REG - Chamberlin PLC - Final Results
30/11/2021 11:05
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RNS Number : 0353U Chamberlin PLC 30 November 2021
30 November 2021
CHAMBERLIN plc
("Chamberlin", the "Company" or the "Group")
FINAL RESULTS
for the 14 month period ended 31 May 2021
Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group,
announces its Final Results for the 14 months to 31 May 2021:
Key Points
Financial
· Revenue of £26.4m for 14 months to 31 May 2021 (Year to 31 March
2020: £26.1m) was 14% lower than prior year on a pro rata basis reflecting
COVID-19 related headwinds in the first half and the impact of the
cancellation of contracts in the second half by BorgWarner
· Underlying operating loss of £2.9m (Year to 31 March 2020:
£1.1m loss), reflecting COVID-19 induced shutdowns, a slow recovery in
activity levels across the automotive sector and the impact of the
cancellation of the BorgWarner contracts
· Underlying loss before taxation of £3.2m (Year to 31 March
2020: £1.4m)
· Non-underlying costs of £7.2m include significant non-cash
impairments associated with the cancellation of the BorgWarner contracts of
£4.7m, restructuring costs of £1.3m, adviser costs of £0.5m and property
dilapidation costs of £0.7m
· Statutory loss before tax of £10.4m (Year to 31 March
2020: £2.3m)
· Underlying diluted loss per share of 13.7p (Year to 31
March 2020: 18.7p)
· Total diluted loss per share of 55.1p (Year to 31 March
2020: 30.1p)
· Net debt reduced to £1.8m (31 March 2020: £4.6m)
following £3.5m equity raise in March 2021
Underlying figures are stated before non-underlying costs (restructuring
costs, hedge ineffectiveness, impairment, GMP equalisation, onerous leases and
share based payment costs) together with the associated tax impact.
Operational
· Foundry revenues fell by 13% on a pro rata basis to £23.3m
(Year to 31 March 2020: £23.1m) reflecting the difficulties noted above
regarding COVID-19 and BorgWarner at Chamberlin & Hill Castings partially
offset by an 18% increase at Russell Ductile Castings
· Foundry operating loss of £1.9m (Year to 31 March 2020:
£0.1m) driven by the issues at Chamberlin & Hill Castings partially
offset by a return to profitability at Russell Ductile Castings
· Engineering revenues of £3.1m decreased by 12% on a pro
rata basis (Year to 31 March 2020: £3.0m), primarily due to COVID-19 induced
customer shutdowns in the first half. Operating performance was strong, with
an operating profit for the 14 months of £0.2m (Year to 31 March 2020:
breakeven) which was largely generated in the second half
The annual report and accounts for the 14 month period ended 31 May 2021
("2021 Accounts") and the Notice of AGM will be posted to shareholders today,
and will be available on the Company's website: https://www.chamberlin.co.uk/,
shortly. The AGM will be held at 11.00a.m. on 5 January 2022 at Chuckery Road,
Walsall, West Midlands, WS1 2DU. Notice of a further shareholder meeting to be
held as soon as the AGM has concluded on 5 January 2022 is also included in
the 2021 Accounts. Further details on both meetings are set out in note 12
below.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the EU
Market Abuse Regulation (2014/596) which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018, as amended and supplemented from time to
time.
Chamberlin plc T: 01922 707100
Kevin Price, Chief Executive
Alan Tomlinson, Finance Director
Cenkos Securities plc T: 020 7397 8900
(Nominated Adviser and Joint Broker)
Katy Birkin
Stephen Keys
Peterhouse Capital Limited T: 020 7469 0930
(Joint Broker)
Lucy Williams
Duncan Vasey
Chairman's Statement
This period in Chamberlin's history has been severely impacted by two
significant events, firstly by an unprecedented global phenomenon in COVID-19,
and secondly the early cancellation of all our contracts with our principal
automotive customer, BorgWarner Turbo Systems Worldwide (BorgWarner). As a
result of these damaging events, the financial performance and strength of the
Group suffered considerably, with the Group loss before tax for the 14 month
period to 31 May 2021 amounting to £10.4m, of which £6.5m related to charges
arising from the loss of the BorgWarner contracts.
In order to stabilise the Group's financial position, we completed a share
placing and subscription in March 2021 raising £3.5m. The equity raised
enabled the Group to facilitate the necessary reduction in headcount to
realign the cost base to the lower level of revenue post the decision by
BorgWarner and to provide sufficient working capital to stabilise the
business. We trust these events are now behind us.
The Board and Staff
In March 2021, the Board was strengthened by the appointment of Trevor Brown,
initially as a Non-Executive Director, and in June 2021 as an Executive
Director with responsibility for strategy. Trevor brings a wealth of
entrepreneurial experience to the Board, which will be invaluable as we embark
upon our new strategy for growth.
On 31 May 2021, both Neil Davies and David Flowerday stepped down as Directors
of the Company. On behalf of the Board, I would like to again thank Neil and
David for their contribution during our recent difficult times and to wish
them well for the future. As part of the restructuring of the Group, on 31 May
2021 Kevin Nolan stepped down from his role as Chief Executive but remains a
Non-Executive Director, retaining responsibility for key projects and client
accounts and providing continuity, experience and support to the Board.
