REG - Chamberlin PLC - Final Results
04/11/2022 12:30
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RNS Number : 4021F Chamberlin PLC 04 November 2022
4 November 2022
CHAMBERLIN plc
("Chamberlin", the "Company" or the "Group")
FINAL RESULTS
for the year ended 31 May 2022
Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group, is
pleased to announce its final results for the year ended 31 May 2022:
Key Points
Financial
· FY 2022 Group operational performance
significantly improved compared to the prior period, delivering a 79% increase
in adjusted EBITDA and a full year profit after tax for the first time in five
years
· Revenue of £16.8m (14 months to 31 May 2021:
£26.4m) was 26% lower than prior year on a pro rata basis reflecting the loss
of BorgWarner Turbo Systems Worldwide ("BorgWarner") contracts in 2021 and
headwinds in the automotive sector. Encouragingly, revenues at Russell Ductile
Castings ("RDC") and Petrel increased by 20% and 21% respectively on a pro
rata basis
· Significant reduction in underlying operating
loss to £0.7m (14 months to 31 May 2021: £2.9m loss) driven by improvements
across all divisions, but most significantly, by record profits at RDC and
Petrel
· Underlying loss before taxation reduced to
£1.0m (14 months to 31 May 2021: £3.2m)
· Statutory loss before tax of £0.5m (14 months
to 31 May 2021: £10.4m) significantly reduced from 2021 which included £7.2m
of non-underlying costs and impairments
· Profit after tax of £0.1m (14 months to 31 May
2021: £9.6m loss) demonstrates the significant progress made in 2022
· Underlying diluted loss per share of (0.5)p (14
months to 31 May 2021: (13.7)p loss per share)
· Total diluted earnings per share of 0.1p (14
months to 31 May 2021: (55.1)p loss per share)
1. Underlying figures are stated before non-underlying costs
(restructuring costs, impairment, onerous leases and share based payment
costs) together with the associated tax impact.
2. Adjusted EBITDA defined as operating profit before interest,
taxation, depreciation, amortisation and non-underlying items
Operational
· Foundry revenues fell by 32% on a pro rata
basis to £13.6m (14 months to 31 May 2021: £23.3m) reflecting the loss of
BorgWarner revenue at Chamberlin & Hill Castings ("CHC") partially offset
by a 20% increase at RDC
· Foundry operating loss reduced to £0.5m (14
months to 31 May 2021: £1.9m) driven by lower losses at CHC from cost
reductions and a record level of profitability at RDC
· Engineering revenues of £3.2m increased by 21%
on a pro rata basis (14 months to 31 May 2021: £3.1m) as the business made
substantial progress in recovering from COVID-19 impacts in 2021. Operating
performance continued to go from strength to strength, with the business
delivering a record operating profit of £0.5m (14 months to 31 May 2021:
£0.2m) by improving margins and tightly controlling costs
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
George Lawson
Peterhouse Capital Limited T: 020 7469 0930
(Joint Broker)
Lucy Williams
Duncan Vasey
Chairman's Statement
The difficulties that Chamberlin faced in the previous financial period have
been well documented but I am pleased to report that these difficulties are
now largely behind us. This financial year has seen the Group execute its
restructuring plan to significantly reduce its cost base following the loss of
the BorgWarner work in 2021 and effectively manage a rapidly changing economic
landscape that has seen unprecedented cost and supply chain pressures.
The Group strengthened the balance sheet through a £1.6m fundraise in
February 2022 and completed a sale and leaseback of the property owned by RDC
in May 2022. These actions have contributed to the Group returning to a
positive net asset position of £0.4m at the end of the financial year
compared to a £2.6m net liability position in 2021.
In addition, the Group launched two new e-commerce brands in Iron Foundry
Weights ("IFW") and Emba cookware and developed and pursued a new, ambitious
strategic direction to enhance shareholder value over the medium to long term.
The journey to a full recovery in the operational performance and financial
standing of the Group has begun extremely well and the financial results for
2022 are evidence of the progress made. All of the operating divisions have
made substantial improvements to their performance compared to the prior
financial period, although progress at CHC has been slower than anticipated.
These operational improvements have enabled the Group to deliver a profit
after tax of £0.1m, a significant turnaround from the £9.6m loss made in
2021.This is the first time in over five years that Chamberlin has reported a
profit after tax to shareholders and is the first step towards our future
growth ambitions.
The Board and Staff
The Board have worked tirelessly through these challenging times to return the
Group to a stable financial position and I have been pleased with the seamless
transition made by Kevin Price, Alan Tomlinson and Trevor Brown to their new
roles on the Board.
