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CHAMBERLIN PLC NEX:CMH.GB NEX Ordinary Share GB0001870228
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Chamberlin PLC Final Results

04/06/2019 7:00am

UK Regulatory (RNS & others)


CHAMBERLIN (NEX:CMH.GB)
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RNS Number : 9997A

Chamberlin PLC

04 June 2019

AIM: CMH

4 June 2019

CHAMBERLIN plc

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

FINAL RESULTS

for the year ended 31 March 2019

KEY POINTS

Financial

 
      --   Sale of engineering subsidiary, Exidor Ltd ("Exidor"), 
            was completed in December 2018 
      --   Revenues on continuing operations up 9.3% to GBP33.0m 
            (2018: GBP30.2m) 
      --   Gross margin of 11.4% (2018: 15.5%) 
      --   Underlying operating loss before tax* of GBP0.9m (2018: 
            GBP0.3m). This result is not directly comparable to 2018's 
            due to the adoption of IFRS 16, which has resulted in 
            increased finance expense of GBP0.1m and reduced operating 
            expenses of GBP0.1m in the year 
      --   Reported profit of GBP2.9m, which was mainly generated 
            from the sale of Exidor (GBP6.2m net profit) offset by 
            an impairment of GBP3.0m on the fixed assets of the foundry 
            operations as the value of the asset could not be supported 
            by the current level of business 
      --   IFRS diluted loss per share for continuing operations 
            increased to 16.8p (2018: loss per share of 12.4p) 
      --   Capital expenditure of GBP1.2m (2018: GBP3.0m), excluding 
            GBP0.8m of leased assets due to early adoption of IFRS 
            16 
      --   Net debt reduced to GBP5.4m as at the year-end (2018: 
            GBP9.6m). This includes machining facility investment 
            and IFRS 16 liabilities of GBP1.0m 
 

Operational

 
      --   Foundry revenues grew by 11.2% to GBP29.3m, mainly reflecting 
            a strong first half 
      --   Continuing engineering revenues decreased by 3.8% to GBP3.6m 
            primarily due to a weaker quarter 4 because of Brexit 
            uncertainties although profitability increased 
      --   Sale of Exidor to ASSA ABLOY Limited for a headline consideration 
            of GBP10.0m: 
                o    generated cash proceeds of GBP8.5m after deductions 
                      for net debt transferred, working capital, retentions 
                      and transaction costs; 
                o    strengthened the Group's balance sheet 
                o    facilitated a one-off contribution of GBP2.5m towards 
                      the defined benefit pension liability 
 

*Underlying figures are stated before exceptional items (GMP Equalisation, impairment of fixed assets and onerous leases) and non-underlying costs (administration costs of the pension scheme, net financing costs on pension obligations and share based payment costs) together with the associated tax impact.

Chairman, Keith Butler-Wheelhouse, commented:

"Although revenues are expected to reduce, we are positioning Chamberlin to deliver an improved operating financial performance in the 2019/20 financial year".

Enquiries

 
 Chamberlin plc                      T: 01922 707100 
  Kevin Nolan, Chief Executive 
  Neil Davies, Finance Director 
 
 Cenkos Securities plc               T: 020 7397 8900 
  (Nominated Adviser and Broker) 
  Russell Cook, Katy Birkin 
 
 KTZ Communications                  T: 020 3178 6378 
  (Financial PR) 
  Katie Tzouliadis, Dan Mahoney 
 

Chairman's Statement

For the last several years we have been seeking to grow both our foundry business and our two smaller engineering businesses. During the year we concluded that we did not have the financial resources to continue this growth on all fronts policy and accordingly set about finding a new owner for Exidor, better placed to develop this business, and who could reflect the potential of the business in the price. Exidor was accordingly sold to ASSA ABLOY for a headline consideration of GBP10m during the year.

The proceeds were used to reduce both the level of debt and the pension deficit. The pension deficit as at the year end was GBP2.6m compared to GBP5.1m last year.

On a like-for-like basis, net debt reduced from GBP8.9m in 2018 to GBP4.4m in 2019. Chamberlin chose to adopt the new IFRS 16 accounting standard to capitalise finance leases early, and this has increased the reported net debt by GBP1.0m to GBP5.4m.

Although each of our businesses grew during the year, the performance of our principal foundry operations deteriorated in the second half, with our automotive turbocharger customers reducing their schedules. This partly reflected upheavals in their activities as the car manufacturers adjusted their offerings in response to the new emissions testing regime and took account of wider trading conditions.

Our profit after tax of GBP1.5m incorporated the gain on the sale of Exidor, which amounted to GBP6.2m, offset by an impairment of GBP3.0m on the fixed assets of the foundry division. The underlying operating loss on continuing operations was GBP0.9m (2018: GBP0.3m). We are now engaged in right-sizing our structure to better match trading conditions.

The Board and Staff

David Roberts resigned as Finance Director and Company Secretary and was replaced by Neil Davies in December 2018. Neil, formerly Finance Director of European Operations for International Automotive Components, has over 20 years' experience in senior finance roles within high volume automotive manufacturing. I would like to record my thanks to David for his strong contribution to the Company and to extend a warm welcome to Neil.

Chamberlin has a hard-working and dedicated team and, on behalf of the Board, I would like to thank everyone for their high level of commitment during the year.

Outlook

Although revenues are expected to reduce, we are positioning Chamberlin to deliver an improved operating financial performance in the 2019/20 financial year.