Subsequent to the period end on 1 June 2021, Kevin Price and Alan Tomlinson
were appointed to the Board as Chief Executive and Finance Director
respectively. Both Kevin and Alan have a strong working knowledge and
experience of the Group's operations from their roles in the Chamberlin Group
prior to their appointment to the Board. On behalf of the Board, I would like
to welcome Kevin and Alan to their new roles.
The period under review has been a challenging one for the Group and the Board
are acutely aware of the impact this has had on our staff. The disruption from
COVID-19 led to shutdowns and the need to place large numbers of our employees
on furlough, in some cases for extended periods of time, while the economies
and markets in which we operate recovered. We were also severely impacted by
the BorgWarner decision, which caused further uncertainty for all our
employees as we embarked upon the necessary fund raise and subsequent
restructure. I would like to place on record the Board's thanks for the
dedication, professionalism and loyalty that our employees have continued to
demonstrate during these unprecedented times.
Outlook
It is with considerable regret that the Board has to announce the huge losses
that it has suffered for the period to 31 May 2021, albeit these were largely
caused by events outside of Chamberlin's control. The combined impact of
COVID-19 and the decision by BorgWarner inflicted near fatal damage to the
very existence of the Company. However, the confidence that new and existing
shareholders have shown by supporting the Group through the equity raise in
March 2021 has enabled the Board to refocus the Group's strategy and future
direction.
Encouragingly, revenues in the first-half of the new financial year have been
in line with management's expectations, despite lower revenues from the
automotive sector due to the semi-conductor shortage impacting that market
globally. However, financial performance continues to be impacted by the
global headwinds facing most companies, namely rising raw material and energy
prices and supply chain and transportation disruption. Management have taken
appropriate action to address these issues and believe that financial
performance will improve, with management expecting the Group to return to a
modest level of profitability in the second-half of the financial year.
As previously announced, the Board is focused on enhancing shareholder value
over the medium to long term through diversification away from the declining,
high-volume automotive sector and into markets with strong growth
characteristics, where we can use our technical and design expertise to
develop new products and provide new services. The Board has confidence that
this change in strategic focus and mindset will provide the Group with greater
opportunities to maintain sustainable, profitable growth in the medium-term
for the benefit of all our shareholders and stakeholders.
Keith Butler-Wheelhouse
Chairman
Chief Executive's Review
The Group's performance during the 14 month period to 31 May 2021 has been
overshadowed by two significant events that has led to substantial financial
losses being incurred, the need to raise equity to continue in operation and a
subsequent restructure of the business to right-size the cost base.
Group revenue of £26.4m for the 14 months to 31 May 2021 (Year to 31 March
2020: £26.1m) was 14% lower than prior year on a pro rata basis reflecting
COVID-19 related headwinds in the first half and the impact of the
cancellation of contracts in the second half by BorgWarner Turbo Systems
Worldwide (BorgWarner). These events primarily affected the Walsall foundry
and machining centre, which had to close completely in April 2020 due to the
COVID-19 induced shutdowns of our European automotive customer's sites.
Although revenue did partially recover once the Walsall sites re-opened,
demand continued to fluctuate as further COVID-19 disruptions throughout the
remainder of the period impacted our customers. This unpredictability was then
further compounded by the news in December 2020 from BorgWarner of the early
termination of the Group's contracts, which contributed £7.5m to revenue in
the 14 month period to 31 May 2021.
Russell Ductile Castings' performance in the period was encouraging as it
benefitted from less disruption from COVID-19 and reduced levels of
competition as a number of competitor foundries were forced to close.
Consequently, revenue for the 14 months to 31 May 2021 increased by almost 18%
compared to the previous 12 months on a pro rata basis and the division turned
an operating loss in the prior year into a profit in the period.
The performance of Petrel, our hazardous area lighting company, also showed
promising improvement despite COVID-19 induced customer shutdowns and delays
to the procurement of some large lighting projects in the first half.
Financial performance in the last eight months of the period dramatically
improved, with Petrel delivering £2.0m of revenue and £0.2m of operating
profit during that period.
As a result of the COVID-19 disruptions and the impact of the BorgWarner
decision, the Group has incurred a substantial loss before tax of £10.4m. It
is obviously disappointing to be reporting such a significant loss but it is
largely the result of £7.2m of non-underlying costs, primarily associated
with the BorgWarner contract losses that will not be repeated. Of these
non-underlying costs, £4.7m relate to non-cash impacting impairment of fixed
assets and inventories, £1.3m relate to the subsequent restructuring, £0.7m
relate to property dilapidation costs and £0.5m relate to legal and adviser
costs.
The Group remained focussed on effective cash management throughout the period
as the shutdowns from COVID-19 began to impact working capital, with the Group
utilising the Government furlough scheme where necessary. However, following
the loss of the BorgWarner contracts, it became evident that the Group would
not be able to sustain its cash headroom without an injection of capital.
Consequently, the Group raised £3.5m in March 2021 from a share issue to
facilitate a restructuring and provide working capital, with net debt reduced
at 31 May 2021 to £1.8m (31 March 2020: £4.6m).