The success of Chamberlin in the future will not only be determined by the
leadership and strategic vision provided by the Board but as importantly, will
be shaped by the outstanding professionalism, dedication and expertise
provided by our loyal workforce. Our employees have a passion for innovation
and a keen focus on delivering excellence to all our customers, which enhance
Chamberlin's reputation and contribute to making the Group a leader in many of
its markets. I would like to place on record the Board's thanks to all our
employees for their considerable efforts during the past year.
Outlook
The Group is well positioned to continue its recovery and expects to return to
a more sustainable level of profitability, having taken the appropriate steps
to reduce its cost base and improve performance at CHC, and to develop and
invest in new growth strategies for each business.
The overall economic outlook for global markets remains uncertain, but the
Board is pleased to report that all three operating divisions have made a
positive start to the new financial year. At the present time, demand across
all of the Group's businesses remains buoyant driven in particular at CHC and
RDC by an increasing trend towards UK on-shore supply. This has contributed to
higher than expected levels of orders for Q1 FY 2023 and strong ongoing order
books.
The Board continues to focus on opportunities to provide the Group with
adequate resources to meet the requirements of the Group's growth strategy and
insulate the Group from potential adverse macro-economic risks.
Keith Butler-Wheelhouse
Chairman
Chief Executive's Review
I am delighted to report that Chamberlin has returned to profitability for the
first time in over five years. This performance is even more pleasing given
the challenges faced by the Group over the last 12 months. During this period,
the Board and the senior management team have worked together to:
• Substantially reduce the cost base at Chamberlin and Hill
Castings in the wake of the loss of the BorgWarner contracts at the end of the
last financial period
• Mitigate the unprecedented level of raw material price
increases to maintain margins at the required level
• Raise £1.6m from shareholders to strengthen the balance
sheet and to implement the new growth strategy and investment plans
• Generate £1.25m from the sale and leaseback of the property
owned by RDC, providing
further funds for investment in its capacity expansion plans and to reduce the
pension deficit by £0.6m
• Launch new products at Chamberlin and Hill Castings through
its IFW fitness and Emba cookware brands
• Navigate an uneven level of demand from our automotive
customers
• Refinance historic debts relating to machine shop plant and
equipment
The Group has been able to successfully navigate its way through these issues
to deliver a significant improvement in financial performance and to place the
Group on a solid financial base from which our strategic plans for growth can
be delivered.
Group revenue of £16.8m for the year ended 31 May 2022 (14 months to 31 May
2021: £26.4m) was 26% lower than the prior period on a pro rata basis,
largely reflecting the loss of revenue at Chamberlin and Hill Castings from
the cancellation of contracts by BorgWarner in 2021. However, revenue at RDC
and Petrel continued the strong upward trajectory from 2021, leading to
increases of 20% and 21% respectively on a pro rata basis. The 20% increase in
revenue at RDC was in addition to an 18% pro rata increase in 2021 and
continues to be driven by reduced competition in the UK foundry industry and
the trend to re-shoring to the UK from overseas. Petrel's revenue growth in
2022 has been primarily driven by a recovery in export markets following a
reduction in the immediate aftermath of Brexit, with export revenues now
representing 31% of Petrel's total revenue (2021: 10%).
The underlying operating loss reduced by 76% to £0.7m (2021: £2.9m), with
the underlying loss before interest, tax, depreciation and amortisation
reducing to £0.4m (2021: £2.1m loss). This improvement in financial
operating performance compared to 2021 came from all three sites, although the
pace of the improvement in results at Chamberlin and Hill Castings was slower
than anticipated due to the uneven recovery in automotive volumes. RDC
improved its operating profit significantly through increased revenues and
gross margin improvement whilst Petrel's performance benefitted from higher
revenues and gross margin together with the full year benefit of overhead cost
reductions implemented in 2021.
After net interest costs of £0.3m (2021: £0.3m), the Group made an
underlying loss before tax of £1.0m (2021: £3.2m loss). With non-underlying
items amounting to a £0.5m credit in 2022 compared to the £7.2m charge taken
in 2021, the statutory loss before tax of £0.5m was 95% lower than the
£10.4m loss incurred in 2021. The tax credit in 2022 amounted to £0.6m
(2021: £0.8m) and reflected research and development tax credits receivable
from the prior period of £0.3m and deferred tax of £0.3m recognised on
trading losses in respect of RDC in the light of their continued improved
financial performance. On an after tax basis, the Group delivered a modest but
pleasing £0.1m profit (2021: £9.6m loss), a significant turnaround compared
to the prior period and giving the Group a basis for delivering future
sustainable profitable growth.