Keith Butler-Wheelhouse

Chairman

3 June 2019

Chief Executive's Review

The Group is pleased to report a profit after tax of GBP1.5m based on revenue of GBP33.0m. This was driven by a one-off profit of GBP6.2m from the disposal of Exidor, part of our engineering operations, partly offset by an impairment charge of GBP3.0m against some of our foundry fixed assets.

Operationally, the technical issues faced during 2017-18 were mainly resolved by mid-2018 but the lower revenues in the second half resulted in the Group posting an underlying operational loss on continuing operations before finance cost and tax of GBP0.9m (2018: GBP0.3m loss).

Foundries

Foundry revenues increased by 11.2% year-on-year from GBP26.4m to GBP29.3m benefiting from a full year contribution from our machining facility. Sales slowed in the second half due to the tightening demand in the European turbocharger market, partly arising from the disruption to vehicle manufacturers schedules by the new Worldwide Harmonised Light Vehicle Test Procedure "WLTP" emissions testing regime.

Operating profits were held back in the first half by operational issues in our new machining facility, which are now resolved. In the second half the reducing volumes constrained the profit opportunity. Second half volumes in the turbo-charger focussed Walsall business unit were 16% below the first half levels, and it was not possible to immediately reduce overheads in step with sales. Additionally a foundry customer entered into administration, impacting our profit by approximately GBP0.1m.

Underlying operating loss for the year for the continuing businesses was below break-even with a negative margin of -0.7% (2018: +2.0%). Overhead reduction and cost control are a main focus as we adjust to the lower demand.

The Group operates two foundries, at Walsall and Scunthorpe, each with a different specialisation. Our foundry at Walsall is our main operation and drives the majority of the foundry division's sales. Walsall's expertise is in producing small castings, typically below 3kg in weight that have complex internal geometry. The complex geometry is achieved through the use of innovative core design and assembly techniques and, importantly, the foundry is capable of producing these castings in high volumes.

The automotive turbocharger segment is a major market for Walsall, with modern designs requiring precise alignment of cooling and lubrication passages to meet the increased performance demanded by modern engines. Legislation is a major driver of this market, with the requirement to reduce nitrogen dioxide emissions promoting the introduction of smaller, turbocharged petrol engines. Approximately 74% of Walsall's casting production is for petrol engines.

Walsall is one of only four specialist foundries in Europe with the technical capability of supplying castings for turbochargers and, with our new machining capability, the foundry is now the only fully integrated supplier of grey iron bearing housings in Europe.

The Scunthorpe foundry specialises in heavy castings weighing up to 6,000kg that have complex geometry and challenging metallurgy. These castings are used in applications where there is a requirement for high strength or high temperature performance, for instance in large process compressors, industrial gas turbines and mining, quarrying and construction equipment, and the majority of customers are Original Equipment Manufacturers ("OEMs"). Demand at the foundry increased as we continued to work to deepen and broaden customer relationships, and to achieve competitive pricing by means of operational efficiency.

Engineering

The sale of our Exidor business was a key event for the year. The headline consideration of GBP10m gave rise to a profit of GBP6.2m, allowing the Group to strengthen its balance sheet and make a one-off cash contribution into our closed final salary pension fund of GBP2.5m.

Petrel, our remaining engineering business, has a well-established reputation for designing and manufacturing high quality lighting and control equipment for use in hazardous or demanding environments. It supplies customers across the UK and Europe as well as internationally. Revenues decreased by 3.8% year-on-year mainly due to concerns over Brexit by our customers but the business managed to grow profits by 9.6% mainly due to excellent cost control. The transition to LED lighting provides growth opportunities and continues to be a main focus as well as developing the business's portable light fittings range.

Financial Matters and Outlook

Chamberlin has adopted IFRS 16 "Accounting for Right of Use Assets" early, and the effect has been an increase in the reported net debt of GBP751k. Including this reclassification, net debt at the year-end was GBP5.4m compared to GBP9.6m in the prior year.

Following the cash injection into the pension fund it is now 86% funded on the IAS19 accounting basis.

During the year the carrying value of our fixed assets was reviewed, and a non-cash impairment charge was made where the value of the asset could not be supported by the current level of business.

Cash is, and will remain, a key performance measure for the Group.

Looking to the new financial year, near-term lower volumes from the automotive market will result in lower revenues. Petrel faces a prospective business move during the year, involving some one-off cash outflows. We are continuing to work with our customers on new projects that will increase the sales opportunity in future years. The major focus in the next financial year will be on reducing costs to match the lower level of output and on improving margins, in addition to developing opportunities for revenue growth.

Kevin Nolan

Chief Executive

3 June 2019

Finance Review

Overview

Sales from continuing operations increased by 9.3% during the year to GBP33.0m (2018: GBP30.2m). Gross profit margin decreased to 11.4% from 15.5% in 2018.

Underlying operating loss before tax increased to GBP1.3m (2018: GBP0.7m).

The IFRS results show a profit for the year of GBP1.5m (2018: loss of GBP0.8m), which includes an asset impairment of GBP3.0m (2018: nil) and a statutory profit per share of 19.2p (2018: loss per share 12.2p).

Non-underlying exceptional items

Exceptional items in the year included GBP0.1m (2018: GBP0.1m) relating to the realignment of the cost base of the Group, GBP3.0m for the impairment of assets and GBP0.3m for Guaranteed Minimum Pension ("GMP") equalisation.

Tax

The effective rate of taxation at Group level was 1% primarily due to the impairment loss and profit from the sale of Exidor both being exempt from tax. The tax position will be aided in the coming years through the reduced rate of tax to 17% and as we utilise elements of losses carried forward.

