REG - Castings PLC - Final Results

CastingsAnnouncement

12/06/2019 07:00

RNS Number : 8476B
Castings PLC
12 June 2019
 


Castings P.L.C.
Annual Financial Report
DTR 6.3.5 Disclosure
Year ended 31 March 2019
 
Chairman's Statement
The turnover of the group increased to £150 million (£133 million last year) with an increase in profit before exceptional items and income tax to £15.3 million compared to £12.0 million last year.
Foundry businesses
The foundries have seen an increase in output and improved profitability compared to the previous year. Whilst profit margins reduced in the first half of the year, we have seen a strong performance in the second half which has seen margins in excess of the previous year. Our investment in robotic handling and other process automation have contributed to a rise in productivity during the year along with process quality improvements. Further investments will continue to be made where cost savings can be identified. It is pleasing to report that William Lee has continued to improve both production and productivity. 
CNC Speedwell
With the new management team having been in place for the full year, the business has been brought back under operational control; output levels are such that the significant levels of extra transport costs ceased early in the year and the loss for the year has reduced.
The engineering improvements being made on specific parts have started to improve the profitability, particularly towards the end of the financial year and will continue during 2019/20. Inevitably it will take time before we see the full benefit of the changes implemented, but we expect the trading results of CNC Speedwell Limited to improve again during this financial year.
Outlook
It appears at the present time our order book is sound and schedules remain stable. In particular demand for commercial vehicles is currently strong and it is hoped this trend will continue.
Dividend
I am pleased to report that the directors recommend an increase in the final dividend to 11.40 pence per share to be paid on 27 August 2019 to shareholders on the register on 19 July 2019. This, together with the interim dividend, gives a total dividend for the year of 14.78 pence per share.
Supplementary dividend
In addition to the final dividend set out above, the board has reviewed the cash position of the group and considered the balance between increasing returns to shareholders whilst retaining flexibility for capital and other investment opportunities. As a result, the directors are declaring a supplementary dividend of 15.00 pence per share to be paid on 23 July 2019 to shareholders on the register on 21 June 2019. This dividend, being discretionary and non-recurring, does not compromise our commitment to invest in market leading technologies to maintain our competitive advantage.
Directors
On 31 March 2019, Gerard Wainwright retired as non-executive director after nearly 21 years' service. I would like to thank him for his invaluable contribution to the company during that time.
As part of our succession planning, Andrew Eastgate was appointed to the board as non-executive director on 1 September 2018. Having been a partner at Pinsents and non-executive director at Headlam Group plc and Epwin Group plc, Andrew will bring significant relevant experience to the group.
I wish to thank all our employees for their continued hard work during the year.
B. J. Cooke
Chairman
12 June 2019
 
 




