REG - Castings PLC - Half-year Report
12/11/2021 07:05
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RNS Number : 2121S Castings PLC 12 November 2021
CASTINGS P.L.C.
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2021
Interim Management Report
Overview
Sales for the six months ended 30 September 2021 were £69.7 million (2020 -
£41.7 million) with profit before tax of £5.41 million (2020 - loss of
£0.63 million). In the prior period, demand was significantly reduced as a
result of the COVID-19 pandemic.
After a strong start, the current period has been impacted by supply chain
disruption affecting our commercial vehicle customers, which represent 70% of
group revenue. As a result of these issues (particularly in respect of
semiconductors), the OEMs have been unable to build sufficient heavy trucks to
satisfy the high demand in the market.
Group despatch weight during the first quarter of the financial year was in
line with recent years before COVID-19. However, with the OEMs having to
reduce truck build rates to below their order intake levels, group sales were
reduced from the last two weeks of June and into the second quarter.
Whilst forward demand schedules from our customers have remained high
throughout the period, the conversion rate to actual sales has been
significantly below what we would normally expect. In an attempt to cut across
these fluctuations and remain efficient, higher production levels were
retained and inventory levels increased. However, this has been hampered by
labour recruitment difficulties and, as a result, we closed the machining
business for a week at the end of September.
Raw material prices have continued to rise throughout the period which, with
the time lag in the associated sales price increase, has continued to put
pressure on margins.
Foundry operations
Output during the period was up 69% at 24,300 tonnes (2020 - 14,350 tonnes)
and external sales revenue was up by 68% to £68.1 million.
The profit from the foundry segment of £5.3 million compares to £0.8 million
in the equivalent period last year ('previous period'). The margin has been
negatively impacted by lower and fluctuating demand during the period, as well
as rising raw material prices.
The strong group cash position has enabled the continued investment in foundry
facilities during the period, including the start of a production line
automation upgrade that will be completed in 2022/23.
Machining operation
CNC Speedwell generated external revenue of £1.6 million during the period,
an increase of 32% compared to the previous period, with a reported profit of
£0.1 million compared to a loss of £2.1 million in the previous period.
The break-even result demonstrates the positive impact of the productivity
improvements made in the business over recent years. However, being a
well-invested business with a depreciation charge of £1.8 million in the six
month period, the significantly lower levels of demand in the second quarter
had a particularly negative impact on the result.
The focus on automation and productivity improvements has continued, which
makes up the majority of the capital investment of £0.3 million during the
period.
Outlook
The long term demand schedules continue to reflect the higher build rates that
the heavy truck OEMs require to satisfy their order books. However, the medium
term call-off schedules have significantly reduced, reflecting the supply
chain restrictions being experienced by our customers.
The group is well positioned to see the benefits of the productivity
improvements in both the foundry and machining businesses when supply chain
restrictions do ease.
The automation of finishing processes within the foundries is now largely
complete, with the focus now shifting to automating elements of the melting
process. The automation investment programme in the machining business will
continue in the medium term.
The group maintains a strong balance sheet with cash levels of £34.6 million;
a decrease of £1.4 million during the period after the dividend payment of
£5.1 million.
Dividend
An interim dividend of 3.66 pence per share has been declared and will be paid
on 6 January 2022 to shareholders who are on the register at 26 November 2021.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a
material impact on the group's performance over the remaining six months of
the financial year and could cause actual results to differ materially from
expected and historical results.
The directors consider that the principal risks and uncertainties remain
substantially the same as those stated on pages 8 to 12 of the Annual Report
for the year ended 31 March 2021.
Cautionary statement
This Interim Management Report ('IMR') has been prepared solely to provide
additional information to shareholders to enable them to assess the group's
strategies and the potential for those strategies to succeed. The IMR should
not be relied on by any other party or for any other purpose. This IMR
contains certain forward-looking statements. These are made by the directors
in good faith based on the information available to them up to the time of
their approval of this report but such statements should be treated with
caution due to the inherent uncertainties, including both economic and
business risk factors, underlying any such forward-looking information.
The group undertakes no obligation to update any forward-looking statements
whether as a result of new information, future events or otherwise.
