REG - Castings PLC - Half-year Report
14/11/2023 07:15
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RNS Number : 3707T Castings PLC 14 November 2023
CASTINGS PLC
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2023
Interim Management Report
Overview
Sales for the six months ended 30 September 2023 were £111.3 million (2022 -
£85.6 million) with profit before tax of £10.3 million (2022 - £7.5
million).
During the period, the underlying demand for heavy trucks (approximately 80%
of group revenue) has been strong and this continues to be reflected in the
forward schedules that our OEM customers are providing. We have also seen
continued progression in our other growth sectors of wind energy, rail,
trailer braking and trailer coupling, as well as increasing opportunities to
supply parts into the US market.
Input prices have stabilised in the current year and in some areas we are
seeing slight reductions. The higher unit cost for electricity, following the
end of a fixed contract on 30 September 2022, continues to be surcharged to
our customers. This does not adversely affect group profit as it is a
pass-through of a direct cost increase but does increase revenue in the six
month period compared to the same period last year.
Foundry operations
Output during the period was up 1.6% at 25,500 tonnes (2022 - 25,100 tonnes)
and external sales revenue was up by 30.6% to £110.6 million. Of the output
weight for the period, 62.1% related to machined castings compared to 57.4% in
the previous period, reflecting the continuing demand trend for more processed
and value-add parts.
The profit from the foundry segment of £7.7 million compares to £7.8 million
in the equivalent period last year. This represents a margin on external sales
of 7.0% compared to 9.2% in the prior period. The most significant impact on
the margin percentage has been the pass-through impact of cost rises, along
with some production inefficiencies due to high demand and production
rebalancing.
The high level of demand, both current and forecast, is in excess of our
current foundry production capacity. As a result, in collaboration with our
customers, we have outsourced some production to other foundries for the
short-term.
As a more strategic and longer-term solution, the board has approved a new
foundry production line at our William Lee site. It is anticipated that the
new line will be commissioned within two years, at a cost of around £17
million, to be funded from internal resources, and will add up to 12,000
tonnes of additional gross foundry capacity. The additional facility will
enable us to satisfy demand for our current heavy truck parts, as well as
providing capacity to take advantage of new and growing market areas such as
truck electrification, wind energy and further opportunities in the US.
Machining operation
CNC Speedwell continues its focus on group work and has therefore seen a
reduction in external revenue to £0.8 million. The company reported a profit
of £1.9 million compared to a loss of £0.5 million in the previous period.
The business returned to profitability in the final quarter of the last
financial year and it is pleasing to report that this has continued in each
month of the current period. This demonstrates the impact of consistently high
volumes in a period and also reflects the benefits of the new parts introduced
last year and the adjustment of prices to pass on recent inflationary cost
rises.
Investment of £1.5 million in the period includes the second phase of the
cooling plant energy efficiency initiative and also the start of a gradual
machine replacement programme.
Outlook
The long-term demand schedules continue to reflect the high build rates that
the heavy truck OEMs require to satisfy their order books.
We expect production and supply efficiencies to improve with the short-term
outsourcing of foundry parts and the continued focus on the engineering of the
new parts that have been introduced in the machine shop. Management believes
that the company will trade marginally ahead of market expectations.
The group maintains a very strong balance sheet with cash levels of £31.3
million. Free cash flow during the period was £8.5 million which was used to
pay dividends totalling £12.4 million (including a supplementary dividend of
£6.5 million).
Dividend
An interim dividend of 4.13 pence per share has been declared and will be paid
on 4 January 2024 to shareholders who are on the register at 24 November 2023.
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 2023.
The risks identified are in respect of market and customer concentration;
competition, product quality, foreign exchange and technological change risks
within the export-dominated commercial vehicle sector; risk of disruption to
supply of raw materials or the availability of capital equipment and the price
risk of input costs; and regulatory and environmental compliance risks.
Brian Cooke
As reported in the Annual Report, after nearly sixty three years with the
company, of which forty were as Chairman, Brian Cooke stood down as a director
of the company on 15 August 2023.
