognised directly in equity 1.7 1.7
Employee share options:
– value of employee services 0.2 0.2
– proceeds from shares issued 0.1 0.1
At 31 March 2006 17.4 6.0 14.5 1.6 1.1 40.6
The currency translation reserve is used to record exchange differences arising from the translation of financial statements of
foreign operations. The hedging reserve is used to record the proportion of the gains or losses on hedging instruments used to
hedge against movements in net investments in foreign operations that are determined to be effective.
Cumulative goodwill written off directly to Group reserves at 31 March 2006, subsequent to the capital reorganisation in January
1985, amounted to £2.0 million (2005 – £2.0 million).
Included in retained earnings is an amount of £11.0 million (net of tax) (2005 – £11.1 million) relating to the revaluation of
freehold property that was undertaken at the date of IFRS adoption. The amount is not distributable until it is realised. 22. Operating lease obligations
At the end of the year there were outstanding commitments for future minimum lease payments under non-cancellable operating
leases as follows:
2006 2005
Properties Equipment Properties Equipment
Continuing Discontinued Continuing Continuing Discontinued Continuing
£m £m £m £m £m £m
Leases expiring:
Within one year 1.0 0.2 0.4 1.0 0.2 0.5
Between two and five years 3.3 0.7 0.7 3.5 0.7 0.8
Over five years 13.6 0.2 0.1 5.4 0.4
Total annual commitments 17.9 1.1 1.2 9.9 1.3 1.3
23. Contingent liabilities
Performance guarantees given to third parties in respect of Group Companies were £2.9 million (2005 – £1.2 million).
24. Reconciliation of profit/(loss) before tax to net cash flows from operations
2006 2005
£m £m
Cash generated from operations:
Continuing operations:
Profit/(loss) before taxation 1.8 (1.8)
Depreciation and amortisation 5.4 6.0
Equity share plans 0.2 0.1
Net finance costs 3.6 2.2
(Increase)/decrease in inventories (1.8) 0.2
(Increase) in receivables (0.4) (4.1)
Increase in payables 2.7 5.2
(Decrease)/increase in provisions (2.7) 4.9
Movement on pension schemes (3.8) (4.1)
Movement in derivative financial instruments (0.3)
Cash generated from continuing operations 4.7 8.6
Discontinued operations:
(Loss)/profit before taxation (1.4) 0.2
Depreciation and amortisation 3.1 2.8
Plant and equipment impairment 0.8
Goodwill impairment 2.6
Negative goodwill release (11.3)
(Gain) on plant and equipment disposals (0.1)
Net finance costs 0.4 0.4
(Increase) in inventories (0.6) (0.2)
Decrease/(increase) in receivables 0.2 (1.8)
Increase/(decrease) in payables 5.3 (1.5)
(Decrease)/increase in provisions (5.7) 6.8
Movement on pension schemes (0.3)
Cash generated/(absorbed) by discontinued operations 1.7 (2.0)
Cash generated from operations 6.4 6.6
Notes to the Consolidated Financial Statements continued
56 Notes to the Consolidated Financial Statements continued
57
25. Financial instruments
These notes should be read in conjunction with the narrative disclosures in the Financial Review on page 11.
(a) The balance sheet position on financial instruments at 31 March 2006 is set out below:
£m
Current assets:
Forward foreign currency contracts – cash flow hedge 0.2
Non-current liabilities:
Interest rate swaps (0.1)
These disclosures are made under IAS 32 and IAS 39 which under the transitional arrangements have been applied from 
1 April 2005.
(b) Short-term receivables and payables
The carrying amount of short-term receivables and payables (being those with a remaining life of less than one year) is
deemed to approximate to their fair value.
(c) Interest rate swap
The notional principal amount of the outstanding interest rate swap contracts at 31 March 2006 was $14.4 million and 
£0.5 million (1 April 2005 – $19.4 million and £1.0 million).
At 31 March 2006 the fixed interest rates vary from 8.3% to 11.0% (1 April 2005 – 6.8% to 9.5%) and floating rates are
7.6% (US LIBOR plus 250 basis points) and 7.2% (LIBOR plus 250 basis points).
The loss deferred in equity will reverse in the income statement during the next three years (being the remaining life of the
swap to 31 March 2009).
(d) Hedge of net investment in foreign entity
The Group has dollar denominated borrowings which it has designated as a hedge of the net investment in its subsidiaries
in the USA. The fair value of the dollar borrowings at 31 March 2006 was £5.4 million (1 April 2005 – £4.6 million). A
foreign exchange loss of £0.5 million on translation of the borrowings into sterling is included as a part of the hedging 
reserve movement. 25. Financial instruments continued
(e) Currency and interest rate profile of financial liabilities of the Group
Weighted
Weighted average
average period for
interest which rate Fixed Floating
Currency rate is fixed rate rate Total
% Years £m £m £m
2006
Sterling
– Financial liabilities 11.0 0.5 0.5 14.8 15.3
– Preference shares 6.0 * 0.5 0.5
US Dollar 8.3 1.5 8.8 5.7 14.5
Euro 4.3 2.0 1.7 4.4 6.1
Other 8.1 1.3 0.5 1.6 2.1
12.0 26.5 38.5
2005
Sterling
– Financial liabilities 9.5 1.5 0.9 19.4 20.3
US Dollar 6.8 1.9 10.3 2.9 13.2
Euro 4.6 2.2 2.1 4.5 6.6
Other 8.1 1.6 0.7 0.7 1.4
14.0 27.5 41.5
* Preference shares have no fixed repayment date.
The sterling and US dollar 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.
(f) Currency and interest rate profile of financial assets at 31 March 2006
2006 2005
Cash at Cash at
bank and Short-term bank and Short-term
Currency in hand deposits Total in hand deposits Total
£m £m £m £m £m £m
Sterling 1.6 1.6 5.9 5.9
Euro 5.5 4.8 10.3 2.9 10.4 13.3
Other 5.9 5.9 4.8 0.5 5.3
13.0 4.8 17.8 13.6 10.9 24.5
Cash balances and short-term deposits are held with the Group’s bankers. These deposits are held largely in France and
Germany and earn interest at bank deposit interest rates for periods of up to three months.
Notes to the Consolidated Financial Statements continued
58 Notes to the Consolidated Financial Statements continued
59
25. Financial instruments continued
(g) Maturity of financial liabilities
The maturity profile of the carrying amount of the Group’s financial liabilities, other than short-term payables such as trade
payables and accruals, was as follows:
2006 2005
Total Total
debt debt
£m £m
In one year or less, or on demand 12.3 28.4
In more than one year but not more than two years 21.7 6.8
In more than two years but not more than five years 2.1 6.2
In more than five years 2.4 0.1
38.5 41.5
Debt due in more than five years includes £0.5 million at 31 March 2006 in respect of Renold plc’s preference shares.