The IMR has been prepared for the group as a whole and therefore gives greater
emphasis to those matters which are significant to Castings P.L.C. and its
subsidiary undertakings when viewed as a whole.
By order of the board
BRIAN J. COOKE
Chairman
12 November 2021
Castings p.l.c.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2021
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£'000 £'000 £'000
Revenue 69,747 41,748 114,702
Cost of sales (55,798) (36,593) (94,870)
Gross profit 13,949 5,155 19,832
Distribution costs (1,490) (769) (2,237)
Administrative expenses (7,071) (5,722) (13,345)
Profit/(loss) before surplus on sale of property 5,388 (1,336) 4,250
Surplus on sale of property - 658 658
Profit/(loss) from operations 5,388 (678) 4,908
Finance income 19 51 79
Profit/(loss) before income tax 5,407 (627) 4,987
Income tax (expense)/credit (1,025) 121 (838)
Profit/(loss) for the period attributable to the equity holders 4,382 (506) 4,149
of the parent company
Other comprehensive income/(losses) for the period:
Items that will not be reclassified to profit and loss:
Movement in unrecognised surplus on defined benefit pension - - 142
schemes net of actuarial gains and losses
Defined benefit pension schemes GMP equalisation charge - - 66
- - 208
Items that may be reclassified subsequently to profit and loss:
Change in fair value of financial assets 26 (15) (50)
Tax effect of items that may be reclassified (4) 3 10
22 (12) (40)
Total other comprehensive income/(losses) for the period 22 (12) 168
(net of tax)
Total comprehensive income/(loss) for the period attributable 4,404 (518) 4,317
to the equity holders of the parent company
Earnings per share attributable to the equity holders
of the parent company
Basic 10.04p (1.16)p 9.51p
Diluted 10.03p (1.16)p 9.50p
Consolidated Balance Sheet
30 September 2021
Unaudited Unaudited Audited
30 September 30 September 31 March
2021 2020 2021
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 65,441 68,843 67,112
Financial assets 334 343 308
65,775 69,186 67,420
Current assets
Inventories 20,275 17,932 18,719
Trade and other receivables 36,048 30,777 35,358
Current tax asset 251 411 -
Cash and cash equivalents 34,648 35,217 36,092
91,222 84,337 90,169
Total assets 156,997 153,523 157,589
LIABILITIES
Current liabilities
Trade and other payables 24,528 23,550 24,371
Current tax liabilities - - 184
24,528 23,550 24,555
Non-current liabilities
Deferred tax liabilities 3,628 3,807 3,570
Total liabilities 28,156 27,357 28,125
Net assets 128,841 126,166 129,464
Equity attributable to equity holders of the parent company
Share capital 4,363 4,363 4,363
Share premium account 874 874 874
Other reserve 13 13 13
Retained earnings 123,591 120,916 124,214
Total equity 128,841 126,166 129,464
Consolidated Cash Flow Statement
For six months ended 30 September 2021
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
£'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) before income tax 5,407 (627) 4,987
Adjustments for:
Depreciation 4,050 4,251 8,802
Profit on disposal of property, plant and equipment - - 3
Profit on disposal of held for sale asset - (658) (658)
Finance income (19) (51) (79)
Equity settled share-based payment expense 74 - 21
Pension administrative costs - - 142
Pension GMP equalisation charge - - 66
(Increase)/decrease in inventories (1,556) 3,243 2,456
Decrease/(increase) in receivables 383 (712) (6,979)
Increase in payables 157 3,458 4,279
Cash generated from operating activities 8,496 8,904 13,040
Tax paid (1,406) (78) (672)
Interest received 9 41 60
Net cash generated from operating activities 7,099 8,867 12,428
Cash flows from investing activities
Dividends received from listed investments 10 10 19
Purchase of property, plant and equipment (2,379) (2,606) (5,244)
Proceeds from disposal of property, plant and equipment - - 20
Proceeds from disposal of held for sale asset - 1,923 1,718
Repayments from pension schemes - - 2,778
Advances to pension schemes (1,073) (1,404) (2,496)
Net cash used in investing activities (3,442) (2,077) (3,205)
Cash flow from financing activities
Dividends paid to shareholders (5,101) (4,974) (6,532)
Net cash used in financing activities (5,101) (4,974) (6,532)
