REG - Chamberlin PLC - Final Results
AIM: CMH
4 June 2019
CHAMBERLIN plc
("Chamberlin", the "Company" or the "Group")
FINAL RESULTS
for the year ended 31 March 2019
KEY POINTS
Financial
·
Sale of engineering subsidiary, Exidor Ltd ("Exidor"), was completed in December 2018
·
Revenues on continuing operations up 9.3% to £33.0m (2018: £30.2m)
·
Gross margin of 11.4% (2018: 15.5%)
·
Underlying operating loss before tax* of £0.9m (2018: £0.3m). This result is not directly comparable to 2018's due to the adoption of IFRS 16, which has resulted in increased finance expense of £0.1m and reduced operating expenses of £0.1m in the year
·
Reported profit of £2.9m, which was mainly generated from the sale of Exidor (£6.2m net profit) offset by an impairment of £3.0m on the fixed assets of the foundry operations as the value of the asset could not be supported by the current level of business
·
IFRS diluted loss per share for continuing operations increased to 16.8p (2018: loss per share of 12.4p)
·
Capital expenditure of £1.2m (2018: £3.0m), excluding £0.8m of leased assets due to early adoption of IFRS 16
·
Net debt reduced to £5.4m as at the year-end (2018: £9.6m). This includes machining facility investment and IFRS 16 liabilities of £1.0m
Operational
·
Foundry revenues grew by 11.2% to £29.3m, mainly reflecting a strong first half
·
Continuing engineering revenues decreased by 3.8% to £3.6m primarily due to a weaker quarter 4 because of Brexit uncertainties although profitability increased
·
Sale of Exidor to ASSA ABLOY Limited for a headline consideration of £10.0m:
o
generated cash proceeds of £8.5m after deductions for net debt transferred, working capital, retentions and transaction costs;
o
strengthened the Group's balance sheet
o
facilitated a one-off contribution of £2.5m towards the defined benefit pension liability
*Underlying figures are stated before exceptional items (GMP Equalisation, impairment of fixed assets and onerous leases) and non-underlying costs (administration costs of the pension scheme, net financing costs on pension obligations and share based payment costs) together with the associated tax impact.
Chairman, Keith Butler-Wheelhouse, commented:
"Although revenues are expected to reduce, we are positioning Chamberlin to deliver an improved operating financial performance in the 2019/20 financial year".
Enquiries
Chamberlin plc
Kevin Nolan, Chief Executive
Neil Davies, Finance Director
T: 01922 707100
Cenkos Securities plc
(Nominated Adviser and Broker)
Russell Cook, Katy Birkin
T: 020 7397 8900
KTZ Communications
(Financial PR)
Katie Tzouliadis, Dan Mahoney
T: 020 3178 6378
Chairman's Statement
For the last several years we have been seeking to grow both our foundry business and our two smaller engineering businesses. During the year we concluded that we did not have the financial resources to continue this growth on all fronts policy and accordingly set about finding a new owner for Exidor, better placed to develop this business, and who could reflect the potential of the business in the price. Exidor was accordingly sold to ASSA ABLOY for a headline consideration of £10m during the year.
The proceeds were used to reduce both the level of debt and the pension deficit. The pension deficit as at the year end was £2.6m compared to £5.1m last year.
On a like-for-like basis, net debt reduced from £8.9m in 2018 to £4.4m in 2019. Chamberlin chose to adopt the new IFRS 16 accounting standard to capitalise finance leases early, and this has increased the reported net debt by £1.0m to £5.4m.
Although each of our businesses grew during the year, the performance of our principal foundry operations deteriorated in the second half, with our automotive turbocharger customers reducing their schedules. This partly reflected upheavals in their activities as the car manufacturers adjusted their offerings in response to the new emissions testing regime and took account of wider trading conditions.
Our profit after tax of £1.5m incorporated the gain on the sale of Exidor, which amounted to £6.2m, offset by an impairment of £3.0m on the fixed assets of the foundry division. The underlying operating loss on continuing operations was £0.9m (2018: £0.3m). We are now engaged in right-sizing our structure to better match trading conditions.
The Board and Staff
David Roberts resigned as Finance Director and Company Secretary and was replaced by Neil Davies in December 2018. Neil, formerly Finance Director of European Operations for International Automotive Components, has over 20 years' experience in senior finance roles within high volume automotive manufacturing. I would like to record my thanks to David for his strong contribution to the Company and to extend a warm welcome to Neil.
Chamberlin has a hard-working and dedicated team and, on behalf of the Board, I would like to thank everyone for their high level of commitment during the year.
