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| 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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -6.00 | -1.62% | 365.00 | 360.00 | 370.00 | 8,589 | 16:35:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Malleable Iron Foundries | 200.99M | 13.79M | 0.3161 | 11.74 | 161.87M |
From Apr 2022 to Apr 2024
TIDMCGS
RNS Number : 8751O
Castings PLC
15 June 2022
Castings P.L.C.
Annual Financial Report
DTR 6.3.5 Disclosure
Year ended 31 March 2022
Chairman's Statement
The turnover of the group increased to GBP149 million (GBP115 million last year) with a rise in profit before exceptional items and income tax to GBP12.1 million compared to GBP4.4 million last year.
Overview
We have seen an improvement in turnover and profit compared with the previous year's trading with output being in line with the three year average before COVID.
The year was again affected by problems experienced by our major customers in the commercial vehicle sector mainly relating to semiconductors. However, things are improving and it is hoped that this will continue.
We have been subjected to large increases in raw materials and other input prices in order to maintain production. These increases are being passed on to our customers, but there is a delay in recovery which affects our ongoing profits in the short-term.
Foundry businesses
I am pleased to report foundry production has improved during the year despite recruitment problems which have now mainly been solved.
We continue to invest both at Castings Brownhills and William Lee to improve productivity, reduce labour costs and improve working conditions.
CNC Speedwell
It is pleasing to report the losses have been reduced from the previous year. The profitability of the business is significantly impacted at lower output levels because of the high capital investment in machinery that is underutilised. We are now moving back towards full production and we expect the result to improve.
Outlook
It is expected that costs will continue to increase in the current year, including significant electricity rises when our current fixed contract comes to an end on 30 September 2022. Our customers have been made aware of the situation and the fact that, in order to continue to supply, the cost increases will be passed on.
Our customers are now increasing their demand and, in this respect, they are more successfully managing the supply of semiconductors and other items in the supply chain. It is hoped that this will continue so we can enjoy improved sales in the current financial year.
Underpinning the improved outlook and on top of new customer platforms where we have greater content, there have been a number of market wins in other sectors including wind energy, trailer braking and coupling systems and innovative agricultural products.
Dividend
Once again our conservative financial policy has proved to be a strength during these difficult times and it is gratifying that, as a result, we have been able to maintain dividend payments during the COVID-19 pandemic.
The directors are recommending the payment of a final dividend of 12.57 pence per share to be paid on 19 August 2022 to shareholders on the register on 22 July 2022. This, together with the interim dividend, gives a total dividend for the year of 16.23 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 26 July 2022 to shareholders on the register on 24 June 2022. This dividend, being discretionary and non-recurring, does not compromise our commitment to invest in market leading technologies to maintain our competitive advantage.
It has been another difficult year with the ongoing disruption from the pandemic and, in this respect, I wish to thank the directors, senior management and all of our employees for their help and commitment during the year.
B. J. Cooke
Chairman
15 June 2022
Business and Financial Review
General overview
The year has been hampered by the fallout from the COVID-19 pandemic with supply chain restrictions impacting on the ability of our customers to satisfy the strong demand in the market.
The first quarter saw commercial vehicle customers, which make up approximately 70% of group revenue, taking product at a level commensurate with pre-COVID years. However, from the last two weeks of June 2021 and into the second quarter, the OEMs had to reduce truck build rates to below their order intake levels, due to supply chain restrictions (particularly in respect of semiconductors).
These restrictions continued during the second half of the year; forward demand schedules from our customers remained high, but the conversion rate to actual sales was significantly below what we would normally expect.
Higher production levels were maintained and inventory levels increased to ensure our facilities remained as efficient as possible and that we would be able to satisfy the high demand when it comes through.
Raw material prices have continued to rise throughout the period which, with the time lag in the associated sales price increase, has continued to put pressure on margins. With significant increases coming through at the end of the year, measures have been put in place to pass on the rises in a more timely manner.
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
As set out previously, customer demand was strong during the first quarter of the financial year but fell in the second quarter and in the second half of the year.
The foundry businesses experienced an increase in output of 24% to 49,800 tonnes and a rise in external sales revenue of 30% to GBP145.6 million. The output weight is broadly in line with the three year average before COVID of 49,700 tonnes.
Of the total output weight for the year, 54.0% related to machined castings compared to 57.5% in the previous year. The reduction being a reflection of the disrupted customer demand patterns in the year as opposed to any change in the trend towards more complex, machined parts.
The segmental profit has increased to GBP13.1 million, from GBP6.7 million in the previous year, which represents a profit margin of 8.0% on total segmental sales (2021 - 5.4%).
Whilst staff recruitment has been an issue during the year, this does now seem to be largely behind us following a significant recruitment drive. As a result, greater production efficiencies have been seen towards the end of the year.
Investment of GBP3.4 million has been made in the foundry businesses during the year. This included GBP0.6 million as part of a project to partially automate the pouring on one of the William Lee production lines.
