Share Name Share Symbol Market Type Share ISIN Share Description
Castings Plc LSE:CGS London Ordinary Share GB0001795680 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.00p -0.27% 370.00p 360.00p 380.00p - - - 0 16:35:19
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Industrial Engineering 150.2 140.5 25.2 14.7 161

Castings PLC Final Results

12/06/2019 7:00am

UK Regulatory (RNS & others)


Castings (LSE:CGS)
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Castings PLC

12 June 2019

Castings P.L.C.

Annual Financial Report

DTR 6.3.5 Disclosure

Year ended 31 March 2019

Chairman's Statement

The turnover of the group increased to GBP150 million (GBP133 million last year) with an increase in profit before exceptional items and income tax to GBP15.3 million compared to GBP12.0 million last year.

Foundry businesses

The foundries have seen an increase in output and improved profitability compared to the previous year. Whilst profit margins reduced in the first half of the year, we have seen a strong performance in the second half which has seen margins in excess of the previous year. Our investment in robotic handling and other process automation have contributed to a rise in productivity during the year along with process quality improvements. Further investments will continue to be made where cost savings can be identified. It is pleasing to report that William Lee has continued to improve both production and productivity.

CNC Speedwell

With the new management team having been in place for the full year, the business has been brought back under operational control; output levels are such that the significant levels of extra transport costs ceased early in the year and the loss for the year has reduced.

The engineering improvements being made on specific parts have started to improve the profitability, particularly towards the end of the financial year and will continue during 2019/20. Inevitably it will take time before we see the full benefit of the changes implemented, but we expect the trading results of CNC Speedwell Limited to improve again during this financial year.

Outlook

It appears at the present time our order book is sound and schedules remain stable. In particular demand for commercial vehicles is currently strong and it is hoped this trend will continue.

Dividend

I am pleased to report that the directors recommend an increase in the final dividend to 11.40 pence per share to be paid on 27 August 2019 to shareholders on the register on 19 July 2019. This, together with the interim dividend, gives a total dividend for the year of 14.78 pence per share.

Supplementary dividend

In addition to the final dividend set out above, the board has reviewed the cash position of the group and considered the balance between increasing returns to shareholders whilst retaining flexibility for capital and other investment opportunities. As a result, the directors are declaring a supplementary dividend of 15.00 pence per share to be paid on 23 July 2019 to shareholders on the register on 21 June 2019. This dividend, being discretionary and non-recurring, does not compromise our commitment to invest in market leading technologies to maintain our competitive advantage.

Directors

On 31 March 2019, Gerard Wainwright retired as non-executive director after nearly 21 years' service. I would like to thank him for his invaluable contribution to the company during that time.

As part of our succession planning, Andrew Eastgate was appointed to the board as non-executive director on 1 September 2018. Having been a partner at Pinsents and non-executive director at Headlam Group plc and Epwin Group plc, Andrew will bring significant relevant experience to the group.

I wish to thank all our employees for their continued hard work during the year.

B. J. Cooke

Chairman

12 June 2019

Business and Financial Review

Overview of business segment performance

The segmental revenue and results for the current and previous years are set out in note 2. An overview of the performance, position and future prospects of each segment, and the relevant KPIs, are set out below.

Key Performance Indicators

The key performance indicators considered by the group are:

   --    Segmental revenue 
   --    Segmental profit 
   --    EPS 
   --    Net cash 
   --    Dividends per share 

Foundry operations

The foundry businesses have experienced an increase in output of 6.1% to 52,200 tonnes and an increase in external sales revenue of 12.7% to GBP143.1 million.

The trend of an increase in more complex, machined parts has continued in the year. Of the total output weight for the year, 55.6% related to machined castings compared to 52.9% in the previous year.

Whilst price increases on steel scrap and other alloys have continued in the year, this has been at a lower level such that the impact on sales revenue is less significant compared to the previous year.

The segmental profit has increased to GBP16.8 million, from GBP16.1 million in the previous year, which represents a profit margin of 10.2% on total segmental sales (2018 - 11.0%). The decline in margin occurred in the first half of the year (8.7%), with the second half margin on total segmental sales increasing to 11.5%.

The aligning of production methods across the foundries and productivity improvements have continued with William Lee increasingly contributing to the overall segment profitability.

Investment of GBP3.5 million has been made in the foundry businesses to support productivity improvements, approximately GBP2.0 million of which has been on automation projects.

With customer requirements forecast to remain steady at the current levels, particularly in the commercial vehicles sector, our focus will be on our continuous efforts to improve productivity to enhance the margin of this segment.

Machining

The machining business generated total sales of GBP27.8 million in the year compared to GBP24.8 million in the previous year. Of the total revenue, 25.8% was generated from external customers compared to 25.2% in 2018.

The segmental result for the year was a loss of GBP1.34 million (2018 - loss of GBP3.95 million).

The new management team in the machining business has now been in place for just over 12 months. The initial focus during this period was to stabilise operations and ensure customer schedules were met. Having achieved supply stability, the initiatives implemented during this time have now started to positively impact results, particularly in the final quarter of the financial year. These improvements will have an increasing impact on results during the current year, although it will still take time before the gains are fully realised.