With this tumultuous and difficult period now largely behind us, the Group is
working through the recovery phase from these unprecedented events and
implementing a strategy and platform to return the Group to profitability. In
the new financial year, resources have been directed towards new product lines
to rapidly reduce reliance on the automotive industry. The Board's aim over
the medium term is to replace the majority of the Group's traditional, low
margin contract-based production, with much higher margin, premium consumer
products in markets with a strong opportunity for growth and where the Group
can innovate, control distribution and sales to effect real and sustainable
growth in revenue and profits. This strategy is already taking shape, with the
establishment of two new customer-focussed brands in the fitness equipment and
cast iron cookware markets:
Iron Foundry Weights
Iron Foundry Weights, Chamberlin's new trading name for its specialist home
and commercial gym equipment business, is developing rapidly. The Group gained
great success with the introduction of a range of kettlebells in November 2020
and since then has expanded its product offering to weight-plates and
dumbbells, selling products direct to the consumer from our own website,
www.ironfoundryweights.co.uk , and through Amazon in the UK, and more recently
in Europe. Through our participation in The Arnold Sports Festival in October
2021, we also have a number of opportunities to sell our products to
businesses in the fitness market. In November 2021 the Group's new range of
precision machined "indestructible" dumbbells was released, using our unique
"Shrink-Fit" assembly technology. The Company has also recently signed an
endorsement agreement with social media ambassador Harrison Bird.
Emba
Chamberlin is making excellent progress with the development of
premium-quality cast iron cookware - the Emba Cookware Range - which
officially launched its initial product range on-line in November 2021. The
rising popularity for premium quality, high value cast iron cookware is
growing rapidly in the UK and the Board expects Chamberlin's Emba brand to be
at the forefront of this market as the only true UK based designer and
manufacturer.
Elsewhere at our Walsall foundry and machining facility, we are actively
pursuing a strategy of reducing the reliance on the high-volume automotive
sector by utilising our reputation for design and technical excellence to
provide engineering solutions in a broader range of markets, including the
automotive after-market. Chamberlin is also focused on maximising the capacity
of its high-quality, technologically advanced machining centre, which includes
the production of fitness equipment for the Iron Foundry Weights brand.
Russell Ductile Castings continues to have a substantial order book and the
Board expects that it will continue to build on its positive performance in
2020-21 in the current financial year, benefitting from favourable market
conditions, a strong product and technical capability and a growing trend of
reshoring to the UK from overseas.
Petrel has continued to deliver excellent results in the new financial year,
continuing the trend from the second half of the 2020-21 financial period.
Furthermore, the launch of a new portable product hire service in October 2021
is expected to bring revenue opportunities in the second half.
The COVID-19 pandemic continues to present global challenges to trading
conditions, including escalating raw material costs, supply chain shortages
and a slowdown in the automotive industry due to widely publicised electronic
control unit (ECU) availability. In response to these challenges, the
management team continues to reduce costs, improve efficiencies, and optimise
pricing to improve margins in order to restore sustainable profitability to
the Group.
Although these challenges present difficulties in the short-term which require
decisive management action, the Board believes that the strategy outlined
above will drive significantly improved results over the medium term.
Furthermore, some of these challenges also present significant opportunities.
With supply chain constraints and transportation delays impacting the global
flow of trade, we are seeing an increasing trend towards re-shoring
manufacturing back to the UK from overseas. Made in the UK is a significant
unique selling point across all our businesses and the Board believe we are
well positioned to take advantage of the opportunities this will inevitably
present.
Kevin Price
Chief Executive
Finance Review
Overview
Revenue for the 14 months ended 31 May 2021 of £26.4m (Year ended 31 March
2020: £26.1m) represents a 14% reduction on a pro rata basis compared to the
prior year, largely due to COVID-19 disruptions in our markets and the effect
of the cancellation of all contracts by BorgWarner Turbo Systems Worldwide.
Gross profit margin, defined as gross profit divided by revenue, decreased to
8.3% from 9.6% in 2020.
Underlying operating loss before tax increased to £2.9m (Year ended 31 March
2020: £1.1m) due to the impacts on the Group noted above.
Financing costs were £0.3m (Year ended 31 March 2020: £0.3m) representing a
14% reduction compared to prior year on a pro rata basis.
As a result of the above, the underlying loss before tax amounted to £3.2m
(Year ended 31 March 2020: £1.4m loss).
The statutory loss before tax of £10.4m (Year ended 31 March 2020: £2.3m)
reflected £7.2m of non-underlying items.
Non-underlying items
Non-underlying items of £7.2m (Year ended 31 March 2020: £0.9m) include
significant non-cash impairments associated with the cancellation of the
BorgWarner contracts of £4.7m, restructuring costs of £1.3m, adviser costs
of £0.5m and property dilapidation costs of £0.7m.
Tax
The effective rate of taxation on a statutory basis was 8% compared to the
mainstream corporation tax rate of 19%, primarily as a result of not
recognising deferred tax on trading losses due to the inherent uncertainty
surrounding future profitability.
Diluted loss per share
Underlying diluted loss per share of 13.7p (Year ended 31 March 2020: 18.7p)
reflects the increase in underlying loss attributable to shareholders and the
increase in the weighted average number of shares in issue following the share
placing and subscription in March 2021.
