REG - Castings PLC - Final Results <Origin Href="QuoteRef">CGS.L</Origin>
06/09/2014 02:12
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Castings PLC
11 June 2014
Castings plc
ANNUAL FINANCIAL REPORT
DTR 6.3.5 DISCLOSURE
YEAR ENDED 31 MARCH 2014
Chairman's Statement
The turnover of the group increased to £137.4m with profits of £21.8m.
As previously reported, the results were affected by the disruption following
the change in European exhaust emissions regulations from Euro 5 to Euro 6.
The increase in demand at short notice created excessive manufacturing and
transport costs to meet our customers' requirements. Business has since
returned to more predictable levels without exceptional disruptions.
Foundry Production
The foundries at Brownhills and Dronfield have enjoyed high levels of
production during most of the year and £3.4m has been invested to increase
capacity for core production and finishing.
Further prudent investments will be made to improve productivity in order to
maintain our position in a highly competitive market.
CNC Speedwell
Once again it is pleasing to report that CNC has increased sales both from
machining castings for our foundries and also for external customers. £6.1m
has been invested during the year on new machines and improved inspection
equipment. Further investments in plant and equipment will be made as and
when new orders are obtained.
Dividend
I am pleased to report the directors recommend an increase in the final
dividend to 9.83 pence per share. This, together with an increased interim
dividend, gives a total for the year of 12.96 pence per share.
Outlook
Customer requirements have slightly reduced at the present time from the high
levels achieved last year. However, several of our major customers have
forecast that demand will increase during quarters 3 and 4 of the current
financial year. We await further developments and hope the economic recovery
in Europe continues.
The company continues to invest in the most up to date machinery both in the
foundries and the machining operations and is in a sound financial position to
react at short notice for any future investments required.
In conclusion I would like to thank all our employees who have reacted well to
the variable demands from our customers.
BRIAN J. COOKE
Chairman
11 June 2014
Castings plc
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Business and Financial Review
Revenue has increased by 12% to £137.5 million of which 67% (2013 - 65%) was
exported. Profit before taxation increased to £21.8 million from £19.2
million.
The dispatch weight of castings to third party customers was 57,600 tonnes,
being an increase of 4,900 tonnes from the previous year.
Revenue from the machining operation, CNC Speedwell, to external customers
increased by 13% during the year.
During the year we have received £0.36 million (2013 - £0.15 million) from the
administrators of the UK subsidiaries of the Icelandic banks. This brings the
total sums received to date, of the original balance of £5.7 million, to £3.26
million which is £1.4 million in excess of the original estimate of
recoverable amounts. Given the uncertainty over the quantum and timing of any
possible further receipts, no allowance has been made for future recoverable
amounts.
The reduction in the level of finance income reflects the lower interest rates
available during the year.
Operationally the group generated £19.2 million in cash (after tax payments)
which, after investment of £9.7 million in property, plant and equipment and
£5.4 million in dividend payments, resulted in an increase in cash of £4.1
million in the year (excluding the impact of the £5 million long-term deposit
that matured during the year). This results in a total cash and deposits
position at the balance sheet date of £27.8 million.
The pension valuation showed an increase in the surplus, on an IAS 19
(Revised) basis, to £14.6 million. This improvement has been aided by
additional contributions of £4 million by the company during the year. The
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.
Overall the group returned a profit before taxation of £21.8 million (2013 -
£19.2 million) for the year. This includes a £0.1 million charge in respect of
the defined benefit pension schemes (as set out in note 6) in accordance with
IAS 19 (Revised) and £0.36 million credit for Icelandic bank receipts.
The directors are recommending a final dividend that will be paid in August
which, with the interim dividend paid in January, will result in the return of
£5.65 million to shareholders.