Machining
The machining business generated total sales of GBP22.5 million in the year compared to GBP18.3 million in the previous year. Of the total revenue, 13.3% was generated from external customers compared to 14.8% in 2021.
The segmental result for the year was a loss of GBP0.9 million (2021 - loss of GBP2.3 million).
With the higher volumes in the first quarter, the benefits of the engineering and productivity improvements that have been made started to be realised and the machining business generated a positive result.
However, the lower volumes in subsequent periods have a particularly negative impact on such a well-invested business; resulting in a breakeven first half and a loss for the full year.
We have invested GBP0.9 million during the year, which is slightly lower than expected due to the increased lead times on new equipment. This investment included GBP0.6 million in the roll-out of automation which will continue during the current year.
Business review and performance
Revenue
Group revenues increased by 29.5% to GBP148.6 million compared to GBP114.7 million reported in 2021, of which 79% was exported (2021 - 76%).
The revenue from the foundry operations to external customers increased by 30% to GBP145.6 million (2021 - GBP112.0 million) with the dispatch weight of castings to third-party customers increasing by 24% to 49,800 tonnes (2021 - 40,100 tonnes).
Revenue from the machining operation to external customers increased by 9.8% during the year to GBP3.0 million (2021 - GBP2.7 million).
Operating profit and segmental result
The group operating profit for the year was GBP12.0 million compared to GBP4.9 million reported in 2021, which represents a return on sales of 8.1% (2021 - 4.3%).
Finance income
The level of finance income decreased to GBP0.05 million compared to GBP0.08 million in 2021, reflecting the lower interest rates available on deposits for the majority of the year as compared to the prior year.
Profit before tax and exceptional items
Profit before tax and exceptional items has increased to GBP12.1 million from GBP4.4 million.
Taxation
The current year tax charge of GBP3.52 million (2021 - GBP0.84 million) is made up of a current tax charge of GBP1.89 million (2021 - GBP1.18 million) and a deferred tax charge of GBP1.63 million (2021 - credit of GBP0.35 million).
The effective rate of tax of 29.2% (2021 - 16.8%) is higher than the main rate of corporation tax of 19%. The primary reason for this is an adjustment to the deferred tax rate applied to 25% to reflect the higher rate of taxation from April 2023. This has resulted in a GBP1.10 million uplift on opening deferred tax balances to the new rate.
In addition, the company has benefited from the super-deduction on plant investment during the year which results in a deferred tax liability.
Earnings per share
Basic earnings per share increased 106% to 19.60 pence (2021 - 9.51 pence), reflecting the 145% increase in profit before tax and a higher effective tax rate compared to the previous year.
Options over 32,149 shares were granted during the year (2021 - options over 35,292 shares). The company purchased 26,100 shares during the year as part of a buyback programme to cover the outstanding share options. As a result, the weighted average number of shares has increased to 43,698,986 resulting in a diluted earnings per share of 19.57 pence per share (2021 - 9.50 pence per share).
Dividends
The directors are recommending a final dividend of 12.57 pence per share (2021 - 11.69 pence per share) to be paid on 19 August 2022 to shareholders on the register on 22 July 2022. This would give a total ordinary distribution for the year of 16.23 pence per share (2021 - 15.26 pence per share).
In addition, a supplementary dividend of 15.00 pence per share has been declared which will be payable on 26 July 2022 to shareholders on the register on 24 June 2022.
Cash flow
The group generated cash from operating activities of GBP12.9 million compared to GBP13.0 million in 2021. When compared to 2021, the variance is mainly due to a significant increase in operating profit of GBP7.1 million, offset by a working capital outflow swing of GBP7.7 million.
In the year to 31 March 2022, the main working capital movement related to the build-up of inventory at higher valuations than the prior year, resulting in an outflow of GBP7.2 million. The higher levels of activity at the end of the year resulted in increases in receivables and payables, with a net outflow of GBP0.8 million.
Corporation tax payments during the year totalled GBP2.6 million compared to GBP0.7 million in 2021.
Capital expenditure during the year amounted to GBP4.4 million (2021 - GBP5.2 million). This included investment of GBP0.6 million as part of a foundry moulding line automation project as well as other automation and productivity enhancements. The charge for depreciation was GBP8.6 million compared to GBP8.8 million in 2021.
In the prior year, proceeds from the disposal of an asset held for sale of GBP1.7 million represents the sale of the Fradley site previously occupied by the machining business. The proceeds were shown net of disposal costs and a payment to secure the freehold of the site.
The company pays pensions on behalf of the two final salary pension schemes and then reclaims these advances from the schemes. During the year repayments of GBP2.5 million (2021 - GBP2.8 million) were received from the schemes and advances were made to the schemes of GBP2.1 million (2021 - GBP2.5 million). These advances will be repaid to the company during the current financial year.
Dividends paid to shareholders were GBP6.7 million in the year (2021 - GBP6.5 million).
The company purchased 26,100 shares to be held in treasury at a total cost of GBP0.08 million.
The net cash and cash equivalents movement for the year was a slight decrease of GBP0.3 million (2021 - increase of GBP2.7 million).