The closure of the Fradley site was completed during the year and the machining business was consolidated to operate from the facility at Brownhills.

We have invested GBP1.9 million during the year, which is significantly lower than the previous year, as management remain focused on ensuring an enhanced return on the capital already invested in the machining business. This investment included the successful introduction of two pilot automation cells with the roll-out of automation to continue during 2019/20 and beyond.

Management is now applying a greater focus on maintaining existing equipment to ensure the asset returns are maximised thus removing the need for further investment in capacity. Consequently the useful economic lives of the recently acquired items of plant and machinery was reviewed during the year. It was determined that a life of 15 years is more appropriate than the 10 years previously used. This life is within the range set out in the group accounting policies and the change has resulted in a reduction of the depreciation charge for the period of GBP1.0 million.

Business review and performance

Revenue

Group revenues increased by 12.7% to GBP150.2 million compared to GBP133.3 million reported in 2018, of which 76% was exported (2018 - 73%).

The revenue from the foundry operations to external customers increased 12.7% to GBP143.1 million (2018 - GBP127.0 million) with the dispatch weight of castings to third-party customers increasing 6.1% to 52,200 tonnes (2018 - 49,200 tonnes).

Revenue from the machining operation to external customers increased by 14.5% during the year to GBP7.2 million (2018 - GBP6.3 million).

Operating profit and segmental result

The group operating profit for the year was GBP13.9 million compared to GBP11.9 million reported in 2018, which represents a return on sales of 9.3% (2018 - 9.0%). However, this result includes exceptional costs of GBP1.28 million, primarily relating to a defined benefit pension charge connected with the equalisation of guaranteed minimum pensions between men and women (as set out in note 4); an adjusted return on sales figure would be 10.1% (2018 - 8.9%).

The foundry operations returned a segmental profit of GBP16.8 million compared to GBP16.1 million in 2018. This represents a slight decrease in segmental profit as a percentage of total segment sales to 10.2% from 11.0% in 2018.

The segmental result of the machining operation was a loss of GBP1.34 million in the year compared to GBP3.95 million in 2018.

Icelandic bank receipts

During the year we have received GBP0.02 million (2018 - GBP0.11 million) in respect of the failed Icelandic banks.

Finance income

The level of finance income has remained consistent to the prior year at GBP0.13 million.

Profit before income tax and exceptional items

Profit before income tax and exceptional items has increased to GBP15.3 million from GBP12.0 million.

Taxation

The current year tax charge of GBP3.04 million (2018 - GBP2.28 million) is made up of a current tax charge of GBP3.17 million (2018 - GBP2.72 million) and a deferred tax credit of GBP0.13 million (2018 - GBP0.44 million).

The effective rate of tax of 21.6% (2018 - 18.9%) is higher than the main rate of corporation tax of 19%. The main reason for this is the impact of the pension adjustments of GBP1.29 million relating to GMP equalisation and GBP0.24 million of administrative costs, in respect of the pension schemes, neither of which are deductible for taxation purposes.

Earnings per share

Basic earnings per share increased 12.3% to 25.23 pence (2018 - 22.46 pence), reflecting the 16.3% increase in profits and a higher effective tax rate compared to the previous year.

Due to the nature and magnitude of the exceptional items, an alternative earnings per share excluding exceptional items has been presented; this has increased by 26.8% to 28.16 pence (2018 - 22.21 pence).

There has been no change in the weighted average number of shares in issue of 43,632,068.

Dividends

The directors are recommending an increase in the final dividend to 11.40 pence per share (2018 - 11.12 pence per share) to be paid on 27 August 2019 to shareholders on the register on 19 July 2019. This would give a total normal distribution for the year of 14.78 pence per share (2018 - 14.50 pence per share).

In addition, a supplementary dividend of 15.00 pence per share has been declared which will be payable on 23 July 2019 to shareholders on the register on 21 June 2019.

Cash flow

The group generated cash from operating activities of GBP18.2 million compared to GBP17.4 million in 2018. When compared to 2018, the increase in operating profit was partially offset by the greater increase in working capital than in 2018. The increase in payables of GBP2.0 million was offset by increases in inventory and receivables of GBP2.9 million and GBP4.4 million respectively.

Corporation tax payments during the year totalled GBP2.7 million compared to GBP3.2 million in 2018, reflecting the timing of quarterly payments.

Capital expenditure during the year amounted to GBP5.3 million (2018 - GBP11.2 million). This included investment of GBP2.0 million in automation as well as other productivity enhancements. The charge for depreciation was GBP8.3 million compared to GBP8.5 million in 2018.

The current interest-bearing deposit of GBP4.9 million taken out in the previous year matured with GBP5.0 million rolled over to mature during the next financial year; the net movement being an increase of GBP0.1 million in current interest-bearing deposits.