Outlook
Although revenues are expected to reduce, we are positioning Chamberlin to deliver an improved operating financial performance in the 2019/20 financial year.
Keith Butler-Wheelhouse
Chairman
3 June 2019
Chief Executive's Review
The Group is pleased to report a profit after tax of £1.5m based on revenue of £33.0m. This was driven by a one-off profit of £6.2m from the disposal of Exidor, part of our engineering operations, partly offset by an impairment charge of £3.0m against some of our foundry fixed assets.
Operationally, the technical issues faced during 2017-18 were mainly resolved by mid-2018 but the lower revenues in the second half resulted in the Group posting an underlying operational loss on continuing operations before finance cost and tax of £0.9m (2018: £0.3m loss).
Foundries
Foundry revenues increased by 11.2% year-on-year from £26.4m to £29.3m benefiting from a full year contribution from our machining facility. Sales slowed in the second half due to the tightening demand in the European turbocharger market, partly arising from the disruption to vehicle manufacturers schedules by the new Worldwide Harmonised Light Vehicle Test Procedure "WLTP" emissions testing regime.
Operating profits were held back in the first half by operational issues in our new machining facility, which are now resolved. In the second half the reducing volumes constrained the profit opportunity. Second half volumes in the turbo-charger focussed Walsall business unit were 16% below the first half levels, and it was not possible to immediately reduce overheads in step with sales. Additionally a foundry customer entered into administration, impacting our profit by approximately £0.1m.
Underlying operating loss for the year for the continuing businesses was below break-even with a negative margin of -0.7% (2018: +2.0%). Overhead reduction and cost control are a main focus as we adjust to the lower demand.
The Group operates two foundries, at Walsall and Scunthorpe, each with a different specialisation. Our foundry at Walsall is our main operation and drives the majority of the foundry division's sales. Walsall's expertise is in producing small castings, typically below 3kg in weight that have complex internal geometry. The complex geometry is achieved through the use of innovative core design and assembly techniques and, importantly, the foundry is capable of producing these castings in high volumes.
The automotive turbocharger segment is a major market for Walsall, with modern designs requiring precise alignment of cooling and lubrication passages to meet the increased performance demanded by modern engines. Legislation is a major driver of this market, with the requirement to reduce nitrogen dioxide emissions promoting the introduction of smaller, turbocharged petrol engines. Approximately 74% of Walsall's casting production is for petrol engines.
Walsall is one of only four specialist foundries in Europe with the technical capability of supplying castings for turbochargers and, with our new machining capability, the foundry is now the only fully integrated supplier of grey iron bearing housings in Europe.
The Scunthorpe foundry specialises in heavy castings weighing up to 6,000kg that have complex geometry and challenging metallurgy. These castings are used in applications where there is a requirement for high strength or high temperature performance, for instance in large process compressors, industrial gas turbines and mining, quarrying and construction equipment, and the majority of customers are Original Equipment Manufacturers ("OEMs"). Demand at the foundry increased as we continued to work to deepen and broaden customer relationships, and to achieve competitive pricing by means of operational efficiency.
Engineering
The sale of our Exidor business was a key event for the year. The headline consideration of £10m gave rise to a profit of £6.2m, allowing the Group to strengthen its balance sheet and make a one-off cash contribution into our closed final salary pension fund of £2.5m.
Petrel, our remaining engineering business, has a well-established reputation for designing and manufacturing high quality lighting and control equipment for use in hazardous or demanding environments. It supplies customers across the UK and Europe as well as internationally. Revenues decreased by 3.8% year-on-year mainly due to concerns over Brexit by our customers but the business managed to grow profits by 9.6% mainly due to excellent cost control. The transition to LED lighting provides growth opportunities and continues to be a main focus as well as developing the business's portable light fittings range.
Financial Matters and Outlook
Chamberlin has adopted IFRS 16 "Accounting for Right of Use Assets" early, and the effect has been an increase in the reported net debt of £751k. Including this reclassification, net debt at the year-end was £5.4m compared to £9.6m in the prior year.
Following the cash injection into the pension fund it is now 86% funded on the IAS19 accounting basis.
During the year the carrying value of our fixed assets was reviewed, and a non-cash impairment charge was made where the value of the asset could not be supported by the current level of business.
Cash is, and will remain, a key performance measure for the Group.