Cash generation and financing
Operating cash outflow was £0.3m (Year ended 31 March 2020: inflow of £1.5m)
which includes £0.5m of cash payments relating to non-underlying adviser
costs.
Cash spent on property, plant and equipment and capitalised software and
development costs in the 14 month period ended 31 May 2021 was £0.2m (Year to
31 March 2020: £0.4m).
New equity of £3.3m was raised in March 2021 following a share placing and
subscription and is net of transaction costs of £0.2m.
Lease payments of £0.9m (Year ended 31 March 2020: £1.1m) primarily relate
to assets at the Group's machining facility and were lower than the prior
period due to a 6 month payment holiday agreed with HSBC during the height of
the COVID-19 impact on the Group.
Net debt
Net debt at 31 May 2021 decreased by £2.8m to £1.8m (31 March 2020: £4.6m)
as a result of the equity raise in March 2021. The Group debt facility has two
elements: a £3.5m invoice discounting facility limited to 90% of outstanding
invoice value and lease liabilities of £2.2m
Foreign exchange
It is the Group's policy to minimise risk arising from 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 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 90% 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 43% of the Group's revenues in the 14 month period ended 31 May
2021 are denominated in Euros. This proportion of Euro revenues is expected to
reduce significantly in the forthcoming financial year as BorgWarner revenues
in the current period are not repeated.
During the 14 months ended 31 May 2021, the average exchange rate used to
translate into GBP Sterling was €1.13 (Year ended 31 March 2020: €1.15).
Pension
The Group has one defined benefit pension scheme. It is closed to future
accrual, with the Group operating a defined contribution pension scheme for
its current employees. The deficit for the defined benefit pension scheme at
31 May 2021 reduced to £1.2m (31 March 2020: £2.0m) as significant asset
return out-performance and changes in demographic assumptions out-weighed the
increase in liabilities resulting from a reduction in bond yields and
consequently the discount rate.
The Group's defined benefit pension scheme was closed to future accrual in
2007. The 31 March 2019 triennial valuation established that employer
contributions are £0.30m for 2021, £0.33m for 2022 and £0.36m for 2023. The
next triennial valuation is due as at 31 March 2022.
Administration costs of the defined benefit pension scheme were £0.2m in the
14 months ended 31 May 2021 (Year ended 31 March 2020: £0.2m), and are shown
in other operating expenses. The Group cash contribution during the 14 months
ended 31 May 2021 was £0.4m (Year ended 31 March 2020: £0.3m).
Audit Opinion
The auditors have reported on the accounts for the 14 month period ended 31
May 2021 and have given a modified audit opinion drawing attention to a
material uncertainty regarding going concern. After making enquiries, the
Directors have an expectation that, in the circumstances of reasonably
foreseeable downside scenarios, the Group and Company have adequate resources
to continue in operational existence for the foreseeable future.
However, the rate at which new work can be secured to replace the lost
BorgWarner activity is difficult to predict. Furthermore, the ability to renew
or source alternative invoice finance facilities or to agree deferred
settlement terms with HMRC results in material uncertainty, which may cast
significant doubt over the ability of the Group and the Company to realise its
assets and discharge its liabilities in the normal course of business and
hence continue as a going concern.
The Directors continue to adopt the going concern basis, whilst recognising
there is material uncertainty relating to the above matters.
Alan Tomlinson
Group Finance Director
Consolidated Income Statement
for the 14 months ended 31 May 2021
14 months ended 31 May 2021 Year ended 31 March 2020
Note Underlying (+) Non- Total Underlying (+) Non- Total
underlying underlying
£000 £000 £000 £000 £000 £000
Revenue 3 26,444 - 26,444 26,143 - 26,143
Cost of sales (24,262) - (24,262) (23,632) - (23,632)
Gross profit 2,182 - 2,182 2,511 - 2,511
Other operating expenses 6 (5,083) (7,193) (12,276) (3,635) (909) (4,544)
Operating loss (2,901) (7,193) (10,094) (1,124) (909) (2,033)
Bank interest receivable 13 - 13 - - -
Finance costs 4 (310) - (310) (310) - (310)
Loss before tax (3,198) (7,193) (10,391) (1,434) (909) (2,343)
Tax credit/(expense) 817 - 817 (50) - (50)
Loss for the period
attributable to equity holders of the parent company
(2,381) (7,193) (9,574) (1,484) (909) (2,393)
Underlying loss per share:
Basic 5 (13.7)p - - (18.7)p - -
Diluted 5 (13.7)p - - (18.7)p - -
Total loss per share:
Basic 5 - - (55.1)p - - (30.1)p
Diluted 5 - - (55.1)p - - (30.1)p
*Non-underlying items include restructuring costs, hedge ineffectiveness,
impairment of assets, dilapidation costs and share-based payment costs
together with the associated tax impact.
