REG - Chamberlin PLC - Interim Results
21/02/2024 12:00
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RNS Number : 9573D Chamberlin PLC 21 February 2024
21 February 2024
AIM: CMH
CHAMBERLIN PLC
("Chamberlin" or "the Company" or "the Group")
Interim Results
for the six months ended 30 November 2023
Chamberlin plc (AIM: CMH) is pleased to announce its interim results for the
six months ended 30 November 2023 ("H1 2024").
Key Points
· Revenue of £10.6m (H1 2023: £10.5m), an increase of
6%
· Underlying operating profit of £0.1m (H1 2023:
£0.1m loss) reflecting 192% increase from prior period
· Profit after tax of £47,000 (H1 2023: £0.3m loss)
Post Period
· Conditional sale of Petrel Limited ("Petrel")
announced today for gross proceeds of £3.0m
Chairman, Keith Butler-Wheelhouse, commented:
"Performance in the first half has been broadly in line with the Board's
expectations. The sale of Petrel will provide the Group with the financial
resources and balance sheet strength that it needs to focus on its core iron
foundry and machining operations and for both businesses to pursue their
respective strategies with greater impetus."
Enquiries
Chamberlin plc T: 01922 707100
Kevin Price, Chief Executive Officer
Alan Tomlinson, Finance Director
Cavendish Capital Markets Limited T: 020 7220 0500
(Nominated Adviser and Joint Broker)
Katy Birkin
Stephen Keys
George Lawson
Peterhouse Capital Limited (Joint Broker) T: 020 7469 0930
Lucy Williams
Duncan Vasey
Chief Executive's Statement
Revenues in the first half increased by 6% to £10.6m (2023: £10.5m), largely
driven by new orders won at Chamberlin and Hill Castings' ("CHC") machining
facility in the final quarter of the previous financial year. Revenues in the
Foundry division at CHC and Russell Ductile Castings ("RDC") and in the
Engineering division at Petrel have remained broadly in line with the elevated
levels seen in the corresponding period last year.
Underlying operating profit of £0.1m (2023: £0.1m loss) included a £0.2m
profit from the sale and leaseback of the Group's property in Walsall, which
completed in June 2023. Excluding the profit from the property transaction,
the underlying operating loss reduced by 46% compared to last half year, as
gross margin moved ahead slightly to 14.0% (2023: 13.6%) and overhead costs
remained tightly controlled. In the Foundry division, RDC improved its
operating profit by 43% compared to last half year as a result of operational
efficiencies from the investment in additional capacity and favourable market
conditions. Operating performance at CHC lagged behind expectations due to the
slower than anticipated commencement of production of new programs and the
costs of ramping up production at the machining facility from a standing start
but this temporary trend is expected to reverse in the second half and
operating performance is expected to improve. Petrel's profitability was
slightly below last half year as overhead costs marginally increased to
support its strategy of expansion in overseas markets.
Following continued expectations of further operational improvement at CHC's
machining facility in the light of new orders secured, an exceptional
operating credit of £0.2m has been recognised in the first half relating to
the reversal of a previous impairment of the machinery. The net interest cost
of £0.4m (2023: £0.2m) largely reflects the full impact of successive
increases in the Bank of England base rate. Loss before tax of £0.1m (2023:
£0.1m) reflected an 83% improvement in actual terms compared to the prior
period and, after a tax credit of £0.1m, profit after tax was £47,000 (2023:
£0.3m loss).
In January 2024, Chamberlin completed a placing and subscription raising
£830,000 before costs to support the Group's working capital requirements as
it continues to deliver the Group's growth strategy and to strengthen the
Group's balance sheet.
On 21 February 2024, the Board announced that it had entered into an agreement
for the conditional sale of Petrel to Project Apollo Limited (the
"Purchaser"), a subsidiary of Longacre Group, for a total gross cash
consideration of £3.0 million. Further details regarding the sale are
included in that announcement.
The triennial valuation of the Group's defined benefit pension scheme was
successfully completed in June 2023. The actions that have been taken by the
Board to improve the funding of the scheme, together with favourable market
movements, have led the deficit to reduce on a Trustees' basis from £5.5m in
March 2019 to around £1.2m following the payment of £1.1m to the scheme on
completion of the property sale and leaseback in June 2023. This £1.1m
contribution resulted in the deficit in the Group balance sheet at 31 May 2023
of £0.6m becoming a surplus of £0.1m at 30 November 2023. The payment of
£0.85m to the scheme resulting from the sale of Petrel will further improve
the pension scheme surplus on the Group balance sheet and reduce the deficit
on a Trustees' basis to around £0.4m.
