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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 | |
---|---|---|---|---|---|---|---|---|---|---|
4.00 | 1.14% | 354.00 | 352.00 | 380.00 | 354.00 | 354.00 | 354.00 | 3,303 | 08:23:15 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Malleable Iron Foundries | 200.99M | 13.79M | 0.3161 | 11.20 | 152.71M |
TIDMCGS
RNS Number : 5936C
Castings PLC
14 June 2023
The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
Castings P.L.C.
Annual Financial Report
DTR 6.3.5 Disclosure
Year ended 31 March 2023
Chairman's Statement
The turnover of the group increased to GBP201 million (GBP149 million last year) with a rise in profit before tax to GBP16.7 million compared to GBP12.1 million last year.
Overview
Turnover increased by 35% compared with the previous year and operating profit increased by 36%. The despatch weight was at the highest level since 2014.
Demand from our customers has been very strong, with the heavy truck OEMs (approximately 75% of revenue) increasing build rates throughout the year and this has continued into the current financial year. In order to satisfy the increasing schedules, which has been skewed towards certain production lines, it has been necessary to rebalance production in the foundries which resulted in some inefficiencies particularly in the second half of the year, but these are now behind us.
We have experienced very significant price increases in raw materials and energy, which have been largely recovered from our customers through established escalators. The most significant increase related to electricity following the end of our fixed price contract on 30 September 2022. This additional cost of power was surcharged to our customers and although it did not adversely affect group profit, it did impact reported margins.
Further price increases have been negotiated in respect of other cost rises which have taken effect from the start of the current financial year.
Foundry businesses
Despite the impact of the production rebalancing, foundry production increased compared to the prior year. The recruitment issues that have been experienced in the last few years now seem to be largely behind us. With increased demand, the foundry profitability has improved compared to the previous year, although the margin percentage is impacted by the direct pass-through of the cost increases.
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 on the return to profitability in the machining business, with a particularly strong final quarter of the financial year. With higher output levels and improved prices, the current performance of CNC Speedwell is beginning to reflect the level of investment that has been made in the business.
Outlook
Our customers continue to increase schedules with the demand for heavy trucks in particular remaining very strong. In addition, demand in other growth sectors such as USA, wind energy, trailer braking and coupling systems and innovative agricultural products continues to grow.
Dividend
The directors are recommending the payment of a final dividend of 13.51 pence per share to be paid on 18 August 2023 to shareholders on the register on 21 July 2023. This, together with the interim dividend, gives a total dividend for the year of 17.35 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 pence per share to be paid on 26 July 2023 to shareholders on the register on 23 June 2023. This dividend, being discretionary and non-recurring, does not compromise our commitment to invest in market leading technologies to maintain our competitive advantage.
Brian Cooke
As previously announced, after nearly sixty three years with the company, of which forty have been as Chairman, Brian Cooke is standing down as a director and will not be seeking re-election at the AGM in August. Brian joined the company from foundry college in 1960 and was appointed a director six years later. Prior to becoming Chairman in 1983, he served as managing director at Brownhills and then as group chief executive.
Brian has led Castings from the front and everything the group does reflects his energy and wise business acumen. We would all like to thank him for his outstanding contribution over the last seven decades. I am very pleased that he has agreed to remain available to consult with the group after the AGM.
I also wish to thank the directors, senior management and all of our employees for their help and commitment during the year.
A. N. Jones
Chairman
14 June 2023
Business and Financial Review
General overview
The year has seen increasing demand during the period with our commercial vehicle customers, which make up approximately 75% of group revenue, experiencing extremely strong order books for heavy trucks.
With demand being skewed towards particular foundry lines, significant production rebalancing has been necessary to try to satisfy the dramatic schedule increases. This has caused some production inefficiencies, particularly in the second half of the year, but these are now largely behind us.
Input price increases have been another key element in the financial year. We have seen significant changes in respect of raw materials and energy which have been recovered from our customers through established escalators. The most significant increase related to electricity following the end of a fixed price contract on 30 September 2022; the additional cost for power (approximately GBP15 million) was surcharged to our customers and resulted in increased revenue in the second half of the year. This did not adversely affect group profit as it is a pass-through of a direct cost increase.
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 with schedules increasing during the financial year.
The foundry businesses experienced an increase in output of 6.6% to 53,100 tonnes and a rise in external sales revenue of
GBP53.4 million (36.7%) to GBP199.0 million. After taking into account the reduction in weight from machining, this equates to approximately 59,000 tonnes of production.