 
Business and Financial Review
 
Overview of business segment performance
The segmental revenue and results for the current and previous years are set out in note 2. An overview of the performance, position and future prospects of each segment, and the relevant KPIs, are set out below.
Key Performance Indicators
The key performance indicators considered by the group are:
•    Segmental revenue
•    Segmental profit
•    EPS
•    Net cash
•    Dividends per share
Foundry operations
The foundry businesses have experienced an increase in output of 6.1% to 52,200 tonnes and an increase in external sales revenue of 12.7% to £143.1 million.
The trend of an increase in more complex, machined parts has continued in the year. Of the total output weight for the year, 55.6% related to machined castings compared to 52.9% in the previous year.
Whilst price increases on steel scrap and other alloys have continued in the year, this has been at a lower level such that the impact on sales revenue is less significant compared to the previous year.
The segmental profit has increased to £16.8 million, from £16.1 million in the previous year, which represents a profit margin of 10.2% on total segmental sales (2018 - 11.0%). The decline in margin occurred in the first half of the year (8.7%), with the second half margin on total segmental sales increasing to 11.5%.
The aligning of production methods across the foundries and productivity improvements have continued with William Lee increasingly contributing to the overall segment profitability.
Investment of £3.5 million has been made in the foundry businesses to support productivity improvements, approximately £2.0 million of which has been on automation projects.
With customer requirements forecast to remain steady at the current levels, particularly in the commercial vehicles sector, our focus will be on our continuous efforts to improve productivity to enhance the margin of this segment.
Machining
The machining business generated total sales of £27.8 million in the year compared to £24.8 million in the previous year. Of the total revenue, 25.8% was generated from external customers compared to 25.2% in 2018.
The segmental result for the year was a loss of £1.34 million (2018 - loss of £3.95 million).
The new management team in the machining business has now been in place for just over 12 months. The initial focus during this period was to stabilise operations and ensure customer schedules were met. Having achieved supply stability, the initiatives implemented during this time have now started to positively impact results, particularly in the final quarter of the financial year. These improvements will have an increasing impact on results during the current year, although it will still take time before the gains are fully realised.
The closure of the Fradley site was completed during the year and the machining business was consolidated to operate from the facility at Brownhills.
We have invested £1.9 million during the year, which is significantly lower than the previous year, as management remain focused on ensuring an enhanced return on the capital already invested in the machining business. This investment included the successful introduction of two pilot automation cells with the roll-out of automation to continue during 2019/20 and beyond.
Management is now applying a greater focus on maintaining existing equipment to ensure the asset returns are maximised thus removing the need for further investment in capacity. Consequently the useful economic lives of the recently acquired items of plant and machinery was reviewed during the year. It was determined that a life of 15 years is more appropriate than the 10 years previously used. This life is within the range set out in the group accounting policies and the change has resulted in a reduction of the depreciation charge for the period of £1.0 million.
Business review and performance
Revenue
Group revenues increased by 12.7% to £150.2 million compared to £133.3 million reported in 2018, of which 76% was exported (2018 - 73%).
The revenue from the foundry operations to external customers increased 12.7% to £143.1 million (2018 - £127.0 million) with the dispatch weight of castings to third-party customers increasing 6.1% to 52,200 tonnes (2018 - 49,200 tonnes).
Revenue from the machining operation to external customers increased by 14.5% during the year to £7.2 million (2018 - £6.3 million).
Operating profit and segmental result
The group operating profit for the year was £13.9 million compared to £11.9 million reported in 2018, which represents a return on sales of 9.3% (2018 - 9.0%). However, this result includes exceptional costs of £1.28 million, primarily relating to a defined benefit pension charge connected with the equalisation of guaranteed minimum pensions between men and women (as set out in note 4); an adjusted return on sales figure would be 10.1% (2018 - 8.9%).
The foundry operations returned a segmental profit of £16.8 million compared to £16.1 million in 2018. This represents a slight decrease in segmental profit as a percentage of total segment sales to 10.2% from 11.0% in 2018.
The segmental result of the machining operation was a loss of £1.34 million in the year compared to £3.95 million in 2018.