Outlook
The sale of Petrel Ltd will provide the Group with the financial resources and
balance sheet strength that it needs to focus on its core iron foundry and
machining operations and for both businesses to pursue their respective
strategies with greater impetus. The transaction proceeds are expected to both
reduce the Group's liabilities by around £2.6m and contribute an exceptional
profit of no less than £2.0m, in FY24.
The Board believes that this is the start of an exciting new chapter for the
Company as it moves forward with improved working capital resources to invest
in the development of steel production at RDC and spheroidal graphite iron
production at CHC. With existing order books at RDC and CHC expected to drive
improvement in operational performance in the second half and beyond,
prospects for sustainable growth, that will replace the lost profits from
Petrel, are achievable over the short to medium term.
Kevin Price
Chief Executive
Consolidated Income Statement
for the six months ended 30 November 2023
Note Unaudited Unaudited Year ended
six months ended
six months ended
31 May 2023
30 November 2023
30 November 2022
Underlying # Non-underlying Total Underlying # Non-underlying Total Underlying # Non-underlying Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 2 10,611 - 10,611 10,544 - 10,544 20,718 - 20,718
Cost of sales (9,118) - (9,118) (9,104) - (9,104) (17,892) - (178928)
Gross profit 1,493 - 1,493 1,440 - 1,440 2,826 - 2,826
Other operating expenses 7 (1,362) 182 (1,180) (1,583) (140) (1,723) (3,413) 1,155 (2,258)
Operating profit/(loss) 131 182 313 (143) (140) (283) (587) 1,155 568
Interest receivable 144 - 144 29 - 29 136 - 136
Finance costs 3 (535) - (535) (213) - (213) (666) - (666)
(Loss)/profit before tax (260) 182 (78) (327) (140) (467) (1,117) 1,155 38
Tax credit/(expense) 4 125 - 125 186 - 186 180 (343) (163)
Profit/(loss) for the period attributable to equity holders of the Parent (135) 182 47 (141) (140) (281) (937) 812 (125)
Company
Earnings/(loss) per share:
Basic 5 0.03p (0.3)p (0.1)p
Diluted 0.03p (0.3)p (0.1)p
(#) Non-underlying items include restructuring costs, reversal of impairment
of assets, and share-based payment costs together with the associated tax
impact.
Consolidated Statement of Comprehensive Income
for the six months ended 30 November 2023
Unaudited Unaudited Year ended
six months ended
six months ended
31 May
30 November
30 November
2023
2023
2022
£000 £000 £000
Profit/(loss) for the period 47 (281) (125)
Other comprehensive income
Movements in fair value of cash flow hedges taken to other comprehensive - 3 5
income
Recycled to the income statement (2) - (135)
Deferred tax on movements in cash flow hedges - (1) 32
Net other comprehensive (expense)/income that may be recycled to profit and (2) 2 (98)
loss
Re-measurement losses on pension scheme assets and liabilities (365) (880) (1,073)
Deferred tax on re-measurement losses on pension scheme assets and liabilities 91 167 204
Net other comprehensive expense that will not be reclassified to profit and (274) (713) (869)
loss
(276) (711) (967)
Other comprehensive expense for the period net of tax
Total comprehensive expense for the period attributable to equity holders of (229)
the Parent Company
(992) (1,092)
Consolidated Balance Sheet
at 30 November 2023
Unaudited Unaudited 31 May
30 November
30 November
2023
2023
2022
£000 £000 £000
Non-current assets
Property, plant and equipment 4,949 3,525 5,235
Intangible assets 106 263 127
Deferred tax assets 1,409 1,621 1,173
Defined benefit pension scheme surplus 80 - -
6,544 5,409 6,535
Current assets
Inventories 3,282 3,449 3,262
Trade and other receivables 5,440 4,955 4,506
Income tax receivable 165 - 286
Cash at bank 184 124 157
9,071 8,528 8,211
Total assets 15,615 13,937 14,746
Current liabilities
Financial liabilities 4,725 3,873 4,096
Trade and other payables 7,069 7,281 7,572
11,794 11,154 11,668
Non-current liabilities
Financial liabilities 2,835 1,814 1,602
Deferred tax liabilities 64 60 40
Provisions 806 806 806
Defined benefit pension scheme deficit - 634 639
3,705 3,314 3,087
Total liabilities 15,499 14,468 14,755
Capital and reserves
Share capital 2,119 2,088 2,107
Share premium 7,210 6,332 6,882
Capital redemption reserve 109 109 109
Revaluation reserve 1,003 1,003 1,003
Hedging reserve - 102 2
Retained earnings (10,325) (10,165) (10,112)
Total equity 116 (531) (9)
Total equity and liabilities 15,615 13,937 14,746
Consolidated Cash Flow Statement
for the six months ended 30 November 2023
Unaudited Unaudited Year ended
six months ended
six months ended
31 May
30 November
30 November
2023
2023
2022
£000 £000 £000
Operating activities
Loss for the period before tax (78) (467) 38
Adjustments for:
Interest receivable (131) (29) (136)