At 31 March 2022, the total cash and deposits position was GBP35.7 million (2021 - GBP36.1 million).
Pensions
The pension valuation showed a decrease in the surplus, on an IAS 19 (Revised) basis, to GBP9.93 million compared to GBP9.98 million in the previous year.
The majority of the liabilities of the schemes are covered by an insurance asset that fully matches, subject to final adjustment of the bulk annuity pricing, the remaining pension liabilities of the schemes. However, there remains the uninsured element relating to the GMP equalisation liability. This liability has increased during the year as a result of the change in valuation assumptions.
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 2022 were GBP131.5 million (2021 - GBP129.5 million). Other than the total comprehensive income for the year of GBP8.7 million, the only movement relates to the dividend payment of GBP6.7 million and the shares purchased in the year for GBP0.08 million.
Non-current assets have decreased to GBP63.2 million (2021 - GBP67.4 million) primarily as a result of investment in property, plant and equipment during the year being at a level below the depreciation charge.
Current assets have increased to GBP102.0 million (2021 - GBP90.2 million). The increase to level of inventories and receivables make up this movement.
Total liabilities have increased to GBP33.7 million (2021 - GBP28.1 million), largely as a result of an increase in trade payables.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2022
Hot Features
Premium
2022 2021
Exceptional Exceptional
Before items Before items
exceptional (note exceptional (note
items 3) Total items 3) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------ ----------- --------- ------------ ----------- --------
Revenue 148,583 - 148,583 114,702 - 114,702
Cost of sales (118,105) - (118,105) (94,870) - (94,870)
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Gross profit 30,478 - 30,478 19,832 - 19,832
Distribution costs (3,411) - (3,411) (2,237) - (2,237)
Administrative expenses (15,046) 6 (15,040) (13,320) 633 (12,687)
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Profit from operations 12,021 6 12,027 4,275 633 4,908
Finance income 47 - 47 79 - 79
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Profit before income
tax 12,068 6 12,074 4,354 633 4,987
Income tax expense (3,522) - (3,522) (838) - (838)
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Profit for the year
attributable to equity
holders of the parent
company 8,546 6 8,552 3,516 633 4,149
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Profit for the year
attributable to equity
holders of the parent
company 8,552 4,149
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 119 142
Defined benefit pension
schemes GMP equalisation
charge - 66
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
119 208
------------------------------- ------------ ----------- --------- ------------ ----------- --------
Items that may be reclassified
subsequently to profit
and loss:
Change in fair value
of financial assets 88 (50)
Tax effect of items
that may be reclassified (22) 10
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
66 (40)
------------------------------- ------------ ----------- --------- ------------ ----------- --------
Other comprehensive
income for the year
(net of tax) 185 168
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Total comprehensive
income for the year
attributable to the
equity holders of the
parent company 8,737 4,317
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Earnings per share
attributable to the
equity holders of the
parent company
Basic 19.60p 9.51p
Diluted 19.57p 9.50p
Basic (before exceptional
items) 19.59p 8.06p
-------------------------------- ------------ ----------- --------- ------------ ----------- --------
Consolidated Balance Sheet
as at 31 March 2022
2022 2021
GBP000 GBP000
--------------------------------------------- ------- -------
ASSETS
Non-current assets
Property, plant and equipment 62,801 67,112
Financial assets 396 308
---------------------------------------------- ------- -------
63,197 67,420
--------------------------------------------- ------- -------
Current assets
Inventories 25,889 18,719
Trade and other receivables 39,874 35,358
Current tax asset 489 -
Cash and cash equivalents 35,745 36,092
---------------------------------------------- ------- -------
101,997 90,169
--------------------------------------------- ------- -------
Total assets 165,194 157,589
---------------------------------------------- ------- -------
LIABILITIES
Current liabilities
Trade and other payables 28,477 24,371
Current tax liabilities - 184
---------------------------------------------- ------- -------
28,477 24,555
--------------------------------------------- ------- -------
Non-current liabilities
Deferred tax liabilities 5,219 3,570
---------------------------------------------- ------- -------
Total liabilities 33,696 28,125
---------------------------------------------- ------- -------
Net assets 131,498 129,464
---------------------------------------------- ------- -------
Equity attributable to equity holders of the
parent company
Share capital 4,363 4,363
Share premium account 874 874
Treasury shares (79) -
Other reserve 13 13
Retained earnings 126,327 124,214
---------------------------------------------- ------- -------
