REG - Castings PLC - Half-year Report
13/11/2024 07:00
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RNS Number : 9695L Castings PLC 13 November 2024
Castings PLC
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2024
Interim Management Report
Overview
Sales for the six months ended 30 September 2024 were £89.2 million (2023 -
£111.3 million) with profit before tax of £4.1 million (2023 - £10.3
million), in line with management expectations.
As previously announced, during the period the underlying demand for heavy
trucks (approximately 75% of group revenue) has remained at lower levels
relative to the elevated demand for most of the year ended 31 March 2024. OEM
customers have reported demand normalisation throughout the period which, as
expected, has flowed through to the schedule reductions we have seen from
them. The US market is a notable exception where we have seen increased
penetration with existing customers.
Following the asset purchase from administration on 14 June 2024, the Castings
Ductile business in Scunthorpe commenced production in early July and it is
pleasing to report that business is now trading profitably.
The expected cost of the new foundry production line being installed at our
Dronfield site remains in line with budget and is still expected to be
complete in summer 2025.
Foundry operations
Output during the period was 20,800 tonnes compared to 25,500 tonnes in the
previous period, a reduction of 18.4% (19.6% on a like-for-like basis
excluding Castings Ductile) and external sales revenue was down by 19.9% to
£88.6 million. Of the output weight for the period, 65.0% related to machined
castings compared to 62.1% in the previous period, reflecting the continuing
demand trend for more machined and value-add parts.
The profit from the foundry segment of £2.4 million compares to £7.7 million
in the equivalent period last year. This represents a margin on external sales
of 2.7% compared to 7.0% in the prior period. On a like-for-like basis, the
margin on external sales was 3.3%.
Profitability in the period reflects the lower levels of sales and the
time-lag to realise the benefits of the actions taken to right size the cost
base. Management believe that the necessary actions have now been taken such
that the foundries can operate more efficiently at the lower levels of demand
during the second half of the year. Importantly, the changes have not been of
a structural nature and so can be quickly reversed to take advantage of the
upturn in volumes when they come through.
The new facility being constructed at our William Lee site is progressing
well. The additional capacity 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. We are also in the process of setting up a
third-party warehouse in the US to enable further growth in North America.
The Castings Ductile business in Scunthorpe, formed after certain assets were
purchased from administration on 14 June 2024, has integrated into the group
well. It reported a loss in the period of £0.4 million but it was profitable
in only its third month of trading. The first priority was to win orders from
its historical customers and the focus now is to grow the volumes to make
greater use of the existing capacity and increase productivity. This business,
producing castings up to 7 tonnes, allows the group to expand its offering to
existing customers particularly in the areas of power generation (gas and
wind) and infrastructure spending.
We have invested just under £8 million in the foundry businesses during the
period, which includes £3.2 million of assets brought into use and £4.8
million of project stage payments. In addition to the new foundry line,
investment has been focussed on upgrading existing equipment as well as
expanding processing robotics.
Machining operation
CNC Speedwell has seen a reduction in total revenue of 11.4% to £16.1 million
with external revenue falling 20.2% to £0.6 million. The company reported a
profit of £1.1 million compared to £1.9 million in the previous period.
Given the high investment levels and the capital-intensive nature of the
machining business, the lower volumes have a significant impact on
profitability. Overall, the margin on total sales fell from 10.6% to 6.6%.
Investment of £2.6 million in the period (including £0.7 million of deposits
from the previous financial year) has been focussed on replacing older machine
types with more efficient, technologically advanced machining centres. This
phase of the machine replacement programme is broadly complete for this
financial year.
Balance sheet
The group maintains a strong balance sheet with cash levels of over £16
million. These have reduced in the period due to the payment of dividends
totalling £9.2 million (including a supplementary dividend of £3 million)
and the foundry capacity investment.
Sustainability report
The company is pleased to announce the publication of its first Sustainability
Report which is available on the company's website (www.castings.plc.uk).
Outlook
The demand schedules for the remainder of this financial year continue to
reflect the lower build rates that the heavy truck OEMs have reported.
We expect production efficiencies to improve in the second half of the year
with the businesses having adjusted to the lower demand patterns. Assuming no
material further reduction in demand schedules, management believes that the
company will trade in line with market expectations for the full year.
In the medium-term, there continues to be opportunities for growth including
new parts being quoted for our existing heavy-truck customers, greater reach
in the US aided by a new warehousing arrangement, the expansion of the
customer base at our larger casting facility and the offshore energy,
agriculture and rail markets.
Dividend
An interim dividend of 4.21 pence per share (2023 - 4.13 pence) has been
declared and will be paid on 2 January 2025 to shareholders who are on the
register at 22 November 2024.