Cash generation and financing

Operating cash outflow from continuing operations was GBP1.0m (2018: inflow of GBP0.8m).

Capital expenditure for the year decreased to GBP1.2m (2018: GBP2.7m) excluding GBP0.8m on leased assets included under IFRS 16. Depreciation and amortisation was GBP1.7m (2018: GBP1.3m) for the year.

Our net proceeds from the sale of Exidor was GBP8.5m with GBP2.5m paid towards the pension deficit. Net borrowings as at 31 March 2019 decreased by GBP3.3m (2018: increase GBP3.6m).

Foreign exchange

It is the Group's policy to minimise risk to 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 currency instruments (primarily 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 50% of the Group's annual exposures are likely to be hedged at any point in time and the Group's net transactional exposure to different currencies varies from time to time.

Approximately 60% of the Group's revenues are denominated in Euros. During the year to 31 March 2019 the average exchange rate used to translate into GBP sterling was EUR1.13 (2018: EUR1.26).

Pension

The Group's defined benefit pension scheme was closed to future accrual in 2007. Following the last triennial valuation, as at 1 April 2016, contributions were set at GBP0.3m per year for the period under review increasing by 3% per year thereafter based on a deficit recovery period of 22 years.

The pension expense for the defined benefit scheme was GBP0.2m in 2019 (2018: GBP0.3m) and is shown in non-underlying results. The Group cash contribution during the year was GBP0.2m (2018: GBP0.3m) in addition to a special payment of GBP2.5m following the sale of Exidor.

The Group operates a defined contribution pension scheme for its current employees. The cost of GBP0.2m (2018: GBP0.2m) is included within underlying operating performance.

A Guaranteed Minimum Pension (GMP) equalisation review was undertaken resulting in an increase in the pension liability of GBP295,000. The IAS 19 deficit at 31 March 2019 was GBP2.6m (2018: GBP5.1m).

Neil Davies

Group Finance Director

3 June 2019

Consolidated Income Statement

for the year ended 31 March 2019

 
                                      Year ended 31 March 2019                     Year ended 31 March 2018 
                            -------------------------------------------  ------------------------------------------- 
                                            (+) Exceptional                               (+) Exceptional 
                                                     / Non-                                        / Non- 
                      Note   Underlying          underlying       Total    Underlying          underlying      Total 
                                 GBP000              GBP000      GBP000        GBP000              GBP000     GBP000 
 
Revenue                3         32,958                   -      32,958        30,153                   -     30,153 
Cost of sales                  (29,192)                   -    (29,192)      (25,474)                   -   (25,474) 
Gross profit                      3,766                   -       3,766         4,679                   -      4,679 
 
Other operating 
 expenses              6        (4,652)             (3,572)     (8,224)       (4,995)               (324)    (5,319) 
                            -----------  ------------------  ----------  ------------  ------------------  --------- 
 
Operating loss                    (886)             (3,572)     (4,458)         (316)               (324)      (640) 
 
Finance costs          4          (387)               (112)       (499)         (346)               (126)      (472) 
                            -----------  ------------------  ----------  ------------  ------------------  --------- 
 
Loss before 
 tax                            (1,273)             (3,684)     (4,957)         (662)               (450)    (1,112) 
 
Tax (expense)/ 
 credit                            (63)                 111          48         (324)                  85      (239) 
                            -----------  ------------------  ----------  ------------  ------------------  --------- 
 
Loss for the 
 year from 
 continuing 
 operations                     (1,336)             (3,573)     (4,909)         (986)               (365)    (1,351) 
 
Discontinued 
 operations            7 
 
Profit for the year 
 from discontinued 
 operations                           -               6,435       6,435                               539        539 
                            -----------  ------------------  ----------  ------------  ------------------  --------- 
 
(Loss)/ profit for 
 the year 
 attributable to 
 equity holders of 
 the parent company             (1,336)               2,862       1,526         (986)                 174      (813) 
                            ===========  ==================  ==========  ============  ==================  ========= 
 
(Loss) per share 
 from continuing 
 operations: 
Basic                  5                                        (16.8)p                                      (12.4)p 
Diluted                5                                        (16.8)p                                      (12.4)p 
 
Earnings per share 
 from discontinued 
 operations: 
Basic                  5                                          80.9p                                         6.8p 
Diluted                5                                          80.9p                                         6.8p 
 
Total earnings 
 / (loss) per 
 share: 
Basic                  5                                          19.2p                                      (12.2)p 
Diluted                5                                          19.2p                                      (12.2)p 
 
 
 *Underlying figures are stated before exceptional items (GMP 
  Equalisation, impairment of fixed assets and onerous leases) 
  and non-underlying costs (administration costs of the pension 
  scheme, net financing costs on pension obligations and share 
  based payment costs) together with the associated tax impact. 
 