Repayments of GBP4.5 million (2018 - GBP3.1 million) were received from the final salary pension schemes during the year and advances were made to the schemes of GBP2.4 million (2018 - GBP3.3 million). The lower level of advances reflects the reduction in value of deferred members transferring out of the schemes.

Dividends paid to shareholders were GBP6.3 million in the year compared to GBP6.1 million in 2018.

The net cash and cash equivalents movement for the year was an increase of GBP6.6 million (2018 - a decrease of GBP3.1 million).

At 31 March 2019, the total cash and deposits position at the balance sheet date is GBP30.8 million (2018 - GBP24.1 million).

Pensions

The pension valuation showed an increase in the surplus, on an IAS 19 (Revised) basis, to GBP24.4 million compared to GBP22.6 million in the previous year. This includes an increase in the expected future liabilities of GBP1.29 million in respect of guaranteed minimum pension equalisation.

The pension surplus continues not to be shown on the balance sheet due to the IAS 19 (Revised) restriction of recognition of assets where the company does not have an unconditional right to receive returns of contributions or refunds.

Balance sheet

Net assets at 31 March 2019 were GBP134.4 million (2018 - GBP128.1 million). Other than the total comprehensive income for the year of GBP12.6 million, the only movement relates to the dividend charge of GBP6.3 million.

Non-current assets have decreased to GBP71.8 million (2018 - GBP76.9 million) primarily as a result of reduced investment in property, plant and equipment during the year and the transfer of the Fradley property (written down value of GBP1.1 million) to assets held for sale. In addition, the continued planned repayments of the pension scheme debtor means the longer term element has been fully repaid (2018 - GBP1.1 million), details of which are set out in note 6.

Current assets have increased to GBP92.1 million (2018 - GBP78.4 million). The level of inventories and receivables have increased compared to 2018 along with the asset reclassified as held for resale and total cash balances.

Total liabilities have increased to GBP29.5 million (2018 - GBP27.2 million), largely as a result of an increase in trade payables.

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2019

 
                                                           2019                                      2018 
                                         Before  Exceptional                     Before  Exceptional 
                                    exceptional        items                exceptional        items 
                                          items     (note 4)      Total           items     (note 4)      Total 
                                         GBP000       GBP000     GBP000          GBP000       GBP000     GBP000 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Revenue                                 150,236            -    150,236         133,276            -    133,276 
Cost of sales                         (118,129)            -  (118,129)       (103,674)            -  (103,674) 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Gross profit                             32,107            -     32,107          29,602            -     29,602 
Distribution costs                      (2,794)            -    (2,794)         (3,818)            -    (3,818) 
Administrative expenses                (14,116)      (1,275)   (15,391)        (13,949)          109   (13,840) 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Profit from operations                   15,197      (1,275)     13,922          11,835          109     11,944 
Finance income                              128            -        128             133            -        133 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Profit before income tax                 15,325      (1,275)     14,050          11,968          109     12,077 
Income tax expense                      (3,040)            -    (3,040)         (2,279)            -    (2,279) 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Profit for the year 
 attributable 
 to equity holders of the 
 parent 
 company                                 12,285      (1,275)     11,010           9,689          109      9,798 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
 
Profit for the year 
 attributable 
 to equity holders of the 
 parent 
 company                                                         11,010                                   9,798 
Other comprehensive 
 income/(losses) 
 for the year: 
Items that will not be 
 reclassified 
 to profit and loss: 
Movement in unrecognised 
 surplus 
 on defined benefit pension 
 schemes net of actuarial gains 
 and losses                                                         237                                     352 
Defined benefit pension schemes 
 GMP equalisation charge                                          1,290                                       - 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
                                                                  1,527                                     352 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Items that may be reclassified 
 subsequently to profit and 
 loss: 
Change in fair value of 
 available-for-sale 
 financial assets                                                    44                                    (72) 
Tax effect of items that may 
 be reclassified                                                    (7)                                      15 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
                                                                     37                                    (57) 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Other comprehensive income 
 for the year (net of tax)                                        1,564                                     295 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Total comprehensive income 
 for the year attributable to 
 the equity holders of the 
 parent 
 company                                                         12,574                                  10,093 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
Earnings per share attributable 
 to the equity holders of the 
 parent company 
Basic and diluted                                                25.23p                                  22.46p 
Basic and diluted before 
 exceptional 
 items                                   28.16p                                  22.21p 
-------------------------------  --------------  -----------  ---------  --------------  -----------  --------- 
 
 