Consolidated Statement of Comprehensive Income
for the 14 months ended 31 May 2021
14 months ended 31 May 2021 Year ended 31 March 2020
Note £000 £000
Loss for the period (9,574) (2,393)
Other comprehensive income /(expense)
Movements in fair value of cash flow hedges taken to other comprehensive
income
650 (614)
Ineffective portion of movement in cash flow hedges recycled to income - 138
statement
Deferred tax on movement in cash flow hedges (133) 81
Net other comprehensive income/(expense) that may be recycled to profit and 517 (395)
loss
Remeasurement gain on pension scheme assets and liabilities 8 463 460
Deferred tax on remeasurement gain on pension scheme 7 (87)
Net other comprehensive income that will not be recycled to profit and loss 470 373
Other comprehensive income/(expense) for the period net of tax 987 (22)
Total comprehensive expense for the period attributable to equity holders of (8,547) (2,415)
the parent company
Consolidated Balance Sheet
at 31 May 2021
Note 31 May 31 March 2020
2021
£000 £000
Non-current assets
Property, plant and equipment 2,431 7,209
Intangible assets 263 341
Deferred tax assets 1,206 611
3,900 8,161
Current assets
Inventories 1,698 2,589
Trade and other receivables 3,932 6,082
Cash at Bank 1,038 457
6,668 9,128
Total assets 10,568 17,289
Current liabilities
Financial liabilities 7 1,715 3,028
Trade and other payables 8,031 7,481
9,746 10,509
Non-current liabilities
Financial liabilities 7 1,158 2,037
Deferred tax 150 39
Provisions 890 200
Defined benefit pension scheme deficit 8 1,190 1,959
3,388 4,235
Total liabilities 13,134 14,744
Capital and reserves
Share capital 2,051 1,990
Share premium 4,720 1,269
Capital redemption reserve 109 109
Hedging reserve 218 (299)
Retained earnings (9,664) (524)
Total equity (2,566) 2,545
Total equity and liabilities 10,568 17,289
Consolidated Cash Flow Statement
for the 14 months ended 31 May 2021
14 months ended 31 May 2021 Year ended
31 March 2020
£000 £000
Operating activities
Loss for the period before tax (10,391) (2,343)
Adjustments to reconcile (loss) for the year to net cash (outflow)/ inflow
from operating activities:
Interest receivable 13 -
Finance costs 310 310
Impairment charge on property, plant and equipment, inventory and receivables 4,632 -
Dilapidations provision 690 -
Hedge ineffectiveness - 138
Depreciation of property, plant and equipment 1,135 980
Amortisation of software 53 52
Amortisation and impairment of development costs 33 25
Profit on disposal of property, plant and equipment 135 (12)
Foreign exchange rate movement 37 (91)
Share-based payments 41 59
Defined benefit pension contributions paid (355) (279)
Decrease in inventories 175 113
Decrease/ (Increase) in receivables 2,036 (95)
Increase in payables 1,009 2,265
Corporation tax received 129 424
Net cash (outflow)/inflow from operating activities (344) 1,546
Investing activities
Purchase of property, plant and equipment (183) (316)
Purchase of software (3) (30)
Development costs (5) (20)
Disposal of property, plant and equipment - 12
Net cash outflow from investing activities (191) (354)
Financing activities
Interest received 13 -
Interest paid (261) (252)
Net invoice finance (outflow)/inflow (1,202) 279
New share capital issued 3,312 -
Proceeds from convertible loan 200 -
Principal element of lease payments (946) (1,066)
Net cash inflow/(outflow) from financing activities 1,116 (1,039)
Net increase in cash and cash equivalents 581 153
Cash and cash equivalents at the start of the year 457 291
Impact of foreign exchange rate movements - 13
Cash and cash equivalents at the end of the year 1,038 457
Cash and cash equivalents comprise:
Cash at bank 1,038 457
1,038 457
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 2019 1,990 1,269 109 96 1,404 4,868
Loss for the year - - - - (2,393) (2,393)
Other comprehensive (expense)/income for the year net of tax - - - (395) 373 (22)
Total comprehensive expense - - - (395) (2,020) (2,415)
Share-based payment - - - - 59 59
Deferred tax on share-based payment
- - - - 33 33
Total of transactions with shareholders
- - - - 92 92
Balance at 1 April 2020 1,990 1,269 109 (299) (524) 2,545
Loss for the period - - - - (9,574) (9,574)
Other comprehensive income for the period net of tax - - - 517 470 987
Total comprehensive income/(expense)
- - - 517 (9,104) (8,587)
New share capital issued 61 3,451 - - - 3,512
Share-based payments - - - - 41 41
Deferred tax on share-based payment
- - - - (77) (77)
Total of transactions with shareholders
61 3,451 - - (36) 3,476
Balance at 31 May 2021 2,051 4,720 109 218 (9,664) (2,566)
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. Transaction
costs directly associated with the share placing and subscription in March
2021 of £0.2m have been debited to share premium in the period.
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 ANNOUNCEMENT
1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF
COMPLIANCE WITH IFRS
The Group and Company's financial statements of Chamberlin Plc for the 14
months ended 31 May 2021 were authorised for issue by the board of directors
on 30 November 2021 and the balance sheets were signed on the Board's behalf
by Kevin Price and Alan Tomlinson. The Company is a public limited company
incorporated and domiciled in England and Wales. The Company's ordinary shares
are admitted to trading on AIM, a market of the same name operated by the
London Stock Exchange.