Total equity 131,498 129,464
---------------------------------------------- ------- -------
Consolidated Cash Flow Statement
for the year ended 31 March 2022
2022 2021
GBP000 GBP000
----------------------------------------------------- ------- -------
Cash flows from operating activities
Profit before income tax 12,074 4,987
Adjustments for:
Depreciation 8,601 8,802
Loss on disposal of property, plant and equipment 62 3
Profit on disposal of asset held for sale - (658)
Finance income (47) (79)
Equity settled share-based payment expense 74 21
Pension administrative costs 119 142
Pension GMP equalisation charge - 66
(Increase)/decrease in inventories (7,170) 2,456
Increase in receivables (4,898) (6,979)
Increase in payables 4,106 4,279
------------------------------------------------------ ------- -------
Cash generated from operating activities 12,921 13,040
Tax paid (2,568) (672)
Interest received 28 60
------------------------------------------------------ ------- -------
Net cash generated from operating activities 10,381 12,428
Cash flows from investing activities
Dividends received from listed investments 19 19
Purchase of property, plant and equipment (4,379) (5,244)
Proceeds from disposal of property, plant and
equipment 27 20
Proceeds from disposal of asset held for sale - 1,718
Repayments from pension schemes 2,496 2,778
Advances to the pension schemes (2,114) (2,496)
------------------------------------------------------ ------- -------
Net cash used in investing activities (3,951) (3,205)
Cash flow from financing activities
Dividends paid to shareholders (6,698) (6,532)
Purchase of own shares (79) -
------------------------------------------------------ ------- -------
Net cash used in financing activities (6,777) (6,532)
Net (decrease)/increase in cash and cash equivalents (347) 2,691
Cash and cash equivalents at beginning of year 36,092 33,401
------------------------------------------------------ ------- -------
Cash and cash equivalents at end of year 35,745 36,092
------------------------------------------------------ ------- -------
Cash and cash equivalents:
Short-term deposits 17,065 13,062
Cash available on demand 18,680 23,030
------------------------------------------------------ ------- -------
35,745 36,092
----------------------------------------------------- ------- -------
Consolidated Statement of Changes in Equity
for the year ended 31 March 2022
Equity attributable to equity holders of
the parent
Share Share Treasury Other Retained
capital premium shares reserve earnings Total
(a) (b) (c) (d) (e) equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- -------- -------- -------- -------- --------- -------
At 1 April 2021 4,363 874 - 13 124,214 129,464
------------------------------------- -------- -------- -------- -------- --------- -------
Profit for the year - - - - 8,552 8,552
Other comprehensive income/(losses):
Movement in unrecognised surplus
on defined benefit pension
schemes net of actuarial gains
and losses - - - - 119 119
Change in fair value of financial
assets - - - - 88 88
Tax effect of items taken directly
to reserves - - - - (22) (22)
------------------------------------- -------- -------- -------- -------- --------- -------
Total comprehensive income
for the year - - - - 8,737 8,737
Shares acquired in the year - - (79) - - (79)
Equity settled share-based
payments - - - - 74 74
Dividends (see note 5) - - - - (6,698) (6,698)
------------------------------------- -------- -------- -------- -------- --------- -------
At 31 March 2022 4,363 874 (79) 13 126,327 131,498
------------------------------------- -------- -------- -------- -------- --------- -------
Equity attributable to equity holders of
the parent
Share Share Treasury Other Retained Total
capital(a) premium(b) shares(c) reserve(d) earnings(e) equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------- ----------- ----------- ---------- ----------- ------------ -------
At 1 April 2020 4,363 874 - 13 126,408 131,658
------------------------------------- ----------- ----------- ---------- ----------- ------------ -------
Profit for the year - - - - 4,149 4,149
Other comprehensive income/(losses): -
Movement in unrecognised surplus
on defined benefit pension
schemes net of actuarial gains
and losses - - - - 142 142
Defined benefit pension schemes
GMP equalisation charge` - - - - 66 66
Change in fair value of financial
assets - - - - (50) (50)
Tax effect of items taken directly
to reserves - - - - 10 10
------------------------------------- ----------- ----------- ---------- ----------- ------------ -------
Total comprehensive income
for the year - - - - 4,317 4,317 Equity settled share-based payments - - - - 21 21 Dividends (see note 5) - - - - (6,532) (6,532) ------------------------------------- ----------- ----------- ---------- ----------- ------------ ------- At 31 March 2021 4,363 874 - 13 124,214 129,464 ------------------------------------- ----------- ----------- ---------- ----------- ------------ -------
a) Share capital - 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) Treasury shares - Value of shares acquired by the company. d) Other reserve - Amounts transferred from share capital on redemption of issued shares.
e) 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 UK-adopted international accounting standard in conformity with the requirements of the Companies Act 2006.