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2019

 
                                                    2019     2018 
                                           Note   GBP000   GBP000 
 
 Profit/(loss) for the year                        1,526    (813) 
 Other comprehensive income 
 Reclassification for cash flow hedge 
  included in sales                                    -     (18) 
 Movements in fair value on cash flow 
  hedges taken to other comprehensive 
  income                                             134       87 
 Deferred tax on movement in cash 
  flow hedges                                       (23)     (12) 
 Net other comprehensive income that 
  may be recycled to profit and loss                 111       57 
 
 Re-measurement losses on pension 
  assets and liabilities                    9         76      (8) 
 Deferred/ current tax (expense)/ 
  credit on re-measurement losses on 
  pension scheme                                    (15)        2 
 
 Net other comprehensive income/ (loss) 
  that will not be recycled to profit 
  and loss                                            61      (6) 
 
 Other comprehensive income for the 
  year net of tax                                    172       51 
 
 Total comprehensive income / (expense) 
  for the period attributable to equity 
  holders of the parent Company                    1,698    (762) 
                                                 =======  ======= 
 
 

Consolidated Balance Sheet

at 31 March 2019

 
                                    Note   31 March   31 March 
                                               2019       2018 
                                             GBP000     GBP000 
 Non-current assets 
  Property, plant and equipment               7,769     12,454 
  Intangible assets                             290        427 
  Deferred tax assets                           906      1,136 
                                          ---------  --------- 
                                              8,965     14,017 
 
 Current assets 
  Inventories                                 2,702      3,551 
  Trade and other receivables                 6,052      7,985 
  Cash at Bank                                  291          - 
                                              9,045     11,536 
 
 Total assets                                18,010     25,553 
                                          =========  ========= 
 
 Current liabilities 
  Financial liabilities              8        2,683      7,091 
  Trade and other payables                    4,600      7,465 
                                              7,283     14,556 
 
 Non-current liabilities 
  Financial liabilities              8        2,966      2,538 
  Deferred tax                                   53         23 
  Provisions                                    200        200 
  Defined benefit pension scheme 
   deficit                           9        2,640      5,080 
                                          ---------  --------- 
                                              5,859      7,841 
 
 Total liabilities                           13,142     22,397 
 
 Capital and reserves 
  Share capital                               1,990      1,990 
  Share premium                               1,269      1,269 
  Capital redemption reserve                    109        109 
  Hedging reserve                                96       (15) 
  Retained earnings                           1,404      (197) 
                                          ---------  --------- 
 Total equity                                 4,868      3,156 
 
 
 Total equity and liabilities                18,010     25,553 
                                          =========  ========= 
 
 
 
 
 
 
 
 

Consolidated Cash Flow Statement

for the year ended 31 March 2019

 
                                               Year ended                 Year ended 
                                                 31 March                   31 March 
                                                     2019                       2018 
                                                   GBP000                     GBP000 
 Operating activities 
 
 (Loss) for the year before tax                   (4,957)                    (1,112) 
 Adjustments to reconcile (loss) 
  for the year to net cash (outflow)/ 
  inflow from operating activities: 
 Net finance costs excluding pensions                 387                        347 
 Impairment charge on property, 
  plant and equipment                               3,043                          - 
 Depreciation of property, plant 
  and equipment                                     1,688                      1,280 
 Amortisation of software                              59                         50 
 Amortisation and impairment of 
  development costs                                    25                         10 
 Profit on disposal of property, 
  plant and equipment                                   -                          5 
 Share based payments                                  40                         46 
 One-off contribution made to the 
  pension scheme                                  (2,500)                          - 
 Remaining difference between pension 
  contributions paid and amounts 
  recognised in the Consolidated 
  Income Statement                                    137                      (137) 
 (Increase)/ Decrease in inventories                (388)                         74 
 Decrease/ (Increase) in receivables                  419                      (315) 
 (Decrease)/ Increase in payables                 (1,332)                        543 
                                             ------------  ------------------------- 
 Cash (outflow)/ inflow from continuing 
  operations                                      (3,379)                        791 
 Cash inflow from discontinued operations             491                        509 
                                             ------------  ------------------------- 
 Net cash (outflow)/ inflow from 
  operating activities                            (2,888)                      1,300 
                                             ------------  ------------------------- 
 
 Investing activities 
 Purchase of property, plant and 
  equipment                                       (1,188)                    (2,726) 
 Purchase of software                                   -                       (16) 
 Development costs                                   (22)                       (24) 
 Proceeds from sale of subsidiary                   8,520                          - 
 Cash and cash equivalents disposed               (1,146)                          - 
 Investing activities from discontinued 
  operations                                        (125)                      (207) 
 
 Net cash inflow/ (outflow) from 
  investing activities                              6,039                    (2,973) 
                                             ------------  ------------------------- 
 
 Financing activities 
 Interest paid                                      (387)                      (347) 
 Repayment of asset loan                                -                      (175) 
 Net invoice finance (outflow)/ 
  inflow                                          (1,832)                        918 
 Import loan (outflow)/ inflow                      (873)                      1,137 
 Import loan facility repayment                         -                    (1,235) 
 Finance lease payment                              (781)                          - 
 Finance lease additions                            1,291                        849 
 Financing activities from discontinued 
  operations                                          207                        257 
 
 Net cash (outflow)/ inflow from 
  financing activities                            (2,375)                      1,404 
                                             ------------  ------------------------- 
 
 Net increase/ (decrease) in cash 
  and cash equivalents                                776                      (269) 
 
 Cash and cash equivalents at the 
  start of the year                                 (485)                      (216) 
 
 Cash and cash equivalents at the 
  end of the year                                     291                      (485) 
                                             ============  ------------------------- 
 
 Cash and cash equivalents included 
  in discontinued operations                            -                        572 
 
 Cash and cash equivalents for continuing 
  operations                                          291                    (1,057) 
                                             ============  ========================= 
 
 Cash and cash equivalents comprise: 
 Cash at bank/ (overdraft)                            291                      (485) 
                                             ------------  ------------------------- 
                                                      291                      (485) 
                                             ============  ========================= 
 

Consolidated statement of changes in equity

 
                                                                                       Attributable 
                                                                                          to equity 
                                          Share       Capital                               holders 
                               Share    premium    redemption    Hedging    Retained         of the 
                             capital    account       reserve    reserve    earnings         parent 
                              GBP000     GBP000        GBP000     GBP000      GBP000         GBP000 
 