In conjunction with returning the Group to profitability, there has been
substantial progress made in the key objective of strengthening the balance
sheet after the significant loss incurred in 2021. With this in mind, the
Group successfully raised £1.6m net of expenses from shareholders in February
2022 to provide funds for investment in new growth strategies and provide
working capital during the implementation. In addition, as part of the Group's
initiative to improve financial stability, a sale and leaseback transaction
was completed in May 2022 on the property owned by RDC generating gross
proceeds of £1.25m. The proceeds were used to reduce the pension scheme
deficit by £0.6m and to provide the funds for further investment in the
business. These actions have contributed to the improvement in the Group's
financial position, with the balance sheet returning to a positive net asset
position of £0.4m compared to a £2.6m net liabilities position in 2021.
Although net debt increased at 31 May 2022 to £5.0m (31 May 2021: £1.8m),
this was largely due to the payment of redundancy costs provided for in 2021
of £1.3m, the unwind of working capital associated with the loss of the
BorgWarner contracts in 2021 and an increase in lease liabilities of £1.0m
arising from the sale and leaseback of the property at RDC.
During this financial year, the Group embarked upon its strategy to deliver
sustainable profitable growth over the medium to long term by diversifying
away from reliance on the automotive sector, investing in plant and machinery
to increase capacity and investing in new products in markets with strong
growth characteristics and opportunities. The progress made in each of our
three businesses in the context of the above strategy is discussed below:
Chamberlin & Hill Castings Ltd - Casting Facility and Machining Facility
("CHC")
The Board has continued to implement the strategy to reduce sole reliance on
the automotive industry, diversify the Group's customer base and pursue more
attractive markets.
In relation to the Group's automotive products, well publicised global
economic conditions such as inflation, escalating raw material costs, supply
chain shortages and a slowdown in the automotive industry remain challenges to
trading conditions. As a result, management continue to reduce costs, improve
efficiencies, and optimise pricing at CHC in order to improve margins and
restore sustainable profitability to the Group. Unfortunately, these actions
are taking longer to implement than anticipated and the division continues to
operate at a loss and is not yet cash generative, albeit the losses are
reducing on a monthly basis. However, longer term demand for the Group's
automotive products is expected to improve in the second half of FY 2023 and
the Group has been successful in winning new contracts in the niche supercar
market and the commercial vehicle sector.
The Group, as the sole UK based foundry manufacturer and distributor of UK
made cast iron cookware, launched its Emba range at the end of November 2021,
which continues to be very well received by consumers. The Group has utilised
targeted marketing to businesses, subsequently entering into a number of small
distribution deals, with traditional and digital retailers, for the Emba
products, as well as focusing on more penetrative marketing strategies for
sales direct to consumers including advertising through social media
platforms, such as Instagram.
The Board was very encouraged by the rapid increase in sales, new leads and
social media followers in the final quarter of FY 2022. With the in-house
capability to design, manufacture and distribute new products into a global
marketplace, the Board firmly believe that further development and investment
in Emba cookware will position the brand to be a material contributor to
growth over the coming months and years.
The IFW brand was launched in May 2021 selling direct to the consumer, where
the Group can offer high-quality, UK made products that have a significantly
reduced carbon footprint compared to products imported from overseas. Demand
in the fitness equipment market has reduced considerably in the final quarter
of the financial year and the Board are continuing to assess the most cost
effective options for securing market share. However, Chamberlin is well
positioned to take advantage of market opportunities as they arise through our
unique ability to design, manufacture and machine fitness products on a
high-volume or bespoke basis.
Driven by the exciting progress of the consumer products brands and the
feedback from consumers, Chamberlin has designed a number of new premium
products to support the existing Emba and IFW offerings and plans to launch
these products in 2023. Chamberlin has recently installed a new shotblast
system at CHC to support the growth plans and ensure that it provides premium
quality, competitively priced products.
Russell Ductile Castings Ltd ("RDC")
The Company's Scunthorpe foundry continues to operate at near full capacity in
response to both a growing customer demand and pipeline of opportunities, with
the current order book at sufficient levels to ensure already that around 70%
of the full-year FY 2023 management sales expectations are met. The
substantial opportunities for RDC arise from a combination of reduced
competition in the UK as competitor foundry numbers continue to dwindle and
the growing trend of re-shoring production back to the UK from overseas
foundries. With planning permission now secured, the investment programme to
expand both the production capacity by up to 40% and the types of product that
can be manufactured at RDC's facilities to exploit new growth opportunities,
including in the offshore and green energy generation markets, is expected to
be completed towards the end of November 2022.
Petrel Ltd
Petrel, Chamberlin's specialist lighting business, delivered a record
operating profit during FY 2022 and continues to exceed the Board's
expectations significantly. Petrel continues to benefit from a strong order
book, reflecting recovery from the lows brought about by both COVID-19 and
Brexit. Petrel is developing a pipeline of new and innovative products that
can be brought to market swiftly and potentially move Petrel into a market
leading position. Management is also investigating the provision of additional
services (such as warranty, inspection and maintenance) to its customers that
have a significant installed base of Petrel products. In addition, management
continue to review and update Petrel's existing product range through in-house
design and manufacture of new products as new technology evolves.