(h) Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at the year end date in respect of which all
conditions precedent had been met at that date:
2006 2005
£m £m
Expiring within one year or less, or on demand 17.7 16.5
The facilities expiring in one year or less, or on demand, are primarily annual facilities subject to review at various dates during
the year ending 31 March 2007.
26. Acquisition in the prior period
The Group acquired Sachs Automotive France SAS (“SAF”) on 14 March 2005. Provisional fair values of the assets and liabilities
acquired were established in the financial statements at 31 March 2005. No adjustments have been required to the fair values
previously reported on a provisional basis. 27. Explanation of the transition to International Financial Reporting Standards (IFRS)
Details of the impact of the transition to IFRS have been provided on the Group’s website (www.renold.com) in two separate
statements entitled “Update on IFRS” and “Renold plc IFRS Restatement”. These statements can be found on the “Investors –
Investor Relations” page of the Website, under the “Useful Information” sub-section. However, in order to provide a summary of
the key issues and changes to the financial statements (covered in greater detail in the statements provided on the website), this
note explains the impact of the transition to IFRS.
The Group previously prepared its financial statements under UK Generally Accepted Accounting Principles (“UK GAAP”).
European Law requires that all listed companies prepare consolidated financial statements in accordance with IFRS. The relevant
Regulation applies to all accounting periods beginning on or after 1 January 2005. This determines that the “transition date” for
Renold plc is 4 April 2004, being the start of the earliest period of comparative information.
Guidance on the transition to IFRS is provided in IFRS 1 (“First Time Adoption of IFRS”). This standard allows exemptions from the
application of certain IFRSs to assist in the transition process. The principal exemptions adopted by Renold can be summarised as;
(1) Business combinations prior to the date of transition are not restated. Accordingly, the carrying value of goodwill was not
adjusted at the transition date.
(2) IAS 32 and 39, the international standards on financial instruments, are adopted only with effect from 1 April 2005 and
therefore 2005 comparative information covered by these standards remains stated in accordance with UK GAAP.
(3) Cumulative translation differences for foreign operations that are recognised separately in equity under IFRS are deemed to
be reset to zero at the transition date.
(4) Freehold properties have been measured on a fair value basis at the date of transition and this valuation is treated as the
deemed cost of the respective properties.
(5) The international standard in respect of Share Based Payments (IFRS 2) only applies to awards made after 7 November 2002
and which vest after 1 January 2005.
The tables below provide a high level summary to put into context the relative importance of the main financial adjustments that
arise following the adoption of IFRS. These tables show the change in the comparative period’s income statement, the balance
sheet at the date of transition (4 April 2004), the comparative balance sheet at 31 March 2005 and the opening balance sheet
as adjusted for the adoption of IAS 32 and 39. A cross reference is given where appropriate at the head of each column to the
narrative which sets out the background to the adjustment.
Notes to the Consolidated Financial Statements continued
60 Notes to the Consolidated Financial Statements continued
61
27. Explanation of the transition to International Financial Reporting Standards (IFRS) continued
The effect of the transition to IFRS on the income statement for the year ended 31 March 2005 is as follows:
Negative Share-
UK goodwill Employee based
GAAP released Goodwill Depreciation benefits payments Taxation IFRS
£m £m £m £m £m £m £m £m
(a) (b) (c) (d) (e) (f)
Revenue 197.0 197.0
Operating costs (excluding 
goodwill and exceptional items) (193.3) (0.1) (0.1) (0.1) (193.6)
Operating profit before goodwill 
and exceptional items 3.7 (0.1) (0.1) (0.1) 3.4
Goodwill amortisation and impairment (3.6) 1.0 (2.6)
Exceptional items (4.3) 4.5 0.2
Operating profit (4.2) 4.5 1.0 (0.1) (0.1) (0.1) 1.0
Net financing costs (2.6) (2.6)
Loss before tax (6.8) 4.5 1.0 (0.1) (0.1) (0.1) (1.6)
Tax 1.6 (0.1) 1.5
Loss for the financial period (5.2) 4.5 1.0 (0.1) (0.1) (0.1) (0.1) (0.1)
The effect of the transition to IFRS on the balance sheet at 4 April 2004 is as follows:
Property at Proposed Employee
UK GAAP deemed cost dividends benefits Taxation IFRS
£m £m £m £m £m £m
(c) (g) (d) (f)
Total assets 183.4 15.2 (4.0) 194.6
Total liabilities (125.5) 2.1 (0.5) (0.2) (124.1)
Net assets 57.9 15.2 2.1 (0.5) (4.2) 70.5
Share capital and reserves 51.9 15.2 2.1 (0.5) (4.2) 64.5
Share premium 6.0 6.0
Total equity 57.9 15.2 2.1 (0.5) (4.2) 70.5 27. Explanation of the transition to International Financial Reporting Standards (IFRS) continued
The effect of the transition to IFRS on the balance sheet at 31 March 2005 is as follows:
Property at Employee Share-based
UK GAAP deemed cost Goodwill benefits payments Taxation IFRS
£m £m £m £m £m £m £m
(c) (a)/(b) (d) (e) (f)
Total assets 195.5 15.2 5.5 (4.9) 211.3
Total liabilities (155.2) (1.0) 1.0 (155.2)
Net assets 40.3 15.2 5.5 (1.0) (3.9) 56.1
Share capital and reserves 34.3 15.2 5.5 (1.0) (0.1) (3.9) 50.0
Share premium 6.0 0.1 6.1
Total equity 40.3 15.2 5.5 (1.0) (3.9) 56.1
The effect of adopting IAS 32 and 39 at 1 April 2005 is as follows:
Reclassification
of preference Adjustment
IFRS shares net of Recognition to trade IFRS
(Pre IAS 32 fair value Deferred of financial receivable (Post IAS 32
and 39) adjustment tax instruments provisions and 39)
£m £m £m £m £m £m
(i) (i) (i) (i)
Total assets 211.3 0.1 0.1 211.5
Total liabilities (155.2) (0.5) (0.5) (156.2)
Net assets 56.1 (0.5) 0.1 (0.5) 0.1 55.3
Share capital and reserves 50.0 (0.5) 0.1 (0.5) 0.1 49.2
Share premium 6.1 6.1
Total equity 56.1 (0.5) 0.1 (0.5) 0.1 55.3
(a) Following an acquisition in March 2005 the UK GAAP balance sheet retained an amount of £4.5 million in respect of the
surplus of fair value of assets acquired over the consideration paid (“negative goodwill”). Following a review of the
acquisition accounting for the purposes of IFRS adoption it was concluded that no revision was necessary to the existing
amount £4.5 million. However, IFRS requires the immediate recognition in the income statement of negative goodwill arising
on acquisition, and hence this amount has been transferred to income for the period.