 Balance at 1 April 
  2017                         1,990      1,269           109       (72)         582          3,878 
 
 Loss for the year                 -          -             -          -       (813)          (813) 
 Other comprehensive 
  income for the year 
  net of tax                       -          -             -         57         (6)             51 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total comprehensive 
  income/ (expense)                -          -             -         57       (819)          (762) 
 
 Share based payment               -          -             -          -          46             46 
 Deferred tax on 
  employee share options           -          -             -          -         (6)            (6) 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total of transactions 
  with shareholders                -          -             -          -          40             40 
 
 Balance as at 1 
  April 2018                   1,990      1,269           109       (15)       (197)          3,156 
 Cumulative impact                 -          -             -          -           -              - 
  of IFRS 16 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Revised Balance 
  at 1 April 2018              1,990      1,269           109       (15)       (197)          3,156 
 
 Profit for the year               -          -             -          -       1,526          1,526 
 Other comprehensive 
  income for the year 
  net of tax                       -          -             -        111          61            172 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total comprehensive 
  income                           -          -             -        111       1,588          1,699 
 
 Share based payments              -          -             -          -          40             40 
 Deferred tax on 
  employee share options           -          -             -          -        (27)           (27) 
                           ---------  ---------  ------------  ---------  ----------  ------------- 
 Total of transactions 
  with shareholders                -          -             -          -          13             13 
 
 
 Balance at 31 March 
  2019                         1,990      1,269           109         96       1,404          4,868 
                           =========  =========  ============  =========  ==========  ============= 
 
 

Share premium account

The share premium account balance includes the proceeds that were above the nominal value from issuance of the Company's equity share capital comprising 25p shares.

Capital redemption reserve

The capital redemption reserve has arisen on the cancellation of previously issued shares and represents the nominal value of those shares cancelled.

Hedging reserve

The hedging reserve records the effective portion of the net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.

Retained earnings

Retained earnings include the accumulated profits and losses arising from the Consolidated Income Statement and certain items from the Statement of Comprehensive Income attributable to equity shareholders, less distributions to shareholders.

NOTES TO THE PRELIMINARY ANNOUNCEMENT

   1.        AUTHORISATION OF FINANCIAL STATEMENTS AND STATEMENT OF COMPLIANCE WITH IFRS 

The Group's and Company's financial statements of Chamberlin for the year ended 31 March 2019 were authorised for issue by the board of directors on 3 June 2019 and the balance sheets were signed on the Board's behalf by Kevin Nolan and Neil Davies. The Company is a public limited company incorporated and domiciled in England & Wales. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.

The financial information set out in this announcement does not constitute the statutory accounts of the Group for the years to 31 March 2019 or 31 March 2018 but is derived from the 2019 Annual Report and Accounts. The Annual Report and Accounts for 2018 have been delivered to the Registrar of Companies and the Group Annual Report and Accounts for 2019 will be delivered to the Registrar of Companies in due course. The auditors, Grant Thornton UK LLP, have reported on the accounts for the year ended 31 March 2019 and have given an unqualified report which does not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006 or an emphasis of matter paragraph.

   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 (GBP000) except when otherwise indicated.

Basis of consolidation

The consolidated financial statements comprise the financial statements of Chamberlin plc and its subsidiaries as at 31 March each year. 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 March 2018 including IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers noting that there is no impact for the Group however we elected to adopt the new IFRS 16 accounting standard to capitalise finance leases early (effective from 1(st) April 2018), increasing the overall reported debt by GBP751k.

Financial impact of initial application of IFRS 16

The table below shows the amount of adjustment for each financial statement line item affected by the application of IFRS 16 for the current year. The weighted average incremental borrowing rate applied to lease liabilities recognised in the consolidated balance sheet at the date of initial application is 4.8%

 
 Impact on assets, Liabilities    As previously   IFRS 16 adjustment   As restated 
  and equity as at 1 April             reported 
  2018 
                                        GBP'000              GBP'000       GBP'000 
 Property, plant and equipment 
 Land and Buildings - NBV                 3,546                  704         4,250 
 Plant and machinery- NBV                 8,157                    -         8,157 
 Motor vehicles- NBV                          -                   47            47 
                                 --------------  -------------------  ------------ 
 Total                                   11,703                  751        12,454 
                                 ==============  ===================  ============ 
 
 
 Financial liabilities < 
  1 year                                  6,989                  102         7,091 
 Financial liabilities >1 
  year                                    1,889                  649         2,538 
                                 --------------  -------------------  ------------ 
 Total                                    8,878                  751         9,629 
                                 ==============  ===================  ============ 
 

Going concern

The Group's forecasts and projections, taking account of reasonably possible changes in trading conditions, show that the Group is able to operate within the level of its current bank facilities, comprising a GBP7.75m ongoing invoice discounting and finance leases of GBP4.0m repayable over 5 years. As a consequence, the Directors believe that the Group is well placed to manage its business and financial risks successfully.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Financial Statements.

   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 provides manufactured and imported products to distributors and end-users operating in the safety and security markets. The products fall into the categories of hazardous area lighting and control gear.