Looking to the new financial year, near-term lower volumes from the automotive market will result in lower revenues. Petrel faces a prospective business move during the year, involving some one-off cash outflows. We are continuing to work with our customers on new projects that will increase the sales opportunity in future years. The major focus in the next financial year will be on reducing costs to match the lower level of output and on improving margins, in addition to developing opportunities for revenue growth.
Kevin Nolan
Chief Executive
3 June 2019
Finance Review
Overview
Sales from continuing operations increased by 9.3% during the year to £33.0m (2018: £30.2m). Gross profit margin decreased to 11.4% from 15.5% in 2018.
Underlying operating loss before tax increased to £1.3m (2018: £0.7m).
The IFRS results show a profit for the year of £1.5m (2018: loss of £0.8m), which includes an asset impairment of £3.0m (2018: nil) and a statutory profit per share of 19.2p (2018: loss per share 12.2p).
Non-underlying exceptional items
Exceptional items in the year included £0.1m (2018: £0.1m) relating to the realignment of the cost base of the Group, £3.0m for the impairment of assets and £0.3m for Guaranteed Minimum Pension ("GMP") equalisation.
Tax
The effective rate of taxation at Group level was 1% primarily due to the impairment loss and profit from the sale of Exidor both being exempt from tax. The tax position will be aided in the coming years through the reduced rate of tax to 17% and as we utilise elements of losses carried forward.
Cash generation and financing
Operating cash outflow from continuing operations was £1.0m (2018: inflow of £0.8m).
Capital expenditure for the year decreased to £1.2m (2018: £2.7m) excluding £0.8m on leased assets included under IFRS 16. Depreciation and amortisation was £1.7m (2018: £1.3m) for the year.
Our net proceeds from the sale of Exidor was £8.5m with £2.5m paid towards the pension deficit. Net borrowings as at 31 March 2019 decreased by £3.3m (2018: increase £3.6m).
Foreign exchange
It is the Group's policy to minimise risk to exchange rate movements affecting sales and purchases by economically hedging or netting currency exposures at the time of commitment, or when there is a high probability of future commitment, using currency instruments (primarily forward exchange contracts). A proportion of forecast exposures are hedged depending on the level of confidence and hedging is topped up following regular reviews. On this basis up to 50% of the Group's annual exposures are likely to be hedged at any point in time and the Group's net transactional exposure to different currencies varies from time to time.
Approximately 60% of the Group's revenues are denominated in Euros. During the year to 31 March 2019 the average exchange rate used to translate into GBP sterling was €1.13 (2018: €1.26).
Pension
The Group's defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1 April 2016, contributions were set at £0.3m per year for the period under review increasing by 3% per year thereafter based on a deficit recovery period of 22 years.
The pension expense for the defined benefit scheme was £0.2m in 2019 (2018: £0.3m) and is shown in non-underlying results. The Group cash contribution during the year was £0.2m (2018: £0.3m) in addition to a special payment of £2.5m following the sale of Exidor.
The Group operates a defined contribution pension scheme for its current employees. The cost of £0.2m (2018: £0.2m) is included within underlying operating performance.
A Guaranteed Minimum Pension (GMP) equalisation review was undertaken resulting in an increase in the pension liability of £295,000. The IAS 19 deficit at 31 March 2019 was £2.6m (2018: £5.1m).
Neil Davies
Group Finance Director
3 June 2019
Consolidated Income Statement
for the year ended 31 March 2019
Year ended 31 March 2019
Year ended 31 March 2018
Note
Underlying
+ Exceptional / Non-
underlying
Total
Underlying
+ Exceptional / Non-
underlying
Total
£000
£000
£000
£000
£000
£000
Revenue
3
32,958
-
32,958
30,153
-
30,153
Cost of sales
(29,192)
-
(29,192)
(25,474)
-
(25,474)
Gross profit
3,766
-
3,766
4,679
-
4,679
Other operating expenses
6
(4,652)
(3,572)
(8,224)
(4,995)
(324)
(5,319)
Operating loss
(886)
(3,572)
(4,458)
(316)
(324)
(640)
Finance costs
4
(387)
(112)
(499)
(346)
(126)
(472)
Loss before tax
(1,273)
(3,684)
(4,957)
(662)
(450)
(1,112)
Tax (expense)/ credit
(63)
111
48
(324)
85
(239)
Loss for the year from continuing operations
(1,336)
(3,573)
(4,909)
(986)
(365)
(1,351)
Discontinued operations
7
Profit for the year from discontinued operations
-
6,435
6,435
539
539
(Loss)/ profit for the year
