REG - Chamberlin PLC - Half-year Report
28/02/2023 07:00
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RNS Number : 2109R Chamberlin PLC 28 February 2023
28 February 2023
AIM: CMH
CHAMBERLIN PLC
("Chamberlin" or "the Company" or "the Group")
Interim Results
for the six months ended 30 November 2022
Chamberlin plc (AIM: CMH) is pleased to announce its interim results for the
six months ended 30 November 2022 ("H1 2023").
Key Points
· Revenue of £10.5m (H1 2022: £8.0m), an increase of
32%
· Underlying loss before tax £0.3m (H1 2022: £0.1m)
· Continued strong growth at Petrel with significantly
improved operating performance
Post Period
· Potential sale and leaseback for Walsall freehold
site, subject to contract
Chairman, Keith Butler-Wheelhouse, commented:
"All operating businesses within the Group are now operationally profitable,
with new opportunities for growth continuing to emerge, the most significant
being the newly reinvigorated Petrel".
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.
Enquiries
Chamberlin plc T: 01922 707100
Kevin Price, Chief Executive Officer
Alan Tomlinson, Finance Director
Cenkos Securities plc (Nominated Adviser and Broker) T: 020 7397 8900
Katy Birkin
Stephen Keys
George Lawson
Peterhouse Capital Limited (Joint Broker) T: 020 7469 0930
Lucy Williams
Duncan Vasey
Chairman's Statement
Revenues in the first six months increased by 32% to £10.5m compared to
£8.0m in the prior period, reflecting strong growth across all operations.
Revenues in the second half of the year are expected to continue on a similar
path, supported by strong order books at RDC and Petrel and the commencement
of new contracts recently won by CHC, as previously announced.
Operational performance of the Group in H1 2023 was impacted by inflationary
cost pressures, primarily at CHC, with the underlying loss before tax
increasing slightly to £0.3m (H1 2022: £0.1m), although these cost pressures
have now been addressed through price increases and further cost savings.
Despite these cost pressures, both Petrel and RDC delivered strong operating
performances, with operating profit increasing by 78% and 11% respectively,
compared with the prior period.
Petrel's new management team, led by divisional Managing Director Mark
Pemberton, has overseen a substantial increase in operating performance. The
team are now seeking to build on this strong base and have developed a
strategy for Petrel that will involve entry into new export markets and
sectors such as pharmaceutical and oil and gas. Petrel will continue to
modernise and innovate to ensure it remains at the forefront of hazard
lighting technology and meets evolving customer requirements.
In January 2023, Chamberlin completed a placing and subscription raising
£650,000 to support the Group's working capital requirements as it enters a
period of profitable growth. At that time, the Board stated that it was
continuing to evaluate further opportunities to strengthen the balance sheet,
including in relation to the Group's property assets. The Group is in
discussions regarding a proposed sale and leaseback transaction at its Walsall
freehold property which would include a proportion of any realised funds to be
utilised to further reduce the Company's pension fund deficit. Whilst the
freehold is currently under offer at £2.2m, Shareholders should note that
this is subject to contract and there can be no certainty that this
transaction will be completed. Further announcements will be made, as
appropriate.
Outlook
The Group continues to go from strength to strength and is performing in line
with market expectations.
The Board believes that Chamberlin is now entering a period of continuous
growth with all businesses profitable in January 2023 for the first time in
many years and supporting the Board's expectations that Group profits in FY
2023 will be second half weighted.