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 operating 
                                            Segmental revenue                    profit 
Year ended                                   2019        2018        2019          2018 
                                           GBP000      GBP000      GBP000        GBP000 
Foundries                                  29,343      26,396       (211)           528 
Engineering                                 3,615       3,757         251           229 
                                       ----------  ----------  ----------  ------------ 
Segmental results                          32,958      30,153          40           757 
                                       ==========  ==========  ==========  ============ 
 
Reconciliation of reported segmental 
 operating profit 
Segment operating profit                                               40           757 
Shared costs (excluding share 
 based payment charge)                                              (927)       (1,073) 
Exceptional and non-underlying 
 costs                                                            (3,684)         (324) 
Net finance costs                                                   (387)         (472) 
 
Loss before tax from continuing 
 operations                                                       (4,957)       (1,112) 
 
Segmental assets 
 
Foundries                                                          15,244        18,320 
Engineering                                                         1,402         1,563 
                                                               ----------  ------------ 
                                                                   16,646        19,883 
                                                               ----------  ------------ 
 
Segmental liabilities 
Foundries                                                         (3,840)       (5,522) 
Engineering                                                         (794)         (949) 
                                                               ----------  ------------ 
                                                                  (4,634)       (6,471) 
                                                               ----------  ------------ 
 
 
 
Segmental net assets                              12,012     13,412 
Unallocated net liabilities                      (7,144)   (12,564) 
Unallocated discontinued                               -      2,308 
                                ------------------------  --------- 
 
Total net assets                                   4,868      3,156 
                                ========================  ========= 
 

Unallocated net liabilities include the pension liability of GBP2,640,000 (2018: GBP5,080,000), financial liabilities of GBP5,359,000 (2018: GBP8,134,000) and deferred tax asset of GBP853,000 (2018: GBP650,000).

 
  Capital expenditure, 
   depreciation and amortisation 
   and impairment 
 Capital additions                             Foundries            Engineering               Total 
                                          2019      2018          2019     2018      2019      2018 
                                        GBP000    GBP000        GBP000   GBP000    GBP000    GBP000 
 Property, plant and 
  equipment                                972     2,720             8      238       980     2,958 
 Software                                    -         9             -        7         -        16 
 Development costs                           -         -            22       24        22        24 
 
 Depreciation, amortisation               Foundries            Engineering              Total 
  and impairment 
                                          2019      2018          2019     2018      2019      2018 
                                        GBP000    GBP000        GBP000   GBP000    GBP000    GBP000 
 Property, plant and 
  equipment                            (1,458)   (1,208)          (49)    (217)   (1,507)   (1,425) 
 Software                                 (49)      (54)           (7)     (10)      (56)      (64) 
 Development costs                           -         -          (18)     (10)      (18)      (10) 
 
 
   (ii)           By geographical segment 
 
                                          2019     2018 
 Revenue by location of customer:       GBP000   GBP000 
 United Kingdom                         12,203   10,292 
 Italy                                   3,743    5,835 
 Germany                                 3,124    4,100 
 Rest of Europe                         13,024    9,291 
 Other countries                           864      635 
                                    ----------  ------- 
                                        32,958   30,153 
                                    ==========  ======= 
 
   4.            FINANCE COSTS 
 
                                            2019     2018 
                                          GBP000   GBP000 
 Bank overdraft interest payable           (335)    (164) 
 Interest expense on lease liabilities      (52)        - 
 Finance cost of pensions                  (112)    (126) 
                                         -------  ------- 
                                           (499)    (472) 
                                         =======  ======= 
 
   5.            (LOSS)/ EARNINGS PER SHARE 

The calculation of (loss)/ earnings per share is based on the profit attributable to shareholders and the weighted average number of ordinary shares in issue. In calculating the diluted (loss)/ earnings per share, adjustment has been made for the dilutive effect of outstanding share options. Underlying (loss)/ earnings per share, which excludes exceptional costs and non-underlying items, as analysed below, has also been disclosed as the Directors believe this allows a better assessment of the underlying trading performance of the Group. Exceptional costs and non-underlying items are detailed in note 6.

 
                                                       2019        2018 
                                                     GBP000      GBP000 
 Loss for basic earnings per share                  (4,909)     (1,351) 
 Exceptional/ non-underlying costs- continuing 
  operations                                          3,113          60 
 Net financing costs and service cost on 
  pension obligations                                   531         344 
 Share based payment charge                              40          46 
 Taxation effect of the above                         (111)        (85) 
 Loss for underlying loss per share                 (1,336)       (986) 
                                                 ==========  ========== 
 
 (Loss) per share (pence) from continuing 
  operations: 
 Underlying                                          (16.8)      (12.4) 
 Diluted underlying                                  (16.8)      (12.4) 
 
                                                       2019        2018 
                                                     GBP000      GBP000 
 Discontinued loss for basic earnings per 
  share                                               6,435         539 
 Exceptional/ non-underlying costs                  (3,684)       (450) 
 Taxation effect of the above                           111          85 
                                                 ----------  ---------- 
 Earnings for underlying earnings per share           2,862         173 
                                                 ==========  ========== 
 
 Earnings per share (pence) from discontinued 
  operations: 
 Underlying                                            80.9         6.8 
 Diluted underlying                                    80.9         6.8 
 
 Total earnings/ (loss) per share (pence): 
 Underlying                                            19.2      (12.2) 
 Diluted underlying                                    19.2      (12.2) 
 
                                                       2019        2018 
                                                     Number      Number 
                                                       '000        '000 
 Weighted average number of ordinary shares           7,958       7,958 
 Adjustment to reflect shares under options             424         350 
                                                 ----------  ---------- 
 Weighted average number of ordinary shares 
  - fully diluted                                     8,382       8,308 
                                                 ==========  ========== 
 
 

As at 31 March 2019 and 31 March 2018 there is no adjustment in the total diluted loss per share calculation for the 424,000 (2018: 350,000) shares under option as they are required to be excluded from the weighted average number of shares for diluted loss per share as they are anti-dilutive for the period then ended.