Icelandic bank receipts
During the year we have received £0.02 million (2018 - £0.11 million) in respect of the failed Icelandic banks.
Finance income
The level of finance income has remained consistent to the prior year at £0.13 million.
Profit before income tax and exceptional items
Profit before income tax and exceptional items has increased to £15.3 million from £12.0 million.
Taxation
The current year tax charge of £3.04 million (2018 - £2.28 million) is made up of a current tax charge of £3.17 million (2018 - £2.72 million) and a deferred tax credit of £0.13 million (2018 - £0.44 million).
The effective rate of tax of 21.6% (2018 - 18.9%) is higher than the main rate of corporation tax of 19%. The main reason for this is the impact of the pension adjustments of £1.29 million relating to GMP equalisation and £0.24 million of administrative costs, in respect of the pension schemes, neither of which are deductible for taxation purposes.
Earnings per share
Basic earnings per share increased 12.3% to 25.23 pence (2018 - 22.46 pence), reflecting the 16.3% increase in profits and a higher effective tax rate compared to the previous year.
Due to the nature and magnitude of the exceptional items, an alternative earnings per share excluding exceptional items has been presented; this has increased by 26.8% to 28.16 pence (2018 - 22.21 pence).
There has been no change in the weighted average number of shares in issue of 43,632,068.
Dividends
The directors are recommending an increase in the final dividend to 11.40 pence per share (2018 - 11.12 pence per share) to be paid on 27 August 2019 to shareholders on the register on 19 July 2019. This would give a total normal distribution for the year of 14.78 pence per share (2018 - 14.50 pence per share).
In addition, a supplementary dividend of 15.00 pence per share has been declared which will be payable on 23 July 2019 to shareholders on the register on 21 June 2019.
Cash flow
The group generated cash from operating activities of £18.2 million compared to £17.4 million in 2018. When compared to 2018, the increase in operating profit was partially offset by the greater increase in working capital than in 2018. The increase in payables of £2.0 million was offset by increases in inventory and receivables of £2.9 million and £4.4 million respectively.
Corporation tax payments during the year totalled £2.7 million compared to £3.2 million in 2018, reflecting the timing of quarterly payments.
Capital expenditure during the year amounted to £5.3 million (2018 - £11.2 million). This included investment of £2.0 million in automation as well as other productivity enhancements. The charge for depreciation was £8.3 million compared to £8.5 million in 2018.
The current interest-bearing deposit of £4.9 million taken out in the previous year matured with £5.0 million rolled over to mature during the next financial year; the net movement being an increase of £0.1 million in current interest-bearing deposits.
Repayments of £4.5 million (2018 - £3.1 million) were received from the final salary pension schemes during the year and advances were made to the schemes of £2.4 million (2018 - £3.3 million). The lower level of advances reflects the reduction in value of deferred members transferring out of the schemes.
Dividends paid to shareholders were £6.3 million in the year compared to £6.1 million in 2018.
The net cash and cash equivalents movement for the year was an increase of £6.6 million (2018 - a decrease of £3.1 million).
At 31 March 2019, the total cash and deposits position at the balance sheet date is £30.8 million (2018 - £24.1 million).
Pensions
The pension valuation showed an increase in the surplus, on an IAS 19 (Revised) basis, to £24.4 million compared to £22.6 million in the previous year. This includes an increase in the expected future liabilities of £1.29 million in respect of guaranteed minimum pension equalisation.
The pension surplus continues not to be shown on the balance sheet due to the IAS 19 (Revised) restriction of recognition of assets where the company does not have an unconditional right to receive returns of contributions or refunds.
Balance sheet
Net assets at 31 March 2019 were £134.4 million (2018 - £128.1 million). Other than the total comprehensive income for the year of £12.6 million, the only movement relates to the dividend charge of £6.3 million. 
Non-current assets have decreased to £71.8 million (2018 - £76.9 million) primarily as a result of reduced investment in property, plant and equipment during the year and the transfer of the Fradley property (written down value of £1.1 million) to assets held for sale. In addition, the continued planned repayments of the pension scheme debtor means the longer term element has been fully repaid (2018 - £1.1 million), details of which are set out in note 6. 
Current assets have increased to £92.1 million (2018 - £78.4 million). The level of inventories and receivables have increased compared to 2018 along with the asset reclassified as held for resale and total cash balances.
Total liabilities have increased to £29.5 million (2018 - £27.2 million), largely as a result of an increase in trade payables.
 