Consolidated Balance Sheet

as at 31 March 2019

 
                                                   2019     2018 
                                                 GBP000   GBP000 
---------------------------------------------   -------  ------- 
ASSETS 
Non-current assets 
Property, plant and equipment                    71,438   75,448 
Financial assets                                    380      336 
Other receivables                                     -    1,135 
----------------------------------------------  -------  ------- 
                                                 71,818   76,919 
 ---------------------------------------------  -------  ------- 
Current assets 
Inventories                                      19,164   16,284 
Trade and other receivables                      41,121   38,090 
Other current interest-bearing deposits           5,000    4,900 
Cash and cash equivalents                        25,771   19,174 
----------------------------------------------  -------  ------- 
                                                 91,056   78,448 
 ---------------------------------------------  -------  ------- 
Assets classified as held for sale                1,060        - 
----------------------------------------------  -------  ------- 
                                                 92,116   78,448 
 ---------------------------------------------  -------  ------- 
Total assets                                    163,934  155,367 
----------------------------------------------  -------  ------- 
LIABILITIES 
Current liabilities 
Trade and other payables                         24,222   22,242 
Current tax liabilities                           1,842    1,380 
----------------------------------------------  -------  ------- 
                                                 26,064   23,622 
 ---------------------------------------------  -------  ------- 
Non-current liabilities 
Deferred tax liabilities                          3,481    3,603 
----------------------------------------------  -------  ------- 
Total liabilities                                29,545   27,225 
----------------------------------------------  -------  ------- 
Net assets                                      134,389  128,142 
----------------------------------------------  -------  ------- 
Equity attributable to equity holders of the 
 parent company 
Share capital                                     4,363    4,363 
Share premium account                               874      874 
Other reserve                                        13       13 
Retained earnings                               129,139  122,892 
----------------------------------------------  -------  ------- 
Total equity                                    134,389  128,142 
----------------------------------------------  -------  ------- 
 

Consolidated Cash Flow Statement

for the year ended 31 March 2019

 
                                                           2019      2018 
                                                         GBP000    GBP000 
-----------------------------------------------------   -------  -------- 
Cash flows from operating activities 
Profit before income tax                                 14,050    12,077 
Adjustments for: 
Depreciation                                              8,296     8,525 
(Profit)/loss on disposal of property, plant 
 and equipment                                            (160)         9 
 
Finance income                                            (128)     (133) 
 
Pension administrative costs                                237       352 
Pension GMP equalisation charge                           1,290         - 
Increase in inventories                                 (2,880)   (2,221) 
Increase in receivables                                 (4,449)   (3,568) 
Increase in payables                                      1,980     2,376 
------------------------------------------------------  -------  -------- 
Cash generated from operating activities                 18,236    17,417 
Tax paid                                                (2,707)   (3,190) 
Interest received                                           108       111 
------------------------------------------------------  -------  -------- 
Net cash generated from operating activities             15,637    14,338 
 
Cash flows from investing activities 
Dividends received from listed investments                   20        22 
Purchase of property, plant and equipment               (4,858)  (11,223) 
Proceeds from disposal of property, plant and 
 equipment                                                  160         3 
Transfer (to)/from other current interest-bearing 
 deposits                                                 (100)       100 
Repayments from pension schemes                           4,455     3,122 
Advances to the pension schemes                         (2,390)   (3,321) 
------------------------------------------------------  -------  -------- 
Net cash used in investing activities                   (2,713)  (11,297) 
 
Cash flow from financing activities 
Dividends paid to shareholders                          (6,327)   (6,095) 
------------------------------------------------------  -------  -------- 
Net cash used in financing activities                   (6,327)   (6,095) 
 
Net increase/(decrease) in cash and cash equivalents      6,597   (3,054) 
Cash and cash equivalents at beginning of year           19,174    22,228 
------------------------------------------------------  -------  -------- 
Cash and cash equivalents at end of year                 25,771    19,174 
------------------------------------------------------  -------  -------- 
Cash and cash equivalents: 
Short-term deposits                                      19,828    16,846 
Cash available on demand                                  5,943     2,328 
------------------------------------------------------  -------  -------- 
                                                         25,771    19,174 
 -----------------------------------------------------  -------  -------- 
 

Consolidated Statement of Changes in Equity

for the year ended 31 March 2019

 
                                                 Equity attributable to equity holders of 
                                                                the parent 
                                             Share        Share        Other      Retained    Total 
                                        capital(a)   premium(b)   reserve(c)   earnings(d)   equity 
                                            GBP000       GBP000       GBP000        GBP000   GBP000 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
At 1 April 2018                              4,363          874           13       122,892  128,142 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
Profit for the year                              -            -            -        11,010   11,010 
Other comprehensive income/(losses): 
Movement in unrecognised surplus 
 on defined benefit pension schemes 
 net of actuarial gains and losses               -            -            -           237      237 
Defined benefit pension schemes 
 GMP equalisation charge                         -            -            -         1,290    1,290 
Change in fair value of available 
 for sale assets                                 -            -            -            44       44 
Tax effect of items taken directly 
 to reserves                                     -            -            -           (7)      (7) 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
Total comprehensive income for 
 the year ended 
 31 March 2019                                   -            -            -        12,574   12,574 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
Dividends (see note 5)                           -            -            -       (6,327)  (6,327) 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
At 31 March 2019                             4,363          874           13       129,139  134,389 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
 