attributable to equity holders of the parent company
(1,336)
2,862
1,526
(986)
174
(813)
(Loss) per share from continuing operations:
Basic
5
(16.8)p
(12.4)p
Diluted
5
(16.8)p
(12.4)p
Earnings per share from discontinued operations:
Basic
5
80.9p
6.8p
Diluted
5
80.9p
6.8p
Total earnings / (loss) per share:
Basic
5
19.2p
(12.2)p
Diluted
5
19.2p
(12.2)p
*Underlying figures are stated before exceptional items (GMP Equalisation, impairment of fixed assets and onerous leases) and non-underlying costs (administration costs of the pension scheme, net financing costs on pension obligations and share based payment costs) together with the associated tax impact.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2019
2019
2018
Note
£000
£000
Profit/(loss) for the year
1,526
(813)
Other comprehensive income
Reclassification for cash flow hedge included in sales
-
(18)
Movements in fair value on cash flow hedges taken to other comprehensive income
134
87
Deferred tax on movement in cash flow hedges
(23)
(12)
Net other comprehensive income that may be recycled to profit and loss
111
57
Re-measurement losses on pension assets and liabilities
9
76
(8)
Deferred/ current tax (expense)/ credit on re-measurement losses on pension scheme
(15)
2
Net other comprehensive income/ (loss) that will not be recycled to profit and loss
61
(6)
Other comprehensive income for the year net of tax
172
51
Total comprehensive income / (expense) for the period attributable to equity holders of the parent Company
1,698
(762)
Consolidated Balance Sheet
at 31 March 2019
Note
31 March 2019
31 March 2018
£000
£000
Non-current assets
Property, plant and equipment
7,769
12,454
Intangible assets
290
427
Deferred tax assets
906
1,136
8,965
14,017
Current assets
Inventories
2,702
3,551
Trade and other receivables
6,052
7,985
Cash at Bank
291
-
9,045
11,536
Total assets
18,010
25,553
Current liabilities
Financial liabilities
8
2,683
7,091
Trade and other payables
4,600
7,465
7,283
14,556
Non-current liabilities
Financial liabilities
8
2,966
2,538
Deferred tax
53
23
Provisions
200
200
Defined benefit pension scheme deficit
9
2,640
5,080
5,859
7,841
Total liabilities
13,142
22,397
Capital and reserves
Share capital
1,990
1,990
Share premium
1,269
1,269
Capital redemption reserve
109
109
Hedging reserve
96
(15)
Retained earnings
1,404
(197)
Total equity
4,868
3,156
Total equity and liabilities
18,010
25,553
Consolidated Cash Flow Statement
for the year ended 31 March 2019
Year ended 31 March 2019
Year ended
31 March 2018
£000
£000
Operating activities
(Loss) for the year before tax
(4,957)
(1,112)
Adjustments to reconcile (loss) for the year to net cash (outflow)/ inflow from operating activities:
Net finance costs excluding pensions
387
347
Impairment charge on property, plant and equipment
3,043
-
Depreciation of property, plant and equipment
1,688
1,280
Amortisation of software
59
50
Amortisation and impairment of development costs
25
10
Profit on disposal of property, plant and equipment
-
5
Share based payments
40
46
One-off contribution made to the pension scheme
(2,500)
-
Remaining difference between pension contributions paid and amounts recognised in the Consolidated Income Statement
137
(137)
(Increase)/ Decrease in inventories
(388)
74
Decrease/ (Increase) in receivables
419
(315)
(Decrease)/ Increase in payables
(1,332)
543
Cash (outflow)/ inflow from continuing operations
(3,379)
791
Cash inflow from discontinued operations
491
509
Net cash (outflow)/ inflow from operating activities
(2,888)
1,300
Investing activities
Purchase of property, plant and equipment
(1,188)
(2,726)
Purchase of software
-
(16)
Development costs
(22)
(24)
Proceeds from sale of subsidiary
8,520
-
Cash and cash equivalents disposed
(1,146)
-
Investing activities from discontinued operations
(125)
(207)
Net cash inflow/ (outflow) from investing activities
6,039
(2,973)
Financing activities
Interest paid
(387)
(347)
Repayment of asset loan
-
(175)
Net invoice finance (outflow)/ inflow
(1,832)
918
Import loan (outflow)/ inflow
(873)
1,137
Import loan facility repayment
-
(1,235)
Finance lease payment
(781)
-
Finance lease additions
1,291
849
Financing activities from discontinued operations
207
257
Net cash (outflow)/ inflow from financing activities
(2,375)
1,404
Net increase/ (decrease) in cash and cash equivalents
776
(269)
Cash and cash equivalents at the start of the year
(485)
(216)
Cash and cash equivalents at the end of the year
291
(485)
Cash and cash equivalents included in discontinued operations
-
572
Cash and cash equivalents for continuing operations
291
(1,057)
Cash and cash equivalents comprise:
Cash at bank/ (overdraft)
291
(485)
291
(485)