Net (decrease)/increase in cash and cash equivalents (1,444) 1,816 2,691
Cash and cash equivalents at beginning of period 36,092 33,401 33,401
Cash and cash equivalents at end of period 34,648 35,217 36,092
Cash and cash equivalents:
Short-term deposits 19,080 33,394 13,062
Cash available on demand 15,568 1,823 23,030
34,648 35,217 36,092
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of the parent
Unaudited Share Share Other reserve Retained Total
capital premium £'000 earnings equity
£'000 £'000 £'000 £'000
At 1 April 2021 4,363 874 13 124,214 129,464
Profit for the period - - - 4,382 4,382
Other comprehensive income/(losses):
Change in fair value of financial assets - - - 26 26
Tax effect of items taken directly to reserves - - - (4) (4)
Total comprehensive income for the period - - - 4,404 4,404
ended 30 September 2021
Equity settled share-based payments - - - 74 74
Dividends - - - (5,101) (5,101)
At 30 September 2021 4,363 874 13 123,591 128,841
Unaudited £'000 £'000 £'000 £'000
£'000
At 1 April 2020 4,363 874 13 126,408 131,658
Loss for the period - - - (506) (506)
Other comprehensive income/(losses):
Change in fair value of financial assets - - - (15) (15)
Tax effect of items taken directly to reserves - - - 3 3
Total comprehensive loss for the period - - - (518) (518)
ended 30 September 2020
Dividends - - - (4,974) (4,974)
At 30 September 2020 4,363 874 13 120,916 126,166
Audited £'000 £'000 £'000 £'000 £'000
At 1 April 2020 4,363 874 13 126,408 131,658
Profit for the period - - - 4,149 4,149
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit pension schemes net of - - - 142 142
actuarial gains and losses
Defined benefit pension GMP equalisation charge - - - 66 66
Change in fair value of financial assets - - - (50) (50)
Tax effect of items taken directly to reserves - - - 10 10
Total comprehensive income for the year - - - 4,317 4,317
ended 31 March 2021
Equity settled share-based payments - - - 21 21
Dividends - - - (6,532) (6,532)
At 31 March 2021 4,363 874 13 124,214 129,464
Notes
1. General information
Castings P.L.C. (the 'company') is a company domiciled in England. The
condensed consolidated interim financial statements of the company for the six
months ended 30 September 2021 comprise the company and its subsidiaries
(together referred to as the 'group').
The principal activities of the group are the manufacture of iron castings and
machining operations.
The financial information for the year ended 31 March 2021 does not constitute
the full statutory accounts for that period. The Annual Report and Financial
Statements for the year ended 31 March 2021 have been filed with the Registrar
of Companies. The Independent Auditors' Report on the Annual Report and
Financial Statements for 2020 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under 498 (2) or
(3) of the Companies Act 2006.
This report has not been audited and has not been reviewed by independent
auditors pursuant to the Auditing Practices Board guidance on Review of
Interim Financial Information.
2. Accounting policies
The annual financial statements of Castings P.L.C. are prepared using the
recognition and measurement principles of IFRSs adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union. The condensed set of
financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the UK.
Basis of preparation
After making enquiries, the directors have a reasonable expectation that the
company and the group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the half-yearly condensed consolidated
interim financial statements.
The same accounting policies, presentation and methods of computation are
followed in the condensed consolidated interim financial statements as applied
in the group's latest annual audited financial statements.
3. Seasonality of operations
The directors do not consider there to be any significant seasonality or
cyclicality to the results of the group.
4. Segment information
For internal decision making purposes, the group is organised into three
operating companies which are considered to represent two 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 for the half year to 30 September 2021.