Net finance costs 522 213 666
Impairment reversal on property, plant and equipment, inventory and
receivables
(200) - (1,372)
Dilapidations provision - - -
Depreciation of property, plant and equipment 295 186 436
Amortisation of intangible assets 17 20 39
Profit on disposal of property plant and equipment (208) - -
Foreign exchange rate movements (2) (6) (140)
Share-based payments 18 34 99
Defined benefit pension contributions paid (1,206) (180) (362)
Increase in inventories (20) (307) (303)
Increase in receivables (1,006) (796) (499)
(Decrease)/increase in payables (270) 830 1,000
Corporation tax received 121 306 306
Net cash outflow from operating activities (2,148) (197) (228)
Investing activities
Purchase of property, plant and equipment (89) (205) (410)
Purchase of software - - (5)
Development costs - - (10)
Disposal of property, plant and equipment 2,200 - -
Interest received 118 29 128
Net cash inflow/(outflow) from investing activities 2,229 (176) (297)
Financing activities
Interest paid (522) (215) (567)
Net invoice finance drawdown/(repaid) 498 1,047 1,297
New share capital issued 310 - 594
Finance lease payments (340) (337) (642)
Net cash (outflow)/inflow from financing activities (54) 497 682
Net increase in cash and cash equivalents 27 124 157
Cash and cash equivalents at the start of the period
Impact of foreign exchange rate movements 157 - -
- - -
Cash and cash equivalents at the end of the period 184 124 157
Cash and cash equivalents compromise:
Cash at bank 184 124 157
Consolidated Statement of Changes in Equity
for the six months ended 30 November 2023
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 2022 2,087 6,308 109 100 (9,199) 408
1,003
Loss for the period - - - - (281) (281)
-
Other comprehensive income/(expense) for the period net of tax - - - 2 - (713) (711)
Total comprehensive income/(expense) - - - 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
Profit for the period - - - - 156 156
Other comprehensive expense for the period net of tax - - - (100) - (156) (256)
Total comprehensive expense - - - (100) - (100)
-
New share capital issued 19 550 - - - 569
-
Share-based payments - - - - 65 65
-
Deferred tax on share-based payments - - - - (12) (12)
-
Total of transactions with shareholders 19 550 - (100) 53 622
-
At 1 June 2023 2,107 6,882 109 2 (10,112) (9)
1,003
Profit for the period - - - - 47 47
-
Other comprehensive expense for the period net of tax - - - (2) (274) (276)
-
Total comprehensive expense - - - (2) (227) (229)
-
New share capital issued 12 328 - - - 340
-
Share-based payments - - - - 18 18
Deferred tax on share-based payments - - - - (4) (4)
Total of transactions with shareholders 12 328 - - 14 358
-
At 30 November 2023 2,119 7,210 109 - (10,325) 116
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 2023 were
approved by the Board of Directors on 30 November 2023 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 2023.
No new standards or interpretations issued since 31 May 2023 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 two years ending 31 May 2024 and 31 May 2025, which reflect
the Director's view of the most likely trading conditions. Since the balance
sheet date, Chamberlin plc has entered into a conditional contract for the
sale of Petrel Limited that will generate gross proceeds of £3.0m on
completion.
The forecast includes revenue growth assumptions across all of the Group's
businesses. At Chamberlin and Hill Castings, these assumptions are based on
secured orders and programs and are based on customer estimates of future
demand and historical run rates. At Russell Ductile Castings, the forecasts
assume that revenue growth will be derived from work recently won for new
customers following the demise of a competitor foundry and are based on
customer estimates of future demand and expected run rates. At Petrel, revenue
growth assumptions are based on the introduction of new or upgraded products
and a strategic drive to increase export sales.
The Directors have applied reasonably foreseeable downside sensitivities to
the forecast, including an assumption that sales growth in the two largest
businesses, namely Chamberlin and Hill Castings and Russell Ductile Castings,
are both 20% lower than expectations. 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 2024 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. The Directors have considered
how they will respond to any working capital challenges bearing in mind the
points raised above. Firstly the business constantly looks at cost
minimisation and that process could be accelerated if required. Secondly, if
access to alternative debt funders were not successful in the short term, the
business will consider other funding options, including equity, to support
working capital requirements.