Consolidated Statement of Comprehensive Income
Year to31 March 2014£'000 Year to31 March 2013£'000
Revenue 137,466 122,215
Cost of sales (101,424) (90,479)
Gross profit 36,042 31,736
Distribution costs (2,722) (1,553)
Administrative expenses
Excluding exceptional (12,034) (11,481)
Exceptional (Note 3) 363 149
Total administrative expenses (11,671) (11,332)
Profit from operations 21,649 18,851
Finance income 184 306
Profit before income tax 21,833 19,157
Income tax expense (4,575) (4,371)
Profit for the year attributable to equity holders of the parent company 17,258 14,786
Other comprehensive income for the year:
Items that will not be reclassified to profit and loss:
Net actuarial loss and movement in unrecognised surplus on defined benefit pension schemes (3,872) (138)
Tax effect of items that will not be reclassified 853 -
(3,019) (138)
Items that may be reclassified subsequently to profit and loss:
Change in fair value of available-for-sale financial assets 28 4
Tax effect of items that may be reclassified (6) (1)
22 3
Total other comprehensive losses for the year (net of tax) (2,997) (135)
Total comprehensive income for the year attributable to the equity holders of the parent company 14,261 14,651
Earnings per share attributable to the equity holders of the parent company
Basic and diluted 39.55p 33.89p
Consolidated Balance Sheet
31 March2014£'000 31 March2013£'000
Assets
Non-current assets
Property, plant and equipment 65,195 61,676
Financial assets 522 494
65,717 62,170
Current assets
Inventories 12,621 10,642
Trade and other receivables 32,753 33,326
Other interest bearing deposits - 5,000
Cash and cash equivalents 27,780 18,654
73,154 67,622
Total assets 138,871 129,792
Liabilities
Current liabilities
Trade and other payables 21,076 19,686
Current tax liabilities 2,615 2,950
23,691 22,636
Non-current liabilities
Deferred tax liabilities 4,271 5,058
Total liabilities 27,962 27,694
Net assets 110,909 102,098
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 105,659 96,848
Total equity 110,909 102,098
Consolidated Cash Flow Statement
Year to31 March2014£'000 Year to31 March2013£'000
Cash flows from operating activities
Profit before income tax 21,833 19,157
Adjustments for:
Depreciation 6,046 7,416
Loss/(profit) on disposal of property, plant & equipment 94 (19)
Finance income (184) (306)
Excess of employer pension contributions over income statement charge (3,872) (138)
Increase in inventories (1,979) (1,332)
Decrease/(increase) in receivables 573 (3,135)
Increase in payables 1,390 823
Cash generated from operating activities 23,901 22,466
Tax paid (4,850) (4,925)
Interest received 162 285
Net cash generated from operating activities 19,213 17,826
Cash flows from investing activities
Dividends received from listed investments 22 21
Purchase of property, plant and equipment (9,668) (6,865)
Proceeds from disposal of property, plant and equipment 9 19
Transfer from/(to) other interest-bearing deposits 5,000 (5,000)
Proceeds from disposal of financial assets - 5
Net cash used in investing activities (4,637) (11,820)
Cash flow from financing activities
Dividends paid to shareholders (5,450) (5,157)
Net cash used in financing activities (5,450) (5,157)
Net increase in cash and cash equivalents 9,126 849
Cash and cash equivalents at beginning of period 18,654 17,805
Cash and cash equivalents at end of period 27,780 18,654
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of the parent
Share capital(a) £000 Share premium(b) £000 Other reserve(c) £000 Retained earnings (d)£000 Total equity £000
At 1st April 2013 4,363 874 13 96,848 102,098
Total comprehensive income for the period ended 31st March 2014 - - - 14,261 14,261
Dividends - - - (5,450) (5,450)
At 31st March 2014 4,363 874 13 105,659 110,909
Equity attributable to equity holders of the parent
Share capital(a) £000 Share premium(b) £000 Other reserve(c) £000 Retained earnings (d)£000 Total equity £000
At 1st April 2012 4,363 874 13 87,354 92,604
Total comprehensive income for the period ended 31st March 2013 - - - 14,651 14,651
Dividends - - - (5,157) (5,157)
At 31st March 2013 4,363 874 13 96,848 102,098
a) Share capital - 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.