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
A. N. Jones
Chairman
14 November 2023
Castings P.L.C.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2023
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Revenue 111,333 85,600 200,990
Cost of sales (90,031) (68,265) (162,077)
Gross profit 21,302 17,335 38,913
Distribution costs (2,434) (2,471) (5,440)
Administrative expenses (9,260) (7,515) (17,104)
Profit from operations 9,608 7,349 16,369
Finance income 648 104 344
Profit before income tax 10,256 7,453 16,713
Income tax expense (2,564) (1,414) (2,923)
Profit for the period attributable to the equity holders 7,692 6,039 13,790
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 - - 117
schemes net of actuarial gains and losses
- - 117
Items that may be reclassified subsequently to profit and loss:
Change in fair value of financial assets - (77) (40)
Tax effect of items that may be reclassified - 15 10
- (62) (30)
Total other comprehensive (losses)/income for the period - (62) 87
(net of tax)
Total comprehensive income for the period attributable 7,692 5,977 13,877
to the equity holders of the parent company
Earnings per share attributable to the equity holders
of the parent company
Basic 17.68p 13.86p 31.66p
Diluted 17.62p 13.83p 31.58p
Consolidated Balance Sheet
As at 30 September 2023
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 61,199 62,236 60,353
Financial assets 372 318 356
61,571 62,554 60,709
Current assets
Inventories 23,654 24,699 26,095
Trade and other receivables 49,484 41,861 51,080
Current tax asset 176 556 980
Cash and cash equivalents 31,262 25,592 35,566
104,576 92,708 113,721
Total assets 166,147 155,262 174,430
LIABILITIES
Current liabilities
Trade and other payables 33,608 24,611 37,051
33,608 24,611 37,051
Non-current liabilities
Deferred tax liabilities 5,924 5,278 5,719
Total liabilities 39,532 29,889 42,770
Net assets 126,615 125,373 131,660
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 (627) (231) (231)
Other reserve 13 13 13
Retained earnings 121,992 120,354 126,641
Total equity 126,615 125,373 131,660
Consolidated Cash Flow Statement
For six months ended 30 September 2023
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2023 2022 2023
£'000 £'000 £'000
Cash flows from operating activities
Profit before income tax 10,256 7,453 16,713
Adjustments for:
Depreciation 3,921 3,996 8,646
Finance income (648) (104) (344)
Equity settled share-based payment expense 73 59 119
Pension administrative costs - - 117
Change in fair value of financial assets (16) - -
Decrease/(increase) in inventories 2,441 1,190 (206)
Decrease/(increase) in receivables 2,659 (919) (11,200)
(Decrease)/increase in payables (3,443) (3,866) 8,574
Cash generated from operating activities 15,243 7,809 22,419
Tax paid (1,555) (1,407) (2,904)
Interest received 642 95 327
Net cash generated from operating activities 14,330 6,497 19,842
Cash flows from investing activities
Dividends received from listed investments 6 9 17
Purchase of property, plant and equipment (4,767) (3,430) (6,198)
Repayments from pension schemes - - 2,114
Advances to pension schemes (1,063) (1,068) (2,120)
Net cash used in investing activities (5,824) (4,489) (6,187)
Cash flow from financing activities
Dividends paid to shareholders (12,414) (12,009) (13,682)
Purchase of own shares (396) (152) (152)
Net cash used in financing activities (12,810) (12,161) (13,834)
Net decrease in cash and cash equivalents (4,304) (10,153) (179)
Cash and cash equivalents at beginning of period 35,566 35,745 35,745
Cash and cash equivalents at end of period 31,262 25,592 35,566
Cash and cash equivalents:
Short-term deposits 13,967 11,627 19,993
Cash available on demand 17,295 13,965 15,573
31,262 25,592 35,566
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of the parent
Unaudited Share Share Treasury shares £'000 Other reserve Retained Total
capital premium £'000 earnings equity
£'000 £'000 £'000 £'000
At 1 April 2023 4,363 874 (231) 13 126,641 131,660
Profit for the period - - - - 7,692 7,692
Total comprehensive income for the period - - - - 7,692 7,692
ended 30 September 2023
Shares acquired during the period - - (396) - - (396)
Equity-settled share-based payments - - - - 73 73
Dividends - - - - (12,414) (12,414)
At 30 September 2023 4,363 874 (627) 13 121,992 126,615
