REG - Castings PLC - Half-year Report
16/11/2022 07:01
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RNS Number : 5040G Castings PLC 16 November 2022
CASTINGS P.L.C.
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2022
Interim Management Report
Overview
Sales for the six months ended 30 September 2022 were £85.6 million (2021 -
£69.7 million) with profit before tax of £7.5 million
(2021 - £5.4 million).
During the period, the underlying demand for heavy trucks has been strong and
the conversion of forward schedules to actual sales has improved when compared
with the same period in the previous year. Two of our largest commercial
vehicle customers have introduced new engine platforms during the period on
which the group has an increased share of parts. The simultaneous introduction
has led to production challenges in the transition phase which are now largely
behind us.
Input price changes continue to be passed onto our customers through both
established escalators and additional price increases. The most significant
increase came into effect on 1 October 2022, following the end of our fixed
price electricity contract. The higher unit cost for power is being surcharged
to our customers immediately and will therefore increase revenue in the second
half of the year. This should not adversely affect group profit as it is a
pass-through of a direct cost increase.
Foundry operations
Output during the period was up 3.3% at 25,100 tonnes (2021 - 24,300 tonnes)
and external sales revenue was up by 24.3% to £84.7million. Of the output
weight for the period, 57.4% related to machined castings compared to 52.4% in
the previous period. This reflects a return to the sales mix for the year
ended 31 March 2021, following a reduction last year due to the disrupted
customer demand patterns.
The profit from the foundry segment of £7.8 million compares to £5.3 million
in the equivalent period last year.
The strong group cash position has enabled the continued investment in foundry
facilities during the period. The most significant investments include £0.8
million on the completion of an automated pouring process on one of our
largest production lines and £0.6 million on automation of the foundry
finishing processes.
Machining operation
CNC Speedwell generated external revenue of £0.9 million during the period, a
reduction of 42.7% compared to the previous period, with a reported loss of
£0.47 million compared to a profit of £0.05 million in the previous period.
The previously mentioned introduction of new engine platforms in the period
has a particularly significant impact on the operational efficiency of the
machining business. With the end of the transitional ramp down and ramp up
period, it is pleasing to see that CNC Speedwell returned to profitability in
the final month of the period.
Outlook
The long-term demand schedules continue to reflect the high build rates that
the heavy truck OEMs require to satisfy their order books.
The group will see the benefit of the greater content won on the new customer
platforms as these are now in production. Production efficiencies will also
improve as the focus will be on the new parts that have been introduced.
The group maintains a strong balance sheet with cash levels of £25.6 million;
a decrease of £10.2 million during the period after paying dividends
totalling £12.0 million (including a supplementary dividend of
£6.5 million).
Dividend
An interim dividend of 3.84 pence per share has been declared and will be paid
on 5 January 2023 to shareholders who are on the register at 25 November 2022.
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 11 of the Annual Report
for the year ended 31 March 2022.
Director changes
I have decided to step down as Chairman of the company with effect from 1
January 2023 and will not be seeking re-election as a director at the next
Annual General meeting of the company to be held in August 2023. I am pleased
to announce that Alec Jones, who is currently senior independent director,
will succeed me as chairman of the company.
Mark Smith has been appointed as a non-executive director with effect from 16
November 2022. He is also appointed Chairman of the Audit and Risk Committee
and a member of the Nomination and Remuneration Committees. Mark was a partner
at PricewaterhouseCoopers LLP for 24 years until his retirement from the firm
in September 2021. He was the Midlands Regional Chairman and a senior partner
in the UK Audit and Risk business and has extensive experience of auditing
public limited companies.