 




 
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2019







                2019


                  2018








Before exceptional items
£000


Exceptional items
(note 4)
£000


Total
£000


Before exceptional items
£000


Exceptional items
(note 4)
£000


Total
£000


 




Revenue


150,236


-


150,236


133,276


-


133,276


 




Cost of sales


(118,129)


-


(118,129)


(103,674)


-


(103,674)


 




Gross profit


32,107


-


32,107


29,602


-


29,602


 




Distribution costs


(2,794)


-


(2,794)


(3,818)


-


(3,818)


 




Administrative expenses


(14,116)


(1,275)


(15,391)


(13,949)


109


(13,840)


 




Profit from operations


15,197


(1,275)


13,922


11,835


109


11,944


 




Finance income


128


-


128


133


-


133


 




Profit before income tax


15,325


(1,275)


14,050


11,968


109


12,077


 




Income tax expense


(3,040)


-


(3,040)


(2,279)


-


(2,279)


 




Profit for the year attributable to equity holders of the parent company


12,285


(1,275)


11,010


9,689


109


9,798


 
































 




Profit for the year attributable to equity holders of the parent company










11,010










9,798


 




Other comprehensive income/(losses) for the year:


























 




Items that will not be reclassified to profit and loss:


























 




Movement in unrecognised surplus on defined benefit pension schemes net of actuarial gains and losses










237










352


 




Defined benefit pension schemes GMP equalisation charge










1,290










-


 
















1,527










352


 




Items that may be reclassified subsequently to profit and loss:


























 




Change in fair value of available-for-sale financial assets










44










(72)


 




Tax effect of items that may be reclassified










(7)










15


 
















37










(57)


 




Other comprehensive income for the year (net of tax)










1,564










295


 




Total comprehensive income for the year attributable to the equity holders of the parent company










12,574










10,093


 




Earnings per share attributable to the equity holders of the parent company


























 




Basic and diluted










25.23p










22.46p


 




Basic and diluted before exceptional items


28.16p










22.21p










 















 
 




 
Consolidated Balance Sheet
as at 31 March 2019











2019
£000


2018
£000




ASSETS
















Non-current assets
















Property, plant and equipment






71,438


75,448




Financial assets






380


336




Other receivables






-


1,135












71,818


76,919




Current assets
















Inventories






19,164


16,284




Trade and other receivables






41,121


38,090




Other current interest-bearing deposits






5,000


4,900




Cash and cash equivalents






25,771


19,174












91,056


78,448




Assets classified as held for sale






1,060


-












92,116


78,448




Total assets






163,934


155,367




LIABILITIES
















Current liabilities
















Trade and other payables






24,222


22,242




Current tax liabilities






1,842


1,380












26,064


23,622




Non-current liabilities
















Deferred tax liabilities






3,481


3,603




Total liabilities






29,545


27,225




Net assets






134,389


128,142




Equity attributable to equity holders of the parent company
















Share capital






4,363


4,363




Share premium account






874


874




Other reserve






13


13




Retained earnings






129,139


122,892




Total equity






134,389


128,142



 
 




 
Consolidated Cash Flow Statement
for the year ended 31 March 2019











2019
£000


2018
£000




Cash flows from operating activities
















Profit before income tax






14,050


12,077




Adjustments for:
















Depreciation






8,296


8,525




(Profit)/loss on disposal of property, plant and equipment






(160)


9






















Finance income






(128)


(133)






















Pension administrative costs






237


352




Pension GMP equalisation charge






1,290


-




Increase in inventories






(2,880)


(2,221)




Increase in receivables






(4,449)


(3,568)




Increase in payables






1,980


2,376




Cash generated from operating activities






18,236


17,417




Tax paid






(2,707)


(3,190)




Interest received






108


111




Net cash generated from operating activities






15,637


14,338






















Cash flows from investing activities
















Dividends received from listed investments






20


22




Purchase of property, plant and equipment






(4,858)


(11,223)




Proceeds from disposal of property, plant and equipment






160


3




Transfer (to)/from other current interest-bearing deposits






(100)


100




Repayments from pension schemes






4,455


3,122




Advances to the pension schemes






(2,390)


(3,321)




Net cash used in investing activities






(2,713)


(11,297)






















Cash flow from financing activities
















Dividends paid to shareholders






(6,327)


(6,095)




Net cash used in financing activities






(6,327)


(6,095)






















Net increase/(decrease) in cash and cash equivalents






6,597


(3,054)




Cash and cash equivalents at beginning of year






19,174


22,228




Cash and cash equivalents at end of year






25,771


19,174




Cash and cash equivalents:
















Short-term deposits






19,828


16,846




Cash available on demand






5,943


2,328












25,771


19,174



 
 




 
Consolidated Statement of Changes in Equity
for the year ended 31 March 2019







Equity attributable to equity holders of the parent








Share
capitala)
£000


Share
premiumb)
£000


Other
reservec)
£000


Retained
earningsd)
£000


Total
equity
£000




At 1 April 2018


4,363


874


13


122,892


128,142




Profit for the year


-


-


-


11,010


11,010




Other comprehensive income/(losses):
























Movement in unrecognised surplus on defined benefit pension schemes net of actuarial gains and losses


-


-


-


237


237




Defined benefit pension schemes GMP equalisation charge


-


-


-


1,290


1,290




Change in fair value of available for sale assets


-


-


-


44


44




Tax effect of items taken directly to reserves


-


-


-


(7)