Outlook
The Board's strategy has already begun both to shape the future direction of
the business and to be reflected in the financial performance of the Group,
having generated a modest profit after tax in 2022. We have made good progress
on implementing the strategy in a relatively short period of time and have
improved the financial stability of the Group to provide the platform to
accelerate our plans. There remains work to do in order to achieve our growth
ambitions and the Board are mindful of the resources that will be required.
Consequently, the Board continues to evaluate the use of its property assets
with the objective of strengthening the balance sheet and ensuring that the
Group has adequate resources to deliver on its growth strategy. Overall, the
Board remain confident that the Group is heading in the right direction, with
a strategic plan that will deliver shareholder value in the future.
Kevin Price
Chief Executive
Finance Review
Overview
Revenue for the year ended 31 May 2022 of £16.8m (14 months ended 31 May
2021: £26.4m) represents a 26% reduction on a pro rata basis compared to the
prior period, largely due to the effect of the cancellation of all contracts
by BorgWarner in 2021.
Gross profit margin increased to 10.7% from 8.3% in 2021 reflecting the
recovery in performance of the Foundry division, which reduced its operating
loss to £0.5m from a £1.9m loss in the previous period, and a substantial
increase in operating margin at Petrel in the Engineering division.
Underlying operating loss before tax reduced to £0.7m (14 months ended 31 May
2021: £2.9m) due to the improved operating results noted above together with
a pro rata 22% reduction in Head Office costs.
Financing costs were maintained at £0.3m (14 months ended 31 May 2021:
£0.3m) with a reduction in the interest charge associated with the pension
scheme offset by increased interest on higher average net debt.
As a result of the above, the underlying loss before tax amounted to £1.0m
(14 months ended 31 May 2021: £3.2m loss).
The statutory loss before tax reduced dramatically to £0.5m (14 months ended
31 May 2021: £10.4m) largely reflecting £7.2m of non-underlying items in
2021 that were not repeated in the current year.
Tax
The tax credit in the year of £0.6m (14 months ended 31 May 2021: £0.8m)
includes the recognition of a deferred tax asset on trading losses in RDC
reflecting the confidence the Group has in the future profitability of this
business.
Diluted earnings per share
Diluted earnings per share of 0.1p (14 months ended 31 May 2021: 55.1p loss
per share) reflects the return to profitability of the Group for the first
time in over five years and a significant turnaround compared to the prior
period.
Cash generation and financing
Operating cash outflow of £4.0m (14 months ended 31 May 2021: inflow of
£0.3m) includes £1.3m of cash payments relating to restructuring the
business in 2021, £0.9m paid to the Group's defined benefit pension scheme
and increased working capital.
Cash spent on property, plant and equipment and capitalised software and
development costs in the year ended 31 May 2022 was £0.5m (14 months ended 31
May 2021: £0.2m).
New equity of £1.6m was raised in February 2022 following a fundraise and was
net of transaction costs of £0.2m.
Lease payments of £0.5m (14 months ended 31 May 2021: £0.9m) primarily
relate to assets at the Group's machining facility and were lower than the
prior period due to a payment holiday agreed with HSBC. These asset leases
were subsequently refinanced with HSBC in April 2022 over a 42 month term
ending in September 2025.
Net debt
Net debt at 31 May 2022 increased by £3.2m to £5.0m (31 May 2021: £1.8m)
reflecting the operating cash outflow described above and an increase in lease
liabilities of £1.0m relating to the sale and leaseback of the property owned
by RDC partially offset by the £1.6m fundraise in February 2022. The Group
debt facility has two elements: a £3.5m invoice discounting facility limited
to 90% of outstanding invoice value (of which £2.3m was drawn at the year
end) and lease liabilities of £2.7m.
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.
During the year ended 31 May 2022, the average exchange rate used to translate
into GBP Sterling was €1.18 (14 months ended 31 May 2021: €1.13).
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 defined benefit pension scheme moved from a
liability position of £1.2m at 31 May 2021 to a £0.1m surplus at 31 May
2022, as reduced liabilities arising from an increase in bond yields and
Company contributions of £0.9m more than offset a reduction in the market
value of scheme assets.
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 as at 31 March 2022 is currently in progress.
Administration costs of the defined benefit pension scheme were £0.2m in the
year ended 31 May 2022 (14 months ended 31 May 2021: £0.2m) and are shown in
other operating expenses. The Group cash contribution during the year ended 31
May 2022 was £0.9m (14 months ended 31 May 2021: £0.4m), which included an
additional £0.6m payment following completion of the sale and leaseback of a
property over which the pension scheme had a charge.