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
16 November 2022
Castings P.L.C.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2022
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Revenue 85,600 69,747 148,583
Cost of sales (68,265) (55,798) (118,105)
Gross profit 17,335 13,949 30,478
Distribution costs (2,471) (1,490) (3,411)
Administrative expenses (7,515) (7,071) (15,040)
Profit from operations 7,349 5,388 12,027
Finance income 104 19 47
Profit before income tax 7,453 5,407 12,074
Income tax expense (1,414) (1,025) (3,522)
Profit for the period attributable to the equity holders 6,039 4,382 8,552
of the parent company
Other comprehensive (losses)/income for the period:
Items that will not be reclassified to profit and loss:
Movement in unrecognised surplus on defined benefit pension - - 119
schemes net of actuarial gains and losses
- - 119
Items that may be reclassified subsequently to profit and loss:
Change in fair value of financial assets (77) 26 88
Tax effect of items that may be reclassified 15 (4) (22)
(62) 22 66
Total other comprehensive (losses)/income for the period (62) 22 185
(net of tax)
Total comprehensive income for the period attributable 5,977 4,404 8,737
to the equity holders of the parent company
Earnings per share attributable to the equity holders
of the parent company
Basic 13.86p 10.04p 19.60p
Diluted 13.83p 10.03p 19.57p
Consolidated Balance Sheet
30 September 2022
Unaudited Unaudited Audited
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 62,236 65,441 62,801
Financial assets 318 334 396
62,554 65,775 63,197
Current assets
Inventories 24,699 20,275 25,889
Trade and other receivables 41,861 36,048 39,874
Current tax asset 556 251 489
Cash and cash equivalents 25,592 34,648 35,745
92,708 91,222 101,997
Total assets 155,262 156,997 165,194
LIABILITIES
Current liabilities
Trade and other payables 24,611 24,528 28,477
24,611 24,528 28,477
Non-current liabilities
Deferred tax liabilities 5,278 3,628 5,219
Total liabilities 29,889 28,156 33,696
Net assets 125,373 128,841 131,498
Equity attributable to equity holders of the parent company
Share capital 4,363 4,363 4,363
Share premium account 874 874 874
Treasury shares (231) - (79)
Other reserve 13 13 13
Retained earnings 120,354 123,591 126,327
Total equity 125,373 128,841 131,498
Consolidated Cash Flow Statement
For six months ended 30 September 2022
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Cash flows from operating activities
Profit before income tax 7,453 5,407 12,074
Adjustments for:
Depreciation 3,996 4,050 8,601
Profit on disposal of property, plant and equipment - - 62
Finance income (104) (19) (47)
Equity settled share-based payment expense 59 74 74
Pension administrative costs - - 119
Decrease/(increase) in inventories 1,190 (1,556) (7,170)
(Increase)/decrease in receivables (919) 383 (4,898)
(Decrease)/increase in payables (3,866) 157 4,106
Cash generated from operating activities 7,809 8,496 12,921
Tax paid (1,407) (1,406) (2,568)
Interest received 95 9 28
Net cash generated from operating activities 6,497 7,099 10,381
Cash flows from investing activities
Dividends received from listed investments 9 10 19
Purchase of property, plant and equipment (3,430) (2,379) (4,379)
Proceeds from disposal of property, plant and equipment - - 27
Repayments from pension schemes - - 2,496
Advances to pension schemes (1,068) (1,073) (2,114)
Net cash used in investing activities (4,489) (3,442) (3,951)
Cash flow from financing activities
Dividends paid to shareholders (12,009) (5,101) (6,698)
Purchase of own shares (152) - (79)
Net cash used in financing activities (12,161) (5,101) (6,777)
Net decrease in cash and cash equivalents (10,153) (1,444) (347)
Cash and cash equivalents at beginning of period 35,745 36,092 36,092
Cash and cash equivalents at end of period 25,592 34,648 35,745
Cash and cash equivalents:
Short-term deposits 11,627 19,080 17,065
Cash available on demand 13,965 15,568 18,680
25,592 34,648 35,745
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of the parent
Unaudited Share Share Treasury shares Other Retained Total
capital premium £'000 reserve earnings equity
£'000 £'000 £'000 £'000 £'000
At 1 April 2022 4,363 874 (79) 13 126,327 131,498
Profit for the period - - - - 6,039 6,039
Other comprehensive income/(losses):
Change in fair value of financial assets - - - - (77) (77)
Tax effect of items taken directly to reserves - - - - 15 15