 
                                                 Equity attributable to equity holders of 
                                                                the parent 
                                             Share        Share        Other      Retained    Total 
                                        capital(a)   premium(b)   reserve(c)   earnings(d)   equity 
                                            GBP000       GBP000       GBP000        GBP000   GBP000 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
At 1 April 2017                              4,363          874           13       118,894  124,144 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
Profit for the year                              -            -            -         9,798    9,798 
Other comprehensive income/(losses): 
Movement in unrecognised surplus 
 on defined benefit pension schemes 
 net of actuarial gains and losses               -            -            -           352      352 
Change in fair value of available 
 for sale assets                                 -            -            -          (72)     (72) 
Tax effect of items taken directly 
 to reserves                                     -            -            -            15       15 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
Total comprehensive income for 
 the year ended 
31 March 2018                                    -            -            -        10,093   10,093 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
Dividends (see note 5)                           -            -            -       (6,095)  (6,095) 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
At 31 March 2018                             4,363          874           13       122,892  128,142 
-------------------------------------  -----------  -----------  -----------  ------------  ------- 
 

a) Share capital (note 17) - The nominal value of allotted and fully paid up ordinary share capital in issue.

   b)   Share premium - Amount subscribed for share capital in excess of nominal value. 
   c)   Other reserve - Amounts transferred from share capital on redemption of issued shares. 

d) Retained earnings - Cumulative net gains and losses recognised in the statement of comprehensive income.

Notes to the Financial Statements

1 Basis of preparation

The group financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards ('IAS') and Interpretations (collectively 'IFRS'), as endorsed for use in the EU.

The IFRSs applied in the group financial statements are subject to ongoing amendment by the IASB and subsequent endorsement by the European Commission and therefore subject to possible change in the future. Further standards and interpretations may be issued that will be applicable for financial years beginning on or after 1 April 2019 or later accounting periods but may be adopted early.

The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies.

The primary statements within the financial information contained in this document have been presented in accordance with IAS 1 Presentation of Financial Statements.

The financial statements are prepared under the historical cost convention, except where adjusted for revaluations of certain assets, and in accordance with applicable Accounting Standards and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies used are consistent with those disclosed in the 31 March 2018 financial statements. The presentation currency used is sterling and the amounts have been presented in round thousands ("GBP000").

2 Operating segments

For internal decision-making purposes, the group is organised into three operating companies which are considered to be the operating segments of the group: Castings P.L.C. and William Lee Limited are aggregated into Foundry operations and CNC Speedwell Limited is the Machining operation.

Inter-segment transactions are entered into under the normal commercial terms and conditions that would be available to third parties.

The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2019:

 
                                               Foundry    Machining 
                                            operations   operations  Elimination     Total 
                                                GBP000       GBP000       GBP000    GBP000 
-----------------------------------------  -----------  -----------  -----------  -------- 
Revenue from external customers                143,060        7,176            -   150,236 
Inter-segmental revenue                         21,499       20,605            -    42,104 
-----------------------------------------  -----------  -----------  -----------  -------- 
 
Segmental result                                16,832      (1,342)         (56)    15,434 
-----------------------------------------  -----------  -----------  -----------  -------- 
Unallocated costs: 
Exceptional credit for recovery of 
 Icelandic bank deposits 
 previously written off                                                                 15 
Defined benefit pension cost                                                         (237) 
Defined benefit pension GMP equalisation 
 charge                                                                            (1,290) 
Finance income                                                                         128 
-----------------------------------------  -----------  -----------  -----------  -------- 
Profit before income tax                                                            14,050 
Total assets                                   145,747       33,393     (15,206)   163,934 
-----------------------------------------  -----------  -----------  -----------  -------- 
Non-current asset additions                      3,496        1,850            -     5,346 
-----------------------------------------  -----------  -----------  -----------  -------- 
Depreciation                                     4,183        4,113            -     8,296 
-----------------------------------------  -----------  -----------  -----------  -------- 
Total liabilities                             (29,632)      (9,879)        9,966  (29,545) 
-----------------------------------------  -----------  -----------  -----------  -------- 
 

All non-current assets are based in the United Kingdom.

The following shows the revenues, results and total assets by reportable segment in the year to 31 March 2018:

 
                                         Foundry    Machining 
                                      operations   operations  Elimination     Total 
                                          GBP000       GBP000       GBP000    GBP000 
-----------------------------------  -----------  -----------  -----------  -------- 
Revenue from external customers          127,007        6,269            -   133,276 
Inter-segmental revenue                   19,024       18,571            -    37,595 
-----------------------------------  -----------  -----------  -----------  -------- 
 
Segmental result                          16,051      (3,950)           86    12,187 
-----------------------------------  -----------  -----------  -----------  -------- 
Unallocated costs: 
Exceptional credit for recovery of 
 Icelandic bank deposits 
previously written off                                                           109 
Defined benefit pension cost                                                   (352) 
Finance income                                                                   133 
-----------------------------------  -----------  -----------  -----------  -------- 
Profit before income tax                                                      12,077 
Total assets                             135,669       36,258     (16,560)   155,367 
-----------------------------------  -----------  -----------  -----------  -------- 
Non-current asset additions                4,134        7,089            -    11,223 
-----------------------------------  -----------  -----------  -----------  -------- 
Depreciation                               3,921        4,604            -     8,525 
-----------------------------------  -----------  -----------  -----------  -------- 
Total liabilities                       (27,008)     (11,581)       11,364  (27,225) 
-----------------------------------  -----------  -----------  -----------  -------- 
 

All non-current assets are based in the United Kingdom.