Audit Opinion
The auditors have reported on the accounts for the year ended 31 May 2022 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 revenue growth and margin improvement can be
achieved during a potentially future recessionary period and uncertain global
trading conditions 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 year ended 31 May 2022
Year ended 31 May 2022 14 months ended 31 May 2021
Note Underlying (+) Non- Total Underlying (+) Non- Total
underlying underlying
£000 £000 £000 £000 £000 £000
Revenue 3 16,836 - 16,836 26,444 - 26,444
Cost of sales (15,038) - (15,038) (24,262) - (24,262)
Gross profit 1,798 - 1,798 2,182 - 2,182
Other operating expenses 6 (2,501) 505 (1,996) (5,083) (7,193) (12,276)
Operating loss (703) 505 (198) (2,901) (7,193) (10,094)
Bank interest receivable
26 - 26 13 - 13
Finance costs 4 (337) - (337) (310) - (310)
Loss before tax (1,014) 505 (509) (3,198) (7,193) (10,391)
Tax credit 581 - 581 817 - 817
Profit/(loss) for the period
attributable to equity holders of the parent company
(433) 505 72 (2,381) (7,193) (9,574)
Underlying loss per share:
Basic 5 (0.5)p - - (13.7)p - -
Diluted 5 (0.5)p - - (13.7)p - -
Total earnings/(loss) per share:
Basic 5 - - 0.1p - - (55.1)p
Diluted 5 - - 0.1p - - (55.1)p
*Non-underlying items include restructuring costs, impairment of assets,
dilapidation costs and share-based payment costs together with the associated
tax impact.
Consolidated Statement of Comprehensive Income
for the year ended 31 May 2022
Year ended 31 May 14 months ended 31 May 2021
2022
Note £000 £000
Profit/(loss) for the period 72 (9,574)
Other comprehensive income
Gain on revaluation of property, plant & equipment 1,003 -
Movements in fair value of cash flow hedges taken to other comprehensive
income
(158) 650
Deferred tax on movement in cash flow hedges 40 (133)
Net other comprehensive income that may be recycled to profit and loss 885 517
Remeasurement gain on pension scheme assets and liabilities 8 332 463
Deferred tax on remeasurement gain on pension scheme (63) 7
Net other comprehensive income that will not be recycled to profit and loss 269 470
Other comprehensive income for the period net of tax 1,154 987
Total comprehensive income/(expense) for the period attributable to equity 1,226 (8,587)
holders of the parent company
Consolidated Balance Sheet
at 31 May 2022
Note 2022 2021
£000 £000
Non-current assets
Property, plant and equipment 3,506 2,431
Intangible assets 283 263
Deferred tax assets 1,434 1,206
Defined benefit pension scheme surplus 8 64 -
5,287 3,900
Current assets
Inventories 3,143 1,698
Trade and other receivables 4,303 3,932
Cash at Bank - 1,038
7,446 6,668
Total assets 12,733 10,568
Current liabilities
Financial liabilities 7 2,877 1,715
Trade and other payables 6,475 8,031
9,352 9,746
Non-current liabilities
Financial liabilities 7 2,097 1,158
Deferred tax 70 150
Provisions 806 890
Defined benefit pension scheme deficit 8 - 1,190
2,973 3,388
Total liabilities 12,325 13,134
Capital and reserves
Share capital 2,087 2,051
Share premium 6,308 4,720
Capital redemption reserve 109 109
Hedging reserve 100 218
Revaluation reserve 1,003 -
Retained earnings (9,199) (9,664)
Total equity 408 (2,566)
Total equity and liabilities 12,733 10,568
Consolidated Cash Flow Statement
for the year ended 31 May 2022
14 months ended
Year ended 31 May 2021
31 May 2022
£000 £000
Operating activities
Loss for the period before tax (509) (10,391)
Adjustments to reconcile loss for the period to net cash outflow from
operating activities:
Interest receivable (26) (13)
Finance costs 337 310
Impairment (reversal)/charge on property, plant and equipment, inventory and (498) 4,632
receivables
Dilapidations provision (84) 690
Depreciation of property, plant and equipment 324 1,135
Amortisation of intangible assets 24 86
(Profit)/loss on disposal of property, plant and equipment (66) 135
Foreign exchange rate movement (1) 37
Share-based payments 67 41
Defined benefit pension contributions paid (935) (355)
(Increase)/decrease in inventories (945) 175
(Increase)/decrease in receivables (168) 2,036
(Decrease)/increase in payables (1,557) 1,009
Corporation tax received - 129
Net cash outflow from operating activities (4,037) (344)
Investing activities
Purchase of property, plant and equipment (520) (183)
Purchase of software (20) (3)
Development costs (24) (5)
Disposal of property, plant and equipment 1,189 -
Net cash inflow/(outflow) from investing activities 625 (191)
Financing activities
Interest received 26 13
Interest paid (324) (261)
Net invoice finance inflow/(outflow) 1,585 (1,202)
New share capital issued 1,624 3,312
Proceeds from convertible loan - 200
Principal element of lease payments (537) (946)
Net cash inflow from financing activities 2,374 1,116
Net (decrease)/increase in cash and cash equivalents (1,038) 581
Cash and cash equivalents at the start of the period 1,038 457
Impact of foreign exchange rate movements - -
Cash and cash equivalents at the end of the period - 1,038
Cash and cash equivalents comprise:
Cash at bank - 1,038
- 1,038
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
Revaluation reserve
£000 £000 £000 £000 £000 £000 £000
Balance at 1 April 2020 1,990 1,269 109 (299) - (524) 2,545