The IFRSs applied in the group financial statements are subject to ongoing amendment by the IASB 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 2022 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 on a going concern basis and 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. A summary of the principal group IFRS accounting policies is set out below. 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, due to the similar nature of the businesses, 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 2022:
Foundry Machining
operations operations Elimination Total
GBP000 GBP000 GBP000 GBP000
----------------------------------- ----------- ----------- ----------- --------
Revenue from external customers 145,601 2,982 - 148,583
Inter-segmental revenue 17,037 19,488 - 36,525
----------------------------------- ----------- ----------- ----------- --------
Segmental result 13,084 (894) (50) 12,140
----------------------------------- ----------- ----------- ----------- --------
Unallocated costs:
Exceptional credit for recovery of
Icelandic bank deposits
previously written off 6
Defined benefit pension cost (119)
Finance income 47
----------------------------------- ----------- ----------- ----------- --------
Profit before income tax 12,074
Total assets 148,554 26,741 (10,101) 165,194
----------------------------------- ----------- ----------- ----------- --------
Non-current asset additions 3,388 991 - 4,379
----------------------------------- ----------- ----------- ----------- --------
Depreciation 4,790 3,811 - 8,601
----------------------------------- ----------- ----------- ----------- --------
Total liabilities (31,561) (6,977) 4,842 (33,696)
----------------------------------- ----------- ----------- ----------- --------
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 2021:
Foundry Machining
operations operations Elimination Total
GBP000 GBP000 GBP000 GBP000
----------------------------------------- ----------- ----------- ----------- --------
Revenue from external customers 111,987 2,715 - 114,702
Inter-segmental revenue 11,089 15,594 - 26,683
----------------------------------------- ----------- ----------- ----------- --------
Segmental result 6,659 (2,255) 13 4,417
----------------------------------------- ----------- ----------- ----------- --------
Unallocated costs:
Exceptional credit for recovery of
Icelandic bank deposits
previously written off 41
Profit on disposal of held for sale
asset 658
Defined benefit pension cost (142)
Defined benefit pension GMP equalisation
charge (66)
Finance income 79
----------------------------------------- ----------- ----------- ----------- --------
Profit before income tax 4,987
Total assets 140,141 28,795 (11,347) 157,589
----------------------------------------- ----------- ----------- ----------- --------
Non-current asset additions 3,744 1,500 - 5,244
----------------------------------------- ----------- ----------- ----------- --------
Depreciation 4,582 4,220 - 8,802
----------------------------------------- ----------- ----------- ----------- --------
Total liabilities (26,525) (7,725) 6,125 (28,125)
----------------------------------------- ----------- ----------- ----------- --------
All non-current assets are based in the United Kingdom.
2022 2021
GBP000 GBP000
----------------------------------------------------- ------- -------
The geographical analysis of revenues by destination
for the year is as follows:
United Kingdom 31,319 26,805
Sweden 38,809 32,237
Germany 20,506 12,618
Netherlands 19,907 14,754
Rest of Europe 26,050 21,435
North and South America 11,294 6,208
Other 698 645
----------------------------------------------------- ------- -------
148,583 114,702
----------------------------------------------------- ------- -------
All revenue arises in the United Kingdom from the group's continuing activities.
3 Exceptional items
2022 2021
GBP000 GBP000
------------------------------------------------------- ------- -------
Recovery of past provision for losses on deposits
with Icelandic banks (6) (41)
Profit on the disposal of asset classified as held
for sale - (658)
Defined benefit pension scheme GMP equalisation charge - 66
------------------------------------------------------- ------- -------
(6) (633)
------------------------------------------------------- ------- -------
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 GBP3.9 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.
In the prior year, the group completed on the sale of the Fradley site, an asset classified as held for sale, resulting in a profit of GBP0.66 million.
An additional GMP equalisation charge to that applied in the year ended 31 March 2019 was recognised in the prior year following the High Court ruling on 20 November 2020. The ruling clarified that pension equalisation should be applied to past transfer values from the defined benefit pension schemes. The best estimate, working with the schemes' actuaries, is an increase of GBP66,000 to the pension liabilities.
4 Income tax expense
2022 2021
GBP000 GBP000
------------------------------------------------------- ------- -------
Corporation tax based on a rate of 19% (2021 - 19%)
UK corporation tax
Current tax on profits for the year 2,050 1,220
Adjustments to tax charge in respect of prior years (155) (32)
------------------------------------------------------- ------- -------
1,895 1,188
Deferred tax
Current year origination and reversal of temporary
differences 624 (196)
Adjustment to deferred tax charge in respect of prior
years (107) (154)
Adjustment to deferred tax charge in respect of change
in tax rate 1,100 -
------------------------------------------------------- ------- -------
1,627 (350)
------------------------------------------------------- ------- -------
Taxation on profit 3,522 838
------------------------------------------------------- ------- -------
Profit before income tax 12,074 4,987
------------------------------------------------------- ------- -------
Tax on profit at the standard rate of corporation
tax
in the UK of 19% (2021 - 19%) 2,294 948
Effect of:
Expenses not deductible for tax purposes 357 36
Adjustment to tax charge in respect of prior years (155) (32)
Adjustment to deferred tax charge in respect of prior
years (107) (154)
Adjustment to deferred tax charge in respect of change
in tax rate 1,110 -
Pension adjustments 23 40
------------------------------------------------------- ------- -------
Total tax charge for the year 3,522 838
------------------------------------------------------- ------- -------
Effective rate of tax (%) 29.2 16.8
------------------------------------------------------- ------- -------
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2021 on 24 May 2021, the applicable main rate increasing from the current level of 19% to 25% from 1 April 2023. Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these financial statements.