Consolidated statement of changes in equity
Share capital
Share premium account
Capital redemption reserve
Hedging reserve
Retained earnings
Attributable to equity holders of the parent
£000
£000
£000
£000
£000
£000
Balance at 1 April 2017
1,990
1,269
109
(72)
582
3,878
Loss for the year
-
-
-
-
(813)
(813)
Other comprehensive income for the year net of tax
-
-
-
57
(6)
51
Total comprehensive income/ (expense)
-
-
-
57
(819)
(762)
Share based payment
-
-
-
-
46
46
Deferred tax on employee share options
-
-
-
-
(6)
(6)
Total of transactions with shareholders
-
-
-
-
40
40
Balance as at 1 April 2018
1,990
1,269
109
(15)
(197)
3,156
Cumulative impact of IFRS 16
-
-
-
-
-
-
Revised Balance at 1 April 2018
1,990
1,269
109
(15)
(197)
3,156
Profit for the year
-
-
-
-
1,526
1,526
Other comprehensive income for the year net of tax
-
-
-
111
61
172
Total comprehensive income
-
-
-
111
1,588
1,699
Share based payments
-
-
-
-
40
40
Deferred tax on employee share options
-
-
-
-
(27)
(27)
Total of transactions with shareholders
-
-
-
-
13
13
Balance at 31 March 2019
1,990
1,269
109
96
1,404
4,868
Share premium account
The share premium account balance includes the proceeds that were above the nominal value from issuance of the Company's equity share capital comprising 25p shares.
Capital redemption reserve
The capital redemption reserve has arisen on the cancellation of previously issued shares and represents the nominal value of those shares cancelled.
Hedging reserve
The hedging reserve records the effective portion of the net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.
Retained earnings
Retained earnings include the accumulated profits and losses arising from the Consolidated Income Statement and certain items from the Statement of Comprehensive Income attributable to equity shareholders, less distributions to shareholders.
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS
The Group's and Company's financial statements of Chamberlin for the year ended 31 March 2019 were authorised for issue by the board of directors on 3 June 2019 and the balance sheets were signed on the Board's behalf by Kevin Nolan and Neil Davies. The Company is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2019 or 31 March 2018 but is derived from the 2019 Annual Report and Accounts. The Annual Report and Accounts for 2018 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2019 will be delivered to the Registrar of Companies in due course. The auditors, Grant Thornton UK LLP, have reported on the accounts for the year ended 31 March 2019 and have given an unqualified report which does not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006 or an emphasis of matter paragraph.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Chamberlin plc and its subsidiaries as at 31 March each year. The financial statements of subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. All inter-Company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.
Accounting policies
The preliminary announcement has been prepared on the same basis as the financial statements for the year ended 31 March 2018 including IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers noting that there is no impact for the Group however we elected to adopt the new IFRS 16 accounting standard to capitalise finance leases early (effective from 1st April 2018), increasing the overall reported debt by £751k.
Financial impact of initial application of IFRS 16
The table below shows the amount of adjustment for each financial statement line item affected by the application of IFRS 16 for the current year. The weighted average incremental borrowing rate applied to lease liabilities recognised in the consolidated balance sheet at the date of initial application is 4.8%
Impact on assets, Liabilities and equity as at 1 April 2018
As previously reported
IFRS 16 adjustment
As restated
£'000
£'000
£'000
Property, plant and equipment
Land and Buildings - NBV
3,546
704
4,250
Plant and machinery- NBV
8,157
-
8,157
Motor vehicles- NBV
-
47
47
Total
11,703
751
12,454
Financial liabilities < 1 year
6,989
102
7,091
Financial liabilities >1 year
1,889
649
2,538
Total
8,878
751
9,629
Going concern
The Group's forecasts and projections, taking account of reasonably possible changes in trading conditions, show that the Group is able to operate within the level of its current bank facilities, comprising a £7.75m ongoing invoice discounting and finance leases of £4.0m repayable over 5 years. As a consequence, the Directors believe that the Group is well placed to manage its business and financial risks successfully.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.