(b) Under UK GAAP capitalised goodwill was amortised over its estimated economic life, subject to the immediate recognition
of any identified impairment. Under IFRS goodwill is not subject to amortisation but is tested annually for impairment. In
the year to 31 March 2005 an impairment charge of £2.4 million was made in the UK GAAP financial statements. Therefore,
as illustrated in the table, the adoption of IFRS has given rise to an improvement in the reported result of £1.0 million,
representing the net reversal of amortisation charges made under the former UK GAAP policy.
(c) The revaluation of the Group’s freehold properties noted above resulted in an increase in the deemed cost of £15.2 million
over the carrying value retained under UK GAAP. The associated impact on the annual depreciation charge is an increase of 
£0.1 million.
Notes to the Consolidated Financial Statements continued
62 Notes to the Consolidated Financial Statements continued
63
27. Explanation of the transition to International Financial Reporting Standards (IFRS) continued
(d) In the UK GAAP financial statements for 2005 Renold accounted for pensions in accordance with FRS 17 (“Retirement
Benefits”) which in most respects is similar to the respective international standard IAS 19 (“Employee Benefits”). However,
a number of technical differences have given rise to revisions in the former FRS 17 disclosure. IAS 19 also introduces more
prescriptive guidance on the treatment of other employee benefits. The total impact of adopting IAS 19 has increased the
charge to income by £0.1 million. The recognition of certain Jubilee and other potential service related awards, together with
the revisions to FRS 17, resulted in additional liabilities of £0.5 million at 4 April 2004 and £1.0 million at 31 March 2005.
(e) In respect of share options granted by the Company no charge to income was required under UK GAAP because the exercise
price was the same as the option price at the date of grant. Following the adoption of IFRS it was necessary to recognise a
charge of £0.1 million due to the requirement to adopt a fair value assessment of the options granted.
(f) The net effect of IFRS adjustments on the taxation charge for the year was £0.1 million. The primary change to the balance
sheet deferred tax provision results from additional liabilities recognised in respect of the property revaluation noted under
(c) above.
(g) Under UK GAAP the final dividend for the 31 March 2004 year was provided in the results for that year; under IFRS the final
dividend can only be recognised as a liability in the year it is declared. Consequently the 2004 final dividend provision has
been reversed. (No final dividend was declared in 2005).
(h) Not shown in the tables above, because there is no impact on net assets, is the reclassification from property, plant and
equipment to intangible assets of software that is not an integral part of the related hardware. The reclassifications were
£0.4 million and £0.3 million in the 4 April 2004 and 31 March 2005 balance sheets respectively.
(i) As permitted under IFRS 1 the Group has adopted IAS 32 and 39 prospectively from 1 April 2005. These standards set out
the accounting rules surrounding the recognition, measurement, disclosure and presentation of financial instruments. As a
result of adopting these standards net assets were reduced by £0.8 million on 1 April 2005. There were three principal areas
explaining this change. Firstly, preference shares (£0.5 million stated at fair value) were formerly shown as part of
Shareholders’ Funds but under IFRS definitions these have been reclassified and disclosed as liabilities. Secondly, derivative
financial instruments (£0.3 million) have been recognised as assets and liabilities measured at fair value. This adjustment
results mainly from the interest rate swap taken out by the Group in relation to its US dollar borrowing costs. Net assets
were increased by £0.1 million following the reassessment of trade receivable provisions on a basis consistent with the
criteria established by IAS 39. A deferred tax asset of £0.1 million was recognised as a result of these changes.
As indicated at the time of publishing the detailed transitional statements, accounting practice surrounding IFRS is continuing to
evolve. In response to developing practice it has been deemed appropriate to reflect certain minor revisions of a presentational
nature. These changes have not altered the post-transition net equity previously reported at 4 April 2004 or 31 March 2005.
The adoption of IFRS has no impact on the actual cash flows of the underlying businesses. However, IAS 7 (“Cash Flow
Statements”) introduces revised definitions that in turn lead to a revised presentation. The change in presentation is illustrated in
the IFRS statements on the Group’s website. Prepared under IFRS Prepared under UK GAAP
2006 2005 2004 2003 2002
£m £m £m £m £m
Group revenue 225.1 197.0 192.1 187.4 190.2
Less discontinued operations (70.1) (53.8)
Revenue from continuing operations 155.0 143.2 192.1 187.4 190.2
Operating profit before exceptional items (and 
goodwill amortisation under UK GAAP) – continuing 6.8 4.6 7.6 9.2 7.8
Operating profit 5.4 0.4 8.6 6.8 2.4
Profit/(loss) before tax 1.8 (1.8) 4.7 4.2 (5.6)
Taxation (1.5) 1.5 (1.7) 0.6
0.3 (0.3) 4.7 2.5 (5.0)
Discontinued operations:
(Loss)/profit from discontinued operations (13.9) 0.2
(Loss)/profit for the year (13.6) (0.1) 4.7 2.5 (5.0)
Net assets employed
Property, plant and equipment, plus intangible software 38.4 64.7 47.0 50.0 54.6
Working capital and other net assets 30.7 43.0 41.2 38.8 42.7
Operating assets 69.1 107.7 88.2 88.8 97.3
Assets of discontinued operations 37.1
Liabilities of discontinued operations (28.1)
Properties held for sale 3.4 2.3
Goodwill 17.1 15.7 18.8 22.6 26.2
Net debt (20.7) (17.0) (19.2) (20.9) (29.1)
Dividends (2.1) (2.1) (2.1)
Deferred and current taxation 17.0 14.6 12.8 2.3 2.8
Provisions (0.4) (11.7) (1.2) (10.9) (12.6)
Net assets excluding pension obligations 94.5 109.3 97.3 82.1 82.5
Pension obligations (53.9) (53.2) (39.4)
Total net assets 40.6 56.1 57.9 82.1 82.5
Other data and ratios
Operating return on average operating assets %
1
7.7 4.7 8.6 9.9 7.6
Operating profit on turnover %
1
4.4 3.2 4.0 4.9 4.1
Capital expenditure £m 6.6 7.6 7.2 5.7 5.4
Basic (loss)/earnings per share p (19.6) (0.1) 6.8 3.5 (7.2)
Dividends per ordinary share p 4.5 4.5 4.5 4.5
Employees at year end (continuing) 2,008 2,015 2,656 2,686 2,780
1
Based on operating profit before exceptional items (and goodwill amortisation under UK GAAP).
Figures presented for 2004 under UK GAAP include pension liabilities and associated deferred tax assets assessed in accordance with
FRS 17 “Retirement Benefits”. Years prior to 2004 have not been adjusted.
Had IFRS been adopted in 2002 to 2004 the main adjustments to the UK GAAP figures as presented above would have been in respect
of pension obligations, the revaluation of freehold properties and goodwill.