Castings plc
Notes to the financial report
1. Basis of preparation and accounting policies
While the financial information included in the annual financial report
announcement has been prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards as
endorsed for use in the European Union (IFRSs), this announcement does not
contain sufficient information to comply with IFRSs.
The same accounting policies that were used in the group financial statements
for the year ended 31 March 2013 are followed except for the adoption of:
· IAS 1 'Presentation of Items in Other Comprehensive Income' (Amendments
to IAS 1) which introduces the grouping of items in other comprehensive
income.
· IAS 19 'Employee Benefits' (Revised 2011) which includes a number of
amendments to the accounting for defined benefit pension schemes, including
actuarial gains and losses are now required to be recognised in the statement
of comprehensive income and excluded permanently from profit and loss and
expected returns on plan assets are no longer recognised in profit and loss.
The transition to IAS 19 (Revised) has had no impact on the group balance
sheet position as actuarial gains and losses were previously reflected within
other comprehensive income and the impact on the amounts included within
profit and loss or statement of comprehensive income are not considered
material so no prior year restatement has been made.
The annual report and accounts will be posted to shareholders on 19 June 2014
and will be available on the company's website, www.castings.plc.uk from 3
July 2014.
2. Business 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 plc and William Lee are aggregated into Foundry Operations and
CNC Speedwell is the Machining Operation.
The following shows the revenues, results and total assets by reportable
segment in the year to 31 March 2014:
Foundry Operations£000 Machining£000 Elimination£000 Total£000
Revenue from external customers 119,893 17,573 - 137,466
Inter-segmental revenue 23,070 13,915 - 36,985
Segmental result 16,225 5,187 - 21,412
Unallocated costs:
Exceptional credit for recovery of Icelandic bank deposits previously written off 363
Excess of employer pension contributions over statement of comprehensive income charge (126)
Finance income 184
Profit before income tax 21,833
Total assets 121,153 30,529 (12,811) 138,871
Non-current asset additions 3,531 6,137 - 9,668
Depreciation 3,031 3,015 - 6,046
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 2013:
Foundry Operations£000 Machining£000 Elimination£000 Total£000
Revenue from external customers 106,674 15,541 - 122,215
Inter-segmental revenue 19,166 11,615 - 30,781
Segmental result 14,656 3,803 105 18,564
Unallocated costs:
Exceptional credit for recovery of Icelandic bank deposits previously written off 149
Excess of employer pension contributions over statement of comprehensive income charge 138
Finance income 306
Profit before income tax 19,157
Total assets 114,690 27,575 (12,473) 129,792
Non-current asset additions 1,141 5,724 - 6,865
Depreciation 4,169 3,247 - 7,416
All non-current assets are based in the United Kingdom.
3. Exceptional item
2014£'000 2013£'000
Recovery of past provision for losses on deposits with Icelandic banks (363) (149)
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 £3.26 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.
4. Dividends
The Board are proposing a final dividend amounting to 9.83 pence per share
(2013: 9.36p). An interim dividend of 3.13 pence per share (2013: 2.98p) has
already been paid, making the total dividend for the year 12.96 pence per
share (2013: 12.34p).
The Annual General Meeting will be held on Tuesday 19 August 2014 and if the
proposed final dividend is approved by the members the dividend will be paid
on 22 August 2014 to shareholders registered on 11 July 2014.
5. Earnings per share
The basic and diluted earnings per share is calculated on the profit on
ordinary activities after taxation of £17,258,000 (2013: £14,786,000) and on
the weighted average number of shares in issue of 43,632,068 in 2014 and in
2013.