Keith Butler-Wheelhouse
Chairman
Consolidated Income Statement
for the six months ended 30 November 2022
Note Unaudited Unaudited Year ended
six months ended
six months ended
31 May 2022
30 November 2022
30 November 2021
Underlying # Non-underlying Total Underlying # Non-underlying Total Underlying # Non-underlying Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 2 10,544 - 10,544 8,013 - 8,013 16,836 - 16,836
Cost of sales (9,104) - (9,104) (6,636) - (6,636) (15,038) - (15,038)
Gross profit 1,440 - 1,440 1,377 - 1,377 1,798 - 1,798
Other operating expenses 7 (1,583) (140) (1,723) (1,409) 50 (1,359) (2,501) 505 (1,996)
Operating (loss)/profit (143) (140) (283) (32) 50 18 (703) 505 (198)
Interest receivable 47 - 47 - - - 26 - 26
Finance costs 3 (231) - (231) (104) - (104) (337) - (337)
(Loss)/profit before tax (327) (140) (467) (136) 50 (86) (1,014) 505 (509)
Tax credit/(expense) 4 186 - 186 188 - 188 581 - 581
Profit/(loss) for the period attributable to equity holders of the Parent (141) (140) (281) 52 50 102 (433) 505 72
Company
Earnings/(loss) per share:
Basic 5 (0.1)p (0.2)p (0.3)p 0.1p - 0.1p (0.5)p 0.6p 0.1p
Diluted (0.1)p (0.2)p (0.3)p 0.1p - 0.1p (0.5)p 0.6p 0.1p
(#) 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 six months ended 30 November 2022
Unaudited Unaudited Year ended
six months ended
six months ended
31 May
30 November
30 November
2022
2022
2021
£000 £000 £000
(Loss)/profit for the period (281) 102 72
Other comprehensive income
Gain on revaluation of property, plant & equipment - - 1,003
Movements in fair value of cash flow hedges taken to other comprehensive 3 (69) (158)
income
Deferred tax on movements in cash flow hedges (1) 17 40
Net other comprehensive income/(expense) that may be recycled to profit and 2 (52) 885
loss
Re-measurement (losses)/gains on pension scheme assets and liabilities (880) (42) 332
Deferred tax on re-measurement (losses)/ gains on pension assets and 167 8 (63)
liabilities
Net other comprehensive (expense)/ income that will not be reclassified to (713) (34) 269
profit and loss
(711) (86) 1,154
Other comprehensive (expense)/income for the period net of tax
Total comprehensive (expense)/income for the period attributable to equity
holders of the Parent Company
(992) 16 1,226
Consolidated Balance Sheet
at 30 November 2022
Unaudited Unaudited 31 May
30 November
30 November
2022
2022
2021
£000 £000 £000
Non-current assets
Property, plant and equipment 3,525 2,515 3,506
Intangible assets 263 244 283
Deferred tax assets 1,621 1,402 1,434
Defined benefit pension scheme surplus - - 64
5,409 4,161 5,287
Current assets
Inventories 3,449 2,264 3,143
Trade and other receivables 4,955 3,160 4,303
Cash at bank 124 6 -
8,528 5,430 7,446
Total assets 13,937 9,591 12,733
Current liabilities
Financial liabilities 3,873 2,573 2,877
Trade and other payables 7,281 6,429 6,475
11,154 9,002 9,352
Non-current liabilities
Financial liabilities 1,814 1,007 2,097
Deferred tax liabilities 60 107 70
Provisions 806 890 806
Defined benefit pension scheme deficit 634 1,077 -
3,314 3,081 2,973
Total liabilities 14,468 12,083 12,325
Capital and reserves
Share capital 2,088 2,051 2,087
Share premium 6,332 4,720 6,308
Capital redemption reserve 109 109 109
Revaluation reserve 1,003 - 1,003
Hedging reserve 102 166 100
Retained earnings (10,165) (9,538) (9,199)
Total equity (531) (2,492) 408
Total equity and liabilities 13,937 9,591 12,733
Consolidated Cash Flow Statement
for the six months ended 30 November 2022
Unaudited Unaudited Year ended
six months ended
six months ended
31 May
30 November
30 November
2022
2022
2021
£000 £000 £000
Operating activities
Loss for the period before tax (467) (86) (509)
Adjustments for:
Interest receivable (47) - (26)
Net finance costs 231 104 337
Impairment charge on property, plant and equipment, inventory and receivables
- (84) (498)
Dilapidations provision - - (84)
Depreciation of property, plant and equipment 186 176 324
Amortisation of intangible assets 20 23 24
Profit on disposal of property plant and equipment - - (66)
Foreign exchange rate movements (6) (1) (1)
Share-based payments 34 34 67
Defined benefit pension contributions paid (180) (165) (935)
(Increase) in inventories (307) (566) (945)
(Increase)/decrease in receivables (796) 779 (168)
Increase/(decrease) in payables 830 (1,688) (1,557)
Corporation tax received 306 - -
Net cash outflow from operating activities (196) (1,474) (4,037)
Investing activities
Purchase of property, plant and equipment (205) (197) (520)
Purchase of software - (4) (20)
Development costs - - (24)
Disposal of property, plant and equipment - - 1,189
Net cash outflow from investing activities (205) (201) 625
Financing activities
Interest received 47 - 26
Interest paid (233) (94) (324)
Net invoice finance drawdown 1,048 1,011 1,585
New share capital issued - - 1,624
Finance lease payments (337) (274) (537)
Net cash inflow from financing activities 525 643 2,374
Net increase/(decrease) in cash and cash equivalents
124 (1,032) (1,038)
Cash and cash equivalents at the start of the period
