REG - Chamberlin PLC - Full Year Trading Update and Notice of Results

ChamberlinAnnouncement

08/07/2022 07:00

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RNS Number : 7676R  Chamberlin PLC  08 July 2022

8 July 2022

 

Chamberlin plc

("Chamberlin", the "Company" or the "Group")

 

Full Year Trading Update and Notice of Results

 

Chamberlin plc (AIM: CMH.L), the specialist castings and engineering group, is
pleased to announce the following trading update for the financial year ended
31 May 2022 ("FY 2022").

 

Key Points

 

·          FY 2022 Group operational performance significantly
improved compared to the prior period, delivering a 112% increase in adjusted
EBITDA and a full year profit after tax for the first time in five years
(subject to audit)

 

·          The Group expects to report record levels of revenue and
operating profit growth at Petrel Ltd and Russell Ductile Castings Ltd,
following a very strong recovery and high demand in the post-pandemic markets

 

·          Slower than anticipated recovery at Chamberlin & Hill
Castings Ltd in Walsall which continues to operate at a loss

 

·          The Group's deficit in shareholders' funds is expected to
largely be eliminated (subject to audit) for FY 2022 as a result of the
restructuring actions taken by the Company, a reduction in the pension deficit
and improved performance across the Group

 

FY 2022 Trading Performance

 

The Group expects to report revenues for FY 2022 of approximately £16.5
million (14 months ended 31 May 2021: £22.7 million), in line with market
expectations and adjusted EBITDA* of £0.2 million, up 112% on the prior
period (14 months ended 31 May 2021: £1.7 million loss). The Company also
expects to report a profit after tax of £0.1 million (subject to audit), in
line with market expectations.

 

Chamberlin & Hill Castings Ltd - Casting Facility and Machining Facility
("CHC")

 

Following the placing completed in February 2022, the Board has continued to
implement the revised strategy in order 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, however the division continues
to operate at a loss and is not yet cash generative. Longer term demand for
the Group's automotive products is however expected to improve in H1 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 Iron Foundry Weights ("IFW") brand was launched in May 2021 and the Board
remains focused on direct selling to the consumer, where the Group can offer
high-quality, bespoke UK made products that have a significantly reduced
carbon footprint compared to products imported from overseas. Chamberlin has
the existing capability to not only design and manufacture cast iron fitness
products but is also actively investing in repurposing its state-of-the-art
machining facility to be able to produce its new range of steel precision
machined dumbbells.

 

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 FY 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 operation continues to operate at near full
production levels in response to both a growing customer demand and pipeline
of opportunities, with the current order book at sufficient levels to ensure
H1 2023 management sales forecasts are met. Operating profitability at RDC
significantly improved during FY 2022, with the Board expecting to report an
increase of over 300 per cent. compared to the prior 14-month period. With
planning permission expected in Summer 2022, the investment programme to
expand production capacity by up to 40 per cent. 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 in Autumn 2022.

 

Petrel Ltd

 

Petrel, Chamberlin's specialist lighting business, traded profitably during FY
2022 and has exceeded the Board's expectations significantly. The Company
expects to report an increase in operating profitability of over 150 per cent.
compared to the prior 14-month period. Petrel continues to benefit from a
strong order book, reflecting recovery from 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 are 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.

 

Balance Sheet and Financing

 

In May 2022, the Group refinanced the terms of its asset finance facility with
HSBC, extending the repayment period to October 2025 at an interest rate of
6.5 per cent.

 

On 5 May 2022, the Company announced details of a sale and leaseback of its
freehold property at RDC with completion of the transaction occurring on 6 May
2022. The proceeds have been used to reduce the Company's pension fund deficit
by £600k in satisfaction of the Chamberlin & Hill Life Assurance Scheme's
charge over the property, with the balance of the proceeds being applied to
the Group's growth strategies and to provide working capital.

 

Net debt at 31 May 2022, including asset leases of £2.7 million (31 May 2021:
£2.2 million), was £4.9 million (unaudited) (31 May 2021: £1.8 million) and
current cash headroom is in line with management expectations at £0.8
million. The Board expects the Group's deficit in shareholder's funds on the
balance sheet to be largely eliminated for FY 2022 (subject to audit), as a
result of the restructuring actions taken by the Company, a reduction in the
pension deficit and improved performance across the Group.

 

Outlook

 

Whilst the overall economic climate remains uncertain, in particular rising
inflation impacting consumer spending, the Board is pleased to report that all
three operating divisions have made a strong start to FY2023 with higher than
expected levels of orders for Q1 2023 and strong ongoing order books.

 

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 invest in new growth strategies for each business.

 

This recovery is further supported by the Group's protection from any current
or medium term energy price increases, having secured a 5 year fixed price
contract for electricity in March 2020, placing the Group in an increasingly
competitive position to win new orders.

 

Notice of Results

 

The Group expects to report its audited results for the financial year ended
31 May 2022 in September 2022.

 

* adjusted EBITDA defined as operating profit before interest, taxation,
depreciation, amortisation and non-underlying items

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018.

 

Enquiries:

 

 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

 

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