3. SEGMENTAL ANALYSIS
For management purposes, the Group is organised into two operating divisions according to the nature of the products and services. Operating segments within those divisions are combined on the basis of their similar long term characteristics and similar nature of their products, services and end users as follows:
The Foundries segment is a supplier of iron castings, in raw or machined form, to a variety of industrial customers who incorporate the castings into their own products or carry out further machining or assembly operations on the castings before selling them on to their customers.
The engineering segment provides manufactured and imported products to distributors and end-users operating in the safety and security markets. The products fall into the categories of hazardous area lighting and control gear.
Management monitors the operating results of its divisions separately for the purposes of making decisions about resource allocation and performance assessment. The Chief Operating Decision Maker is the Chief Executive.
(i) By operating segment
Segmental revenue
Segmental operating profit
Year ended
2019
2018
2019
2018
£000
£000
£000
£000
Foundries
29,343
26,396
(211)
528
Engineering
3,615
3,757
251
229
Segmental results
32,958
30,153
40
757
Reconciliation of reported segmental operating profit
Segment operating profit
40
757
Shared costs (excluding share based payment charge)
(927)
(1,073)
Exceptional and non-underlying costs
(3,684)
(324)
Net finance costs
(387)
(472)
Loss before tax from continuing operations
(4,957)
(1,112)
Segmental assets
Foundries
15,244
18,320
Engineering
1,402
1,563
16,646
19,883
Segmental liabilities
Foundries
(3,840)
(5,522)
Engineering
(794)
(949)
(4,634)
(6,471)
Segmental net assets
12,012
13,412
Unallocated net liabilities
(7,144)
(12,564)
Unallocated discontinued
-
2,308
Total net assets
4,868
3,156
Unallocated net liabilities include the pension liability of £2,640,000 (2018: £5,080,000), financial liabilities of £5,359,000 (2018: £8,134,000) and deferred tax asset of £853,000 (2018: £650,000).
Capital expenditure, depreciation and amortisation and impairment
Capital additions
Foundries
Engineering
Total
2019
2018
2019
2018
2019
2018
£000
£000
£000
£000
£000
£000
Property, plant and equipment
972
2,720
8
238
980
2,958
Software
-
9
-
7
-
16
Development costs
-
-
22
24
22
24
Depreciation, amortisation and impairment
Foundries
Engineering
Total
2019
2018
2019
2018
2019
2018
£000
£000
£000
£000
£000
£000
Property, plant and equipment
(1,458)
(1,208)
(49)
(217)
(1,507)
(1,425)
Software
(49)
(54)
(7)
(10)
(56)
(64)
Development costs
-
-
(18)
(10)
(18)
(10)
(ii) By geographical segment
2019
2018
Revenue by location of customer:
£000
£000
United Kingdom
12,203
10,292
Italy
3,743
5,835
Germany
3,124
4,100
Rest of Europe
13,024
9,291
Other countries
864
635
32,958
30,153
4. FINANCE COSTS
2019
2018
£000
£000
Bank overdraft interest payable
(335)
(164)
Interest expense on lease liabilities
(52)
-
Finance cost of pensions
(112)
(126)
(499)
(472)
5. (LOSS)/ EARNINGS PER SHARE
The calculation of (loss)/ earnings per share is based on the profit attributable to shareholders and the weighted average number of ordinary shares in issue. In calculating the diluted (loss)/ earnings per share, adjustment has been made for the dilutive effect of outstanding share options. Underlying (loss)/ earnings per share, which excludes exceptional costs and non-underlying items, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Exceptional costs and non-underlying items are detailed in note 6.
2019
2018
£000
£000
Loss for basic earnings per share
(4,909)
(1,351)
Exceptional/ non-underlying costs- continuing operations
3,113
60
Net financing costs and service cost on pension obligations
531
344
Share based payment charge
40
46
Taxation effect of the above
(111)
(85)
Loss for underlying loss per share
(1,336)
(986)
(Loss) per share (pence) from continuing operations:
Underlying
(16.8)
(12.4)
Diluted underlying
(16.8)
(12.4)
2019
2018
£000
£000
Discontinued loss for basic earnings per share
6,435
539
Exceptional/ non-underlying costs
(3,684)
(450)
Taxation effect of the above
111
85
Earnings for underlying earnings per share
2,862
173
Earnings per share (pence) from discontinued operations:
Underlying
80.9
6.8
Diluted underlying
80.9
6.8
Total earnings/ (loss) per share (pence):
Underlying
19.2
(12.2)
Diluted underlying
19.2
(12.2)
2019
2018
Number
'000
Number
'000
Weighted average number of ordinary shares
7,958
7,958
Adjustment to reflect shares under options
424
350
Weighted average number of ordinary shares - fully diluted
8,382
8,308
As at 31 March 2019 and 31 March 2018 there is no adjustment in the total diluted loss per share calculation for the 424,000 (2018: 350,000) shares under option as they are required to be excluded from the weighted average number of shares for diluted loss per share as they are anti-dilutive for the period then ended.