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 2024. The risks identified are in respect of
markets and competition; customer concentration; technological change risks
within the export-dominated commercial vehicle sector competition; product
quality; foreign exchange; risk of disruption to supply of raw materials or
the availability of capital equipment and the price risk of input costs;
information technology; and regulatory and environmental compliance risks.
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
Castings P.L.C.
A. N. Jones
Lichfield Road
Chairman
Brownhills
13 November 2024
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2024
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Revenue 89,180 111,333 224,414
Cost of sales (74,183) (90,031) (181,124)
Gross profit 14,997 21,302 43,290
Distribution costs (1,679) (2,434) (4,694)
Administrative expenses (9,822) (9,260) (18,837)
Profit from operations 3,496 9,608 19,759
Finance income 652 648 1,527
Finance expenses (37) - -
Profit before income tax 4,111 10,256 21,286
Income tax expense (1,037) (2,564) (4,565)
Profit for the period attributable to the equity holders 3,074 7,692 16,721
of the parent company
Other comprehensive income for the period:
Items that will not be reclassified to profit and loss:
Movement in unrecognised surplus on defined benefit pension - - 112
schemes net of actuarial gains and losses
- - 112
Total other comprehensive income for the period (net of tax) - - 112
Total comprehensive income for the period attributable 3,074 7,692 16,833
to the equity holders of the parent company
Earnings per share attributable to the equity holders
of the parent company
Basic 7.07p 17.68p 38.45p
Diluted 7.04p 17.62p 38.32p
Consolidated Balance Sheet
As at 30 September 2024
Unaudited Unaudited Audited
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 63,446 61,199 61,799
Right-of-use assets 1,911 - -
Financial assets - 372 -
65,357 61,571 61,799
Current assets
Inventories 33,604 23,654 33,136
Trade and other receivables 48,378 49,484 46,593
Current tax assets - 176 -
Cash and cash equivalents 16,354 31,262 32,527
98,336 104,576 112,256
Total assets 163,693 166,147 174,055
LIABILITIES
Current liabilities
Trade and other payables 26,729 33,608 33,329
Lease liabilities 226 - -
Current tax liabilities 872 - 706
27,827 33,608 34,035
Non-current liabilities
Lease liabilities 1,707 - -
Deferred tax liabilities 6,237 5,924 6,030
7,944 5,924 6,030
Total liabilities 35,771 39,532 40,065
Net assets 127,922 126,615 133,990
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) (627) (627)
Other reserve 13 13 13
Retained earnings 123,299 121,992 129,367
Total equity 127,922 126,615 133,990
Consolidated Cash Flow Statement
For six months ended 30 September 2024
Unaudited Unaudited Audited
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Cash flows from operating activities
Profit before income tax 4,111 10,256 21,286
Adjustments for:
Depreciation of property, plant and equipment and right of use assets 4,195 3,921 8,851
Loss on disposal of property, plant and equipment - - 25
Finance income (652) (648) (1,527)
Finance expenses 37 - -
Equity-settled share-based payment expense 67 73 102
Change in fair value of financial assets - (16) -
Pension administrative costs - - 112
Operating cash flow before changes in working capital 7,758 13,602 28,849
(Increase)/decrease in inventories (468) 2,441 (7,041)
(Increase)/decrease in receivables (663) 2,659 4,486
Decrease in payables (5,668) (3,443) (4,651)
Cash generated from operating activities 959 15,243 21,643
Tax paid (664) (1,555) (2,568)
Interest received 648 642 1,474
Net cash generated from operating activities 943 14,330 20,549
Cash flows from investing activities
Dividends received from listed investments 4 6 12
Purchase of property, plant and equipment (6,752) (4,767) (9,584)
Proceeds from disposal of property, plant and equipment - - 191
Proceeds from sale of financial assets - - 397
Repayments from pension schemes - - 2,120
Advances to pension schemes (1,122) (1,063) (2,119)
Net cash used in investing activities (7,870) (5,824) (8,983)
Cash flow from financing activities
Dividends paid to shareholders (9,209) (12,414) (14,209)
Interest on leases (37) - -
Purchase of own shares - (396) (396)
Net cash used in financing activities (9,246) (12,810) (14,605)
Net decrease in cash and cash equivalents (16,173) (4,304) (3,039)
Cash and cash equivalents at beginning of period 32,527 35,566 35,566
Cash and cash equivalents at end of period 16,354 31,262 32,527
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 2024 4,363 874 (627) 13 129,367 133,990
Profit for the period - - - - 3,074 3,074
Total comprehensive income for the period ended 30 September 2024 - - - - 3,074 3,074
Equity-settled share-based payments - - - - 67 67