Unaudited £'000 £'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
ended 30 September 2022 - - - - 5,977 5,977
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
Audited £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2022 4,363 874 (79) 13 126,327 131,498
Profit for the year - - - - 13,790 13,790
Other comprehensive income/(losses):
Movement in unrecognised surplus on defined benefit pension schemes net of - - - - 117 117
actuarial gains and losses
Change in fair value of financial assets - - - - (40) (40)
Tax effect of items taken directly to reserves - - - - 10 10
Total comprehensive income for the year - - - - 13,877 13,877
Shares acquired in the year - - (152) - - (152)
Equity-settled share-based payments - - - - 119 119
Dividends - - - - (13,682) (13,682)
At 31 March 2023 4,363 874 (231) 13 126,641 131,660
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 2023 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 2023 does not constitute
the full statutory accounts for that period. The Annual Report and Financial
Statements for the year ended 31 March 2023 have been filed with the Registrar
of Companies. The Independent Auditors' Report on the Annual Report and
Financial Statements for 2023 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 Financial Reporting Council guidance on Review of
Interim Financial Information.
2. Accounting policies
The annual financial statements of Castings P.L.C. are prepared in accordance
with UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006. 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 2023.
Foundry operations Machining Elimination Total
£'000 £'000 £'000 £'000
Revenue from external customers 110,566 767 - 111,333
Inter-segmental revenue 14,339 17,441 - 31,780
Segmental result 7,685 1,923 - 9,608
Unallocated income:
Finance income
648
Profit before income tax 10,256
Total assets 155,677 29,144 (18,674) 166,147
Non-current asset additions 3,239 1,528 - 4,767
Depreciation 2,294 1,627 - 3,921
Total liabilities (43,098) (7,273) 10,839 (39,532)
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 year ended 31 March 2023.
Foundry operations Machining Elimination Total
£'000 £'000 £'000 £'000
Revenue from external customers 198,972 2,018 - 200,990
Inter-segmental revenue 24,739 25,640 - 50,379
Segmental result 16,332 169 (15) 16,486
Unallocated costs:
Defined benefit pension cost (117)
Finance income 344
Profit before income tax 16,713
Total assets 162,671 26,687 (14,928) 174,430
Non-current asset additions 4,826 1,372 - 6,198
Depreciation 5,235 3,411 - 8,646
Total liabilities (45,668) (6,759) 9,657 (42,770)
5. Dividends
Amounts recognised as distributions to shareholders in the period:
Half year to Half year to
30 September 30 September
2023 2022
£'000 £'000
Final dividend of 13.51p per share for the year ended 31 March 2023 5,880 5,475
(2022 - 12.57p per share)
Supplementary dividend of 15p per share for the year ended 31 March 2023 6,534 6,534
(2022 - 15p per share)
12,414 12,009
The directors have declared an interim dividend in respect of the financial
year ending 31 March 2024 of 4.13 pence per share (2023 - 3.84 pence), which
will be paid on 4 January 2024.
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
2023 2022 2023
Profit after tax (£'000) 7,692 6,039 13,790
Weighted average number of shares - basic calculation 43,518,814 43,565,115 43,561,593
Weighted average number of shares - diluted calculation 43,666,343 43,675,024 43,671,502
Earnings per share - basic 17.68p 13.86p 31.66p
Earnings per share - diluted 17.62p 13.83p 31.58p
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. Both schemes are in surplus with the combined position at 31 March
2023 being an unrecognised surplus of £10,413,000.
The pension schemes are related parties of the group and during the period
£1,063,000 (2022 - £1,068,000) was paid by the group on behalf of the
schemes in respect of pension payments and administration costs. At 30
September 2023, the outstanding balance of £3,183,000 (2022 - £3,182,000) is
repayable within one year.
8. Interim report
Copies of this interim management report will be available on the company's
website, www.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.
By order of the board
S. J. Mant
Group Finance Director
14 November 2023
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