Impact of foreign exchange rate movements - 1,038 1,038
- - -
Cash and cash equivalents at the end of the period 124 6 -
Cash and cash equivalents compromise:
Cash at bank 124 6 -
Consolidated Statement of Changes in Equity
for the six months ended 30 November 2022
Share capital Share premium Capital redemption reserve Hedging reserve Retained earnings Total equity
Revaluation reserve
£000 £000 £000 £000 £000 £000 £000
At 1 June 2021 2,051 4,720 109 218 - (9,664) (2,566)
Profit for the period - - - - - 102 102
Other comprehensive income/(expense) for the period net of tax - - - (52) - (34) (86)
Total comprehensive income/(expense) - - - (52) - 68 16
Share-based payments - - - - - 34 34
Deferred tax on share-based payments - - - - - 24 24
Total of transactions with shareholders - - - - 58 58
-
At 30 November 2021 2,051 4,720 109 166 (9,538) (2,492)
-
Loss for the period - - - - (30) (30)
Other comprehensive income for the period net of tax - - - (66) 303 1,240
1,003
Total comprehensive income/(expense) - - - (66) 273 1,210
1,003
New share capital issued 36 1,588 - - - 1,624
-
Share-based payments - - - - 33 33
-
Deferred tax on share-based payments - - - - 33 33
-
Total of transactions with shareholders 36 1,588 - - 66 1,690
-
At 1 June 2022 2,087 6,308 109 100 (9,199) 408
1,003
Loss for the period - - - - (281) (281)
-
Other comprehensive expense for the period net of tax - - - 2 (713) (711)
-
Total comprehensive (expense)/income - - - 2 (994) (992)
-
New share capital issued 1 24 - - - 25
-
Share-based payments - - - - 34 34
Deferred tax on share-based payments - - - - (6) (6)
Total of transactions with shareholders 1 24 - - 28 53
-
At 30 November 2022 2,088 6,332 109 102 (10,165) (531)
1,003
Notes to the Interim Financial statements
1 General information and accounting policies
The unaudited interim condensed consolidated financial statements do not
comprise the Group's statutory accounts as defined by section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31 May 2022 were
approved by the Board of Directors on 4 November 2022 and filed at Companies
House. The auditor's report on those accounts was unqualified but contained
an emphasis of matter paragraph relating to a material uncertainty regarding
going concern.
Basis of preparation
The Group's financial statements have been prepared in accordance with
International Accounting Standards in conformity with the requirements of the
Companies Act 2006.
The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with AIM Rules issued by the
London Stock Exchange.
Accounting policies
The principal accounting policies applied in preparing the interim Financial
Statements comply with IFRS as adopted by the European Union and are
consistent with the policies set out in the Annual Report and Accounts for the
year ended 31 May 2022.
No new standards or interpretations issued since 31 May 2022 have had a
material impact on the financial statements of the Group.
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. In
November 2022, the Group secured an increase to its invoice finance facilities
from £3.5m to £4.5m 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.
2 Segmental analysis
For management purposes, the Group is organised into two operating divisions:
Foundries and Engineering. The operating segments reporting format reflects
the Group's management and internal reporting structures for the Chief
Operating Decision Maker.
Revenue Operating (loss)/ profit
Unaudited Unaudited Unaudited Unaudited
six months six months Year ended six months six months Year ended
ended ended 31 May ended ended 31 May
30 November 30 November 2022 30 November 30 November 2022
2022 2021 2022 2021
£000 £000
£000 £000 £000 £000
Foundries 8,600 6,469 13,604 (9) 120 (463)
Engineering 1,944 1,544 3,232 343 193 535
Segmental results 10,544 8,013 16,836 334 313 72
Shared costs (477) (345) (775)
Non-underlying items (Note 7) (140) 50 505
Net finance costs (184) (104) (311)
Loss before tax (467) (86) (509)
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. The Engineering segment provides
manufactured hazardous area lighting products to distributors and end-users.
Financing and income tax are managed on a Group basis and are not allocated to
operating segments.
3 Finance costs
Unaudited Unaudited Year ended
six months ended
six months ended
31 May
30 November
30 November
2022
2022 2021
£000 £000 £000
Interest on bank financing facilities (132) (23) (94)
Interest expense on lease liabilities and other interest payable (101) (71) (230)
Net interest on defined benefit pension liability 2 (10) (13)
(231) (104) (337)
4 Income tax expense
An estimated effective rate of tax for the six months to 30 November 2022 of
39.8% (30 November 2021: 218.6%) has been used in these interim statements.
This rate differs to the standard corporation tax rate of 19% due primarily
due to the recognition of a deferred tax asset on certain trading losses,
accelerated capital allowances and short-term timing differences. The
corporation tax rate remained at 19% for the year ended 31 May 2022.