 
                                                          2019     2018 
                                                        GBP000   GBP000 
-----------------------------------------------------  -------  ------- 
The geographical analysis of revenues by destination 
 for the year is as follows: 
United Kingdom                                          35,763   36,542 
Sweden                                                  42,758   36,787 
Netherlands                                             21,830   22,070 
Rest of Europe                                          42,290   33,452 
North and South America                                  6,849    3,735 
Other                                                      746      690 
-----------------------------------------------------  -------  ------- 
                                                       150,236  133,276 
-----------------------------------------------------  -------  ------- 
 

All revenue arises in the United Kingdom from the group's continuing activities.

3 Exceptional items

 
                                                            2019     2018 
                                                          GBP000   GBP000 
-------------------------------------------------------  -------  ------- 
Recovery of past provision for losses on deposits 
 with Icelandic banks                                       (15)    (109) 
Defined benefit pension scheme GMP equalisation charge     1,290        - 
-------------------------------------------------------  -------  ------- 
                                                           1,275    (109) 
-------------------------------------------------------  -------  ------- 
 

The company reported in the year ended 31 March 2009 that GBP1.86 million was included in other receivables as the net recoverable after provision from various Icelandic banks. So far GBP3.8 million has been received of the original balance of GBP5.7 million with the excess over the GBP1.86 million being shown as an exceptional credit.

On 26 October 2018, the High Court judgment involving Lloyds Banking Group defined benefit pension schemes concluded that schemes should equalise pension benefits for men and women in relation to guaranteed minimum pension ('GMP') benefits. Working in conjunction with the schemes' actuary, the best estimate assessment of the impact is a GBP1.29 million increase to the pension liabilities as at 31 March 2019. The directors have made the judgement that this estimated impact is a past service cost in respect of pensionable service between 1990 and 1997 that should be reflected through the consolidated income statement as an exceptional item and that any subsequent change in the estimate should be recognised in other comprehensive income.

4 Income tax expense

 
                                                           2019     2018 
                                                         GBP000   GBP000 
------------------------------------------------------  -------  ------- 
Corporation tax based on a rate of 19% (2018 - 19%) 
UK corporation tax 
Current tax on profits for the year                       3,250    2,759 
Adjustments to tax charge in respect of prior years        (81)     (44) 
------------------------------------------------------  -------  ------- 
                                                          3,169    2,715 
 
Deferred tax 
Current year origination and reversal of temporary 
 differences                                              (129)     (95) 
Adjustment to deferred tax charge in respect of prior 
 years                                                        -    (341) 
------------------------------------------------------  -------  ------- 
                                                          (129)    (436) 
------------------------------------------------------  -------  ------- 
Taxation on profit                                        3,040    2,279 
------------------------------------------------------  -------  ------- 
 
Profit before income tax                                 14,050   12,077 
------------------------------------------------------  -------  ------- 
 
Tax on profit at the standard rate of corporation 
 tax in the UK of 19% (2018 - 19%)                        2,670    2,295 
Effect of: 
Expenses not deductible for tax purposes                    161      302 
Adjustment to tax charge in respect of prior years         (81)     (44) 
Adjustment to deferred tax charge in respect of prior 
 years                                                        -    (341) 
Pension adjustments                                         290       67 
------------------------------------------------------  -------  ------- 
Total tax charge for the year                             3,040    2,279 
------------------------------------------------------  -------  ------- 
Effective rate of tax (%)                                  21.6     18.9 
------------------------------------------------------  -------  ------- 
 

Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2017 on 6 September 2017. These include reductions to the main rate, to reduce the rate to 17% from 1 April 2020. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.

5 Dividends

 
                                                       2019     2018 
                                                     GBP000   GBP000 
--------------------------------------------------  -------  ------- 
Final paid of 11.12p per share for the year ended 
 31 March 2018 (2017 - 10.59p)                        4,852    4,620 
Interim paid of 3.38p per share (2018 - 3.38p)        1,475    1,475 
--------------------------------------------------  -------  ------- 
                                                      6,327    6,095 
--------------------------------------------------  -------  ------- 
 

The directors are proposing a final dividend of 11.40 pence (2018 - 11.12 pence) per share totalling GBP4,974,056 (2018 - GBP4,851,886). In addition, the directors have declared a supplementary dividend of 15.00 pence per share, totalling GBP6,544,810. These dividends have not been accrued at the balance sheet date.

6 Earnings per share

Earnings per share of 25.23 pence per share (2018 - 22.46 pence per share) is calculated on the profit on ordinary activities after taxation of GBP11,010,000 (2018 - GBP9,798,000). Earnings per share excluding exceptional items of 28.16 pence per share (2018 - 22.21 pence per share) is calculated on the profit on ordinary activities before exceptional items after taxation of GBP12,285,000 (2018 - GBP9,689,000).

