renold plc annual report 2006
annual report 2006 product applications
renold hitec 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 1550 1432
operating profit 54 04
operating profit before exceptional items 68 46
profit before tax and exceptional items 32 24
profitloss before tax 18 18
discontinued operations
lossprofit from discontinued operations including
impairment charges 139 02
other information
basic and diluted loss per share – group 196p 01p
basic and diluted earningsloss per share –
continuing operations 04p 04p
adjusted earnings per share
adjusting for the after tax effects of exceptional items 17p 38p
dividends paid per ordinary share 45p
capital expenditure 66 76
net debt 207 170
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 £68 million
compared with £46 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 pretax profit of £18 million
compared with a pretax loss of £18 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 £128 million relating to
discontinued operations the group loss for the year was
£136 million compared with a loss of £01 million in
200405
group net borrowings excluding preference shares ended
the year at £202 million compared with £170 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 refocused business
board changes
tony brown finance director and geoffrey newton company
secretary both plan to retire following the 2006 agm both
are longterm 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 200607
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 200405 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
200405 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
inaschaeffler kg with over€50 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 selfcontained sites in
rochdale holroydedgetek 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 ‘slimline’ 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
headshaft an extremely space consuming design for aesthetical reasons and
ease of maintenance schindler required the gearbox to be shaft mounted
directly on to the headshaft 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 nonfinancial 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 200405 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 200607 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 200607 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 freedry
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 worldwide 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
8500kg 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 hitec rubberincompression 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 £15 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 3000 square metres of
manufacturing space close to shanghai this is currently being
refurbished and the product will be manufactured in this
location during 200607 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 200607 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 £45 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
multiyear mass transit contract for alstomnew york city
this runs until 2008 and over £2 million worth of shipments
are scheduled for 200607 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 multiyear 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
£1550 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 halfyear at 
£791 million were 4 higher than the first half
operating profit
operating profit before exceptional items was £68 million up
48 on 200405 operating profit in the second halfyear was
£42 million representing a 53 return on sales compared
with £26 million in the first half or 34 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 200405 year
exceptional costs were £14 million compared with 
£42 million in 200405 and related to redundancy and
restructuring costs incurred mainly in the european chain
operations
financing costs
net interest cost rose to £22 million 200405 £19 million
there were costs of £07 million relating to the renegotiation
of banking facilities and a fair value gain on derivatives of
£03 million the net of interest costs on pension balances 
and the expected return on pension plan assets was a charge
of £10 million 200405 £03 million
profit before tax
profit before tax and before exceptional items was £32 million
compared with £24 million last year profit before tax after
exceptional items was £18 million compared with a loss of
£18 million in 200405
taxation
the tax charge of £15 million 200405 £15 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 £11 million in the year
compared with a profit of £02 million in 200405 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 £136 million stated after disposal
impairment charges of £128 million compared with 
£01 million in 200405 the basic and diluted loss per share
was 196p 200405 01p loss the basic and diluted
earnings per share from continuing operations was 04p
200405 loss 04p
balance sheet
net assets at 31 march 2006 were £406 million 
200405 £561 million after an impairment charge of 
£128 million in relation to discontinued operations details 
of which are shown in note 13 the liability for retirement
benefit obligations was £539 million 200405 £532 million
before allowing for a deferred tax asset of £127 million
200405 £143 million cash flow and borrowings
cash inflow from continuing operations was £47 million
200405 £86 million there was a net cash outflow of 
£27 million for redundancy and restructuring costs in the 
year 200405 £49 million inflow
cash inflow from discontinued operations was £17 million
200405 £20 million outflow
payment for purchase of property plant and equipment was
£67 million 200405 £77 million of which £29 million
200405 £39 million related to discontinued activities
proceeds of disposals including the sale of leasehold
improvements at the bredbury factory site totalled 
£32 million
group net borrowings at 31 march 2006 were £207 million
2005 £170 million comprising cash and cash equivalents
£178 million 2005 £245 million and borrowings of 
£385 million 2005 £415 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 nonfunctional
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 longerterm
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 shortterm 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 
£54 million at 31 march 2006 31 march 2005 £46 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 1627 1956 329 1424 1772 348
overseas
schemes
– funded 155 179 24 124 121 03
– unfunded 186 186 187 187
1782 2321 539 1548 2080 532
during the year the assets of the funded schemes rose by
£234 million due mainly to the return on assets exceeding the
expected return by £162 million and to uk deficit reduction
payment of £31 million made in the year the funding deficit
did not materially change however as liabilities increased by
£215 million due to actuarial losses caused primarily by a
reduction in bond rates with that used for discounting uk
liabilities falling from 54 to 50
the overseas deficit comprises £24 million in respect of
defined benefit schemes and £186 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 prefunded 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 js
financial review continued
11 financial review continued
12
as at 31 march 2006 rgps rsps js total
£m £m £m £m
ias 19 liabilities 1259 309 388 1956
market value of assets 1022 236 369 1627
deficit on ias 19 basis 237 73 19 329
annual deficit reduction 
payment based on 
funding valuations 22 07 02 31
total members approx 6200 120 1080 7400