Group Five Year Financial Review
64 Principal Subsidiary Companies
as at 31 March 2006
65
UNITED KINGDOM
Renold Power Transmission Limited* FACTORIES: BREDBURY , BURTON, CARDIFF, HALIFAX, LEICESTER, MILNROW 
Renold International Holdings Limited*
REST OF EUROPE
Austria Renold GmbH 
Belgium Renold Continental Limited (incorporated in the United Kingdom)
Denmark Renold A/S
France Brampton Renold SA FACTORIES: CALAIS, LILLE
– Renold SAF SAS: ST SIMEON DE BRESSIEUX
Jones & Shipman SARL
Germany Renold (Deutschland) GmbH
– Arnold & Stolzenberg GmbH FACTORY: EINBECK
– Renold Automotive Systems Germany GmbH
Holland Renold Continental Limited (incorporated in the United Kingdom)
Poland Renold Polska sp.z o.o.
Sweden Renold Transmission AB
Switzerland Renold (Switzerland) GmbH
NORTH AMERICA
Canada Renold Canada Limited
USA Renold Holdings Inc
– Renold Inc FACTORY: WESTFIELD, NY
– Renold Automotive Systems, LLC
– Jeffrey Chain Acquisition Company Inc
– Jeffrey Chain Corporation
– Jeffrey Chain LP FACTORY: MORRISTOWN, TN
OTHER COUNTRIES
Australia Renold Australia Proprietary Limited FACTORY: MELBOURNE
China Renold Transmission (Shanghai) Company Limited
Malaysia Renold (Malaysia) Sdn Bhd
New Zealand Renold New Zealand Limited FACTORY: AUCKLAND
Singapore Renold Transmission 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 subsidiaries of Renold plc, the parent company ultimately holding a 100% interest in the equity
shares and voting rights. 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. To the members of Renold plc
We have audited the Parent Company financial statements of
Renold plc for the year ended 31 March 2006 which comprise
the balance sheet, and the related notes. These Parent Company
financial statements have been prepared under the accounting
policies set out therein. We have also audited the information in
the Directors’ Remuneration Report that is described as having
been audited.
We have reported separately on the Group financial statements
of Renold plc for the year ended 31 March 2006.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report,
including the Directors’ Remuneration Report and the Parent
Company financial statements in accordance with applicable
law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice) are set out in
the Statement of Directors’ Responsibilities.
Our responsibility is to audit the Parent Company financial
statements and the part of the Directors’ Remuneration Report
to be audited in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and
Ireland). This report, including the opinion, has been prepared
for and only for the Company’s members as a body in
accordance with Section 235 of the Companies Act 1985 and
for no other purpose. We do not, in giving this opinion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands 
it may come save where expressly agreed by our prior consent
in writing.
We report to you our opinion as to whether the Parent
Company financial statements give a true and fair view and
whether the Parent Company financial statements and the 
part of the Directors' Remuneration Report to be audited have
been properly prepared in accordance with the Companies 
Act 1985. We report to you whether in our opinion the
information given in the Report of the Directors is consistent
with the Parent Company financial statements. We also report
to you if, in our opinion, 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 regarding directors' remuneration and other
transactions is not disclosed.
We read other information contained in the Annual Report 
and consider whether it is consistent with the audited Parent
Company financial statements. The other information comprises
only the unaudited part of the Directors’ Remuneration Report,
the Chairman’s Statement, the Chief Executive’s Review, the
Financial Review, the Operations Review and the Corporate
Governance Statement. We consider the implications for our
report if we become aware of any apparent misstatements 
or material inconsistencies with the Parent Company 
financial statements. Our responsibilities do not extend to any
other information.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the
Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited. It also includes
an assessment of the significant estimates and judgements
made by the directors in the preparation of the Parent Company
financial statements, and of whether the accounting policies are
appropriate to the Company’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 Parent Company financial statements and
the part of the Directors’ Remuneration Report to be audited
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 Parent Company financial statements and the
part of the Directors’ Remuneration Report to be audited.
Opinion
In our opinion:
● the Parent Company financial statements give a true and
fair view, in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the
Company’s affairs at 31 March 2006;
● the Parent Company financial statements and the part 
of the Directors’ Remuneration Report to be audited have
been properly prepared in accordance with the Companies
Act 1985; and
● the information given in the Report of the Directors is
consistent with the Parent Company financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
101 Barbirolli Square
Manchester M2 3PW
19 July 2006
Report of the Independent Auditors
66 Accounting Policies – Company
67
A summary of the principal Company accounting policies is set
out below. These have been applied on a consistent basis unless
otherwise indicated.
In the year the Company has adopted FRS 20 “Share-based
payment”, FRS 21 “Events after the balance sheet date”, FRS 23
“The effects of changes in foreign exchange rates”, FRS 25
“Financial instruments: disclosure and presentation”, FRS 26
“Financial instruments: measurement”, and FRS 28
“Corresponding amounts”. With the exception of the adoption
of FRS 25 and FRS 26, where specific transitional provisions of
those standards have been applied, the changes in accounting
policy have been accounted for as a prior period adjustment,
and the Company balance sheet as at 31 March 2005 has been
restated as detailed in Note (xi).
As permitted by Section 230 of the Companies Act 1985 
the Parent Company has not presented its own profit and 
loss account.
Basis of accounting – The financial statements have been
prepared in compliance with the Companies Act 1985 and in 
accordance with UK Generally Accepted Accounting Principles
(UK GAAP). They have been prepared under the historical 
cost convention.
Foreign currencies – Foreign currency transactions are
translated into the functional currency using the exchange rates
prevailing at the date of the transaction. Foreign exchange
gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies, are recognised in the income statement.
Financial instruments and risk management – The
Company adopted FRS 25 and FRS 26 with effect from 1 April
2005. In accordance with the transitional provisions of those
standards, the comparative information for 2005 has not been
restated. The accounting policies of the Company for 2005 and
2006 in respect of financial instruments are consistent with
those of the Group, and are detailed in the consolidated
financial statements. In accordance with paragraph 3(c) of 
FRS 25, the Company is exempt from the disclosure
requirements of paragraphs 51 to 95 of FRS 25. The Company’s
financial instruments are consolidated with those of the Group
and are incorporated into the disclosures in note 25.
Tangible fixed assets represented by properties and
equipment are stated at cost, being purchase cost plus any
incidental costs of acquisition, less accumulated depreciation.
The book values of certain assets which were the subject of past
revaluations have been retained as permitted by the transitional
arrangements of FRS 15 “Tangible Fixed Assets”. Depreciation is
calculated by reference to original cost at fixed percentages
Leasehold properties – the period of the lease
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
Where appropriate, adjustments are made to the remaining
effective useful lives of assets to reflect changes in
circumstances to those envisaged when the asset was brought
into use.
Leases – Annual rentals in respect of operating leases are
charged against the profit of the year in which they 
are incurred.
Investments – Shares in subsidiary companies are stated at
their net asset value at the end of the year. This basis has been
adopted because it is considered that it more fairly represents
the value of the investment to Renold plc.