6. Property, plant and equipment
Land and buildings£000 Plant and other equipment£000 Total£000
Cost
At 1 April 2013 30,083 103,100 133,183
Additions during year 867 8,801 9,668
Disposals - (1,531) (1,531)
At 31 March 2014 30,950 110,370 141,320
Depreciation and amounts written off
At 1 April 2013 4,625 66,882 71,507
Charge for year 775 5,271 6,046
Disposals - (1,428) (1,428)
At 31 March 2014 5,400 70,725 76,125
Net book values
At 31 March 2014 25,550 39,645 65,195
At 31 March 2013 25,458 36,218 61,676
Cost
At 1 April 2012 29,337 97,482 126,819
Additions during year 746 6,145 6,891
Disposals - (502) (502)
Adjustment to opening position - (25) (25)
At 31 March 2013 30,083 103,100 133,183
Depreciation and amounts written off
At 1 April 2012 3,988 60,605 64,593
Charge for year 637 6,779 7,416
Disposals - (502) (502)
At 31 March 2013 4,625 66,882 71,507
Net book values
At 31 March 2013 25,458 36,218 61,676
At 31 March 2012 25,349 36,877 62,226
The net book value of group land and buildings includes £2,527,000 (2013:
£2,527,000) for land which is not depreciated. The cost of land and buildings
includes £359,000 for property held on long leases (2013: £359,000).
7. Commitments
2014£000 2013£000
Capital commitments contracted for by the group but not provided for in the accounts 3,047 2,571
8. 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 2014 was a surplus of £14,587,000 (2013: £6,655,000). 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.
9. The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 March 2014 or 2013, but is derived
from those accounts. Statutory accounts for 2013 have been delivered to the
Registrar of Companies and those for 2014 will be delivered following the
company's annual general meeting. The auditors have reported on those
accounts; 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.
Appendix A
Review of Principal Risks and Uncertainties
Risk
In common with all trading business, 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, products and employment.
Whilst it is not possible to either completely record or to 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.
Operational and commercial risks
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.
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 risk
Foreign exchange rate risk is sometimes partially hedged using forward foreign
exchange contracts. Translational risk arises as a consequence of applying
different exchange rates to net assets denominated in currencies other than
sterling and, not being an exposure that results in an actual cash flow, is
not hedged.
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 the highest possible standards
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. The machining business also operates from two
separate locations enabling the transfer of some production if required.
Suppliers and trade credit
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 dependant, this is not always possible to guarantee without risk of
short-term business disruption, additional costs and potential damage to
relationships with key customers. The ability of our suppliers to maintain
credit insurance on the group and its principal operating business is an
important issue. We have excellent relationships with our suppliers and we
continue to work closely with them on a normal commercial basis. A reduction
in the level of cover available to suppliers may impact on our trading
relationship with them and may have a significant effect on cash flows.
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 twelve months, although
renegotiation risks remain at contract maturity dates but again this is
mitigated through the application of price adjustment clauses.
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 back-up 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 counter-party is restricted. However, institutions
can be downgraded before maturity therefore possibly placing these deposits at
risk.
Environmental risk
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 2014 the schemes were in
surplus on an IAS19 (Revised 2011) basis. The potential risks and
uncertainties 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 will only
leave past service liabilities to be funded.
Appendix B
The statements below have been prepared in connection with the group's full
annual report for the year ended 31 March 2014. Certain parts thereof are not
included within this announcement.
Each of the persons who is a director at the date of approval of this report
confirms that to the best of his knowledge:
(a) each of the Group and Parent financial statements, prepared in
accordance with International Financial Reporting Standards as adopted by the
EU and UK Accounting Standards respectively, gives a true and fair view of the
assets, liabilities, financial position and profit or loss of the issuer and
the undertakings included in the consolidation taken as a whole; and
(b) the Chairman's Statement, Strategic Report and Directors' Report
includes a fair review of the development and performance of the business and
the position of the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
By order of the Board
B J Cooke
Chairman
11 June 2014
This information is provided by RNS
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