Loss for the year - - - - - (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 payment - - - - - 41 41
Deferred tax on share-based payment
- - - - - (77) (77)
Total of transactions with shareholders 61 3,451 - - - (36) 3,476
Balance at 1 June 2021 2,051 4,720 109 218 - (9,664) (2,566)
Profit for the year - - - - - 72 72
Other comprehensive income for the year net of tax - - - (118) 269 1,154
1,003
Total comprehensive income/(expense) - - - (118) 1,003 341 1,226
New share capital issued 36 1,588 - - - - 1,624
Share-based payments - - - - - 67 67
Deferred tax on share-based payment
- - - - - 57 57
Total of transactions with shareholders 36 1,588 - - - 124 1,748
Balance at 31 May 2022 2,087 6,308 109 100 1,003 (9,199) 408
NOTES TO THE FINAL RESULTS ANNOUNCEMENT
1. AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE
WITH UK ADOPTED INTERNATIONAL ACCOUNTING STANDARDS
The Group and Company financial statements of Chamberlin Plc (the 'Company')
for the year ended 31 May 2022 were authorised for issue by the Board of
Directors on 4 November 2022, 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 UK
adopted International Accounting Standards in conformity with the requirements
of the Companies Act 2006. The Company's financial statements have been
prepared in accordance with Financial Reporting Standard 101 'The Reduced
Disclosure Framework'.
The financial information set out in this announcement does not constitute the
statutory accounts of the Group for the year ended 31 May 2022 or for the 14
months ended 31 May 2021 but is derived from the 2022 Annual Report and
Accounts. The Annual Report and Accounts for the 14 months ended 31 May 2021
have been delivered to the Registrar of Companies and the Group Annual Report
and Accounts for the year ended 31 May 2022 will be delivered to the Registrar
of Companies by 30 November 2022. The auditors, Crowe UK LLP, have reported on
the accounts for the year ended 31 May 2022 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. 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 May 2022. There were no new
accounting standards adopted in the year that have a material impact on the
financial statements.
Going concern
The Director's assessment of going concern is based on the Group's detailed
forecast for the three years ending 31 May 2023, 31 May 2024 and 31 May 2025,
which reflect the Director's view of the most likely trading conditions. Since
the balance sheet date, HSBC have confirmed their agreement to an increase in
the Group's invoice finance facilities and the forecasts indicate that these
bank facilities are expected to remain adequate.
The forecasts include revenue growth and margin improvement assumptions across
all of the Group's businesses. At Chamberlin and Hill Castings, these
assumptions include an improvement in automotive volumes as this sector
recovers from the backlog of passenger vehicle orders arising from the
shortage of vital electronic and other components in the last 18 months,
modest growth from fitness equipment and cookware products and diversification
into new markets. At RDC, the forecasts assume that revenue and margin growth
will be achieved from the investment being made in the expansion of its
capacity and the ability to manufacture and sell a wider range of products
using new materials. At Petrel, revenue and margin growth assumptions are
based on the introduction of new products, including the use of new
technology, and services, including warranty, inspection and maintenance.
The Directors have applied reasonably foreseeable downside sensitivities to
the forecast, including sales growth and margin improvement at Chamberlin and
Hill Castings is 40% and 20% lower than expectations respectively, sales
growth and margin improvement at RDC are both 20% lower than expectations and
sales growth and margin at Petrel are 20% and 10% lower than expectations
respectively. 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 2023 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 £1.5m 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 revenue growth and margin improvement can be
achieved during a potentially future recessionary period and uncertain global
trading conditions 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
Year ended 14 months ended 31 May 2021 Year ended 14 months ended 31 May 2021
31 May 31 May
2022 2022
£000 £000 £000 £000
Foundries 13,604 23,321 (463) (1,931)
Engineering 3,232 3,123 535 191
Segment results 16,836 26,444 72 (1,740)
Reconciliation of reported segmental operating profit/(loss)
Segment operating profit/(loss) 72 (1,740)
Shared costs (775) (1,161)
Non-underlying items 505 (7,193)
Net finance costs (311) (297)
Loss before tax (509) (10,391)
Segmental assets Year ended 14 months ended
31 May 2021
31 May
2022
£000 £000
Foundries 9,811 7,211
Engineering 1,425 1,113
11,236 8,324
Segmental liabilities
Foundries (5,771) (7,674)
Engineering (1,511) (1,247)
(7,282) (8,921)
Segmental net assets/(liabilities) 3,954 (597)
Unallocated net liabilities (3,546) (1,969)
Total net assets/(liabilities) 408 (2,566)
Unallocated net liabilities include the pension asset of £64,000 (2021:
£1,190,000), net debt of (£4,974,000) (2021: £1,835,000) and a net deferred
tax asset of £1,364,000 (2021: £1,056,000).