Deferred tax is recognised on all timing differences that have
originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more,
or a right to pay less, tax in the future have occurred at the
balance sheet date, with the following exceptions:
● Provision is not made for tax that would arise on the
remittance of retained earnings of overseas subsidiaries
unless the dividends have been accrued as receivable at the
balance sheet date.
● Deferred tax assets are recognised only to the extent that,
based on all available evidence, it is considered more likely
than not that there will be suitable taxable profits from
which the future reversal of the underlying timing
differences can be deducted.
assuming effective useful lives as follows: Deferred tax is measured on a non-discounted basis at the tax
rates that are expected to apply in the periods in which the
timing differences are expected to reverse, based on tax rates
and laws enacted or substantively enacted by the balance 
sheet date.
Pension costs – Employees of the Company participate in the
pension schemes operated by the Renold plc Group in the UK.
These include pension schemes of the defined benefit and
defined contribution types. However, the contributions paid by
the Company are accounted for as defined contribution
schemes in all cases. This is because the Company is unable to
identify its share of the underlying assets and liabilities in the
respective schemes, as required by Financial Reporting Standard
17 (Retirement Benefits). Therefore, contributions paid to the
respective pension schemes are charged to the profit and loss
account as incurred. Disclosures associated with the Renold
Group defined benefit schemes are provided in the Renold plc
Group financial statements.
Share-based compensation – The Company operates 
equity-settled share-based compensation plans as detailed in
the Group financial statements. The fair value of Company
employee services received in exchange for the grant of the
options is recognised as an expense in the income statement,
with the corresponding amount being recognised in equity. The
total amount to be expensed over the vesting period is
determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting
conditions, using a Black-Scholes pricing model. Non-market
vesting conditions are included in assumptions about the
number of options that are expected to become exercisable. At
each balance sheet date, an update is made of the estimates of
the number of options that are expected to become exercisable.
The impact of the revision of original estimates, if any, is
recognised in the income statement, and a corresponding
adjustment made to equity over the remaining vesting period.
As permitted under the transitional provisions of FRS 20, the
Company has applied the standard only to equity-settled
awards granted after 7 November 2002 and which vested after 
1 January 2005.
Dividends – Final dividend distributions to the Company’s
shareholders are recognised as a liability in the financial
statements in the period in which the dividends are approved by
the Company’s shareholders, while interim dividend
distributions are recognised in the period in which the dividends
are declared and paid. Dividends receivable from subsidiary
undertakings are similarly recognised on this basis.
Cash flow statement – As permitted by Financial Reporting
Standard 1 (Cash Flow Statements (revised 1996)), the financial
statements do not contain a cash flow statement as the
financial statements of the Group, which are publicly available,
contain a cash flow statement.
Related party transactions – The Company has taken
advantage of the exemption not to disclose related party
transactions with other members of the Group under Financial
Reporting Standard 8 (Related Party Disclosures) as these
transactions are fully eliminated on consolidation.
Accounting Policies – Company continued
68 Company Balance Sheet
69
Note 2006 2005
£m £m
Fixed assets
Tangible assets i 0.2 0.2
Investments in subsidiary undertakings ii 55.7 93.4
55.9 93.6
Current assets
Debtors iii 2.0 1.4
Cash and short-term deposits 21.9 0.1
23.9 1.5
Creditors – amounts falling due within one year
Creditors iv (2.1) (1.7)
Bank borrowings v (2.5) (19.2)
Net current assets/(liabilities) 19.3 (19.4)
Total assets less current liabilities 75.2 74.2
Creditors – amounts falling due after more than one year
Bank borrowings v (20.8) (11.0)
Preference shares v (0.5)
Derivative financial instruments vi (0.1)
Net assets 53.8 63.2
Capital and reserves
Called up share capital viii 17.4 17.9
Share premium ix 6.0 6.0
Profit and loss account ix 30.4 39.3
Shareholders’ funds 53.8 63.2
Approved by the Board on 19 July 2006 and signed on its behalf by:
Roger Leverton Robert Davies
Director Director
The balance sheet should be read in conjunction with the notes on pages 70 to 74.
as at 31 March 2006 (i) Tangible assets
Properties Equipment Total
£m £m £m
Cost
At beginning of year 0.1 0.8 0.9
Additions at cost 0.1 0.1
At end of year 0.1 0.9 1.0
Depreciation
At beginning of year 0.7 0.7
Depreciation for the year 0.1 0.1
At end of year 0.8 0.8
Net book value at end of year 0.1 0.1 0.2
Net book value at beginning of year 0.1 0.1 0.2
(ii) Investments in subsidiary undertakings
Shares Advances Total
£m £m £m
Subsidiary companies
Cost or valuation
At beginning of year 35.3 58.1 93.4
Net advances/(repayments) (25.6) (25.6)
Deficit on revaluation (12.1) (12.1)
At end of year 23.2 32.5 55.7
The principal subsidiary companies of Renold plc at 31 March 2006 are set out on page 65.
(iii) Debtors
2006 2005
£m £m
Amounts owed by Group undertakings 1.5 1.0
Deferred tax asset 0.3 0.1
Other debtors 0.1 0.2
Prepayments and accrued income 0.1 0.1
2.0 1.4
(iv) Creditors
2006 2005
£m £m
Amounts falling due within one year:
Trade creditors 0.5 0.7
Amounts owed by Group undertakings 0.1
Other taxation and social security 0.3 0.3
Other creditors 0.9 0.3
Accruals 0.3 0.4
2.1 1.7
Notes to the Company Financial Statements
70 Notes to the Company Financial Statements continued
71
(v) Borrowings
2006 2005
£m £m
Amounts falling due within one year:
Bank loans 2.5 19.2
Amounts falling due after one year:
Bank loans 20.8 11.0
Repayable:
In more than one year but not more than two years 20.8 6.0
In more than two years but not more than five years 5.0
20.8 11.0
Total bank loans 23.3 30.2
Preference shares 0.5
Total borrowings 23.8 30.2
Bank borrowings are secured by fixed and floating charges over the assets of UK subsidiaries.
All payments of dividends on the 6% cumulative preference shares have been paid on the due dates. The preference shares have
the following rights:
(i) a fixed cumulative preferential dividend at the rate of 6% per annum payable half yearly on 1 January and 1 July in each year;
(ii) 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;
(iii) 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 arrears for six calendar months;
(iv) there is no redemption entitlement.
(vi) Derivative financial instrument
2006
£m
Interest rate swap contract 0.1
Upon adoption of FRS 25 and FRS 26 on 1 April 2005, the above contract was recognised at its fair value of £0.4 million and
recorded as a financial liability (Note xi). The fair value movement in the period of £0.3 million has been taken to profit and loss
account for the year.