5 Earnings/(loss) per share
The calculation of earnings/(loss) per share is based on the profit/(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 earnings/(loss) per share, which excludes
non-underlying items and the related tax thereon as disclosed in Note 7, as
analysed below, has been disclosed as the Directors believe this allows a
better assessment of the underlying trading performance of the Group.
Unaudited Unaudited Year ended
six months ended six months ended 31 May
30 November 30 November 2022
2022 2021
£000 £000 £000
(Loss)/profit after tax for basic earnings per share (281) 102 72
Non-underlying operating items 140 (50) (505)
Taxation effect of the above - - -
(Loss)/profit for underlying earnings per share (141) 52 (433)
Unaudited Unaudited Year ended
six months ended six months ended 31 May
30 November 30 November 2022
2022 2021
000 000 000
Weighted average number of ordinary shares 105,625 69,625 79,488
Adjustment to reflect dilutive shares under option 3,581 3,581 3,581
Diluted weighted average number of ordinary shares 109,206 73,206 83,069
There is no adjustment for the shares under option in the diluted loss per
share calculation for the six months ended 30 November 2022 as they are
required to be excluded from the weighted average number of shares as they are
anti-dilutive.
6 Pensions
The Group operates a defined benefit pension scheme and a defined contribution
pension scheme on behalf of its employees. For the defined contribution
scheme, contributions paid in the period are charged to the income
statement. For the defined benefit scheme, actuarial calculations are
performed in accordance with IAS 19 in order to arrive at the amounts to be
charged in the income statement and recognised in the statement of
comprehensive income. The defined benefit scheme is closed to new entrants
and future accrual.
Under IAS 19, the Group recognises all movements in the actuarial funding
position of the scheme in each period. This is likely to lead to volatility
in shareholders' equity from period to period.
The IAS 19 figures are based on a number of actuarial assumptions as set out
below, which the actuaries have confirmed they consider appropriate. The
projected unit credit actuarial cost method has been used in the actuarial
calculations.
30 November 30 November 31 May
2022 2021 2022
Salary increases n/a n/a n/a
Pension increases (post 1997) 3.1% 3.2% 3.4%
Discount rate 4.5% 1.6% 3.4%
Inflation assumption - RPI 3.1% 3.3% 3.5%
Inflation assumption - CPI 2.4% 2.6% 2.8%
The demographic assumptions used for 30 November 2022 were the same as those
used at 31 May 2022, and were based on the last full actuarial valuation
performed as at 31 March 2019. The contributions expected to be paid during
the year to 31 May 2023 are £362,000. The triennial valuation as at 31 March
2022 is currently in progress.
The defined benefit scheme funding has changed under IAS 19 as follows:
Unaudited Unaudited
30 November 30 November 31 May
Funding status 2022 2021 2022
£000 £000 £000
Scheme assets at end of period 11,924 16,156 14,024
Benefit obligations at end of period (12,558) (17,233) (13,960)
(Deficit)/surplus in scheme (634) (1,077) 64
Related deferred tax asset/(liability) 159 269 (16)
Net pension (liability)/asset (475) (808) 48
The change in the net pension liability since 31 May 2022 is mainly due to
negative investment returns arising from a fall in the market value of scheme
assets partially offset by a reduction in the value of liabilities as a
consequence of an increase in bond yields increasing the discount rate.
7 Non-underlying items
Unaudited Unaudited Year ended
six months ended six months ended 31 May
30 November 30 November 2022
2022 2021
£000 £000 £000
Group reorganisation 106 - -
Additional liability from customer claim relating to disposal of Exidor - - 10
Limited
Impairment reversal relating to inventory and receivables - (84) (498)
Dilapidations provision release - - (84)
Share-based payment charge 34 34 67
Non-underlying operating costs/(income) 140 (50) (505)
Taxation
- tax effect of non-underlying costs - - -
140 (50) (505)
In the six months ended 30 November 2022, the Group undertook a restructure of
the senior management team at Petrel leading to redundancy and other
associated costs of £106,000.
8 Net debt
Unaudited Unaudited
30 November 30 November 31 May
2022 2021 2022
£000 £000 £000
Financial liabilities
Net cash (124) (6) -
Lease liabilities 580 1,065 634
Invoice finance liability 3,293 1,508 2,243
Net debt due in less than one year 3,749 2,567 2,877
Lease liabilities due in more than one year 1,814 1,007 2,097
Net debt 5,563 3,574 4,974
9 Interim report
This interim results statement is available on the Group's website,
www.chamberlin.co.uk.
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