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 05
increase in bond yields the uk deficit would reduce by some
£12 million for a 05 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 63 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
63 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 £1603 million compared with assets of £1627 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 
£31 million per year in total these deficit reduction payments
were established at the most recent actuarial valuations as at
js 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 reappointed 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
nonexecutive director
was appointed to the board in march 2005 she is the
group marketing director of baa plc and has extensive
experience throughout the retailservice industries and has
had operations management experience with several major
companies including bt plc
mark smith fca age 67
nonexecutive director
was appointed to the board in 1994 and is the senior
nonexecutive 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
nonexecutive 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 0161 498 4500
fax 44 0161 437 7782
email enquiryrenoldcom
website wwwrenoldcom
auditors
pricewaterhousecoopers llp manchester
merchant bankers
kbc peel hunt
stockbrokers
kbc peel hunt
registrar
capita registrars
northern house
woodsome park
fenay bridge
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telephone 0870 162 3131
email shareholderservicescapitaregistrarscom
website wwwcapitaregistrarscom report of the directors
for the financial year ended 31 march 2006
15
to be presented to the seventysixth annual general meeting 
of renold plc to be held at renold house styal road
wythenshawe manchester m22 5wl on tuesday 
19 september 2006 at 1130 am
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 £18 million compared with a loss of £18 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 reelection 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 1635
prudential plc 1283 
ii “material interests” equal to or more than 3 
platinum fund managers ltd 873 
steel partners ii lp 754 
lowland investment company plc 684 
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 coordinate group actions 
and compliance
employees
at 31 march 2006 the renold group employed 2863 people
including 1021 in the uk and 1140 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 £18 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 reappoint 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 nonexecutive chairman two
independent nonexecutive 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 nonexecutive 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 
reelection 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 reelection 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 nonexecutive 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 nonaudit 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 nonexecutive 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 nonexecutive directors the meeting in 200506
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 nonexecutive 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 nonexecutive directors and
individual nonexecutive 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 wwwrenoldcom 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 nonexecutive
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 nonexecutive directors do not have service agreements and
have no automatic right of reappointment 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 nonexecutive 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 200506
● 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” ie 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 retesting of the performance
criteria will occur no award was made in 200506 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 15 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 retesting 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 200506
in addition the company operates a savingsrelated 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 threeyear or fiveyear
savings contract the options granted during the year under the
saye scheme were made under a threeyear 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 £105600 in 200506 with a shadow
earnings cap to be applied for future years this provides for a
pension at age 62 of twothirds of final pensionable salary up
to the earnings cap where applicable after 20 years’ service
on death in retirement a dependant’s pension of twothirds 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 £26400 in 200506
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 nonexecutive 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 8000 8000
r j davies 85000 610744 85000 600000
b a beckett
d a brown 65502 181594 65502 170850
m a smith 20000 20000
there were no nonbeneficial 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 noncash 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 1605 21 2 23 137
i r trotter retired 6404 9
456 85 12 33 586 607
nonexecutive directors
r f leverton – chairman 85 85 85
b a beckett from 1305 29 29 2
m a smith 32 32 27
t b fortune retired 2170599 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 31306 31305 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 £26400 in 200506
share options
number of share options option date
price from
at granted lapsed at pence which expiry
31305 31306 per share exercisable date
r j davies
executive scheme a475000 475000 8800 2907 1914
125000 125000 7650 11307 10314
savings related scheme 10744 10744 5430 1309 31809
d a brown
executive  scheme 30000 30000 8350 271106 261113
45000 45000 5850 271105 261112
45000 45000 6734 281104 271111
20000 20000 11850 19703 18710
10000 10000 13783 16702 15709
10000 10000 23733 17701 16708
6115 6115 29383 16799 15706
savings related  scheme 4735 4735 5508 1206 31706
10744 10744 5430 1309 31809
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 395 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 wwwrenoldcom 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 executives 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 “firsttime 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 intercompany 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 yearend 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 writtenoff 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 straightline
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 straightline 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 straightline 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 longterm 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 longterm
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 percentageofcompletion 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 straightline 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 sharebased compensation
the group operates equitysettled sharebased
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 nonmarket vesting
accounting policies continued
28 conditions using a blackscholes 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 
“sharebased payment” only to equitysettled 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 groups 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 oneoff 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 shortterm 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 coordinated plan to achieve such a