   6.            EXCEPTIONAL AND NON-UNDERLYING COSTS 
 
                                                      2019     2018 
                                                    GBP000   GBP000 
 Group reorganisation                                   52       60 
 Asset impairment                                    3,043        - 
 Onerous leases                                         17        - 
 GMP Equalisation                                      295        - 
                                                   -------  ------- 
 Exceptional items                                   3,408       60 
 Defined benefit pension scheme administration 
  costs                                                124      218 
 Share based payment charge                             40       46 
 Non-underlying other operating expenses               164      264 
 Finance cost of pensions                              112      126 
 Taxation 
  - tax effect of exceptional and non-underlying 
   costs                                             (111)     (85) 
                                                   -------  ------- 
                                                     3,572      365 
                                                   -------  ------- 
 

During 2019 the Group continued to rationalise its operations. Group reorganisation costs, including redundancy and recruitment, relate to this rationalisation.

The Group undertook an impairment review of two of its sites within the foundry division which identified the assets were identified that the prior carrying value could not be supported by the future value to the business.

Guaranteed Minimum Pension (GMP) equalisation review was undertaken resulting in an increase in the pension liability of GBP295,000.

7. DISCONTINUED OPERATIONS

On 19 December 2018 Exidor was sold. As a result the results of Exidor are classified as a discontinued operation and presented as such in these financial statements.

 
 The operating profit of Exidor is summarised 
  as follows: 
                                                             GBP000 
 
 
 Property, plant and equipment                                1,135 
 Intangible assets                                               74 
 Deferred tax                                                    70 
 Inventories                                                  1,491 
 Trade and other receivables                                  1,882 
 Cash and cash equivalents                                    1,146 
 Trade and other payables                                   (3,508) 
                                                 ------------------ 
 Net assets disposed                                          2,291 
 
 
 Consideration                                               10,000 
 Working capital adjustment                                    (98) 
 Debt adjustment                                              (639) 
 Claim retention                                              (350) 
                                                              8,913 
 Disposal costs                                               (393) 
                                                 ------------------ 
 Net cash received relating to disposal                       8,520 
                                                 ================== 
 
 
 Cash proceeds                                                8,520 
 Net assets disposed                                        (2,291) 
                                                 ------------------ 
 Profit on disposal                                           6,229 
                                                 ================== 
 

Included in the consideration is a retention of GBP350,000 relating to a customer claim.

The results prior to 19 December 2018 for the discontinued operations included in the consolidated income statement were:

 
                                        2019     2018 
 
                                        '000     '000 
 Revenue                               5,924    7,517 
 Operating profit                        305      672 
 Finance costs                          (23)     (30) 
                                     -------  ------- 
 Profit before tax                       282      642 
 Tax                                    (76)    (103) 
 Profit on disposal                    6,229        - 
 
 Profit of discontinued operations     6,435      539 
                                     =======  ======= 
 

Exidor contributed the following to the Group's cashflow:

 
                           2019     2018 
 
                           '000     '000 
 Operating activities       491      509 
 Investing activities     (125)    (207) 
 Financing activities       207      257 
                        -------  ------- 
                            573      559 
                        =======  ======= 
 
 
   8.            FINANCIAL LIABILITIES 
 
                                                2019     2018 
                                              GBP000   GBP000 
 Current liabilities 
 Bank overdraft                                    -      485 
 Invoice finance facility                      1,628    4,740 
 Import loan facility                              -    1,137 
 Finance lease liability (right of use)          184      102 
 Current instalments due on finance leases       871      627 
                                               2,683    7,091 
 Non-current liabilities 
 Instalments due on finance leases             2,175    1,889 
 Finance lease liability (right of use)          791      649 
                                             -------  ------- 
 Total financial liabilities                   5,649    9,629 
                                             -------  ------- 
 

The overdraft which was held with HSBC Bank plc as part of the Group net facility was reviewed in December 2018 as part of the Exidor disposal and was fully settled.

The net overdraft position as at 31 March 2019 was GBPnil (2018: GBP485,000), this comprises cash balances of GBP314,000 (2018: GBP1,735,000) and bank overdrafts of GBP23,000 (2018: GBP2,220,000). Interest is payable at 2.0% (2018: 2.0%) over base rate.

Asset finance loans were fully repaid in the year. Previously they were secured against various items of plant and machinery across the Group.

The import loan facility is used to facilitate the purchase of equipment for the new machining centre. Once each asset is commissioned the import loan facility is repaid in full, facilitated by a sale and lease back on finance lease. Interest is payable at 3.25% over base rate.

Other finance leases are secured against the specific item to which they relate. These leases are repayable by monthly instalments for a period of five years to March 2022. Interest is payable at fixed amounts that range between 3.1% and 6.2%.

Invoice finance balances are secured against the trade receivables of the Group and are repayable on demand. Interest is payable at 2.3% over base rate. The maximum facility as at 31 March 2019 was GBP7,750,000 (2018: GBP7,000,000). Management have assessed the treatment of the financing arrangements and have determined it is appropriate to recognise trade receivables and invoice finance liabilities separately.

   9.            PENSIONS ARRANGEMENTS 

During the year, the Group operated funded defined benefit and defined contribution pension schemes for the majority of its employees, these being established under trusts with the assets held separately from those of the Group. The pension operating cost for the Group defined benefit scheme for 2019 was GBP124,000 (2018: GBP218,000) plus GBP112,000 of financing cost (2018: GBP126,000).