6. EXCEPTIONAL AND NON-UNDERLYING COSTS
2019
2018
£000
£000
Group reorganisation
52
60
Asset impairment
3,043
-
Onerous leases
17
-
GMP Equalisation
295
-
Exceptional items
3,408
60
Defined benefit pension scheme administration costs
124
218
Share based payment charge
40
46
Non-underlying other operating expenses
164
264
Finance cost of pensions
112
126
Taxation
- tax effect of exceptional and non-underlying costs
(111)
(85)
3,572
365
During 2019 the Group continued to rationalise its operations. Group reorganisation costs, including redundancy and recruitment, relate to this rationalisation.
The Group undertook an impairment review of two of its sites within the foundry division which identified the assets were identified that the prior carrying value could not be supported by the future value to the business.
Guaranteed Minimum Pension (GMP) equalisation review was undertaken resulting in an increase in the pension liability of £295,000.
7. DISCONTINUED OPERATIONS
On 19 December 2018 Exidor was sold. As a result the results of Exidor are classified as a discontinued operation and presented as such in these financial statements.
The operating profit of Exidor is summarised as follows:
£000
Property, plant and equipment
1,135
Intangible assets
74
Deferred tax
70
Inventories
1,491
Trade and other receivables
1,882
Cash and cash equivalents
1,146
Trade and other payables
(3,508)
Net assets disposed
2,291
Consideration
10,000
Working capital adjustment
(98)
Debt adjustment
(639)
Claim retention
(350)
8,913
Disposal costs
(393)
Net cash received relating to disposal
8,520
Cash proceeds
8,520
Net assets disposed
(2,291)
Profit on disposal
6,229
Included in the consideration is a retention of £350,000 relating to a customer claim.
The results prior to 19 December 2018 for the discontinued operations included in the consolidated income statement were:
2019
2018
'000
'000
Revenue
5,924
7,517
Operating profit
305
672
Finance costs
(23)
(30)
Profit before tax
282
642
Tax
(76)
(103)
Profit on disposal
6,229
-
Profit of discontinued operations
6,435
539
Exidor contributed the following to the Group's cashflow:
2019
2018
'000
'000
Operating activities
491
509
Investing activities
(125)
(207)
Financing activities
207
257
573
559
8. FINANCIAL LIABILITIES
2019
2018
£000
£000
Current liabilities
Bank overdraft
-
485
Invoice finance facility
1,628
4,740
Import loan facility
-
1,137
Finance lease liability (right of use)
184
102
Current instalments due on finance leases
871
627
2,683
7,091
Non-current liabilities
Instalments due on finance leases
2,175
1,889
Finance lease liability (right of use)
791
649
Total financial liabilities
5,649
9,629
The overdraft which was held with HSBC Bank plc as part of the Group net facility was reviewed in December 2018 as part of the Exidor disposal and was fully settled.
The net overdraft position as at 31 March 2019 was £nil (2018: £485,000), this comprises cash balances of £314,000 (2018: £1,735,000) and bank overdrafts of £23,000 (2018: £2,220,000). Interest is payable at 2.0% (2018: 2.0%) over base rate.
Asset finance loans were fully repaid in the year. Previously they were secured against various items of plant and machinery across the Group.
The import loan facility is used to facilitate the purchase of equipment for the new machining centre. Once each asset is commissioned the import loan facility is repaid in full, facilitated by a sale and lease back on finance lease. Interest is payable at 3.25% over base rate.
Other finance leases are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a period of five years to March 2022. Interest is payable at fixed amounts that range between 3.1% and 6.2%.
Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable at 2.3% over base rate. The maximum facility as at 31 March 2019 was £7,750,000 (2018: £7,000,000). Management have assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and invoice finance liabilities separately.
9. PENSIONS ARRANGEMENTS
During the year, the Group operated funded defined benefit and defined contribution pension schemes for the majority of its employees, these being established under trusts with the assets held separately from those of the Group. The pension operating cost for the Group defined benefit scheme for 2019 was £124,000 (2018: £218,000) plus £112,000 of financing cost (2018: £126,000).
The other schemes within the Group are defined contribution schemes and the pension cost represents contributions payable. The total cost of defined contribution schemes was £191,000 (2018: £190,000). The notes below relate to the defined benefit scheme.