disposal the posttax 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 1550 1432
operating costs 2 1496 1428
operating profit 54 04
operating profit before exceptional items 68 46
exceptional items 2 14 42
operating profit 54 04
financial expenses 141 118
financial income 105 96
net financing costs 3 36 22
profitloss before tax 18 18
taxation 4 15 15
profitloss for the financial year from continuing operations 03 03
discontinued operations
lossprofit for the financial year from discontinued operations 5 139 02
loss for the financial year 136 01
earnings per share 6
basic and diluted loss per share 196p 01p
basic and diluted earningsloss per share from continuing operations 04p 04p
2006 2005
£m £m
loss for the year 136 01
net incomeexpense recognised directly in equity
foreign exchange translation differences 11 01
gains on fair value of hedging net investments in foreign operations 11
actuarial losses on retirement benefit obligations 53 159
tax on items taken directly to equity 17 46
total expense recognised directly in equity 14 112
total recognised income and expense for the year 150 113
change in equity following adoption of ias 39 02
total recognised income and expense 152 113
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
noncurrent assets
goodwill 8 171 157
other intangible fixed assets 8 02 05
property plant and equipment 9 382 642
other noncurrent assets 11 03 04
deferred tax assets 17 184 170
742 978
current assets
inventories 10 365 473
trade and other receivables 11 258 417
derivative financial instruments 25 02
cash and cash equivalents 12 178 245
803 1135
asset held for sale 13 34
assets of discontinued operations 13 371
1208 1135
total assets 1950 2113
liabilities
current liabilities
borrowings 14 124 285
trade and other payables 15 313 455
provisions 16 04 117
current tax liabilities 07 10
448 867
liabilities directly associated with discontinued operations 13 281
729 867
net current assets 479 268
noncurrent liabilities
borrowings 14 256 130
derivative financial instruments 25 01
preference shares 14 05
trade and other payables 15 07 09
deferred tax liabilities 17 07 14
retirement benefit obligations 18 539 532
815 685
total liabilities 1544 1552
net assets 406 561
equity
issued share capital 19 174 179
share premium 21 60 60
other reserves 21 27 05
retained earnings 21 145 317
total shareholders’ equity 406 561
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 47 86
cash generatedabsorbed by operations – discontinued 17 20
64 66
income taxes paid 17 10
net cash from operating activities 47 56
cash flows from investing activities
purchase of property plant and equipment 67 77
purchase of intangible assets 02 03
proceeds on disposal of property plant and equipment 32
purchase of subsidiary 01
cash acquired on purchase of subsidiary 97
interest received 01
net cash from investing activities 37 17
cash flows from financing activities
financing costs paid 33 22
increase in borrowings 69 24
issue of ordinary shares 01
payment of finance lease liabilities 01 01
equity dividends paid 32
net cash from financing activities 36 31
net increase in cash and cash equivalents 46 42
net cash and cash equivalents at beginning of year 48 06
effects of exchange rate changes 02
net cash and cash equivalents at end of year note 12 96 48
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 1166 1158
– automotive 361
– machine tools 176
1166 1695
unallocated corporate assets 17 03
cash and cash equivalents 178 245
deferred tax 184 170
1545 2113
asset held for sale 34
assets of discontinued operations 371
consolidated total assets 1950 2113
reconciliation of segment liabilities to consolidated total liabilities
liabilities allocated to segments
– industrial power transmission 863 818
– automotive 254
– machine tools 37
863 1109
unallocated corporate liabilities 04
preference shares note 19 05
derivative financial instruments 01
borrowings 380 415
current and deferred tax 14 24
1263 1552
liabilities directly associated with assets of discontinued operations 281
consolidated total liabilities 1544 1552
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 34 03 58 02
automotive 67 20
machine tools 04 08
105 03 86 02
included in capital expenditure for automotive in 2005 is an amount of £32 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 204 200 295 504 16 20
germany 146 142 195 189 17 21
france 74 75 59 412 01 57
rest of europe 282 267 67 60 01 01
north america 572 488 412 400 08 07
other countries 272 260 138 130 02 02
1550 1432 1166 1695 45 108
unallocated assets 379 418
asset held for sale 34
discontinued operations 371 21
1550 1432 1950 2113 66 108
included within capital expenditure shown for france in 2005 is an amount of £32 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 chargingcrediting
2006 2005
£m £m £m £m
change in stocks of finished goods and work in progress 11 02
own work capitalised 01 06
other operating income 08 10
raw materials and consumables 588 561
other external charges 219 175
employee costs
gross wages and salaries 523 489
social security costs 62 57
pension costs – defined benefit 26 26
– defined contribution 05 06
cost of sharebased incentive plans 02 01
618 579
depreciation of property plant and equipment
– owned assets 51 57
– leased assets 01 01
amortisation of intangible assets 01 02
other operating lease rentals payable
– plant and machinery 03 06
– property 16 12
19 18
profit on disposal of property plant and equipment 01
research and development expenditure 02 07
remuneration of auditors for audit work 04 03
trade receivables impairment charge 01
exceptional items
redundancy and restructuring charges 14 42
1496 1428
b auditors’ remuneration
in addition to audit fees of £04 million 2005 – £03 million in relation to continuing operations audit fees of £01 million
2005 – £01 million were incurred relating to discontinued operations
during the year the group including its overseas subsidiaries obtained the following nonaudit 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 nonaudit services 124 158
included in the group audit fee is an amount of £30000 2005 – £26000 paid in respect of the parent company of the
total nonaudit services provided to the group £60000 2005 – £34000 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 03 32
other redundancy and restructuring charges 11 10
14 42
during the year additional charges of £03 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 £03 million 2005 – £04 million and france £05 million 2005 – £01 million with
£03 million 2005 – £05 million being incurred in other territories
d employees and key management compensation
employee costs including directors are set out in 2a 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
2008 829 2015 662
3 net financing costs
2006 2005
£m £m £m £m
financial expenses
interest payable on bank loans and overdrafts 23 20
interest cost on pension plan balances 111 98
costs associated with refinancing 07
141 118
financial income
interest receivable on bank deposits and cash equivalents 01 01
expected return on pension plan assets 101 95
fair value gains on derivative instruments 03
105 96
net financing costs 36 22 4 taxation
analysis of tax chargecredit in the year
2006 2005
£m £m
united kingdom
uk corporation tax at 30 2005 – 30 05 07
less double taxation relief 05 07
overseas taxes
corporation taxes 13 10
total current tax 13 10
deferred tax
united kingdom 03 16
overseas 04 09
total deferred tax 01 25
tax chargecredit on loss on ordinary activities 12 15
analysed as