The Group's financial statements have been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006 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 14 months ended 31 May 2021 or for the
year ended 31 March 2020 but is derived from the 2021 Annual Report and
Accounts. The Annual Report and Accounts for the year ended 31 March 2020 have
been delivered to the Registrar of Companies and the Group Annual Report and
Accounts for 14 months ended 31 May 2021 will be delivered to the Registrar of
Companies on 30 November 2021. The auditors, Crowe UK LLP, have reported on
the accounts for the 14 months ended 31 May 2021 and have given a modified
audit opinion drawing attention to a material uncertainty regarding going
concern.
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 May following a change in the
accounting period end from 31 March. 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 period ended 31 May 2021. There were no new
accounting standards adopted in the year that have a material impact on the
financial statements.
Going concern
On 16 December 2020, the Company was notified by its major customer,
BorgWarner Turbo Systems Worldwide that it intended to cancel all contracts
with effect from 22 January 2021. As a result, the Board and its advisers
immediately implemented measures to reduce costs and preserve cash whilst
exploring options to strengthen the balance sheet. The result of this process
was the appointment of Trevor Brown as a Non-Executive Director in March 2021
and a share placing and subscription that raised equity for the Group of £3.5
million. The equity raise provided the cash resources necessary to undertake a
restructuring to realign the Group's cost base to the lower level of ongoing
revenue and to provide short-term working capital.
The Group's detailed forecast for the year ending 31 May 2022 and budget for
the year ending 31 May 2023 reflect the Director's view of the most likely
trading conditions. The forecast and budget indicate that existing bank
facilities are expected to remain adequate.
The forecast and budget include revenue growth assumptions in the second half
of the year to 31 May 2022 and continuing into the year ended 31 May 2023,
which is needed to replace the lost BorgWarner contracts. These assumptions
include growth into new E-commerce and consumer-led markets relating to
fitness equipment and cookware following the recent launch of the Iron Foundry
Weights (IFW) and Emba Cookware brands.
The Directors have applied reasonably foreseeable downside sensitivities to
the forecast and budget, which assumes that sales growth from new E-commerce
products is 50% lower than expectations, automotive volumes remain at current
low levels and non-automotive sales growth is 50% lower than expectations. The
budget, forecast and sensitised scenario exclude the possible receipt of
compensation from BorgWarner and proceeds from the sales of under-utilised
machinery. Furthermore, the Group is reliant on an invoice finance facility to
fund its working capital needs. The renewal of the facility at the next annual
review in March 2022 cannot be guaranteed, although there are no indications
at the date of the approval of the financial statements that a renewal with
the existing provider would not be granted or that alternative providers could
not be found. In addition, the Directors have assumed that deferred settlement
terms will be agreed with HMRC in relation to PAYE arrears of £1.3m for one
subsidiary in the Group that have arisen in the period since the announcement
by BorgWarner, having already agreed deferred settlement terms with HMRC for
two subsidiaries.
As a consequence, after making enquiries, the Directors have an expectation
that, in the circumstances of the reasonably foreseeable downside scenarios
described above, the Group and Company have adequate resources to continue in
operational existence for the foreseeable future.
However, the rate at which new work can be secured to replace the lost
BorgWarner activity is difficult to predict. Furthermore, the ability to renew
or source alternative invoice finance facilities or to agree deferred
settlement terms with HMRC results in material uncertainty, which may cast
significant doubt over the ability of the Group and the Company to realise its
assets and discharge its liabilities in the normal course of business and
hence continue as a going concern.
The Directors continue to adopt the going concern basis, whilst recognising
there is material uncertainty relating to the above matters.
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 supplies manufactured products to distributors and
end-users operating in hazardous area and industrial lighting markets.
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 (loss)/profit
14 months ended 31 May 2021 Year ended 31 March 14 months ended 31 May Year ended 31 March
2021
2020
2020
£000 £000 £000 £000
Foundries 23,321 23,106 (1,931) (84)
Engineering 3,123 3,037 191 (45)
Segment results 26,444 26,143 (1,740) (129)
Reconciliation of reported segmental operating (loss) / profit
Segment operating loss (1,740) (129)
Shared costs (1,161) (995)
Non-underlying costs (7,193) (909)
Net finance costs (297) (310)
Loss before tax from continuing operations (10,391) (2,343)
Segmental assets 14 months ended 31 May 2021 Year ended 31 March
2020
£000 £000
Foundries 7,211 14,974
Engineering 1,113 1,247
8,324 16,221
Segmental liabilities
Foundries (7,674) (6,880)
Engineering (1,247) (801)
(8,921) (7,681)
Segmental net (liabilities)/assets (597) 8,540
Unallocated net liabilities (1,969) (5,995)
Total net assets (2,566) 2,545
Unallocated net liabilities include the pension liability of £1,190,000
(2020: £1,959,000), net debt of £1,835,000 (2020: £4,608,000) less a net
deferred tax asset of £1,056,000 (2020: £572,000).