(7)




Total comprehensive income for the year ended

31 March 2019


-


-


-


12,574


12,574




Dividends (see note 5)


-


-


-


(6,327)


(6,327)




At 31 March 2019


4,363


874


13


129,139


134,389



 







Equity attributable to equity holders of the parent








Share
capitala)
£000


Share
premiumb)
£000


Other
reservec)
£000


Retained
earningsd)
£000


Total
equity
£000




At 1 April 2017


4,363


874


13


118,894


124,144




Profit for the year


-


-


-


9,798


9,798




Other comprehensive income/(losses):
























Movement in unrecognised surplus on defined benefit pension schemes net of actuarial gains and losses


-


-


-


352


352




Change in fair value of available for sale assets


-


-


-


(72)


(72)




Tax effect of items taken directly to reserves


-


-


-


15


15




Total comprehensive income for the year ended
























31 March 2018


-


-


-


10,093


10,093




Dividends (see note 5)


-


-


-


(6,095)


(6,095)




At 31 March 2018


4,363


874


13


122,892


128,142



a)   Share capital (note 17) - The nominal value of allotted and fully paid up ordinary share capital in issue.
b)   Share premium - Amount subscribed for share capital in excess of nominal value.
c)   Other reserve - Amounts transferred from share capital on redemption of issued shares.
d)   Retained earnings - Cumulative net gains and losses recognised in the statement of comprehensive income.
 
 




 
Notes to the Financial Statements
1 Basis of preparation
The group financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards ('IAS') and Interpretations (collectively 'IFRS'), as endorsed for use in the EU.
 
The IFRSs applied in the group financial statements are subject to ongoing amendment by the IASB and subsequent endorsement by the European Commission and therefore subject to possible change in the future. Further standards and interpretations may be issued that will be applicable for financial years beginning on or after 1 April 2019 or later accounting periods but may be adopted early.
 
The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies.
 
The primary statements within the financial information contained in this document have been presented in accordance with IAS 1 Presentation of Financial Statements.
 
The financial statements are prepared under the historical cost convention, except where adjusted for revaluations of certain assets, and in accordance with applicable Accounting Standards and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies used are consistent with those disclosed in the 31 March 2018 financial statements. The presentation currency used is sterling and the amounts have been presented in round thousands ("£000").
 
2 Operating segments
For internal decision-making purposes, the group is organised into three operating companies which are considered to be the operating segments of the group: Castings P.L.C. and William Lee Limited are aggregated into Foundry operations and CNC Speedwell Limited is the Machining operation.
Inter-segment transactions are entered into under the normal commercial terms and conditions that would be available to third parties.
The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2019:







Foundry
operations
£000


Machining
operations
£000


Elimination
£000


Total
£000




Revenue from external customers


143,060


7,176


-


150,236




Inter-segmental revenue


21,499


20,605


-


42,104


























Segmental result


16,832


(1,342)


(56)


15,434




Unallocated costs:




















Exceptional credit for recovery of Icelandic bank deposits

previously written off














15




Defined benefit pension cost














(237)




Defined benefit pension GMP equalisation charge














(1,290)




Finance income














128




Profit before income tax














14,050




Total assets


145,747


33,393


(15,206)


163,934




Non-current asset additions


3,496


1,850


-


5,346




Depreciation


4,183


4,113


-


8,296




Total liabilities


(29,632)


(9,879)


9,966


(29,545)



All non-current assets are based in the United Kingdom.




 
The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2018:







Foundry
operations
£000


Machining
operations
£000


Elimination
£000


Total
£000




Revenue from external customers


127,007


6,269


-


133,276




Inter-segmental revenue


19,024


18,571


-


37,595


























Segmental result


16,051


(3,950)


86


12,187




Unallocated costs:




















Exceptional credit for recovery of Icelandic bank deposits




















previously written off














109




Defined benefit pension cost














(352)




Finance income














133




Profit before income tax














12,077




Total assets


135,669


36,258


(16,560)


155,367




Non-current asset additions


4,134


7,089


-


11,223




Depreciation


3,921


4,604


-


8,525




Total liabilities


(27,008)


(11,581)


11,364


(27,225)



All non-current assets are based in the United Kingdom.