Of the total output weight for the year, 59.2% related to machined castings compared to 54.0% in the previous year. The change reflects a return to the increasing proportion of more complex, machined parts after the reduction last year as a result of disrupted demand patterns.
The segmental profit has increased to
GBP16.3 million, from GBP13.1 million in the previous year, which represents a profit margin of 7.3% on total segmental sales (2022 - 8.0%).
The most significant impact on the margin percentage is due to the pass-through impact of cost rises, along with the disruption due to production rebalancing. Further price increases have been negotiated with customers to address the margin erosion experienced during the year.
Investment of GBP4.8 million has been made in the foundry businesses during the year. This included GBP0.8 million completing the project to partially automate the pouring on one of the William Lee production lines and a further GBP1.1 million on other automation projects.
Machining
The machining business generated total sales of GBP27.7 million in the year compared to GBP22.5 million in the previous year. Of the total revenue, 7.3% was generated from external customers compared to 13.3% in 2022.
The segmental result for the year was a profit of GBP0.2 million (2022 - loss of GBP0.9 million).
With the higher volumes in the year, the benefits of the engineering and productivity improvements that have been made are now being realised. With the pricing corrections that have been made, the result in the final quarter was particularly strong.
We have invested GBP1.4 million during the year, which included GBP0.4 million in the roll-out of automation which will continue during the current year. A further GBP0.5 million investment was made in a more power efficient cooling plant in one area of the business, which will help to reduce energy consumption.
Business review and performance
Revenue
Group revenues increased by 35.3% to GBP201.0 million compared to GBP148.6 million reported in 2022, of which 83% was exported (2022 - 79%).
The revenue from the foundry operations to external customers increased by 36.7% to GBP199.0 million (2022 - GBP145.6 million) with the dispatch weight of castings to third-party customers increasing by 6.6% to 53,100 tonnes (2022 - 49,800 tonnes).
Revenue from the machining operation to external customers decreased by 32.3% during the year to GBP2.0 million (2022 -
GBP3.0 million).
Operating profit and segmental result
The group operating profit for the year was GBP16.4 million compared to GBP12.0 million reported in 2022, which represents a return on sales of 8.1% (2022 - 8.1%).
Finance income
The level of finance income increased to GBP0.34 million compared to GBP0.05 million in 2022, reflecting the rising interest rates available on deposits during the financial year.
Profit before tax
Profit before tax has increased to GBP16.7 million from GBP12.1 million in the prior year.
Taxation
The current year tax charge of GBP2.92 million (2022 - GBP3.52 million) is made up of a current tax charge of GBP2.41 million (2022 - GBP1.89 million) and a deferred tax charge of GBP0.51 million (2022 - charge of GBP1.63 million).
The effective rate of tax of 17.5% (2022 - 29.2%) is lower than the main rate of corporation tax of 19%. The primary reason for this is a credit to the deferred tax estimate relating to the prior year of GBP0.43 million, offset by the deferred tax liability arising from the super-deduction claimed on plant investment during the year.
Earnings per share
Basic earnings per share increased 61.5% to 31.66 pence (2022 - 19.60 pence), reflecting the 38.0% increase in profit before tax and a significantly lower effective tax rate compared to the previous year.
Options over 42,468 shares were granted during the year (2022 - options over 32,149 shares). The company purchased 47,900 shares during the year (2022 - 26,100). As a result, the weighted average number of shares has decreased to 43,671,502 resulting in a diluted earnings per share of 31.58 pence per share (2022 - 19.57 pence per share).
Dividends
The directors are recommending a final dividend of 13.51 pence per share (2022 - 12.57 pence per share) to be paid on 18 August 2023 to shareholders on the register on 21 July 2023. This would give a total ordinary distribution for the year of 17.35 pence per share (2022 - 16.23 pence per share).
In addition, a supplementary dividend of 15.00 pence per share has been declared which will be payable on 26 July 2023 to shareholders on the register on 23 June 2023.
Cash flow
The group generated cash from operating activities of GBP22.4 million compared to GBP12.9 million in 2022. When compared to 2022, the variance is mainly due to a significant increase in operating profit of GBP4.6 million and a working capital outflow swing of GBP5.1 million.
In the year to 31 March 2023, the main working capital movements centre around the higher input prices from suppliers which are then passed onto customers in the form of higher selling prices. This has resulted in a GBP10.0 million increase in trade receivables in the year and a GBP6.5 million increase in trade payables. The input price increase impact on inventory has been offset by the lower level held in stock at the year end compared to the prior year.