5 Dividends
2022 2021
GBP000 GBP000
-------------------------------------------------- ------- -------
Final paid of 11.69p per share for the year ended
31 March 2021 (2020 - 11.40p) 5,101 4,974
Interim paid of 3.66p per share (2021 - 3.57p) 1,597 1,558
-------------------------------------------------- ------- -------
6,698 6,532
-------------------------------------------------- ------- -------
The directors are proposing a final dividend of 12.57 pence (2021 - 11.69 pence) per share totalling GBP5,484,551 (2021 - GBP5,100,589). 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 and diluted earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
2022 2021
-------------------------------------------------------- ---------- ----------
Profit after taxation (GBP000) 8,552 4,149
-------------------------------------------------------- ---------- ----------
Weighted average number of shares - basic calculation 43,631,545 43,632,068
Earnings per share - basic calculation (pence per
share) 19.60p 9.51p
-------------------------------------------------------- ---------- ----------
Number of dilutive share options in issue 67,441 35,292
Weighted average number of shares - diluted calculation 43,698,986 43,667,360
Earnings per share - diluted calculation (pence per
share) 19.57p 9.50p
-------------------------------------------------------- ---------- ----------
Earnings per share (basic) excluding exceptional items of 19.59 pence per share (2021 - 8.06 pence per share) is calculated on the profit on ordinary activities before exceptional items after taxation of GBP8,546,000 (2021 - GBP3,516,000), using the basic weighted average number of shares of 43,631,545. The corresponding diluted earnings per share excluding exceptional items, using the weighted average number of shares of 43,698,986 is 19.57 pence per share (2021 - 8.05 pence per share).
7 Property, plant and equipment
Freehold
and leasehold
land and Plant
buildings and equipment Total
GBP000 GBP000 GBP000
-------------------------- -------------- -------------- -------
Cost
At 1 April 2021 40,357 151,831 192,188
Additions during the year 163 4,216 4,379
Disposals (410) (451) (861)
-------------------------- -------------- -------------- -------
At 31 March 2022 40,110 155,596 195,706
-------------------------- -------------- -------------- -------
Accumulated depreciation
At 1 April 2021 11,632 113,444 125,076
Charge for year 1,073 7,528 8,601
Disposals (410) (362) (772)
-------------------------- -------------- -------------- -------
At 31 March 2022 12,295 120,610 132,905
-------------------------- -------------- -------------- -------
Net book values
At 31 March 2022 27,815 34,986 62,801
-------------------------- -------------- -------------- -------
At 31 March 2021 28,725 38,387 67,112
-------------------------- -------------- -------------- -------
Cost
At 1 April 2020 40,183 147,449 187,632
Additions during the year 584 4,660 5,244
Disposals (410) (278) (688)
-------------------------- -------------- -------------- -------
At 31 March 2021 40,357 151,831 192,188
-------------------------- -------------- -------------- -------
Accumulated depreciation
At 1 April 2020 10,941 105,998 116,939
Charge for year 1,101 7,701 8,802
Disposals (410) (255) (665)
-------------------------- -------------- -------------- -------
At 31 March 2021 11,632 113,444 125,076
-------------------------- -------------- -------------- -------
Net book values
At 31 March 2021 28,725 38,387 67,112
-------------------------- -------------- -------------- -------
At 31 March 2020 29,242 41,451 70,693
-------------------------- -------------- -------------- -------
The net book value of land and buildings includes GBP2,169,000 (2021 - GBP2,169,000) for land which is not depreciated.
Included within plant and equipment are assets in the course of construction with a net book value of GBP1,043,000 (2021 - GBP464,000) which are not depreciated.
8 Commitments and contingencies
2022 2021
GBP000 GBP000
---------------------------------------------------- ------- -------
Capital commitments contracted for by the group but
not provided for in the financial statements 1,637 1,784
---------------------------------------------------- ------- -------
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 2022, the directors do not consider any significant liability will arise in respect of any such claims (2021 - 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 2022 was a surplus of GBP9,932,000 (2021 - GBP9.980,000). On 24 March 2020, the Trustees of the schemes completed a bulk annuity insurance buy-in with Aviva Life & Pensions UK Limited thus providing certainty and security for all members of the schemes. The buy-in secures an insurance asset from Aviva that fully matches, subject to final price adjustment of the bulk annuity pricing, the remaining pension liabilities of the schemes. The buy-in covers the investment, longevity, interest rate and inflation risks in respect of the schemes and therefore substantially reduces the pension risk to the company.
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 2022 or 2021 but is derived from those financial statements. Statutory financial statements for 2022 have been delivered to the Registrar of Companies and those for 2022 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 24 June 2022 and will be available on the company's website, www.castings.plc.uk, from 27 June 2022.
Appendix 1 - Principal Risks and Uncertainties
In common with all trading businesses, the group is exposed to a variety of risks in the conduct of its normal business operations.
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.
The group does not operate a formal internal audit function; however, risk management is overseen by senior management and group risk registers are maintained and regularly reviewed, alongside factors which may result in changes to risk assessments or require additional mitigation measures to be implemented.
External consultants are used to assess design and effectiveness of controls relating to IT security to provide specialist support to management in this area.