2019
£000


2018
£000




The geographical analysis of revenues by destination for the year is as follows:












United Kingdom


35,763


36,542




Sweden


42,758


36,787




Netherlands


21,830


22,070




Rest of Europe


42,290


33,452




North and South America


6,849


3,735




Other


746


690








150,236


133,276



All revenue arises in the United Kingdom from the group's continuing activities.
3 Exceptional items







2019
£000


2018
£000




Recovery of past provision for losses on deposits with Icelandic banks


(15)


(109)




Defined benefit pension scheme GMP equalisation charge


1,290


-








1,275


(109)



The company reported in the year ended 31 March 2009 that £1.86 million was included in other receivables as the net recoverable after provision from various Icelandic banks. So far £3.8 million has been received of the original balance of £5.7 million with the excess over the £1.86 million being shown as an exceptional credit.
On 26 October 2018, the High Court judgment involving Lloyds Banking Group defined benefit pension schemes concluded that schemes should equalise pension benefits for men and women in relation to guaranteed minimum pension ('GMP') benefits. Working in conjunction with the schemes' actuary, the best estimate assessment of the impact is a £1.29 million increase to the pension liabilities as at 31 March 2019. The directors have made the judgement that this estimated impact is a past service cost in respect of pensionable service between 1990 and 1997 that should be reflected through the consolidated income statement as an exceptional item and that any subsequent change in the estimate should be recognised in other comprehensive income.




 
4 Income tax expense







2019
£000


2018
£000




Corporation tax based on a rate of 19% (2018 - 19%)












UK corporation tax












Current tax on profits for the year


3,250


2,759




Adjustments to tax charge in respect of prior years


(81)


(44)








3,169


2,715


















Deferred tax












Current year origination and reversal of temporary differences


(129)


(95)




Adjustment to deferred tax charge in respect of prior years


-


(341)








(129)


(436)




Taxation on profit


3,040


2,279


















Profit before income tax


14,050


12,077


















Tax on profit at the standard rate of corporation tax in the UK of 19% (2018 - 19%)


2,670


2,295




Effect of:












Expenses not deductible for tax purposes


161


302




Adjustment to tax charge in respect of prior years


(81)


(44)




Adjustment to deferred tax charge in respect of prior years


-


(341)




Pension adjustments


290


67




Total tax charge for the year


3,040


2,279




Effective rate of tax (%)


21.6


18.9



Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2017 on 6 September 2017. These include reductions to the main rate, to reduce the rate to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.
5 Dividends







2019
£000


2018
£000




Final paid of 11.12p per share for the year ended 31 March 2018 (2017 - 10.59p)


4,852


4,620




Interim paid of 3.38p per share (2018 - 3.38p)


1,475


1,475








6,327


6,095



The directors are proposing a final dividend of 11.40 pence (2018 - 11.12 pence) per share totalling £4,974,056 (2018 - £4,851,886). In addition, the directors have declared a supplementary dividend of 15.00 pence per share, totalling £6,544,810. These dividends have not been accrued at the balance sheet date.
6 Earnings per share
Earnings per share of 25.23 pence per share (2018 - 22.46 pence per share) is calculated on the profit on ordinary activities after taxation of £11,010,000 (2018 - £9,798,000). Earnings per share excluding exceptional items of 28.16 pence per share (2018 - 22.21 pence per share) is calculated on the profit on ordinary activities before exceptional items after taxation of £12,285,000 (2018 - £9,689,000).
The weighted average number of shares in issue at the end of the year of 43,632,068 (2018 - 43,632,068). There are no potentially dilutive shares, hence the diluted earnings per share are the same as above.