The weighted average number of shares in issue at the end of the year of 43,632,068 (2018 - 43,632,068). There are no potentially dilutive shares, hence the diluted earnings per share are the same as above.

7 Property, plant and equipment

 
                                           Freehold 
                                      and leasehold 
                                           land and   Plant and 
                                          buildings   equipment    Total 
                                             GBP000      GBP000   GBP000 
-----------------------------------  --------------  ----------  ------- 
Cost 
At 1 April 2018                              41,081     135,549  176,630 
Additions during the year                       369       4,977    5,346 
Disposals                                         -       (559)    (559) 
Assets classified as held for sale          (1,624)           -  (1,624) 
-----------------------------------  --------------  ----------  ------- 
At 31 March 2019                             39,826     139,967  179,793 
-----------------------------------  --------------  ----------  ------- 
Accumulated depreciation 
At 1 April 2018                               9,178      92,004  101,182 
Charge for year                               1,166       7,130    8,296 
Disposals                                         -       (559)    (559) 
Assets classified as held for sale            (564)           -    (564) 
-----------------------------------  --------------  ----------  ------- 
At 31 March 2019                              9,780      98,575  108,355 
-----------------------------------  --------------  ----------  ------- 
Net book values 
At 31 March 2019                             30,046      41,392   71,438 
-----------------------------------  --------------  ----------  ------- 
At 31 March 2018                             31,903      43,545   75,448 
-----------------------------------  --------------  ----------  ------- 
 
 
Cost 
At 1 April 2017                              40,235     125,863  166,098 
Additions during the year                       846      10,377   11,223 
Disposals                                         -       (691)    (691) 
-----------------------------------  --------------  ----------  ------- 
At 31 March 2018                             41,081     135,549  176,630 
-----------------------------------  --------------  ----------  ------- 
Accumulated depreciation 
At 1 April 2017                               8,014      85,322   93,336 
Charge for year                               1,164       7,361    8,525 
Disposals                                         -       (679)    (679) 
-----------------------------------  --------------  ----------  ------- 
At 31 March 2018                              9,178      92,004  101,182 
-----------------------------------  --------------  ----------  ------- 
Net book values 
At 31 March 2018                             31,903      43,545   75,448 
-----------------------------------  --------------  ----------  ------- 
At 31 March 2017                             32,221      40,541   72,762 
-----------------------------------  --------------  ----------  ------- 
 

The cost of land and buildings includes GBPnil for property held on long leases (2018 - GBP359,000). The net book value of land and buildings includes GBP2,169,000 (2018 - GBP2,527,000) for land which is not depreciated.

Included within plant and equipment are assets in the course of construction with a net book value of GBP240,000 (2018 - GBP158,000) and assets not fully in production with a net book value of GBPnil (2018 - GBP1,618,000) which are not being depreciated.

In June 2018 the directors decided to sell the long leasehold land and property at Fradley which is an asset within the foundry segment in note 2. There are a number of interested parties and the sale is expected to complete before the end of March 2020 and therefore the asset has been shown under assets classified as held for sale.

8 Commitments and contingencies

 
                                                         2019     2018 
                                                       GBP000   GBP000 
----------------------------------------------------  -------  ------- 
Capital commitments contracted for by the group but 
 not provided for in the financial statements           1,631      752 
----------------------------------------------------  -------  ------- 
 

The group does not insure against the potential cost of product warranty or recall. Accordingly, there is always the possibility of claims against the group for quality related issues on parts supplied to customers. As at 31 March 2019, the directors do not consider any significant liability will arise in respect of any such claims (2018 - GBPnil).

9 Pensions

The company operates two defined benefit pension schemes which were closed to future accruals at 6 April 2009. The funded status of these schemes at 31 March 2019 was a surplus of GBP24,418,000 (2018 - GBP22,631,000). The pension surplus has not been recognised as the group does not have an unconditional right to receive returns of contributions or refunds under the scheme rules.

10 Preliminary statement

The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 March 2019 or 2018, but is derived from those financial statements. Statutory financial statements for 2018 have been delivered to the Registrar of Companies and those for 2019 will be delivered following the company's Annual General Meeting. The auditors have reported on those financial statements; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under Section 498 of the Companies Act 2006.

The annual report and financial statements will be posted to shareholders on 21 June 2019 and will be available on the company's website, www.castings.plc.uk, from 28 June 2019.

Appendix A - Principal Risks and Uncertainties

Risk

In common with all trading businesses, the group is exposed to a variety of risks in the conduct of its normal business operations.

The group maintains a range of insurance policies against major identified insurable risks, including (but not limited to) those related to business interruption, damage to property and equipment, damage to stocks, public and product liability and employers' liability.

The directors regularly assess the principal risks facing the entity. Whilst it is difficult to completely quantify every material risk that the group faces, below is a summary of those risks that the directors believe are most significant to the group's business and could have a material impact on future performance, causing it to differ materially from expected or historic achieved results. Information is also provided as to how the risks are, where possible, being managed or mitigated.