Corporation tax payments during the year totalled GBP2.9 million compared to GBP2.6 million in 2022.
Capital expenditure during the year amounted to GBP6.2 million (2022 - GBP4.4 million). This included investment of GBP0.8 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 (2022 - GBP8.6 million).
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 GBP2.1 million (2022 - GBP2.5 million) were received from the schemes and advances were paid on behalf of the schemes of GBP2.1 million (2022 - GBP2.1 million). These advances will be repaid to the company during the current financial year.
Dividends paid to shareholders were GBP13.7 million in the year (2022 - GBP6.7 million) which includes GBP6.5 million in relation to a supplementary dividend in respect of the year ended 31 March 2022.
The company purchased 47,900 (2022 - 26,100) shares to be held in treasury at a total cost of GBP0.15 million (2022 - GBP0.08 million).
The net cash and cash equivalents movement for the year was a slight decrease of GBP0.18 million (2022 - decrease of GBP0.35 million).
At 31 March 2023, the total cash and deposits position was GBP35.6 million (2022 - GBP35.8 million).
Pensions
The pension valuation showed an increase in the surplus, on an IAS 19 (Revised) basis, to GBP10.4 million compared to GBP9.9 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 decreased 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 2023 were GBP131.7 million (2022 - GBP131.5million). Other than the total comprehensive income for the year of GBP13.9 million (2022 - GBP8.7 million), the only movements relate to the dividend payment of GBP13.7 million (2022 - GBP6.7 million), shares purchased in the year for GBP0.15 million (2022 - GBP0.08 million) and share-based payment charge of GBP0.1 million
(2022 - GBP0.08 million).
Non-current assets have decreased to GBP60.7 million (20221 - GBP63.2 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 GBP113.7 million (2022 - GBP102.0million) as a result of the increase in trade receivables as previously mentioned.
Total liabilities have increased to GBP42.8 million (2022 - GBP33.7 million), largely as a result of an increase in trade payables.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2023
2023 2022 GBP000 GBP000 ----------------------------------------------------- --------- --------- Revenue 200,990 148,583 Cost of sales (162,077) (118,105) ------------------------------------------------------ --------- --------- Gross profit 38,913 30,478 Distribution costs (5,440) (3,411) Administrative expenses (17,104) (15,040) ------------------------------------------------------ --------- --------- Profit from operations 16,369 12,027 Finance income 344 47 ------------------------------------------------------ --------- --------- Profit before income tax 16,713 12,074 Income tax expense (2,923) (3,522) ------------------------------------------------------ --------- --------- Profit for the year attributable to equity holders of the parent company 13,790 8,552 ------------------------------------------------------ --------- --------- Profit for the year attributable to equity holders of the parent company 13,790 8,552 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 117 119 ------------------------------------------------------ --------- --------- 117 119 ----------------------------------------------------- --------- --------- Items that may be reclassified subsequently to profit and loss: Change in fair value of financial assets (40) 88 Tax effect of items that may be reclassified 10 (22) ------------------------------------------------------ --------- --------- (30) 66 ----------------------------------------------------- --------- --------- Other comprehensive income for the year (net of tax) 87 185 ------------------------------------------------------ --------- --------- Total comprehensive income for the year attributable to the equity holders of the parent company 13,877 8,737 ------------------------------------------------------ --------- --------- Earnings per share attributable to the equity holders of the parent company Basic 31.66p 19.60p Diluted 31.58p 19.57p ------------------------------------------------------ --------- ---------
Consolidated Balance Sheet
as at 31 March 2023
2023 2022 GBP000 GBP000 --------------------------------------------- ------- ------- ASSETS Non-current assets Property, plant and equipment 60,353 62,801 Financial assets 356 396 ---------------------------------------------- ------- ------- 60,709 63,197 --------------------------------------------- ------- ------- Current assets Inventories 26,095 25,889 Trade and other receivables 51,080 39,874 Current tax asset 980 489 Cash and cash equivalents 35,566 35,745 ---------------------------------------------- ------- ------- 113,721 101,997 --------------------------------------------- ------- ------- Total assets 174,430 165,194 ---------------------------------------------- ------- ------- LIABILITIES Current liabilities
Trade and other payables 37,051 28,477 ---------------------------------------------- ------- ------- 37,051 28,477 --------------------------------------------- ------- ------- Non-current liabilities Deferred tax liabilities 5,719 5,219 ---------------------------------------------- ------- ------- Total liabilities 42,770 33,696 ---------------------------------------------- ------- ------- Net assets 131,660 131,498 ---------------------------------------------- ------- ------- Equity attributable to equity holders of the parent company Share capital 4,363 4,363 Share premium account 874 874 Treasury shares (231) (79) Other reserve 13 13 Retained earnings 126,641 126,327 ---------------------------------------------- ------- ------- Total equity 131,660 131,498 ---------------------------------------------- ------- -------