Capital expenditure, depreciation, amortisation and impairment
Capital additions Foundries Engineering Total
Year ended 14 months ended 31 May 2021 Year ended 14 months ended 31 May 2021 Year 14 months
31 May 2022 31 May 2022 ended ended 31 May 2021
31 May 2022
£000 £000 £000 £000 £000 £000
Property, plant and equipment 1,327 177 - 20 1,327 197
Software 20 3 - - 20 3
Development costs - - 24 5 24 5
Depreciation, amortisation and impairment Foundries Engineering Total
Year ended 14 months ended 31 May 2021 Year ended 14 months ended 31 May 2021 Year 14 months
31 May 2022 31 May 2022 ended ended 31 May 2021
31 May 2022
£000 £000 £000 £000 £000 £000
Property, plant and equipment (317) (1,113) (7) (22) (324) (1,135)
Software 4 (47) (1) (6) 3 (53)
Development costs - - (27) (33) (27) (33)
In addition to the above, property, plant and equipment in the Foundries
division in 2021 were impaired by £3,809,000.
(ii) By geographical segment
Year ended 14 months ended 31 May 2021
31 May
2022
Revenue by location of customer: £000 £000
United Kingdom 13,344 13,944
Italy 1,171 1,351
Germany 1,382 2,595
Rest of Europe 211 7,425
Other countries 738 1,129
16,836 26,444
4. FINANCE COSTS
14 months ended
Year ended 31 May 2022 31 May 2021
£000 £000
Bank overdraft and invoice finance interest payable (94) (103)
Interest expense on lease liabilities and other interest payable (230) (158)
Finance cost of pensions (13) (49)
(337) (310)
5. EARNINGS/(LOSS) PER SHARE
The calculation of earnings/(loss) per share is based on the earnings/(loss)
attributable to shareholders and the weighted average number of ordinary
shares in issue. In calculating the diluted earnings/(loss) per share,
adjustment has been made for the dilutive effect of outstanding share options
where applicable. Underlying earnings/(loss) per share, which excludes
non-underlying items, as disclosed in Note 6, has also been disclosed.
14 months ended
Year ended 31 May 2021
31 May 2022
£000 £000
Earnings/(loss) for basic earnings per share 72 (9,574)
Non-underlying items (505) 7,193
Taxation effect of the above - -
Loss for underlying earnings per share (433) (2,381)
Underlying loss per share (pence):
Basic (0.5) (13.7)
Diluted (0.5) (13.7)
Total earnings/(loss) per share (pence):
Basic 0.1 (55.1)
Diluted 0.1 (55.1)
2022 2021
Number Number
'000 '000
Weighted average number of ordinary shares 79,488 17,387
Adjustment to reflect shares under options 3,581 3,798
Weighted average number of ordinary shares - fully diluted 83,069 21,185
There is no adjustment in the diluted loss per share calculation for the
3,798,000 shares under option in 2021 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 83,069,000 (2021:17,387,000).
6. NON-UNDERLYING ITEMS
14 months ended
Year ended 31 May 2021
31 May 2022
£000 £000
Group reorganisation - 1,310
Adviser costs relating to corporate restructuring - 520
Impairment of property, plant and equipment - 3,809
Impairment of inventory and receivables (498) 823
Additional liability from customer claim relating to disposal of Exidor 10 -
Limited
Dilapidations provision (84) 690
Share-based payment charge 67 41
Non-underlying operating items (505) 7,193
Taxation
- tax effect of non-underlying items - -
(505) 7,193
During the year, an agreement was reached on the settlement of a customer
claim relating to Exidor Limited, a subsidiary that was sold in December 2018.
Additional costs of £10,000 over and above the original provision made at the
time of the disposal were agreed to settle the claim.
In 2022, £84,000 was released from the dilapidations provision following
negotiations with the landlord. The charge of £690,000 in 2021 relates to the
estimated costs for land and building leases that are nearing their end date.