continuing 15 15
discontinued 03
12 15
2006 2005
£m £m
tax on items taken directly to equity
deferred tax on pension plan balances 16 46
deferred tax on other direct movements on reserves 01
17 46
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
profitloss on ordinary activities before tax
continuing operations 18 18
discontinued operations 14 02
04 16
tax on ordinary activities at 30 2005 – 30 01 05
effects of
permanent differences 01 06
overseas tax rate differences 03 01
unrelieved tax losses 16 04
utilisation of brought forward tax losses 04 01
depreciation and other timing differences 01 04
prior year adjustments 03 01
current tax charge continuing operations 13 10
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 493 208 701 353 185 538
operating lossprofit before
exceptional items 16 01 15 12 12
redundancy restructuring and 
impairment of plant and equipment 07 02 05 69 69
negative goodwill arising on acquisition 113 113
impairment of goodwill 26 26
operating lossprofit 09 01 10 32 26 06
net financing costs 03 01 04 03 01 04
lossprofit before tax 12 02 14 29 27 02
taxation 05 02 03
lossprofit after tax 07 04 11 29 27 02
impairment on classification as
disposal groups 91 37 128
taxation
net impairment on classification as
disposal groups 91 37 128
lossprofit for the year on
discontinued operations 98 41 139 29 27 02
in 20052006 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 £19 million with an operating profit of £02 million 
the cash flows attributed to discontinued operations comprise
2006 2005
£m £m
from operating activities 17 20
from investing activities 28 57
from financing activities 05 01
in 2005 the cash inflow from investing activities reflects cash acquired with the purchase of sachs automotive france sas
£97 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 pershare number of pershare
earnings shares amount earnings shares amount
£m thousands pence £m thousands pence
basic eps
earnings attributed to ordinary
shareholders 136 69350 196 01 69328 01
effect of dilutive securities
employee share options 63 332
diluted eps 136 69413 196 01 69660 01
earnings per share from continuing operations
basic eps 136 69350 196 01 69328 01
post tax lossprofit from discontinued
operations note 5 11 16 02 03
impairment on classification as disposal
groups note 5 128 184
basic eps from continuing operations 03 69350 04 03 69328 04
earnings per share from discontinued operations
post tax lossprofit from discontinued
operations note 5 11 69350 16 02 69328 03
impairment on classification as disposal
groups note 5 128 184
basic eps from 
discontinued operations 139 69350 200 02 69328 03
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 03 69350 04 03 69328 04
effect of exceptional items after tax
redundancy and restructuring costs 09 13 29 42
adjusted eps 12 69350 17 26 69328 38
inclusion of the dilutive securities shown above in the calculation of adjusted eps does not change the amounts shown of 17p
2005 – 38p
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 30p 21
interim dividend paid of nil 15p 11
32
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 183 24 207
exchange adjustment 14 14
additions
1
02 02
relating to disposal groups 26 08 34
at 31 march 2006 171 18 189
accumulated amortisation and impairment
1 april 2005 26 19 45
amortisation charge
2
03 03
relating to disposal groups 26 06 32
at 31 march 2006 16 16
net book amount at 31 march 2006 171 02 173
net book amount at 31 march 2005 157 05 162
1
“additions” includes £nil 2005 – £02 million in respect of discontinued operations
2
“amortisation charge” includes £02 million 2005 – £nil in respect of discontinued operations
computer
goodwill software total
£m £m £m
cost
at 3 april 2004 188 21 209
exchange adjustment 05 05
additions 03 03
at 31 march 2005 183 24 207
accumulated amortisation and impairment
3 april 2004 17 17
impairment charge 26 26
amortisation charge 02 02
at 31 march 2005 26 19 45
net book amount at 31 march 2005 157 05 162
net book amount at 2 april 2004 188 04 192 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 200506 no impairment charge has been recognised in the period
2005 – an impairment charge of £26 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 31 a discount rate of 102 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 309 1348 1657
exchange adjustment 04 20 24
additions
1
02 62 64
disposals 31 89 120
reclassified as asset held for sale 35 35
relating to disposal groups 39 449 488
at 31 march 2006 210 892 1102
aggregate depreciation
at 1 april 2005 35 980 1015
exchange adjustment 15 15
charge for the year
2
04 78 82
disposals 19 70 89
reclassified as asset held for sale 01 01
relating to disposal groups 01 301 302
at 31 march 2006 18 702 720
impairment
impairment at 1 april 2005
impairment losses recognised in the period 08 08
relating to disposal groups 08 08
at 31 march 2006
total depreciation and impairment
at 31 march 2006 18 702 720
at 31 march 2005 35 980 1015
net book amount at 31 march 2006 192 190 382
net book amount at 31 march 2005 274 368 642
1
“additions” includes £20 million 2005 – £39 million in respect of discontinued operations
2
“charge for the year” includes £30 million 2005 – £28 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 £05 million 2005 – £06 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 £17 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 postdisposal and the facility will be made available to the purchaser
under a shortterm 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 284 1266 1550
exchange adjustment 01 13 14
acquisitions 19 13 32
additions 05 68 73
disposals 12 12
at 31 march 2005 309 1348 1657
aggregate depreciation
at 3 april 2004 30 902 932
exchange adjustment 09 09
charge for the year 05 81 86
disposals 12 12
at 31 march 2005 35 980 1015
net book amount at 31 march 2005 274 368 642
net book amount at 2 april 2004 254 364 618
under the options available within ifrs 1 “firsttime 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 £152 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 
£01 million 2005 – £05 million
10 inventories
2006 2005
£m £m
materials 66 95
work in progress 81 124
finished products 218 254
365 473
inventories pledged as security for liabilities amounted to £213 million 2005 – £169 million
writeoffs taken to the income statement amount to £05 million 2005 – £02 million 11 trade and other receivables
2006 2005
current noncurrent current noncurrent
£m £m £m £m
trade receivables 246 386
less provision for impairment of receivables 06 13
trade receivables – net 240 373
other receivables 08 02 34 03
prepayments and accrued income 10 01 10 01
258 03 417 04
the group has recognised a loss of £01 million 2005 – £01 million for the impairment of its trade receivables during the year
where appropriate the noncurrent receivables have been fair valued using an effective interest rate of 57 the group has no
significant concentration of credit risk
12 cash and cash equivalents
2006 2005
£m £m
cash at bank and in hand 87 136
shortterm bank deposits 48 109
cash equivalents 43
cash and cash equivalents 178 245
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 178 245
less overdrafts note 14 82 197
net cash and cash equivalents 96 48
13 assets classified as held for sale and associated liabilities
a assets held for sale
2006 2005
£m £m
property 34
as announced during the second halfyear the group is in the process of selling the former burtonontrent 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
noncurrent assets