Dividends - - - - (9,209) (9,209)
30 September 2024 4,363 874 (627) 13 123,299 127,922
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 2023 4,363 874 (231) 13 126,641 131,660
Profit for the period - - - - 7,692 7,692
Total comprehensive income for the period
ended 30 September 2023 - - - - 7,692 7,692
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
Equity attributable to equity holders of the parent
Audited Share Share Treasury shares Other Retained Total
capital premium £000 reserve earnings equity
£000 £000 £000 £000 £000
At 1 April 2023 4,363 874 (231) 13 126,641 131,660
Profit for the year - - - - 16,721 16,721
Other comprehensive income:
Movement in unrecognised surplus on defined benefit pension schemes net of - - - - 112 112
actuarial gains and losses
Total comprehensive income for the year - - - - 16,833 16,833
Shares acquired in the year - - (396) - - (396)
Equity-settled share-based payments - - - - 102 102
Dividends - - - - (14,209) (14,209)
At 31 March 2024 4,363 874 (627) 13 129,367 133,990
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 2024 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 2024 does not constitute
the full statutory accounts for that period. The Annual Report and Financial
Statements for the year ended 31 March 2024 have been filed with the Registrar
of Companies. The Independent Auditors' Report on the Annual Report and
Financial Statements for 2024 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 four
operating companies which are considered to represent two operating segments
of the group. Castings P.L.C., William Lee Limited and Castings Ductile
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 2024.
Foundry Machining Elimination Total
operations £'000 £'000 £'000
£'000
Revenue from external customers 88,568 612 - 89,180
Inter-segmental revenue 11,027 15,521 - 26,548
2,428 1,068 - 3,496
Segmental result
Unallocated income:
Finance income 652
Finance expenses (37)
Profit before income tax 4,111
Total assets 147,598 31,165 (15,070) 163,693
Non-current asset additions 3,186 2,637 - 5,823
Depreciation 2,375 1,820 - 4,195
Total liabilities (35,640) (6,937) 6,806 (35,771)
The following shows the revenues, results and total assets by reportable
segment for the half year to 30 September 2023.
Foundry Machining Elimination Total
operations £'000 £'000 £'000
£'000
Revenue from external customers 110,566 767 - 111,333
Inter-segmental revenue 14,339 17,441 - 31,780
7,685 1,923 - 9,608
Segmental result
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 year ended
31 March 2024.
Foundry Machining Elimination Total
operations £'000 £'000 £'000
£'000
Revenue from external customers 222,542 1,872 - 224,414
Inter-segmental revenue 28,433 35,774 (64,207) -
16,184 3,719 (32) 19,871
Segmental result
Unallocated costs:
Defined benefit pension cost (112)
Finance income 1,527
Profit before income tax 21,286
Total assets 156,605 30,822 (13,372) 174,055
Non-current asset additions 5,179 5,334 - 10,513
Depreciation 5,069 3,782 - 8,851
Total liabilities (40,424) (7,719) 8,078 (40,065)
5. Dividends
Amounts recognised as distributions to shareholders in the period:
Half year to Half year to
30 September 30 September
2024 2023
£'000 £'000
Final dividend of 14.19p per share for the year ended 31 March 2024
(2023 - 13.51p per share) 6,167 5,880
Supplementary dividend of 7.00p per share for the year ended 31 March 2024
(2023 - 15p per share) 3,042 6,534
9,209 12,414
The directors have declared an interim dividend in respect of the financial
year ending 31 March 2025 of 4.21 pence per share (2023 - 4.13 pence), which
will be paid on 2 January 2025.
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
2024 2023 2024
Profit after tax (£'000) 3,074 7,692 16,721
Weighted average number of shares - basic calculation 43,458,068 43,518,814 43,488,441
Weighted average number of shares - diluted calculation 43,672,384 43,666,343 43,635,970
Earnings per share - basic 7.07p 17.68p 38.45p
Earnings per share - diluted 7.04p 17.62p 38.32p
7. Pension schemes
The group operates two defined benefit pension schemes which are closed to new
entrants and were 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
2024 being an unrecognised surplus of £10,863,000.
The pension schemes are related parties of the group and during the period
£1,122,000 (2023 - £1,063,000) was paid by the group on behalf of the
schemes in respect of pension payments and administration costs. At 30
September 2024, the outstanding balance of £3,241,000 (2023 - £3,183,000) 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://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.
The directors of Castings P.L.C. are listed on the back cover of this report.
By order of the board
S. J. Mant
Group Finance Director
13 November 2024
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