The other schemes within the Group are defined contribution schemes and the pension cost represents contributions payable. The total cost of defined contribution schemes was GBP191,000 (2018: GBP190,000). 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 March   31 March   31 March 
                                      2019       2018       2017 
 
 Salary increases                      n/a        n/a        n/a 
 Pension increases (post 1997)        3.2%       3.1%       3.3% 
 Discount rate                        2.3%       2.5%       2.5% 
 Inflation assumption - RPI           3.3%       3.2%       3.3% 
 Inflation assumption - CPI           2.3%       2.2%       2.3% 
 

Demographic assumptions are all based on the S2PA (2018: S2PA) mortality tables with a 1% 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 pensions relating to an employee retiring in 2032.

 
                                            2019     2018 
                                           Years    Years 
 
 Current pensioner at 65 - male             20.9     21.1 
 
                          *    female       23.1     23.0 
 Future pensioner at 65 - male              21.8     22.1 
 
                          *    female       24.2     24.1 
 

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 triennial valuation as at 1 April 2017 was completed in the year and concluded that in return for maintaining the previous contribution arrangements and extending the deficit reduction period to 2038, the Company has given security over the Group's land and buildings to the pension scheme. There will be a further triennial review with effect from 1 April 2020, which will establish future deficit payments. This will reflect, amongst other matters, the special payment of GBP2.5m into the scheme during 2018/19.

The contributions expected to be paid during the year to 31 March 2020 are GBP279,000.

The scheme assets are stated at the market values at the respective balance sheet dates. The assets and liabilities of the scheme were:

 
                                       2019       2018 
                                     GBP000     GBP000 
 
 Equities/ diversified growth 
  fund                               14,286     11,802 
 Bonds                                1,580      1,280 
 Insured pensioner assets                26         28 
 Cash                                   173         97 
                                 ----------  --------- 
 Market value of assets              16,065     13,207 
 Actuarial value of liability      (18,705)   (18,287) 
                                 ----------  --------- 
 Scheme deficit                     (2,640)    (5,080) 
 Related deferred tax asset             448        864 
                                 ----------  --------- 
 Net pension liability              (2,192)    (4,216) 
                                 ----------  --------- 
 
 
 
                                         2019      2018 
   Net benefit expense recognised      GBP000    GBP000 
   in profit and loss 
 
 Operating costs                        (112)     (126) 
                                        (112)     (126) 
                                     --------  -------- 
 
 
 
 Re-measurement losses/ (gains) in other               2019      2018 
  comprehensive income                               GBP000    GBP000 
 
 Actuarial losses/ (gains) arising from 
  changes in financial assumptions                      622     (151) 
 Actuarial gains arising from changes 
  in demographic assumptions                          (151)     (129) 
 Experience adjustments                                  91       291 
 Return on assets (excluding interest 
  income)                                             (638)       (3) 
                                                 ----------  -------- 
                                                       (76)         8 
                                                 ----------  -------- 
 
                                                       2019      2018 
                                                     GBP000    GBP000 
 
 Actual return on plan assets                           976       334 
                                                 ----------  -------- 
 
 
 
 
 Movement in deficit during the        2019      2018 
  year                               GBP000    GBP000 
 
 Deficit in scheme at beginning 
  of year                           (5,080)   (5,209) 
 Employer contributions               2,771       263 
 Net interest expense                 (112)     (126) 
 Actuarial loss                          76       (8) 
                                   --------  -------- 
 Deficit in scheme at end of 
  year                              (2,345)   (5,080) 
                                   --------  -------- 
 
 
 
 Movement in scheme assets                 2019      2018 
                                         GBP000    GBP000 
 
 Fair value at beginning of year         13,207    13,548 
 Interest income on scheme assets           338       331 
 Return on assets (excluding 
  interest income)                          638         3 
 Employer contributions                   2,771       263 
 Benefits paid                            (889)     (938) 
                                     ----------  -------- 
 Fair value at end of year               16,065    13,207 
                                     ----------  -------- 
 
 
 
 
 Movement in scheme liabilities                  2019      2018 
                                               GBP000    GBP000 
 
 Benefit obligation at start of year           18,287    18,757 
 Interest cost                                    450       457 
 Actuarial losses/ (gains) arising from 
  changes in financial assumptions                622     (151) 
 Actuarial gains arising from changes 
  in demographic assumptions                    (151)     (129) 
 Experience adjustments                            91       291 
 Benefits paid                                  (889)     (938) 
                                           ----------  -------- 
 Benefit obligation at end of year             18,705    18,287 
                                           ----------  -------- 
 
 

The weighted average duration of the pension scheme liabilities are 13.5 years (2018: 13.5 years).

A quantitative sensitivity analysis for significant assumptions as at 31 March 2019 is as shown below:

 
                                                             2019 
   Present value of scheme liabilities when changing       GBP000 
   the following assumptions: 
 
 Discount rate increased by 1% p.a.                        16,497 
 RPI and CPI increased by 1% p.a.                          19,734 
 Mortality- members assumed to be their actual 
  age as opposed to 1 year older                           19,594 
 
 

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.

   10.          REPORT AND ACCOUNTS 

Copies of the Annual Report will be available on the Group's website, www.chamberlin.co.uk from 28 June 2019 and from the Group's head office at Chuckery Road, Walsall, West Midlands, WS1 2DU. The AGM will be held on 23 July 2019 at Chuckery Road, Walsall, West Midlands, WS1 2DU.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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