Foundry Machining Elimination Total
operations £'000 £'000 £'000
£'000
Revenue from external customers 68,132 1,615 - 69,747
Inter-segmental revenue 7,538 9,381 - 16,919
Segmental result 5,336 52 - 5,388
Unallocated income:
Finance income
19
Profit before income tax 5,407
Total assets 141,272 28,119 (12,394) 156,997
Non-current asset additions 2,081 298 - 2,379
Depreciation 2,263 1,787 - 4,050
Total liabilities (27,328) (6,997) 6,169 (28,156)
The following shows the revenues, results and total assets by reportable
segment for the half year to 30 September 2020.
Foundry Machining Elimination Total
operations £'000 £'000 £'000
£'000
Revenue from external customers 40,523 1,225 - 41,748
Inter-segmental revenue 4,099 4,767 - 8,866
Segmental result 776 (2,112) - (1,336)
Unallocated income:
Exceptional profit on disposal of held for sale asset 658
Finance income
51
Loss before income tax (627)
Total assets 136,837 29,966 (13,280) 153,523
Non-current asset additions 1,784 822 - 2,606
Depreciation 2,246 2,005 - 4,251
Total liabilities (26,214) (9,299) 8,156 (27,357)
The following shows the revenues, results and total assets by reportable
segment for the year ended 31 March 2021.
Foundry Machining Elimination Total
operations £'000 £'000 £'000
£'000
Revenue from external customers 111,987 2,715 - 114,702
Inter-segmental revenue 11,089 15,594 - 26,683
Segmental result 6,659 (2,255) 13 4,417
Unallocated income/(costs):
Exceptional credit for recovery of Icelandic bank deposits previously written 41
off
Profit on disposal of held for sale asset 658
Defined benefit pension cost (142)
Defined benefit pension GMP equalisation charge (66)
Finance income 79
Profit before income tax 4,987
Total assets 140,141 28,795 (11,347) 157,589
Non-current asset additions 3,744 1,500 - 5,244
Depreciation 4,582 4,220 - 8,802
Total liabilities (26,525) (7,725) 6,125 (28,125)
5. Surplus on sale of property
During the prior period the group completed on the sale of a property that was
previously classified as an asset held for sale. The surplus on the sale of
the property was £658,000.
6. Dividends
Amounts recognised as distributions to shareholders in the period:
Half year to Half year to
30 September 30 September
2021 2020
£'000 £'000
Final dividend of 11.69p per share for the year ended 31 March 2021 5,101 4,974
(2020 - 11.40p per share)
5,101 4,974
The directors have declared an interim dividend in respect of the financial
year ending 31 March 2022 of 3.66p per share (2021 - 3.57p), which will be
paid on 6 January 2022.
7. Earnings per share and diluted earnings per share
Earnings per share is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period. The diluted earnings per share includes the
outstanding share options within the weighted average number of shares figure.
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2021 2020 2021
Profit/(loss) after tax (£'000) 4,382 (506) 4,149
Weighted average number of shares - basic calculation 43,632,068 43,632,068 43,632,068
Weighted average number of shares - diluted calculation 43,699,509 43,667,360 43,667,360
Earnings per share - basic 10.04p (1.16)p 9.51p
Earnings per share - diluted 10.03p (1.16)p 9.50p
8. Pension schemes
The group operates two defined benefit pension schemes which are closed to new
entrants and closed to future accruals on 6 April 2009. The assets of the
schemes are independent of the finances of the group and are administered by
trustees.
The pension schemes are related parties of the group and during the period
£1,073,000 (2020 - £1,404,000) was paid by the group on behalf of the
schemes in respect of pension payments and administration costs. At 30
September 2021, the outstanding balance of £3,569,000 (2020 - £4,182,000) is
repayable within one year.
Payments made by the company on behalf of the schemes in the current period
are repayable by 30 November 2022.
9. Interim report
Copies of this interim management report will be available on the company's
website, https://castings.plc.uk/ (https://castings.plc.uk/) , and from the
registered office.
Statement of Directors' Responsibilities
The directors confirm that the condensed consolidated interim financial
statements have been prepared in accordance with IAS 34 and that the interim
management report includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R.
The directors of Castings P.L.C. are listed on the back cover of this report.
By order of the board
S. J. Mant FCA
Group Finance Director
12 November 2021
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