intangible assets 02 02
property plant and equipment 138 91 40 35 52
current assets
inventory 72 74 146
trade and other receivables 107 66 173
317 91 182 37 371
following the classification as discontinued operations the net assets have been reevaluated 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 noncurrent 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 162 67 229
provisions 29 29
noncurrent liabilities
trade and other payables 04 04
retirement benefit obligations 17 17
deferred tax liabilities 02 02
212 69 281
executive’s review on page 5 14 borrowings
2006 2005
£m £m
amounts falling due within one year
overdrafts 82 197
bank loans 41 87
obligations under finance leases 01 01
124 285
amounts falling due after more than one year
bank loans 252 127
obligations under finance leases 04 03
256 130
preference shares 05
261 130
total borrowings 385 415
secured borrowings
included in group borrowings are secured borrowings of £316 million 2005 – £256 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 01 01
amounts payable between two and five years 05 03
amounts payable after five years 01
total gross payments 06 05
less finance charges allocated to future periods 01 01
05 04
allocated as
current obligations 01 01
noncurrent obligations 04 03
05 04
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 noncurrent current noncurrent
£m £m £m £m
trade payables 178 291
other tax and social security 29 58
other payables 35 35
accruals and deferred income 71 07 71 09
313 07 455 09
16 provisions
business
restructuring
provision
£m
at beginning of year 117
exchange adjustments 01
net credit to income statement
1
14
utilised in year
2
71
relating to disposal groups 29
at end of year 04
1
“net credit to income statement” includes an amount of £17 million relating to discontinued operations
2
“utilised in year” includes £39 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 23 27 09 27 14
pension plans 126 135 01 08 127 143
tax losses 32 23 02 05 34 28
other timing differences 03 15 01 02 15
tax assetliabilities 184 170 07 14 177 156
net off liabilitiesassets 07 14 07 14
net tax assets 177 156 177 156
discontinued operations
other timing differences 02 02
tax liabilities 02 02
net tax liabilities 02 02
total net tax assets 177 156 02 175 156
the net deferred tax asset recoverable after more than one year is £175 million 2005 – £156 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 3239 statement equity balance
£m £m £m £m £m
accelerated capital allowances 27 04 23
pension plans 135 25 16 126
tax losses 23 09 32
other timing differences 15 01 16 01 03
170 01 04 17 184
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 27 18 09
pension plans 08 07 01
tax losses 05 03 02
other timing differences 03 03
14 05 09
during the year the group has reported an operating profit of £68 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 £61 million 2005 – £57 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 34 33 29 28
rate of increase in pensions in payment and deferred pensions 28 26 18 18
discount rate 50 54 52 56
inflation assumption 29 28 22 22
expected return on plan assets 63 65 80 85
the predominant defined benefit obligation for funded schemes within the group resides in the uk £1956 million of the 
£2135 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 postretirement mortality assumptions are based on the pa92 series tables published by the uk actuarial profession
the postretirement 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 nonpensioners and 2004 for current pensioners reduced by 10
for nonpensioners 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 longterm 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 shortterm 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 782 716 92 70 874 786
bonds 845 708 38 42 883 750
other 25 12 25 12
total market value of assets 1627 1424 155 124 1782 1548
present value of scheme liabilities 1956 1772 365 308 2321 2080
deficits in schemes 329 348 210 184 539 532
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 1772 308 2080 1540 286 1826
current service cost 21 07 28 20 07 27
interest cost
1
95 17 112 82 17 99
contributions by plan participants 08 02 10 09 01 10
actuarial gains and losses 152 63 215 204 204
gains on curtailments 01 03 04
liabilities extinguished on settlements 10 10
benefits paid 81 23 104 83 15 98
business combination 08 08
exchange adjustment 11 11 04 04
relating to disposal groups 17 17
closing obligation 1956 365 2321 1772 308 2080
1
“interest cost” includes £01 million 2005 – £01 million in respect of discontinued operations
the total defined benefit obligation can be analysed as follows
obligations related to funded 
pension plans 1956 179 2135 1772 121 1893
obligations related to unfunded 
pension plans 186 186 187 187
1956 365 2321 1772 308 2080
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 1424 124 1548 1330 106 1436
expected return on plan assets 91 10 101 87 08 95
actuarial gains and losses 145 17 162 33 12 45
assets distributed on settlement 09 09
contributions by the employer 49 06 55 48 03 51
contributions by plan participants 08 02 10 09 01 10
benefits paid 81 13 94 83 05 88
exchange adjustment 09 09 01 01
closing assets 1627 155 1782 1424 124 1548
balance sheet reconciliation
plan obligations 1956 365 2321 1772 308 2080
plan assets 1627 155 1782 1424 124 1548
retirement benefit obligation 329 210 539 348 184 532
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
215 204
actuarial gains and losses arising on scheme assets 162 45
net actuarial gains and losses 53 159
1
“actuarial gains and losses arising on scheme obligations” includes a gain of £01 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 28 26
gains on curtailments 01
liabilities extinguished on settlements 10
assets distributed on settlements 09
26 26
amounts relating to discontinued operations
current service cost 01
gains on curtailments 03
total cost of retirement benefits 23 27 18 pensions continued
the cumulative amount of actuarial losses recognised in equity since 4 april 2004 was £212 million 2005 – £159 million 
of this amount £nil 2005 – loss £01 million related to discontinued operations the group expects to contribute approximately
£57 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 £22 million will be paid to the rgps scheme £07 million to the rsps scheme and 
£02 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 £05 million 2005 – £06 million
there were outstanding contributions in creditors of £nil 2005 – £01 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 231 231 174 173
nonequity interests
6 cumulative preference stock £1 units 06 06
237 179
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 £05 million resulting in an adjustment of £01 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 69429220 2005 – 69335410 ordinary shares of 25p each
during the year the company issued ordinary shares of 25p each for a cash consideration of £51671 2005 – £13648 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 sharebased payments
details of the sharebased 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 3591299 2005 – 3326272 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 29383 52307 56636
18 july 2000 1995 scheme 24267 19042 19042
17 july 2001 1995 scheme 23733 145000 175000
16 july 2002 1995 scheme 13783 155000 195000
19 july 2003 1995 scheme 11850 97500 125000
22 december 2003 1995 scheme 9450 10000 20000
18 june 2004 1995 scheme 10200 125000
28 november 2004 1995 scheme 6734 297000 474000