(vii) Pensions
Employees of Renold plc include members of the principal UK defined benefit schemes. However, the contributions paid by the
Company are accounted for as a defined contribution scheme, as the Company is unable to identify its share of the underlying
assets and liabilities in the respective schemes. As a consequence, the deficit in the UK defined benefit schemes is only recognised
as a liability in the Group Balance Sheet. (viii)Called up share capital
Authorised Issued
2006 2005 2006 2005
£m £m £m £m
Equity interests
Ordinary shares of 25p each 23.1 23.1 17.4 17.3
Non-equity interests
6% Cumulative Preference Shares (£1 units) 0.6 0.6
23.7 17.9
Following the adoption of FRS 25 and FRS 26 on 1 April 2005, the preference shares have been reclassified from that date and
are recorded as a component of borrowings (Note v). In addition, in accordance with FRS 26, the preference shares were assessed
on a fair value basis at an amount of £0.5 million, resulting in an adjustment to the carrying amount of £0.1 million (Note xi).
At 31 March 2005 the issued Ordinary Share Capital comprised 69,429,220 (2005 – 69,335,410) Ordinary shares of 25p each.
During the year the Company issued 93,810 ordinary shares of 25p each for a cash consideration of £51,671 by the exercise of
options under the Renold Savings Related Share Option Scheme.
Share options have been granted under the Executive Share Option Schemes and the Savings Related Share Option Schemes. 
At 31 March 2006 unexercised options for ordinary shares amounted to 3,591,299 (2005 – 3,326,272) made up as follows:
Option price Number of Number of 
(pence per shares shares
share) 2006 2005
Date normally exercisable
Executive Share Option Schemes
Within seven years from:
16 July 1999 (1995 Scheme) 293.83 52,307 56,636
18 July 2000 (1995 Scheme) 242.67 19,042 19,042
17 July 2001 (1995 Scheme) 237.33 145,000 175,000
16 July 2002 (1995 Scheme) 137.83 155,000 195,000
19 July 2003 (1995 Scheme) 118.50 97,500 125,000
22 December 2003 (1995 Scheme) 94.50 10,000 20,000
18 June 2004 (1995 Scheme) 102.00 125,000
28 November 2004 (1995 Scheme) 67.34 297,000 474,000
27 November 2005 (1995 Scheme) 58.50 381,000 404,000
28 July 2006 (1995 Scheme) 80.84 50,000 50,000
27 November 2006 (1995 Scheme) 83.50 245,000 275,000
11 March 2007 (1995 Scheme) 76.50 125,000 125,000
2 September 2007 (2004 Scheme) 88.00 475,000 475,000
22 November 2007 (2004 Scheme) 74.30 135,000 135,000
2,186,849 2,653,678
Savings Related Share Option Schemes
Within six months from:
1 February 2005 (1995 Scheme) 89.36 122,324
1 February 2006 (1995 Scheme) 55.08 238,473 359,094
1 February 2008 (1995 Scheme) 55.08 167,919 191,176
1 March 2009 (2004 Scheme) 54.30 998,058
1,404,450 672,594
Further details of share-based payment schemes operated by the Company are provided in the Remuneration Report and 
note 20 of the consolidated financial statements.
Notes to the Company Financial Statements continued
72 Notes to the Company Financial Statements continued
73
(ix) Reserves
Profit
and loss Share Total
account premium reserves
£m £m £m
At beginning of year as previously reported 41.0 6.0 47.0
Prior year adjustment (Note xi) (1.7) (1.7)
At beginning of year as restated 39.3 6.0 45.3
Adoption of FRS 26 (Note xi) (0.2) (0.2)
At 1 April 2005 as restated 39.1 6.0 45.1
Loss for the year (8.8) (8.8)
Employee share option schemes – value of employee services 0.1 0.1
At end of year 30.4 6.0 36.4
As permitted by Section 230 of the Companies Act 1985, no profit and loss account is presented in these financial statements.
The Company’s loss for the financial year was £8.8 million (2005 as restated – loss £1.0 million).
(x) Contingent liabilities
The Company has guaranteed borrowings by subsidiary undertakings of £6.0 million (2005 – £3.2 million). Performance
guarantees given to third parties in respect of Group Companies were £0.2 million (2005 – £1.2 million). (xi) Restatement of prior year amounts
The Company’s balance sheet for 2005 has been restated to reflect the impact of Financial Reporting Standards adopted for the
first time in the year. The financial impact of this restatement on the balance sheet at 31 March 2005 and, as a consequence of
FRS 25 and FRS 26, the balance sheet at 1 April 2005 is set out below:
FRS 25 and 26
FRS 21 Preference
31 March events after 31 March shares 1 April
2005 balance 2005 Associated reclassification 2005
as sheet as Financial deferred at fair as
reported date restated derivatives tax value restated
£m £m £m £m £m £m £m
Tangible fixed assets 0.2 0.2 0.2
Investments 93.4 93.4 93.4
Current assets
Debtors 3.1 (1.7) 1.4 0.1 1.5
Cash and deposits 0.1 0.1 0.1
3.2 (1.7) 1.5 0.1 1.6
Creditors – amounts falling 
due within one year (20.9) (20.9) (20.9)
Net current assets (17.7) (1.7) (19.4) 0.1 (19.3)
Total assets less current liabilities 75.9 (1.7) 74.2 0.1 74.3
Creditors – amounts falling 
due after more than one year (11.0) (11.0) (0.4) (0.5) (11.9)
Net assets 64.9 (1.7) 63.2 (0.4) 0.1 (0.5) 62.4
Called up share capital 17.9 17.9 (0.6) 17.3
Share premium 6.0 6.0 6.0
Profit and loss account 41.0 (1.7) 39.3 (0.4) 0.1 0.1 39.1
Equity shareholders’ funds 64.9 (1.7) 63.2 (0.4) 0.1 (0.5) 62.4
FRS 21 requires that dividends declared and approved after the balance sheet date should not be recognised as an asset/liability
in the manner they were under former UK practice. Instead dividends are recognised in the period in which they are declared and
approved. The change in accounting policy resulted in a decrease in shareholders’ funds of £1.7 million, being the derecognition
of final dividends formerly treated as receivable from subsidiary undertakings. The same dividend is now recorded as income
received in the year to 31 March 2006.
FRS 20 (Share-based payment) has been adopted but the net adjustment has no effect on shareholders’ funds as at 
31 March 2005.
With effect from 1 April 2005, under the transitional provisions, the Company’s interest rate swap contract, held in respect 
of US dollar borrowings, has been recognised at its fair value of £0.4 million, together with an associated deferred tax asset of
£0.1 million. In addition, the Company’s preference shares (£0.6 million) have been reclassified from forming a part of the
Company’s equity to forming a component of debt. At the point of transfer the shares were assessed on a fair value basis at 
£0.5 million, the adjustment of £0.1 million being taken to profit and loss reserves.