Total comprehensive income for the period - - - - 5,977 5,977
ended 30 September 2022
Shares acquired during the period - - (152) - - (152)
Equity settled share-based payments - - - - 59 59
Dividends - - - - (12,009) (12,009)
At 30 September 2022 4,363 874 (231) 13 120,354 125,373
Unaudited £'000 £'000 £'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
ended 30 September 2021 - - - - 4,404 4,404
Equity settled share-based payments - - - - 74 74
Dividends - - - - (5,101) (5,101)
At 30 September 2021 4,363 874 - 13 123,591 128,841
Audited £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2021 4,363 874 - 13 124,214 129,464
Profit for the year - - - - 8,552 8,552
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit pension schemes net of - - - - 119 119
actuarial gains and losses
Change in fair value of financial assets - - - - 88 88
Tax effect of items taken directly to reserves - - - - (22) (22)
Total comprehensive income for the year - - - - 8,737 8,737
Shares acquired in the year - - (79) - - (79)
Equity settled share-based payments - - - - 74 74
Dividends - - - - (6,698) (6,698)
At 31 March 2022 4,363 874 (79) 13 126,327 131,498
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 2022 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 2022 does not constitute
the full statutory accounts for that period. The Annual Report and Financial
Statements for the year ended 31 March 2022 have been filed with the Registrar
of Companies. The Independent Auditors' Report on the Annual Report and
Financial Statements for 2022 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 2022.
Foundry operations Machining Elimination Total
£'000 £'000 £'000 £'000
Revenue from external customers 84,676 924 - 85,600
Inter-segmental revenue 10,309 9,773 - 20,082
Segmental result 7,818 (469) - 7,349
Unallocated income:
Finance income
104
Profit before income tax 7,453
Total assets 141,547 25,594 (11,879) 155,262
Non-current asset additions 2,820 610 - 3,430
Depreciation 2,381 1,615 - 3,996
Total liabilities (28,733) (6,299) 5,143 (29,889)
The following shows the revenues, results and total assets by reportable
segment for the half year to 30 September 2021.
Foundry operations Machining Elimination Total
£'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 year ended 31 March 2022.
Foundry operations Machining Elimination Total
£'000 £'000 £'000 £'000
Revenue from external customers 145,601 2,982 - 148,583
Inter-segmental revenue 17,037 19,488 - 36,525
Segmental result 13,084 (894) (50) 12,140
Unallocated costs:
Exceptional credit for recovery of Icelandic bank deposits
previously written off 6
Defined benefit pension cost (119)
Finance income 47
Profit before income tax 12,074
Total assets 148,554 26,741 (10,101) 165,194
Non-current asset additions 3,388 991 - 4,379
Depreciation 4,790 3,811 - 8,601
Total liabilities (31,561) (6,977) 4,842 (33,696)
5. Dividends
Amounts recognised as distributions to shareholders in the period:
Half year to Half year to
30 September 30 September
2022 2021
£'000 £'000
Final dividend of 12.57p per share for the year ended 31 March 2022 5,475 5,101
(2021 - 11.69p per share)
Supplementary dividend of 15.00p per share for the year ended 31 March 2022 6,534 -
12,009 5,101
The directors have declared an interim dividend in respect of the financial
year ending 31 March 2023 of 3.84p per share (2022 - 3.66p), which will be
paid on 5 January 2023.
6. 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
2022 2021 2022
Profit after tax (£'000) 6,039 4,382 8,552
Weighted average number of shares - basic calculation 43,565,115 43,632,068 43,631,545
Weighted average number of shares - diluted calculation 43,675,024 43,699,509 43,698,986
Earnings per share - basic 13.86p 10.04p 19.60p
Earnings per share - diluted 13.83p 10.03p 19.57p
7. 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
£1,068,000 (2021 - £1,073,000) was paid by the group on behalf of the
schemes in respect of pension payments and administration costs. At 30
September 2022, the outstanding balance of £3,182,000 (2021 - £3,569,000) 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.
8. Interim report
Copies of this interim management report will be available on the company's
website, www.castings.plc.uk (www.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.
By order of the board
S. J. Mant FCA
Group Finance Director
16 November 2022
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