27 november 2005 1995 scheme 5850 381000 404000
28 july 2006 1995 scheme 8084 50000 50000
27 november 2006 1995 scheme 8350 245000 275000
11 march 2007 1995 scheme 7650 125000 125000
2 september 2007 2004 scheme 8800 475000 475000
22 november 2007 2004 scheme 7430 135000 135000
2186849 2653678
savings related share option schemes
within six months from
1 february 2005 1995 scheme 8936 122324
1 february 2006 1995 scheme 5508 238473 359094
1 february 2008 1995 scheme 5508 167919 191176
1 march 2009 2004 scheme 5430 998058
1404450 672594 20 sharebased 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 2412006 22112004 292004
share price at date of grant 620p 743p 88p
exercise price 543p 743p 88p
number of employees 198 71
shares under option 999779 135000 475000
vesting period years 3 33
expected volatility 299 350 411
option life years 35 10 10
expected life years 31 66
risk free interest rate 42 45 49
assumed dividends expressed as a dividend yield 40 61 51
possibility of ceasing employment before vesting 3 zero zero
fair value per option 146p 155p 247p
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 zerocoupon 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 2653678 9914p 2412178 11817p
granted 610000 8497p
lapsed 466829 9988p 351500 20694p
exercised 17000 6370p
outstanding at 31 march 2186849 9898p 2653678 9914p
exercisable at 31 march 90000 6267p 473829 9735p
savings related share option scheme
weighted weighted
average average
exercise exercise
number price number price
outstanding at 1 april 672594 6131p 717893 6161p
granted 999779 5430p
lapsed 174113 7916p 40181 6745p
exercised 93810 5508p 5118 5508p
outstanding at 31 march 1404450 5453p 672594 6131p
exercisable at 31 march 238473 5508p 3554 6017p
notes to the consolidated financial statements continued
54 notes to the consolidated financial statements continued
55
20 sharebased 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
585p to 101p 7516p 1718000 35 75 7618p 1958000 43 83
101p to 29383p 18624p 468849 01 28 19302p 695678 07 72
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
543p to 8936p 5453p 1404450 24 26 6131p 672594 14 16
the weighted average share price during the period for options exercised over the year was 5914p 2005 7926p the total
charge for the year relating to employee share based payment plans was £158000 2005 £51000 all of which related to
equitysettled sharebased transactions after deferred tax the total charge was £180000 2005 £74000
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 179 60 466 705
loss for the year 01 01
foreign exchange translation difference 04 05 01
actuarial gains and losses 159 159
dividends 32 32
tax on items recognised directly in equity 46 46
employee share options
– value of employee services 01 01
as at 31 march 2005 179 60 317 05 561
effect of adoption of ias 32 and ias 39 06 02 08
at 1 april 2005 restated 173 60 315 05 553
loss for the year 136 136
foreign exchange translation difference 11 11
actuarial gains and losses 53 53
gains on fair value of hedging net 
investments in foreign operations 11 11
tax on items recognised directly in equity 17 17
employee share options
– value of employee services 02 02
– proceeds from shares issued 01 01
at 31 march 2006 174 60 145 16 11 406
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 £20 million 2005 – £20 million
included in retained earnings is an amount of £110 million net of tax 2005 – £111 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 noncancellable 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 10 02 04 10 02 05
between two and five years 33 07 07 35 07 08
over five years 136 02 01 54 04
total annual commitments 179 11 12 99 13 13
23 contingent liabilities
performance guarantees given to third parties in respect of group companies were £29 million 2005 – £12 million
24 reconciliation of profitloss before tax to net cash flows from operations
2006 2005
£m £m
cash generated from operations
continuing operations
profitloss before taxation 18 18
depreciation and amortisation 54 60
equity share plans 02 01
net finance costs 36 22
increasedecrease in inventories 18 02
increase in receivables 04 41
increase in payables 27 52
decreaseincrease in provisions 27 49
movement on pension schemes 38 41
movement in derivative financial instruments 03
cash generated from continuing operations 47 86
discontinued operations
lossprofit before taxation 14 02
depreciation and amortisation 31 28
plant and equipment impairment 08
goodwill impairment 26
negative goodwill release 113
gain on plant and equipment disposals 01
net finance costs 04 04
increase in inventories 06 02
decreaseincrease in receivables 02 18
increasedecrease in payables 53 15
decreaseincrease in provisions 57 68
movement on pension schemes 03
cash generatedabsorbed by discontinued operations 17 20
cash generated from operations 64 66
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 02
noncurrent liabilities
interest rate swaps 01
these disclosures are made under ias 32 and ias 39 which under the transitional arrangements have been applied from 
1 april 2005
b shortterm receivables and payables
the carrying amount of shortterm 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 144 million and 
£05 million 1 april 2005 – 194 million and £10 million
at 31 march 2006 the fixed interest rates vary from 83 to 110 1 april 2005 – 68 to 95 and floating rates are
76 us libor plus 250 basis points and 72 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 £54 million 1 april 2005 – £46 million a
foreign exchange loss of £05 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 110 05 05 148 153
– preference shares 60  05 05
us dollar 83 15 88 57 145
euro 43 20 17 44 61
other 81 13 05 16 21
120 265 385
2005
sterling
– financial liabilities 95 15 09 194 203
us dollar 68 19 103 29 132
euro 46 22 21 45 66
other 81 16 07 07 14
140 275 415
 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 shortterm bank and shortterm
currency in hand deposits total in hand deposits total
£m £m £m £m £m £m
sterling 16 16 59 59
euro 55 48 103 29 104 133
other 59 59 48 05 53
130 48 178 136 109 245
cash balances and shortterm 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 shortterm 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 123 284
in more than one year but not more than two years 217 68
in more than two years but not more than five years 21 62
in more than five years 24 01
385 415
debt due in more than five years includes £05 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 177 165
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 wwwrenoldcom 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” subsection 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 1970 1970
operating costs excluding 
goodwill and exceptional items 1933 01 01 01 1936
operating profit before goodwill 
and exceptional items 37 01 01 01 34
goodwill amortisation and impairment 36 10 26
exceptional items 43 45 02
operating profit 42 45 10 01 01 01 10
net financing costs 26 26
loss before tax 68 45 10 01 01 01 16
tax 16 01 15
loss for the financial period 52 45 10 01 01 01 01 01
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 1834 152 40 1946
total liabilities 1255 21 05 02 1241
net assets 579 152 21 05 42 705
share capital and reserves 519 152 21 05 42 645
share premium 60 60
total equity 579 152 21 05 42 705 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 sharebased
uk gaap deemed cost goodwill benefits payments taxation ifrs
£m £m £m £m £m £m £m
c ab d e f
total assets 1955 152 55 49 2113