The actuarial liabilities have been calculated using the Projected Unit method. The major assumptions used by the actuary were (in nominal terms):-
31 March
2019
31 March
2018
31 March
2017
Salary increases
n/a
n/a
n/a
Pension increases (post 1997)
3.2%
3.1%
3.3%
Discount rate
2.3%
2.5%
2.5%
Inflation assumption - RPI
3.3%
3.2%
3.3%
Inflation assumption - CPI
2.3%
2.2%
2.3%
Demographic assumptions are all based on the S2PA (2018: S2PA) mortality tables with a 1% annual increase. The post retirement mortality assumptions allow for expected increases in longevity. The current disclosures relate to assumptions based on longevity in years following retirement as of the balance sheet date, with future pensions relating to an employee retiring in 2032.
2019
Years
2018
Years
Current pensioner at 65 - male
20.9
21.1
- female
23.1
23.0
Future pensioner at 65 - male
21.8
22.1
- female
24.2
24.1
The scheme was closed to future accrual with effect from 30 November 2007, after which the Company's regular contribution rate reduced to zero (previously the rate had been 9.1% of members' pensionable salaries).
The triennial valuation as at 1 April 2017 was completed in the year and concluded that in return for maintaining the previous contribution arrangements and extending the deficit reduction period to 2038, the Company has given security over the Group's land and buildings to the pension scheme. There will be a further triennial review with effect from 1 April 2020, which will establish future deficit payments. This will reflect, amongst other matters, the special payment of £2.5m into the scheme during 2018/19.
The contributions expected to be paid during the year to 31 March 2020 are £279,000.
The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the scheme were:
2019
£000
2018
£000
Equities/ diversified growth fund
14,286
11,802
Bonds
1,580
1,280
Insured pensioner assets
26
28
Cash
173
97
Market value of assets
16,065
13,207
Actuarial value of liability
(18,705)
(18,287)
Scheme deficit
(2,640)
(5,080)
Related deferred tax asset
448
864
Net pension liability
(2,192)
(4,216)
Net benefit expense recognised in profit and loss
2019
£000
2018
£000
Operating costs
(112)
(126)
(112)
(126)
Re-measurement losses/ (gains) in other comprehensive income
2019
£000
2018
£000
Actuarial losses/ (gains) arising from changes in financial assumptions
622
(151)
Actuarial gains arising from changes in demographic assumptions
(151)
(129)
Experience adjustments
91
291
Return on assets (excluding interest income)
(638)
(3)
(76)
8
2019
£000
2018
£000
Actual return on plan assets
976
334
Movement in deficit during the year
2019
£000
2018
£000
Deficit in scheme at beginning of year
(5,080)
(5,209)
Employer contributions
2,771
263
Net interest expense
(112)
(126)
Actuarial loss
76
(8)
Deficit in scheme at end of year
(2,345)
(5,080)
Movement in scheme assets
2019
£000
2018
£000
Fair value at beginning of year
13,207
13,548
Interest income on scheme assets
338
331
Return on assets (excluding interest income)
638
3
Employer contributions
2,771
263
Benefits paid
(889)
(938)
Fair value at end of year
16,065
13,207
Movement in scheme liabilities
2019
£000
2018
£000
Benefit obligation at start of year
18,287
18,757
Interest cost
450
457
Actuarial losses/ (gains) arising from changes in financial assumptions
622
(151)
Actuarial gains arising from changes in demographic assumptions
(151)
(129)
Experience adjustments
91
291
Benefits paid
(889)
(938)
Benefit obligation at end of year
18,705
18,287
The weighted average duration of the pension scheme liabilities are 13.5 years (2018: 13.5 years).
A quantitative sensitivity analysis for significant assumptions as at 31 March 2019 is as shown below:
Present value of scheme liabilities when changing the following assumptions:
2019
£000
Discount rate increased by 1% p.a.
16,497
RPI and CPI increased by 1% p.a.
19,734
Mortality- members assumed to be their actual age as opposed to 1 year older
19,594
The sensitivity analysis above has been determined based on a method that extrapolates the impact on defined benefit obligations as a result of reasonable changes in key assumptions occurring at the end of the year.
10. REPORT AND ACCOUNTS
Copies of the Annual Report will be available on the Group's website, www.chamberlin.co.uk from 28 June 2019 and from the Group's head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM will be held on 23 July 2019 at Chuckery Road, Walsall, West Midlands, WS1 2DU.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDFR DMGGVVFNGLZM
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