In 2021, following the cancellation of all contracts by the Group's major
customer, BorgWarner, 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, the Group
undertook a review of the carrying value of the assets in the Foundry division
in 2021. This gave rise to an asset impairment charge of £4,632,000, of which
£3,809,000 related to property, plant & equipment, £716,000 related to
obsolete inventory and £107,000 related to irrecoverable receivables. In
2022, £498,000 of the impairment charge relating to inventory was reversed,
as a number of new contract wins indicates that the inventory will now be
utilised.
The share-based payment charge in 2022 of £67,000 (2021: £41,000) relates to
the fair value cost of share option schemes for the year.
7. NET DEBT
31 May 2022 31 May
2021
£000 £000
Net cash - (1,038)
Invoice finance facility 2,243 665
Lease liabilities 634 1,050
Net debt due in less than one year 2,877 677
Non-current liabilities
Lease liabilities 2,097 1,158
Total net debt 4,974 1,835
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 10
years to May 2032. 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 May 2022 was £3,500,000 (2021:
£3,500,000). 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 in the UK,
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 2022 was £151,000 (2021: £236,000), with the reduction being due
to costs associated with the triennial valuation in 2021 not repeated,
together with £13,000 of financing cost (2021: £49,000).
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 £200,000 (2021: £377,000). 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 May 31 March
2022 2021 2020
Salary increases n/a n/a n/a
Pension increases (post 1997) 3.4% 3.1% 2.6%
Discount rate 3.4% 1.85% 2.3%
Inflation assumption - RPI 3.5% 3.2% 2.6%
Inflation assumption - CPI 2.8% 2.5% 1.7%
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.
2022 2021
Years Years
Current pensioner at 65 - male 20.6 20.5
- female 23.0 22.9
Future pensioner at 65 - male 21.4 21.3
- female 24.1 24.0
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. During the year, the charge over one of the Group's properties
was released following the payment of an additional contribution to the
pension scheme of £600,000, paid out of the proceeds of a sale and leaseback
transaction. The triennial review with effect from 31 March 2022, which will
establish future deficit payments, is currently in progress.
The scheme assets are stated at the market values at the respective balance
sheet dates. The assets and liabilities of the scheme were:
2022 2021
£000 £000
Equities/ diversified growth fund 1,937 5,273
Bonds - -
Liability Driven Investments 2,370 2,993
Buy and Maintain Credit 1,853 2,211
Multi-Sector Credit 4,273 4,962
Insured pensioner assets 13 21
Cash 3,578 141
Market value of assets 14,024 15,601
Actuarial value of liabilities (13,960) (16,791)
Scheme surplus/(deficit) 64 (1,190)
Related deferred tax asset (16) 297
Net pension surplus/(deficit) 48 (893)
Net benefit expense recognised in profit and loss 2022 2021
£000 £000
Net interest cost (13) (49)
(13) (49)
Re-measurement losses/ (gains) in other comprehensive income 2022 2021
£000 £000
Actuarial losses/(gains) arising from changes in financial assumptions (2,466) 1,510
Actuarial gains arising from changes in demographic assumptions 60 (429)
Experience adjustments 98 171
(Return)/loss on assets (excluding interest income) 1,976 (1,715)
Total re-measurement gain shown in other comprehensive income (332) (463)
2022 2021
£000 £000
Actual return/(loss) on plan assets (1,686) 2,092
Movement in deficit during the period 2022 2021
£000 £000
Deficit in scheme at beginning of period (1,190) (1,959)
Employer contributions 935 355
Net interest expense (13) (49)
Actuarial gain 332 463
Surplus/(deficit) in scheme at end of period 64 (1,190)
Movement in scheme assets 2022 2021
£000 £000
Fair value at beginning of period 15,601 14,538
Interest income on scheme assets 290 377
Return on assets (excluding interest income) (1,976) 1,715
Employer contributions 935 355
Benefits paid (826) (1,384)
Fair value at end of period 14,024 15,601
Movement in scheme liabilities 2022 2021
£000 £000
Benefit obligation at start of period 16,791 16,497
Interest cost 303 426
Actuarial (gains)/ losses arising from changes in financial assumptions (2,466) 1,510
Actuarial gains arising from changes in demographic assumptions 60 (429)
Experience adjustments 98 171
Benefits paid (826) (1,384)
Benefit obligation at end of period 13,960 16,791
The weighted average duration of the pension scheme liabilities are 12 years
(2021: 13 years).
A quantitative sensitivity analysis for significant assumptions as at 31 May
2022 is as shown below:
2022 2021
Present value of scheme liabilities when changing the following assumptions: £000 £000
Discount rate increased by 1% p.a. 12,543 14,859
RPI and CPI increased by 1% p.a. 14,584 17,705
Mortality- members assumed to be their actual age as opposed to one year older 14,627 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.
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