total liabilities 1552 10 10 1552
net assets 403 152 55 10 39 561
share capital and reserves 343 152 55 10 01 39 500
share premium 60 01 61
total equity 403 152 55 10 39 561
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 2113 01 01 2115
total liabilities 1552 05 05 1562
net assets 561 05 01 05 01 553
share capital and reserves 500 05 01 05 01 492
share premium 61 61
total equity 561 05 01 05 01 553
a following an acquisition in march 2005 the uk gaap balance sheet retained an amount of £45 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 £45 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 £24 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 £10 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 £152 million
over the carrying value retained under uk gaap the associated impact on the annual depreciation charge is an increase of 
£01 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 £01 million the recognition of certain jubilee and other potential service related awards together with
the revisions to frs 17 resulted in additional liabilities of £05 million at 4 april 2004 and £10 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 £01 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 £01 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
£04 million and £03 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 £08 million on 1 april 2005 there were three principal areas
explaining this change firstly preference shares £05 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 £03 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 £01 million following the reassessment of trade receivable provisions on a basis consistent with the
criteria established by ias 39 a deferred tax asset of £01 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 posttransition 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 2251 1970 1921 1874 1902
less discontinued operations 701 538
revenue from continuing operations 1550 1432 1921 1874 1902
operating profit before exceptional items and 
goodwill amortisation under uk gaap – continuing 68 46 76 92 78
operating profit 54 04 86 68 24
profitloss before tax 18 18 47 42 56
taxation 15 15 17 06
03 03 47 25 50
discontinued operations
lossprofit from discontinued operations 139 02
lossprofit for the year 136 01 47 25 50
net assets employed
property plant and equipment plus intangible software 384 647 470 500 546
working capital and other net assets 307 430 412 388 427
operating assets 691 1077 882 888 973
assets of discontinued operations 371
liabilities of discontinued operations 281
properties held for sale 34 23
goodwill 171 157 188 226 262
net debt 207 170 192 209 291
dividends 21 21 21
deferred and current taxation 170 146 128 23 28
provisions 04 117 12 109 126
net assets excluding pension obligations 945 1093 973 821 825
pension obligations 539 532 394
total net assets 406 561 579 821 825
other data and ratios
operating return on average operating assets 
1
77 47 86 99 76
operating profit on turnover 
1
44 32 40 49 41
capital expenditure £m 66 76 72 57 54
basic lossearnings per share p 196 01 68 35 72
dividends per ordinary share p 45 45 45 45
employees at year end continuing 2008 2015 2656 2686 2780
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 as
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 spz oo
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 “sharebased
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 yearend 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 3c 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 nondiscounted 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
sharebased compensation – the company operates 
equitysettled sharebased 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 nonmarket vesting
conditions using a blackscholes pricing model nonmarket
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 equitysettled
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 02 02
investments in subsidiary undertakings ii 557 934
559 936
current assets
debtors iii 20 14
cash and shortterm deposits 219 01
239 15
creditors – amounts falling due within one year
creditors iv 21 17
bank borrowings v 25 192
net current assetsliabilities 193 194
total assets less current liabilities 752 742
creditors – amounts falling due after more than one year
bank borrowings v 208 110
preference shares v 05
derivative financial instruments vi 01
net assets 538 632
capital and reserves
called up share capital viii 174 179
share premium ix 60 60
profit and loss account ix 304 393
shareholders’ funds 538 632
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 01 08 09
additions at cost 01 01
at end of year 01 09 10
depreciation
at beginning of year 07 07
depreciation for the year 01 01
at end of year 08 08
net book value at end of year 01 01 02
net book value at beginning of year 01 01 02
ii investments in subsidiary undertakings
shares advances total
£m £m £m
subsidiary companies
cost or valuation
at beginning of year 353 581 934
net advancesrepayments 256 256
deficit on revaluation 121 121
at end of year 232 325 557
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 15 10
deferred tax asset 03 01
other debtors 01 02
prepayments and accrued income 01 01
20 14
iv creditors
2006 2005
£m £m
amounts falling due within one year
trade creditors 05 07
amounts owed by group undertakings 01
other taxation and social security 03 03
other creditors 09 03
accruals 03 04
21 17
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 25 192
amounts falling due after one year
bank loans 208 110
repayable
in more than one year but not more than two years 208 60
in more than two years but not more than five years 50
208 110
total bank loans 233 302
preference shares 05
total borrowings 238 302
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 01
upon adoption of frs 25 and frs 26 on 1 april 2005 the above contract was recognised at its fair value of £04 million and
recorded as a financial liability note xi the fair value movement in the period of £03 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 viiicalled up share capital
authorised issued
2006 2005 2006 2005
£m £m £m £m
equity interests
ordinary shares of 25p each 231 231 174 173
nonequity interests
6 cumulative preference shares £1 units 06 06
237 179
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 £05 million resulting in an adjustment to the carrying amount of £01 million note xi
at 31 march 2005 the issued ordinary share capital comprised 69429220 2005 – 69335410 ordinary shares of 25p each
during the year the company issued 93810 ordinary shares of 25p each for a cash consideration of £51671 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 3591299 2005 – 3326272 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 29383 52307 56636
18 july 2000 1995 scheme 24267 19042 19042
17 july 2001 1995 scheme 23733 145000 175000
16 july 2002 1995 scheme 13783 155000 195000
19 july 2003 1995 scheme 11850 97500 125000
22 december 2003 1995 scheme 9450 10000 20000
18 june 2004 1995 scheme 10200 125000
28 november 2004 1995 scheme 6734 297000 474000
27 november 2005 1995 scheme 5850 381000 404000
28 july 2006 1995 scheme 8084 50000 50000
27 november 2006 1995 scheme 8350 245000 275000
11 march 2007 1995 scheme 7650 125000 125000
2 september 2007 2004 scheme 8800 475000 475000
22 november 2007 2004 scheme 7430 135000 135000
2186849 2653678
savings related share option schemes
within six months from
1 february 2005 1995 scheme 8936 122324
1 february 2006 1995 scheme 5508 238473 359094