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 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 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 2023 30 November 30 November 2023
2023 2022 2023 2022
£000 £000
£000 £000 £000 £000
Foundries 8,649 8,600 16,889 68 (9) (210)
Engineering 1,962 1,944 3,829 327 343 606
Segmental results 10,611 10,544 20,718 395 334 396
Shared costs (264) (477) (983)
Non-underlying items (Note 7) 182 (140) 1,155
Net finance costs (391) (184) (530)
(Loss)/profit before tax (78) (467) 38
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
2023
2023 2022
£000 £000 £000
Bank overdraft and invoice finance interest payable (321) (127) (365)
Interest expense on lease liabilities and other interest payable (214) (86) (301)
(535) (213) (666)
4 Income tax expense
An estimated effective rate of tax for the six months to 30 November 2023 of
160.3% (30 November 2022: 39.8%) has been used in these interim statements.
This rate differs to the standard corporation tax rate of 25% due primarily
due to the recognition of a deferred tax asset on certain trading losses,
accelerated capital allowances, research and development credits and
short-term timing differences. The corporation tax rate was 19% for the year
ended 31 May 2023 and is expected to be 25% for the year ended 31 May 2024.
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
Profit/(loss) after tax for basic earnings per share 47 (281) (125)
Non-underlying operating items (182) 140 (1,155)
Taxation effect of the above - - 343
Loss for underlying earnings per share (135) (141) (937)
Unaudited Unaudited
six months ended six months ended Year ended
30 November 30 November 31 May
2023 2022 2023
000 000 000
Weighted average number of ordinary shares 137,723 105,625 112,603
Adjustment to reflect dilutive shares under option 3,688 3,581 1,888
Diluted weighted average number of ordinary shares 141,411 109,206 114,491
There is no adjustment for the shares under option in the diluted loss per
share calculation for the six months ended 30 November 2022 and year ended 31
May 2023 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
2023 2022 2023
Salary increases n/a n/a n/a
Pension increases (post 1997) 3.0% 3.1% 3.0%
Discount rate 5.2% 4.5% 5.4%
Inflation assumption - RPI 3.1% 3.1% 3.1%
Inflation assumption - CPI 2.5% 2.4% 2.5%
The demographic assumptions used for 30 November 2023 were the same as those
used at 31 May 2023, and were based on the last full actuarial valuation
performed as at 31 March 2022. The contributions expected to be paid during
the year to 31 May 2024 are £409,000. The next triennial valuation is due as
at 31 March 2025.
The defined benefit scheme funding has changed under IAS 19 as follows:
Unaudited Unaudited
30 November 30 November 31 May
Funding status 2023 2022 2023
£000 £000 £000
Scheme assets at end of period 11,847 11,924 11,000
Benefit obligations at end of period (11,767) (12,558) (11,639)
Surplus/(deficit) in scheme 80 (634) (639)
Related deferred tax (liability)/asset (20) 159 160
Net pension asset/(liability) 60 (475) (479)
The change in the net pension liability since 31 May 2023 is mainly due to the
additional employer contribution of £1.1m partially offset by negative
investment returns arising from a fall in the market value of scheme assets
and an increase in the value of liabilities as a consequence of a reduction in
bond yields reducing the discount rate.
7 Non-underlying items
Unaudited Unaudited
six months ended six months ended Year ended
30 November 30 November 31 May
2023 2022 2023
£000 £000 £000
Group reorganisation - 106 118
Reversal of impairment of property, plant & equipment (200) - (1,372)
Share-based payment charge 18 34 99
Non-underlying operating income/(costs) (182) 140 (1,155)
Taxation
- tax effect of non-underlying costs - - 343
(182) 140 (812)
In the six months ended 30 November 2023, the Group reversed £200,000 of the
impairment to property, plant and equipment in the foundry division's
machining facility following improved performance and prospects.
8 Net debt
Unaudited Unaudited
30 November 30 November 31 May
2023 2022 2023
£000 £000 £000
Current financial assets/(liabilities)
Net cash 184 124 157
Lease liabilities (689) (580) (554)
Invoice finance liability (4,036) (3,293) (3,542)
Net debt due in less than one year (4,541) (3,749) (3,939)
Lease liabilities due in more than one year (2,835) (1,814) (1,602)
Net debt (7,376) (5,563) (5,541)
9 Interim report
This interim results statement is available on the Group's website,
www.chamberlin.co.uk.
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