Key risks arising or increasing in impact are reviewed at both group and subsidiary board meetings.
The impact of each risk set out below has been described as increased, stable or decreased dependent upon whether the business environment and group activity has resulted in a change to the potential impact of that risk.
Several principal risks have been removed which have been key themes in the last few years. As the conditions of the United Kingdom's exit from the European Union seems to be largely concluded and the resulting changes embedded, it is no longer considered a principal risk to the business as a standalone issue. Similarly, with vaccination programmes largely successful in major markets, COVID-19 has also been removed as a principal risk. Both issues remain subject to review as part of the group's internal risk review process.
Risk description Impact Mitigation and control
--------------------------------- --------------------------------- --------------------------------
Technological change
--------------------------------- --------------------------------- --------------------------------
Customers continue to Stable The strategic focus of
invest in the development The group continues to the group is evaluated
of electric and hydrogen work with key customers regularly through group
powered vehicles to move producing the next generation board meetings.
away from internal combustion of ICE commercial vehicles, Consideration is given
engines ('ICE'). whilst monitoring opportunities to what opportunities
The initial phase of for the future. might be available within
this is focussed on passenger alternative light-weight
cars and smaller, short-range metals, such as aluminium,
trucks which are not or through value-added
key markets for the group. opportunities.
However, the continued The group continues to
development of new technology monitor the potential
does present a medium-term market impacts from hydrogen
risk to the group as fuel cell deployment
c. 30% of group revenue (considered to be the
arises from the supply most likely replacement
of cast iron powertrain technology for heavy-duty
components. trucks).
It is important to note
that such a change also
presents an opportunity
for the group to evolve
its product offering,
as has always been the
case over the years.
--------------------------------- --------------------------------- --------------------------------
Operational and commercial
--------------------------------- --------------------------------- --------------------------------
The group's revenues Stable The group's operations
are principally derived The operational and commercial are set up in such a
from the commercial vehicle activity of the business way as to ensure that
markets which can be is driven by customer variation in demand can
subject to variations demand. At present demand be accommodated and rapidly
in patterns of demand. has the potential to responded to.
Commercial vehicle sales change rapidly dependent Demand is closely reviewed
are linked to technological upon the significant by senior management
factors (for example variable factors in the on a constant basis.
emissions legislation) macroeconomic environment
and economic growth. such as conflict in Ukraine,
semi-conductor shortages,
COVID-19 or changing
regulatory positions.
--------------------------------- --------------------------------- --------------------------------
Market competition
--------------------------------- --------------------------------- --------------------------------
Commercial vehicle markets Stable Whilst there can be no
are, by their nature, Erosion of market share guarantee that business
highly competitive, which could result in loss will not be lost on price,
has historically led of revenue and profit. we are confident that
to deflationary pressure we can remain competitive.
on selling prices. This The group continues to
pressure is most pronounced mitigate this risk through
in cycles of lower demand. investment in productivity,
A number of the group's with a strong focus on
customers are also adopting cost and customer value.
global sourcing models
with the aim to reduce
bought-out costs.
--------------------------------- --------------------------------- --------------------------------
Customer concentration, programme dependencies and relationships
------------------------------------------------------------------------------------------------------
The group has strong Stable We build strong relationships
relationships with key The loss of, or deterioration with our customers to
customers in the commercial in, any major customer develop products to meet
vehicle market which relationship could have their specific needs.
form the majority of a material impact on
the customer base. the group's results.
--------------------------------- --------------------------------- --------------------------------
Product quality and liability
--------------------------------- --------------------------------- --------------------------------
The group's businesses Stable Whilst it is a policy
expose it to certain Fines or penalties could of the group to endeavour
product liability risks result in a loss of revenue, to limit its financial
which, in the event of additional costs and liability by contract
failure, could give rise reduced profits. in all long-term agreements
to material financial ('LTAs'), it is not always
liabilities. 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 Stable The group's foreign exchange
to foreign exchange risk The group is exposed risk is well-mitigated
on both sales and purchases to gains or losses that through commercial arrangements
denominated in currencies could be material to with key customers.
other than sterling, the group's financial Foreign exchange rate
being primarily euro results and can increase risk is sometimes partially
and US dollar. or decrease how competitive mitigated by using forward
the group's pricing is foreign exchange contracts.
to overseas markets. Such contracts are short
term in nature, matched
to contractual cash flows
and non-speculative.
--------------------------------- --------------------------------- --------------------------------
Equipment
--------------------------------- --------------------------------- --------------------------------
The group operates a Stable Whilst this risk cannot
number of specialist A large incident could be entirely mitigated
pieces of equipment, disrupt business at the without uneconomic duplication
including foundry furnaces, site affected and result of all key equipment,
moulding lines and CNC in significant rectification all key equipment is
milling machines which, costs or material asset maintained to a high
due to manufacturing impairments. standard and inventories
lead times, would be of strategic equipment
difficult to replace spares maintained.
sufficiently quickly The foundry facilities
to prevent major interruption at Brownhills and Dronfield
and possible loss of have similar equipment
business in the event and work can be transferred
of unforeseen failure. from one location to
another very quickly.