Notes to the Company Financial Statements continued
74 Notice of Annual General Meeting
75
Notice is hereby given that the seventy-sixth Annual General Meeting of Renold plc (the “Company”) will be held at Renold House,
Styal Road, Wythenshawe, Manchester M22 5WL on Tuesday 19 September 2006 at 11.30 am for the following purposes:
As Ordinary Business
1. To receive and adopt the accounts for the year ended 31 March 2006, together with the Reports of the Directors and of the
Auditors.
2. To re-elect Mr R J Davies as a director.
3. To re-elect Mr M A Smith as a director.
4. To elect Peter Edward Bream as a director.
5. To re-appoint PricewaterhouseCoopers LLP as auditors of the Company, 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.
6. To approve the Directors’ Remuneration Report for the year ended 31 March 2006.
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, 9, 10 and 11 as Special Resolutions:-
7. THAT, subject to and in accordance with Article 15 of the Articles of Association of the Company, the directors be generally and
unconditionally authorised in accordance with section 80 of the Companies Act 1985 (the “Act”) (in substitution for any existing
authority to allot relevant securities) to exercise all the powers of the Company to allot relevant securities (within the meaning of
section 80 of the Act 1985) up to a maximum nominal amount of £5,785,768 (being approximately one third of the current
issued share capital) provided that such authority shall expire on 18 December 2007, but so 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 by this resolution had
not expired.
8. THAT subject to the passing of the Ordinary Resolution numbered 7 above, and in accordance with Article 16 of the Articles
of Association of the Company, the directors be empowered pursuant to Section 95 of the Act to allot equity securities
(within the meaning of Section 94 of the Act) for cash pursuant to the authority conferred by the said Ordinary Resolution,
as if sub-section (1) of Section 89 of the Act did not apply to any such allotment provided that this power shall be limited to
allotments of equity securities:
(a) in connection with or pursuant to an offer by way of rights, open offer or other pre-emptive offer to the holders of shares
in the Company 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 any territory or the regulations or requirements of
any regulatory authority or any stock exchange in any territory;
(b) under the Renold plc 2004 Performance Share Plan, the Renold plc 2004 Deferred Annual Bonus Scheme, the Renold plc
Inland Revenue Approved Company Share Option Plan, the Renold plc 2004 Non Inland Revenue Approved Company Share
Option Plan, the Renold plc 2004 Inland Revenue Approved SAYE Share Option Scheme; and
(c) the allotment of equity securities (otherwise than pursuant to paragraphs (a) and (b) above) up to an aggregate nominal
amount of £867,865 (being equal to 5% of the aggregate nominal amount of the Company’s ordinary share capital currently
in issue at the date of passing this resolution) and such power shall expire on 18 December 2007 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. Notice of Annual General Meeting continued
9. To amend article 130.8 of the Articles of Association of the Company by the deletion of the current article 130.8 and the insertion
of the following new wording in its place:
“130.8 the Company’s “Adjusted Capital and Reserves” will be established by the following calculations:
Add:-
(i) the amount paid up on the Company’s issued share capital (including any shares held as treasury shares); and
(ii) the amount standing to the credit of the reserves of the Company (which include any share premium account, capital
redemption reserve and any credit balance on the Company’s profit and loss account or retained earnings),
using the figures shown on the then latest audited balance sheet.
Then:-
(iii) deduct any debit balances on profit and loss account or retained earnings at the date of the audited balance sheet (if
such a deduction has not already been made on that account);
(iv) make any adjustments needed to reflect any changes since the date of the balance sheet to the amount of paid up share
capital or reserves; and
(v) exclude the effect on the reserves of the company of any retirement benefit scheme surplus or deficit (net of applicable
deferred taxation) which would otherwise be reflected in accordance with any applicable accounting standards.”
(Notes: Articles 127 - 130 of the Articles of Association of the Company set a limit on the borrowing powers of the
Company, which is calculated based on a multiple of one and a half times the adjusted capital and reserves. The
introduction of International Accounting Standards (“IAS”) may result in greater volatility in the annual results of listed
companies and, in particular, IAS 19 relating to pension scheme assets and liabilities, which may cause a company to
breach the borrowing restrictions set out in its articles. The current article 130.8 is to be replaced in order to exclude
any effect of applicable accounting standards (including IAS 19) relating to the assets and liabilities of any pension
scheme in so far as they would effect the calculation of the reserves of the Company).   
10. To amend articles 186.1, 186.2 and 186.3 of the Articles of Association of the Company by the deletion of the current articles
186.1, 186.2 and 186.3 and the insertion of the following new wording in their place:
“186.1 Subject to the provisions of, and so far as may be permitted by, the Statutes but without prejudice to any indemnity to
which the person concerned may be otherwise entitled, the Company may indemnify every director, alternate director,
auditor, secretary or other officer of the Company against all costs, charges, losses, expenses and liabilities incurred by
him in the execution and discharge of his duties or the exercise of his powers or otherwise in relation to or in connection
with his duties, powers or office, including any liability which may attach to him in respect of any negligence, default,
breach of duty or breach of trust in relation to anything done or omitted to be done or alleged to have been done or
omitted to be done by him as a director, alternate director, auditor, secretary or other officer of the Company.
76 Notice of Annual General Meeting continued
77
186.2 Subject to the provisions of, and so far as may be permitted by, the Statutes, the Company shall be entitled to fund the
expenditure of every director, alternate director or other officer of the Company incurred or to be incurred:
186.2.1 in defending any criminal or civil proceedings; or
186.2.2 in connection with any application under sections 144(3), 144(4) or 727 of Act.”
(Notes: The current articles relating to directors’ indemnification are to be amended to allow the company to permit funding of
directors defence proceedings and broaden the scope of directors indemnities in line with the Companies (Audit, Investigations
and Community Enterprise) Act 2004).
11. To amend articles:
2.2 by the insertion of a new definition of “electronic communication” in the following terms “has the same meaning as
that given to it in section 15 of the Electronic Communications Act 2000”
2.2 by the insertion at the end of the definition of “in writing” of the words “including (to the extent permitted by law) sent
by electronic communication”
6 60 by the insertion after the words “…. such notice or form of proxy by any person entitled thereto …. “ of the words
“(including in both cases where given by electronic communication)” and the insertion of new articles 60.2 and 60.3 in
the following terms:
“60.2 For the purposes of Article 60.1 (and for the avoidance of doubt):
60.2.1 notice in writing is to include any case in which notice of the meeting is sent by electronic communication to
the address notified by any of the persons referred to in Article 60.1 as being entitled to receive such notice;
60.2.2 a notice in writing of a meeting is also to be treated as given to a person entitled to receive such notice
where:
60.2.2(a) the Company and that person have agreed that notices of meetings may instead be accessed by him 
on a website;
60.2.2(b) the meeting is a meeting to which the agreement in Article 60.2.2(a) applies;
60.2.2(c) the person is notified in the manner agreed by him and the Company of the publication of the notice on 
a website, the address of that website and the place on that website where the notice may be accessed and
how it may be accessed; and
60.2.2(d) the notice continues to be published on that website throughout the period beginning with the giving 
of that notification and ending with the conclusion of the meeting.