Capital expenditure, depreciation, amortisation and impairment
Capital additions Foundries Engineering Total
14 months ended 31 May 2021 Year ended 31 14 months ended 31 May 2021 Year ended 31 March 2020 14 months ended 31 May Year
March 2020
2021
ended 31 March
2020
£000 £000 £000 £000 £000 £000
Property, plant and equipment 177 426 20 - 197 426
Software 3 97 - 1 3 98
Development costs - - 5 30 5 30
Depreciation, amortisation and impairment Foundries Engineering Total
14 months ended 31 May 2021 Year ended 31 March 2020 14 months ended 31 May 2021 Year ended 31 March 2020 14 months ended 31 May Year
2021
ended 31 March 2020
£000 £000 £000 £000 £000 £000
Property, plant and equipment (1,113) (965) (22) (15) (1,135) (980)
Software (47) (45) (6) (7) (53) (52)
Development costs - - (33) (25) (33) (25)
In addition to the above, property, plant and equipment in the Foundries
division was impaired by £3,809,000 (2020: Nil).
(ii) By geographical segment
14 months ended 31 May Year ended 31 March
2021
2020
Revenue by location of customer: £000 £000
United Kingdom 13,944 9,008
Italy 1,351 2,051
Germany 2,595 2,602
Rest of Europe 7,425 11,863
Other countries 1,129 619
26,444 26,143
4. FINANCE COSTS
14 months ended 31 May 2021 Year
ended 31 March 2020
£000 £000
Bank overdraft and invoice finance interest payable (103) (164)
Interest expense on lease liabilities and other interest payable (158) (88)
Finance cost of pensions (49) (58)
(310) (310)
5. LOSS PER SHARE
The calculation of loss per share is based on the loss attributable to
shareholders and the weighted average number of ordinary shares in issue. In
calculating the diluted loss per share, adjustment has been made for the
dilutive effect of outstanding share options where applicable. Underlying loss
per share, which excludes non-underlying items, as disclosed in Note 6, has
also been disclosed.
14 months ended 31 May Year ended
2021
31 March 2020
£000 £000
Loss for basic earnings per share (9,574) (2,393)
Non-underlying items 7,193 909
Taxation effect of the above - -
Loss for underlying loss per share (2,381) (1,484)
Underlying loss per share (pence):
Basic (13.7) (18.7)
Diluted (13.7) (18.7)
Total loss per share (pence):
Basic (55.1) (30.1)
Diluted (55.1) (30.1)
2021 2020
Number Number
'000 '000
Weighted average number of ordinary shares 17,387 7,958
Adjustment to reflect shares under options 3,798 217
Weighted average number of ordinary shares - fully diluted 21,185 8,175
There is no adjustment in the diluted loss per share calculation for the
3,798,000 (2020:217,000) 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. The weighted average number of shares used in the
fully diluted calculation is therefore 17,387,000 (2020: 7,958,000).
6. NON-UNDERLYING ITEMS
14 months ended 31 May Year ended
2021
31 March 2020
£000 £000
Group reorganisation 1,310 712
Adviser costs relating to corporate restructuring 520 -
Hedge ineffectiveness - 138
Impairment of property, plant and equipment 3,809 -
Impairment of inventory and receivables 823 -
Dilapidations provision 690 -
Share-based payment charge 41 59
Non-underlying operating costs 7,193 909
Taxation
- tax effect of non-underlying costs - -
7,193 909
As a result of the cancellation of all contracts by the Group's major
customer, BorgWarner Turbo Systems Worldwide, announced on 16 December 2020,
the Group embarked upon a significant restructuring programme to realign the
cost base of the Foundry division to the reduced level of continuing revenue.
Group reorganisation costs of £1,310,000, which include redundancy and
associated costs, relate to this restructuring programme.
Following the cancellation of the Group's contracts by BorgWarner Turbo
Systems Worldwide, the Group undertook a review of the carrying value of the
assets in the Foundry division. This gave rise to an asset impairment charge
of £4,601,000, of which £3,809,000 related to property, plant &
equipment, £716,000 related to obsolete inventory and £107,000 related to
irrecoverable receivables.
The dilapidations provision of £690,000 relates to the estimated costs for
land and building leases that are nearing their end date.
The hedge ineffectiveness charge of £138,000 in 2020 arose from a short-term
reduction in highly probable Euro denominated sales as a result of economic
disruption to our customers caused by Covid-19.
The share-based payment charge in 2021 of £41,000 (2020: £59,000) relates to
the fair value cost of share option schemes for the period.
7. NET DEBT
31 May 31 March
2021
2020
£000 £000
Net cash (1,038) (457)
Invoice finance facility 665 1,925
Lease liabilities 1,050 1,103
Net debt due in less than one year 677 2,571
Non-current liabilities
Lease liabilities 1,158 2,037
Total net debt 1,835 4,608
Lease liabilities are secured against the specific item to which they relate.
These leases are repayable by monthly instalments for a period of up to four
years to February 2025. Interest is payable at fixed amounts that range
between 3.1% and 9.4%.
Invoice finance balances are secured against the trade receivables of the
Group and are repayable on demand. Interest is payable at 2.75% over base
rate. The maximum facility as at 31 March 2020 was £3,500,000 (2020:
£6,000,000). Management have assessed the treatment of the financing
arrangements and have determined it is appropriate to recognise trade
receivables and invoice finance liabilities separately.
8. 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
2021 was £236,000 (2020: £199,000), with the increase being due to costs
associated with the triennial valuation, together with £49,000 of financing
cost (2020: £58,000).