Consolidated Cash Flow Statement
for the year ended 31 March 2023
2023 2022 GBP000 GBP000 -------------------------------------------------- -------- ------- Cash flows from operating activities Profit before income tax 16,713 12,074 Adjustments for: Depreciation 8,646 8,601 Loss on disposal of property, plant and equipment - 62 Finance income (344) (47) Equity-settled share-based payment expense 119 74 Pension administrative costs 117 119 Increase in inventories (206) (7,170) Increase in receivables (11,200) (4,898) Increase in payables 8,574 4,106 --------------------------------------------------- -------- ------- Cash generated from operating activities 22,419 12,921 Tax paid (2,904) (2,568) Interest received 327 28 --------------------------------------------------- -------- ------- Net cash generated from operating activities 19,842 10,381 Cash flows from investing activities Dividends received from listed investments 17 19 Purchase of property, plant and equipment (6,198) (4,379) Proceeds from disposal of property, plant and equipment - 27 Repayments from pension schemes 2,114 2,496 Advances on behalf of the pension schemes (2,120) (2,114) --------------------------------------------------- -------- ------- Net cash used in investing activities (6,187) (3,951) Cash flow from financing activities Dividends paid to shareholders (13,682) (6,698) Purchase of own shares (152) (79) --------------------------------------------------- -------- ------- Net cash used in financing activities (13,384) (6,777) Decrease in cash and cash equivalents (179) (347) Cash and cash equivalents at beginning of year 35,745 36,092 --------------------------------------------------- -------- ------- Cash and cash equivalents at end of year 35,566 35,745 --------------------------------------------------- -------- ------- Cash and cash equivalents: Short-term deposits 19,993 17,065 Cash available on demand 15,573 18,680 --------------------------------------------------- -------- ------- 35,566 35,745 -------------------------------------------------- -------- -------
Consolidated Statement of Changes in Equity
for the year ended 31 March 2023
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 2022 4,363 874 (79) 13 126,327 131,498 ------------------------------------- -------- -------- -------- -------- --------- -------- Profit for the year - - - - 13,790 13,790 Other comprehensive income/(losses): Movement in unrecognised surplus on defined benefit pension schemes net of actuarial gains and losses - - - - 117 117 Change in fair value of financial assets - - - - (40) (40) Tax effect of items taken directly to reserves - - - - 10 10 ------------------------------------- -------- -------- -------- -------- --------- -------- Total comprehensive income for the year - - - - 13,877 13,877 Shares acquired in the year - - (152) - - (152) Equity-settled share-based payments - - - - 119 119 Dividends (see note 4) - - - - (13,682) (13,682) ------------------------------------- -------- -------- -------- -------- --------- -------- At 31 March 2023 4,363 874 (231) 13 126,641 131,660 ------------------------------------- -------- -------- -------- -------- --------- -------- 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 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 4) - - - - (6,698) (6,698) ------------------------------------- ----------- ----------- ---------- ----------- ------------ ------- At 31 March 2022 4,363 874 (79) 13 126,327 131,498 ------------------------------------- ----------- ----------- ---------- ----------- ------------ -------
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 Consolidated 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 2023 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 2023:
Foundry Machining operations operations Elimination Total GBP000 GBP000 GBP000 GBP000 -------------------------------- ----------- ----------- ----------- -------- Revenue from external customers 198,972 2,018 - 200,990 Inter-segmental revenue 24,739 25,640 - 50,379 -------------------------------- ----------- ----------- ----------- -------- Segmental result 16,332 169 (15) 16,486 -------------------------------- ----------- ----------- ----------- -------- Unallocated costs: Defined benefit pension cost (117) Finance income 344 -------------------------------- ----------- ----------- ----------- -------- Profit before income tax 16,713 Total assets 162,671 26,687 (14,928) 174,430 -------------------------------- ----------- ----------- ----------- -------- Non-current asset additions 4,826 1,372 - 6,198 -------------------------------- ----------- ----------- ----------- -------- Depreciation 5,235 3,411 - 8,646 -------------------------------- ----------- ----------- ----------- -------- Total liabilities (45,668) (6,759) 9,657 (42,770) -------------------------------- ----------- ----------- ----------- --------
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 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.