60.3 A notice which is treated as given to a person by virtue of Article 60.2 is treated as given at the same time
as the notification referred to in Article 60.2.2(c)”
79 by the insertion of a new article 79.2 in the following terms:
“79.2 If the Directors in their discretion decide, a proxy appointment may be sent by electronic communication”
80.1 by the insertion after the words “An instrument” of the words “that is not being sent by electronic communication” 80.1.2 by the insertion after the words “…. pursuant to Article 80.1.1 ….” of the words “or 80.2” and by the insertion 
of a new Article 80.2 (with all subsequent Articles being renumbered accordingly) in the following terms:
“80.2 A proxy appointment which is being sent by electronic communication must be received at an address
specified by the Company for the purpose of receiving such communications:
80.2.1 in (or by way of a note to) the notice convening the meeting; or
80.2.2 in any form of proxy appointment sent out by the Company; or
80.2.3 in any invitation contained in an electronic communication to appoint a proxy issued by the Company;
in each case not less than 48 hours before the time of the meeting or adjourned meeting at which the person named
in the proxy form proposes to vote.”
82 by the insertion after the words “…. An instrument ….” of the words “, including one sent by electronic communication”
171 by the renumbering of Article 171 as “Article 171.1”, the replacement after the words “…. by the Company either
personally ….” of the word “or” by a “,” and the insertion after the words “…. for the service of notices or documents
…. “ of the words “or by electronic communication”.
171 by the insertion of a new Article 171.2 in the following terms:
“171.2 Any notice or document sent by electronic communication shall be deemed to be served on the day of
transmission.  Proof that a notice or other document sent by electronic communication was sent in accordance
with guidance issued by the Institute of Chartered Secretaries and Administrators shall be conclusive evidence
that notice was given.”
173 by the insertion after the words “…. of any member in pursuance of these Articles ….” of the words “or by electronic
mail or electronic communication”
174 by the insertion after the words “…. within the United Kingdom for service of Notices …. “ of the words “or an address
to which notices may be sent using electronic communication”
180 by the renumbering of Article 180 as “Article 180.1” and the insertion a new Article 180.2 in the following terms:
“180.2 the provisions of this Article 180 shall apply to any address, number or location supplied by a member for the
purposes of electronic communication”
189 by the insertion of a new article 189 in the following terms:
“189 Electronic Communication
189.1 Where these Articles require the Company to send, circulate or despatch notices or documents to its members,
the Company shall be deemed to have complied with that requirement in relation to any member if either:
189.1.1 the Company and the member have agreed to use electronic communication to send such notices 
or documents; and
189.1.2 the notices or documents are notices or documents to which the agreement applies; and
189.1.3 copies of the notices or documents are sent by electronic communication to the address, number or other
location notified by the member to the Company for that purpose; or
189.1.4 the Company and the member have agreed to the member having access to notices or documents 
on a website, and:
Notice of Annual General Meeting continued
78 189.1.5 the notices or documents are notices or documents to which the agreement applies; and
189.1.6 the member is notified of the publication of the notices or documents on the website, the address of the
website, the place on the website where the notices or documents can be accessed and how they can be
accessed, and the period of time for which the notices or documents will be available on the website.
189.2 The period of time referred to in Article 189.1.6 must not be less than 21 days from the date of notification
or, if later, until the conclusion of any general meeting to  which the notices or documents relate.
189.3 If the notices or documents are published on the website for a part only of the period of time referred to in
Article 189.1.6, they will be treated as being published throughout the period if the failure to publish
throughout that period is wholly attributable to circumstances which it would not be reasonable to have
expected the Company to prevent or avoid.
189.4 Where the Company sends notices or documents to shareholders by electronic communication in
accordance with Article 189.1, it must also make the notices or documents available to members in printed
form and free of charge on request during normal business hours for a period of not less than 21 days from
the date of communication or notification or, if later, until the conclusion of any general meeting to which
the notices or documents relate.
189.5 The printed copies referred to in Article 189.4 must be made available in sufficient numbers to satisfy
demand from its members and be made available at the Registered Office and also at the Transfer Office.”
(Notes: The articles of association are to be generally updated to permit the use of electronic communication between
the Company and its members).
By order of the Board
G R Newton Registered Office:
Secretary Renold House
Styal Road
19 July 2006 Wythenshawe
Manchester M22 5WL
Notes:
Any member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or more proxies (who need not be a member of the
Company) to attend and, on a poll, to vote instead of the member. Completion and return of a form of proxy will not preclude a member from attending
and voting at the meeting in person, should he subsequently decide to do so.
In order to be valid, any form of proxy and power of attorney or other authority under which it is signed, or a notarially certified or office copy of such
power or authority, must reach the Company’s Registrars, Capita Registrars, of Northern House, Woodsome Park, Fenay Bridge, Huddersfield HD8 0LA
not less than 48 hours before the time of the meeting or of any adjournment of the meeting.
As permitted by Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders who hold shares in uncertificated form must be entered
on the Company’s share register at 11.30am on 17 September 2006 in order to be entitled to attend and vote at the Annual General Meeting. Such
shareholders may only cast votes in respect of shares held at such time. Changes to entries on the relevant register after that time shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
Copies of the service contracts of each of the Directors, the register of Directors’ interests in shares of the Company kept pursuant to section 325 of
the Companies Act 1985 and the articles of association of the Company (updated to include the amendments proposed in this notice) will be available
for inspection at the registered office of the Company and the offices of Eversheds, Senator House, 85 Queen Victoria Street, London EC4V 4JL during
usual business hours on any weekday (Saturdays and public holidays excluded) from the date of this notice until the date of the Annual General Meeting
and at the place of the Annual General Meeting from at least 15 minutes prior to and until the conclusion of the Annual General Meeting.
Biographical details of each Director who is being proposed for election or re-election by shareholders, including their membership of Board committees,
are set out at page 13 of the Annual Report and Accounts.
Notice of Annual General Meeting continued
79 2006
Annual General Meeting 19 September
Half year end 2006/07 30 September
Half year 2006/07 results published mid November
2007
Interim ordinary dividend for 2006/07 payable end January
Year end 2006/07 31 March
Preliminary announcement of annual results 2006/07 early June
Other dividend payments
Preference dividends 1 July and 1 January
Financial Calendar
80 Renold has developed an international
reputation for innovation and excellence.
Through its established global sales and
service organisation this makes Renold the
leading partner of choice for industry. RENOLD plc   Annual Report 2006
Renold plc, Renold House, Styal Road, Wythenshawe, Manchester, England M22 5WL
Tel: +44 (0)161 498 4500 Fax: +44 (0)161 437 7782 E-mail: enquiry@renold.com
www.renold.com