The other scheme within the Group is a defined contribution scheme and the
pension cost represents contributions payable. The total cost of the defined
contribution scheme was £377,000 (2020: £396,000). 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 May 31 March 31 March
2021 2020 2019
Salary increases n/a n/a n/a
Pension increases (post 1997) 3.1% 2.6% 3.2%
Discount rate 1.85% 2.3% 2.3%
Inflation assumption - RPI 3.2% 2.6% 3.3%
Inflation assumption - CPI 2.5% 1.7% 2.3%
Demographic assumptions are all based on the S3PA (2019: S2PA) mortality
tables with a 1.25% 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 pensioners relating to an employee retiring in 2032.
2021 2020
Years Years
Current pensioner at 65 - male 20.5 21.0
- female 22.9 23.2
Future pensioner at 65 - male 21.3 21.9
- female 24.0 24.3
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 latest triennial valuation was completed as at 31 March 2019 and concluded
that Company contributions would increase to £300,000 for the year ended 31
March 2021, £330,000 for the year ended 31 March 2022 and £360,000 for the
year ended 31 March 2023, with the deficit reduction period reducing to 2032.
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 31
March 2022, which will establish future deficit payments.
The scheme assets are stated at the market values at the respective balance
sheet dates. The assets and liabilities of the scheme were:
2021 2020
£000 £000
Equities/ diversified growth fund 5,273 12,534
Bonds - 1,565
Liability Driven Investments 2,993 -
Buy and Maintain Credit 2,211 -
Multi-Sector Credit 4,962 -
Insured pensioner assets 21 24
Cash 141 415
Market value of assets 15,601 14,538
Actuarial value of liabilities (16,791) (16,497)
Scheme deficit (1,190) (1,959)
Related deferred tax asset 297 333
Net pension liability (893) (1,626)
Net benefit expense recognised in profit and loss 2021 2020
£000 £000
Net interest cost (49) (58)
(49) (58)
Re-measurement losses/ (gains) in other comprehensive income 2021 2020
£000 £000
Actuarial losses/(gains) arising from changes in financial assumptions 1,510 (593)
Actuarial gains arising from changes in demographic assumptions (429) (244)
Experience adjustments 171 (931)
(Return)/loss on assets (excluding interest income) (1,715) 1,308
Total re-measurement gain shown in other comprehensive income (463) (460)
2021 2020
£000 £000
Actual return/(loss) on plan assets 2,092 (946)
Movement in deficit during the period 2021 2020
£000 £000
Deficit in scheme at beginning of period (1,959) (2,640)
Employer contributions 355 279
Net interest expense (49) (58)
Actuarial gain 463 460
Deficit in scheme at end of period (1,190) (1,959)
Movement in scheme assets 2021 2020
£000 £000
Fair value at beginning of period 14,538 16,065
Interest income on scheme assets 377 362
Return on assets (excluding interest income) 1,715 (1,308)
Employer contributions 355 279
Benefits paid (1,384) (860)
Fair value at end of period 15,601 14,538
Movement in scheme liabilities 2021 2020
£000 £000
Benefit obligation at start of period 16,497 18,705
Interest cost 426 420
Actuarial (gains)/ losses arising from changes in financial assumptions 1,510 (593)
Actuarial gains arising from changes in demographic assumptions (429) (244)
Experience adjustments 171 (931)
Benefits paid (1,384) (860)
Benefit obligation at end of period 16,791 16,497
The weighted average duration of the pension scheme liabilities are 13 years
(2020: 13 years).
A quantitative sensitivity analysis for significant assumptions as at 31 May
2021 is as shown below:
2021
Present value of scheme liabilities when changing the following assumptions: £000
Discount rate increased by 1% p.a. 14,859
RPI and CPI increased by 1% p.a. 17,705
Mortality- members assumed to be their actual age as opposed to one year older 17,653
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.
9. REPORT AND ACCOUNTS
The Annual Report and Accounts for the 14 months ended 31 May 2021 are
available on the Group's website, www.chamberlin.co.uk and from the Group's
head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM, which
will be a closed meeting given the current restrictions in relation to
COVID-19, will be held on 5 January 2022 at Chuckery Road, Walsall, West
Midlands, WS1 2DU. An additional general meeting to be held as soon as the AGM
has concluded on 5 January 2022 is being convened in light of the 2021
Accounts giving rise to a serious loss of capital event pursuant to section
656(1) of the Companies Act 2006. Both meetings will be subject to COVID 19
restrictions and, as such, any shareholder wishing to attend in person will be
required to pre-register with the Company Secretary not less than 5 business
day prior to the meeting by using the contact form for the Company Secretary
on the following page of the Company's website:
https://www.chamberlin.co.uk/contact/contact-us/company-secretary
(https://www.chamberlin.co.uk/contact/contact-us/company-secretary) (please
state "Chamberlin PLC: AGM" and include the shareholder's full name in the
'comments' box. Alternatively, shareholders will be able to ask questions of
the board in advance of the meeting by also emailing the Company Secretary on
the above link (any such questions to arrive not later than 48 hours before
the relevant meeting). The Board will endeavour to answer all questions at the
relevant meeting and publish a summary on the Company's website.
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