Operational and commercial

The group's revenues are principally derived from commercial vehicle and automotive markets. Both markets, and therefore group revenues, can be subject to variations in patterns of demand. Commercial vehicle sales are linked to technological factors

(e.g. emission legislations) and economic growth. Passenger vehicle sales are influenced, inter alia, by consumer preferences, incentives and the availability of consumer credit.

Market competition

Automotive and commercial vehicle markets are, by their nature, highly competitive, which has historically led to deflationary pressure on selling prices. This pressure is most pronounced in cycles of lower demand. A number of the group's customers are also adopting global sourcing models with the aim to reduce bought-out costs. Whilst there can be no guarantee that business will not be

lost on price, we are confident that we can remain competitive.

Customer concentration, programme dependencies and relationships

The loss of, or deterioration in, any major customer relationship could have a material impact on the group's results. We build strong relationships with our customers to develop products to meet their specific needs.

European market exposure

The negotiations on the UK's membership and future relationship with the European Union remain ongoing and so, as a group with over 70% of sales exported to Europe, this represents a potential risk. The risk cannot be addressed until the final position is known but, during this period of uncertainty, we maintain a regular dialogue with our key suppliers and customers to ensure the risk in disruption to supply is mitigated. As part of the short-term mitigation, we are maintaining higher than normal levels of raw material inventories and customers have been encouraged to do the same.

Product quality and liability

The group's businesses expose it to certain product liability risks which, in the event of failure, could give rise to material financial liabilities. Whilst it is a policy of the group to limit its financial liability by contract in all long-term agreements ("LTAs"), it is not always possible to secure such limitations in the absence of LTAs. The group's customers do require the maintenance of demanding quality systems to safeguard against quality-related risks and the group maintains appropriate external quality accreditations. The group maintains insurance for public liability-related claims but does not insure against the risk of product warranty or recall.

Foreign exchange

The group is exposed to foreign exchange risk on both sales and purchases denominated in currencies other than sterling, being primarily euro and US dollar. Foreign exchange rate risk is sometimes partially mitigated by using forward foreign exchange contracts. Such contracts are short term in nature, matched to contractual cash flows and non-speculative.

Equipment

The group operates a number of specialist pieces of equipment, including foundry furnaces, moulding lines and CNC milling machines which, due to manufacturing lead times, would be difficult to replace sufficiently quickly to prevent major interruption and possible loss of business in the event of unforeseen failure. Whilst this risk cannot be entirely mitigated without uneconomic duplication of all key equipment, all key equipment is maintained to a high standard and inventories of strategic equipment spares maintained. The facilities at Brownhills and Dronfield have similar equipment and work can be transferred from one location to another very quickly.

Suppliers

Although the group takes care to ensure alternative sources of supply remain available for materials or services on which the group's businesses are critically dependent, this is not always possible to guarantee without risk of short-term business disruption, additional costs and potential damage to relationships with key customers.

Commodity and energy pricing

The principal metal raw materials used by the group's businesses are steel scrap and various alloys. The most important alloy raw material inputs are premium graphite, magnesium ferro-silicon, copper, nickel and molybdenum. Wherever possible, prices and quantities (except steel) are secured through long-term agreements with suppliers. In general, the risk of price inflation of these materials resides with the group's customers through price adjustment clauses.

Energy contracts are locked in for at least 12 months, although renegotiation risks remain at contract maturity dates but again this is mitigated through the application of price adjustment clauses. At 31 March 2019, the group has electricity contracts in place until 30 September 2020.

Information technology and systems reliability

The group is dependent on its information technology ("IT") systems to operate its business efficiently, without failure or interruption. Whilst data within key systems is regularly backed up and systems subject to virus protection, any failure of backup systems or other major IT interruption could have a disruptive effect on the group's business.

Short-term deposits

A review of credit ratings is undertaken prior to making new deposits and the maximum exposure to any one counterparty is restricted. However, institutions can be downgraded before maturity, thereby possibly placing these deposits at risk.

Environmental

The group's businesses are subject to compliance with many different laws and requirements in the UK, Europe, North America and elsewhere. Great care is made to act responsibly towards the environment to achieve compliance with all relevant laws and to establish a standard above the minimum level required. Whilst the group's manufacturing processes are not generally considered to provide a high risk of harm to the environment, a major control failure leading to environmental harm could give rise to a material financial liability as well as significant harm to the reputation of our business.

Pension scheme funding

The fair value of the assets and liabilities of the group's defined benefit pension schemes is substantial. As at 31 March 2019 the schemes were in surplus on an IAS 19 (Revised) basis. Further details are set out in note 6 to the financial statements. The potential risks and uncertainties resulting from factors such as investment return, interest rates and mortality rates are mitigated by careful management and continual monitoring of the schemes and by appropriate and timely action to ensure as far as possible that the defined benefit pension liabilities do not increase disproportionately. The company works closely with the scheme trustees and specialist advisers in managing the inherent risks of such schemes.

The schemes were closed to future accruals from 6 April 2009, which only leaves past service liabilities to be funded.

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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