 
7 Property, plant and equipment







Freehold and leasehold land and
buildings
£000


Plant and equipment
£000


Total
£000




Cost
















At 1 April 2018


41,081


135,549


176,630




Additions during the year


369


4,977


5,346




Disposals


-


(559)


(559)




Assets classified as held for sale


(1,624)


-


(1,624)




At 31 March 2019


39,826


139,967


179,793




Accumulated depreciation
















At 1 April 2018


9,178


92,004


101,182




Charge for year


1,166


7,130


8,296




Disposals


-


(559)


(559)




Assets classified as held for sale


(564)


-


(564)




At 31 March 2019


9,780


98,575


108,355




Net book values
















At 31 March 2019


30,046


41,392


71,438




At 31 March 2018


31,903


43,545


75,448








































Cost
















At 1 April 2017


40,235


125,863


166,098




Additions during the year


846


10,377


11,223




Disposals


-


(691)


(691)




At 31 March 2018


41,081


135,549


176,630




Accumulated depreciation
















At 1 April 2017


8,014


85,322


93,336




Charge for year


1,164


7,361


8,525




Disposals


-


(679)


(679)




At 31 March 2018


9,178


92,004


101,182




Net book values
















At 31 March 2018


31,903


43,545


75,448




At 31 March 2017


32,221


40,541


72,762



The cost of land and buildings includes £nil for property held on long leases (2018 - £359,000). The net book value of land and buildings includes £2,169,000 (2018 - £2,527,000) for land which is not depreciated.
Included within plant and equipment are assets in the course of construction with a net book value of £240,000 (2018 - £158,000) and assets not fully in production with a net book value of £nil (2018 - £1,618,000) which are not being depreciated. 
In June 2018 the directors decided to sell the long leasehold land and property at Fradley which is an asset within the foundry segment in note 2. There are a number of interested parties and the sale is expected to complete before the end of March 2020 and therefore the asset has been shown under assets classified as held for sale.
8 Commitments and contingencies







2019
£000


2018
£000




Capital commitments contracted for by the group but not provided for in the financial statements


1,631


752



The group does not insure against the potential cost of product warranty or recall. Accordingly, there is always the possibility of claims against the group for quality related issues on parts supplied to customers. As at 31 March 2019, the directors do not consider any significant liability will arise in respect of any such claims (2018 - £nil).
9 Pensions
The company operates two defined benefit pension schemes which were closed to future accruals at 6 April 2009. The funded status of these schemes at 31 March 2019 was a surplus of £24,418,000 (2018 - £22,631,000). The pension surplus has not been recognised as the group does not have an unconditional right to receive returns of contributions or refunds under the scheme rules.
10 Preliminary statement
The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 March 2019 or 2018, but is derived from those financial statements. Statutory financial statements for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the company's Annual General Meeting. The auditors have reported on those financial statements; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under Section 498 of the Companies Act 2006.
The annual report and financial statements will be posted to shareholders on 21 June 2019 and will be available on the company's website, www.castings.plc.uk, from 28 June 2019.




 
Appendix A - Principal Risks and Uncertainties
 
Risk
In common with all trading businesses, the group is exposed to a variety of risks in the conduct of its normal business operations.
The group maintains a range of insurance policies against major identified insurable risks, including (but not limited to) those related to business interruption, damage to property and equipment, damage to stocks, public and product liability and employers' liability.
The directors regularly assess the principal risks facing the entity. Whilst it is difficult to completely quantify every material risk that the group faces, below is a summary of those risks that the directors believe are most significant to the group's business and could have a material impact on future performance, causing it to differ materially from expected or historic achieved results. Information is also provided as to how the risks are, where possible, being managed or mitigated.
Operational and commercial
The group's revenues are principally derived from commercial vehicle and automotive markets. Both markets, and therefore group revenues, can be subject to variations in patterns of demand. Commercial vehicle sales are linked to technological factors

(e.g. emission legislations) and economic growth. Passenger vehicle sales are influenced, inter alia, by consumer preferences, incentives and the availability of consumer credit.
Market competition
Automotive and commercial vehicle markets are, by their nature, highly competitive, which has historically led to deflationary pressure on selling prices. This pressure is most pronounced in cycles of lower demand. A number of the group's customers are also adopting global sourcing models with the aim to reduce bought-out costs. Whilst there can be no guarantee that business will not be