--------------------------------- --------------------------------- --------------------------------
Suppliers
--------------------------------- --------------------------------- --------------------------------
The group holds long-standing Increased Although the group takes
relationships with key The risk of a supplier's care to ensure alternative
suppliers and there is business interruption sources of supply remain
a risk that a business remains very high due available for materials
which the group is critically to the current global or services on which
dependent upon could business environment. the group's businesses
be subject to significant are critically dependent,
disruption and that this this is not always possible
could materially impact to guarantee without
the operations of the risk of short-term business
group. disruption, additional
There are specifically costs and potential damage
high risks of semi-conductor to relationships with
shortages in the supply key customers.
chain, COVID-19 outbreaks, The group continues to
disruption because of maintain productive dialogue
the conflict in Ukraine with key suppliers, working
or logistical delays. together to adjust to
changes to the business
environment.
--------------------------------- --------------------------------- --------------------------------
Commodity and energy
pricing
--------------------------------- --------------------------------- --------------------------------
The group is exposed Increased Wherever possible, prices
to the risk of price Changes to the pricing and quantities (except
inflation on raw materials of the group's commodity steel) are secured through
and energy contracts. and energy purchases long-term agreements
The principal metal raw could materially impact with suppliers.
materials used by the the financial performance In general, the risk
group's businesses are of the group if no mitigating of price inflation of
steel scrap and various actions were taken. these materials resides
alloys. The most important Power and raw material with the group's customers
alloy raw material inputs markets have become very through price adjustment
are premium graphite, volatile because of the clauses.
magnesium ferro-silicon, current conflict in Ukraine Energy contracts are
copper, nickel and molybdenum. and other associated typically for a period
supply issues. of 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 2022, the
group had electricity
and gas contracts in
place until
30 September 2022 and
2023 respectively.
--------------------------------- --------------------------------- --------------------------------
Information technology and systems reliability
------------------------------------------------------------------------------------------------------
The group is dependent Stable Whilst data within key
on its information technology Significant failures systems is regularly
('IT') systems to operate to the IT systems of backed up and systems
its business efficiently, the group as a result subject to virus protection,
without failure or interruption. of external factors could any failure of backup
The group continues to result in operational systems or other major
invest in IT systems disruption and a negative IT interruption could
to aid in the operational impact on customer delivery have a disruptive effect
performance of the group and reporting capabilities. on the group's business.
and its reporting capabilities. IT projects are reviewed
There are increasing and approved at board
global threats faced level and the group continues
by these systems as a to invest in IT security
result of sophisticated to improve our resilience
cyberattacks. and response towards
such threats.
The group engages with
external specialists
to regularly assess the
security of the IT network
and systems.
--------------------------------- --------------------------------- --------------------------------
Regulatory and legislative
compliance
--------------------------------- --------------------------------- --------------------------------
The group must comply Stable The group maintains a
with a wide range of Failure to comply with comprehensive range of
legislative and regulatory legislation could lead policies, procedures
requirements including to substantial financial and training programmes
modern slavery, anti-bribery penalties, business disruption, in order to ensure that
and anti-competition diversion of management both management and relevant
legislation, taxation time, personal and corporate employees are informed
legislation, employment liability and loss of of legislative changes
law and import and export reputation. and it is clear how the
controls. group's business is expected
to be carried out.
Whistleblowing procedures
and an open-door management
style are in place to
enable concerns to be
raised and addressed.
Specialist advice is
made available to management
when required to ensure
that the group is up
to date with changes
in regulation and legislation.
--------------------------------- --------------------------------- --------------------------------
Climate change
--------------------------------- --------------------------------- --------------------------------
The group's operations Stable A working group has been
are energy-intensive It is expected that green formed to continue to
and whilst the group taxes on energy and the monitor and report on
considers that its businesses compliance cost of meeting developments with regards
provide fundamental components developing reporting to climate risk.
and services which will obligations for our stakeholders As part of the renewal
prove resilient in a will result in increased of energy contracts the
transition towards a energy prices and administrative group reviews whether
net zero economy, the expenses. investment in renewable
board recognises the energy sources would
group is likely to receive meet the group's investment
increased scrutiny in criteria and such proposals
the future in relation will continue to be considered
to emissions and climate on their commercial merits.
change. The group will continue
to engage with and understand
the needs of its stakeholders
with regard to climate
risk.
--------------------------------- --------------------------------- --------------------------------
People risk
--------------------------------- --------------------------------- --------------------------------
The group's operations Increased The group looks to provide
depend upon the availability The labour market has safe, stable and long-term
of both skilled and unskilled been extremely competitive employment at competitive
labour to operate manual during the year. rates of pay.
equipment and fulfil We invest in people development
our strategic goals. and utilise technology
Inability to attract and productivity gains
and retain talent could to ensure that our products
result in either a shortage remain competitively
of staff or a reduction priced.
in operating margins.
--------------------------------- --------------------------------- --------------------------------
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