1 february 2008 1995 scheme 5508 167919 191176
1 march 2009 2004 scheme 5430 998058
1404450 672594
further details of sharebased 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 410 60 470
prior year adjustment note xi 17 17
at beginning of year as restated 393 60 453
adoption of frs 26 note xi 02 02
at 1 april 2005 as restated 391 60 451
loss for the year 88 88
employee share option schemes – value of employee services 01 01
at end of year 304 60 364
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 £88 million 2005 as restated – loss £10 million
x contingent liabilities
the company has guaranteed borrowings by subsidiary undertakings of £60 million 2005 – £32 million performance
guarantees given to third parties in respect of group companies were £02 million 2005 – £12 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 02 02 02
investments 934 934 934
current assets
debtors 31 17 14 01 15
cash and deposits 01 01 01
32 17 15 01 16
creditors – amounts falling 
due within one year 209 209 209
net current assets 177 17 194 01 193
total assets less current liabilities 759 17 742 01 743
creditors – amounts falling 
due after more than one year 110 110 04 05 119
net assets 649 17 632 04 01 05 624
called up share capital 179 179 06 173
share premium 60 60 60
profit and loss account 410 17 393 04 01 01 391
equity shareholders’ funds 649 17 632 04 01 05 624
frs 21 requires that dividends declared and approved after the balance sheet date should not be recognised as an assetliability
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 £17 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 sharebased 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 £04 million together with an associated deferred tax asset of
£01 million in addition the company’s preference shares £06 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 
£05 million the adjustment of £01 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 seventysixth 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 1130 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 reelect mr r j davies as a director
3 to reelect mr m a smith as a director
4 to elect peter edward bream as a director
5 to reappoint 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 £5785768 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 subsection 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 preemptive 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 £867865 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 1308 of the articles of association of the company by the deletion of the current article 1308 and the insertion
of the following new wording in its place
“1308 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 1308 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 1861 1862 and 1863 of the articles of association of the company by the deletion of the current articles
1861 1862 and 1863 and the insertion of the following new wording in their place
“1861 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
1862 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
18621 in defending any criminal or civil proceedings or
18622 in connection with any application under sections 1443 1444 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
22 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”
22 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 602 and 603 in
the following terms
“602 for the purposes of article 601 and for the avoidance of doubt
6021 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 601 as being entitled to receive such notice
6022 a notice in writing of a meeting is also to be treated as given to a person entitled to receive such notice
where
6022a the company and that person have agreed that notices of meetings may instead be accessed by him 
on a website
6022b the meeting is a meeting to which the agreement in article 6022a applies
6022c 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
6022d 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
603 a notice which is treated as given to a person by virtue of article 602 is treated as given at the same time
as the notification referred to in article 6022c”
79 by the insertion of a new article 792 in the following terms
“792 if the directors in their discretion decide a proxy appointment may be sent by electronic communication”
801 by the insertion after the words “an instrument” of the words “that is not being sent by electronic communication” 8012 by the insertion after the words “… pursuant to article 8011 …” of the words “or 802” and by the insertion 
of a new article 802 with all subsequent articles being renumbered accordingly in the following terms
“802 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
8021 in or by way of a note to the notice convening the meeting or
8022 in any form of proxy appointment sent out by the company or
8023 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 1711” 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 1712 in the following terms
“1712 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 1801” and the insertion a new article 1802 in the following terms
“1802 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
1891 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
18911 the company and the member have agreed to use electronic communication to send such notices 
or documents and
18912 the notices or documents are notices or documents to which the agreement applies and
18913 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
18914 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 18915 the notices or documents are notices or documents to which the agreement applies and
18916 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
1892 the period of time referred to in article 18916 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
1893 if the notices or documents are published on the website for a part only of the period of time referred to in
article 18916 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
1894 where the company sends notices or documents to shareholders by electronic communication in
accordance with article 1891 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
1895 the printed copies referred to in article 1894 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 1130am 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 reelection 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 200607 30 september
half year 200607 results published mid november
2007
interim ordinary dividend for 200607 payable end january
year end 200607 31 march
preliminary announcement of annual results 200607 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 0161 498 4500 fax 44 0161 437 7782 email enquiryrenoldcom
wwwrenoldcom


Summary:
 improved trading during the second half enabled the group to
achieve progress in the operating results for all the businesses
last year in 200405 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
200405 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
inaschaeffler kg with over€50 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 selfcontained sites in
rochdale holroydedgetek 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 ‘slimline’ 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
headshaft an extremely space consuming design for aesthetical reasons and
ease of maintenance schindler required the gearbox to be shaft mounted
directly on to the headshaft 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