lost on price, we are confident that we can remain competitive.
Customer concentration, programme dependencies and relationships
The loss of, or deterioration in, any major customer relationship could have a material impact on the group's results. We build strong relationships with our customers to develop products to meet their specific needs.
European market exposure
The negotiations on the UK's membership and future relationship with the European Union remain ongoing and so, as a group with over 70% of sales exported to Europe, this represents a potential risk. The risk cannot be addressed until the final position is known but, during this period of uncertainty, we maintain a regular dialogue with our key suppliers and customers to ensure the risk in disruption to supply is mitigated. As part of the short-term mitigation, we are maintaining higher than normal levels of raw material inventories and customers have been encouraged to do the same.
Product quality and liability
The group's businesses expose it to certain product liability risks which, in the event of failure, could give rise to material financial liabilities. Whilst it is a policy of the group to limit its financial liability by contract in all long-term agreements ("LTAs"), it is not always possible to secure such limitations in the absence of LTAs. The group's customers do require the maintenance of demanding quality systems to safeguard against quality-related risks and the group maintains appropriate external quality accreditations. The group maintains insurance for public liability-related claims but does not insure against the risk of product warranty or recall.
Foreign exchange
The group is exposed to foreign exchange risk on both sales and purchases denominated in currencies other than sterling, being primarily euro and US dollar. Foreign exchange rate risk is sometimes partially mitigated by using forward foreign exchange contracts. Such contracts are short term in nature, matched to contractual cash flows and non-speculative.
Equipment
The group operates a number of specialist pieces of equipment, including foundry furnaces, moulding lines and CNC milling machines which, due to manufacturing lead times, would be difficult to replace sufficiently quickly to prevent major interruption and possible loss of business in the event of unforeseen failure. Whilst this risk cannot be entirely mitigated without uneconomic duplication of all key equipment, all key equipment is maintained to a high standard and inventories of strategic equipment spares maintained. The facilities at Brownhills and Dronfield have similar equipment and work can be transferred from one location to another very quickly.
Suppliers
Although the group takes care to ensure alternative sources of supply remain available for materials or services on which the group's businesses are critically dependent, this is not always possible to guarantee without risk of short-term business disruption, additional costs and potential damage to relationships with key customers.
Commodity and energy pricing
The principal metal raw materials used by the group's businesses are steel scrap and various alloys. The most important alloy raw material inputs are premium graphite, magnesium ferro-silicon, copper, nickel and molybdenum. Wherever possible, prices and quantities (except steel) are secured through long-term agreements with suppliers. In general, the risk of price inflation of these materials resides with the group's customers through price adjustment clauses.
Energy contracts are locked in for at least 12 months, although renegotiation risks remain at contract maturity dates but again this is mitigated through the application of price adjustment clauses. At 31 March 2019, the group has electricity contracts in place until 30 September 2020.
Information technology and systems reliability
The group is dependent on its information technology ("IT") systems to operate its business efficiently, without failure or interruption. Whilst data within key systems is regularly backed up and systems subject to virus protection, any failure of backup systems or other major IT interruption could have a disruptive effect on the group's business.
Short-term deposits
A review of credit ratings is undertaken prior to making new deposits and the maximum exposure to any one counterparty is restricted. However, institutions can be downgraded before maturity, thereby possibly placing these deposits at risk.
Environmental
The group's businesses are subject to compliance with many different laws and requirements in the UK, Europe, North America and elsewhere. Great care is made to act responsibly towards the environment to achieve compliance with all relevant laws and to establish a standard above the minimum level required. Whilst the group's manufacturing processes are not generally considered to provide a high risk of harm to the environment, a major control failure leading to environmental harm could give rise to a material financial liability as well as significant harm to the reputation of our business.
Pension scheme funding
The fair value of the assets and liabilities of the group's defined benefit pension schemes is substantial. As at 31 March 2019 the schemes were in surplus on an IAS 19 (Revised) basis. Further details are set out in note 6 to the financial statements. The potential risks and uncertainties resulting from factors such as investment return, interest rates and mortality rates are mitigated by careful management and continual monitoring of the schemes and by appropriate and timely action to ensure as far as possible that the defined benefit pension liabilities do not increase disproportionately. The company works closely with the scheme trustees and specialist advisers in managing the inherent risks of such schemes.
The schemes were closed to future accruals from 6 April 2009, which only leaves past service liabilities to be funded.
 




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