2023 2022 GBP000 GBP000 ----------------------------------------------------- ------- ------- The geographical analysis of revenues by destination for the year is as follows: United Kingdom 34,519 31,319 Sweden 55,107 38,809 Germany 32,292 20,506 Netherlands 31,763 19,907 Rest of Europe 31,810 26,050 North and South America 14,322 11,294 Other 1,177 698 ----------------------------------------------------- ------- ------- 200,990 148,583 ----------------------------------------------------- ------- -------
All revenue arises in the United Kingdom from the group's continuing activities.
3 Income tax expense 2023 2022 GBP000 GBP000 ------------------------------------------------------- ------- ------- Corporation tax based on a rate of 19% (2022 - 19%) UK corporation tax Current tax on profits for the year 2,500 2,050 Adjustments to tax charge in respect of prior years (87) (155) ------------------------------------------------------- ------- ------- 2,413 1,895 Deferred tax Current year origination and reversal of temporary differences 935 624 Adjustment to deferred tax charge in respect of prior years (425) (107) Adjustment to deferred tax charge in respect of change in tax rate - 1,100 ------------------------------------------------------- ------- ------- 510 1,627 ------------------------------------------------------- ------- ------- Taxation on profit 2,923 3,522 ------------------------------------------------------- ------- ------- Profit before income tax 16,713 12,074 ------------------------------------------------------- ------- ------- Tax on profit at the standard rate of corporation tax in the UK of 19% (2022 - 19%) 3,175 2,294 Effect of: Expenses not deductible for tax purposes 238 357 Adjustment to tax charge in respect of prior years (87) (155) Adjustment to deferred tax charge in respect of prior years (425) (107) Adjustment to deferred tax charge in respect of change in tax rate - 1,110 Pension adjustments 22 23 ------------------------------------------------------- ------- ------- Total tax charge for the year 2,923 3,522 ------------------------------------------------------- ------- ------- Effective rate of tax (%) 17.5 29.2 ------------------------------------------------------- ------- -------
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.
4 Dividends 2023 2022 GBP000 GBP000 --------------------------------------------------- ------- ------- Final paid of 12.57p per share for the year ended 31 March 2022 (2021 - 11.69p) 5,475 5,101 Interim paid of 3.84p per share (2022 - 3.66p) 1,673 1,597 Supplementary dividend of 15.00p per share for the year ended 31 March 2022 (2021 - nil) 6,534 - --------------------------------------------------- ------- ------- 13,682 6,698 --------------------------------------------------- ------- -------
The directors are proposing a final dividend of 13.51 pence (2022 - 12.57 pence) per share totalling GBP5,884,695 (2022 - GBP5,475,249). In addition, the directors have declared a supplementary dividend of 15.00 pence per share, totalling GBP6,533,710. These dividends have not been accrued at the balance sheet date.
5 Earnings per share and diluted earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
2023 2022 -------------------------------------------------------- ---------- ---------- Profit after taxation (GBP000) 13,790 8,552 -------------------------------------------------------- ---------- ---------- Weighted average number of shares - basic calculation 43,561,593 43,631,545 Earnings per share - basic calculation (pence per share) 31.66p 19.60p -------------------------------------------------------- ---------- ---------- Number of dilutive share options in issue 109,909 67,441 Weighted average number of shares - diluted calculation 43,671,502 43,698,986 Earnings per share - diluted calculation (pence per share) 31.58p 19.57p -------------------------------------------------------- ---------- ---------- 6 Property, plant and equipment Freehold land and Plant buildings and equipment Total GBP000 GBP000 GBP000 -------------------------- ---------- -------------- ------- Cost At 1 April 2022 40,110 155,596 195,706 Additions during the year 437 5,761 6,198 Disposals - (961) (961) Other 410 - 410 -------------------------- ---------- -------------- ------- At 31 March 2023 40,957 160,396 201,353 -------------------------- ---------- -------------- ------- Accumulated depreciation At 1 April 2022 12,295 120,610 132,905 Charge for year 1,015 7,631 8,646 Disposals - (961) (961) Other 410 - 410 -------------------------- ---------- -------------- ------- At 31 March 2023 13,720 127,280 141,000 -------------------------- ---------- -------------- ------- Net book values At 31 March 2023 27,237 33,116 60,353 -------------------------- ---------- -------------- ------- At 31 March 2022 27,815 34,986 62,801 -------------------------- ---------- -------------- ------- 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 -------------------------- ---------- -------------- -------
The net book value of land and buildings includes GBP2,169,000 (2022 - 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 GBP385,000 (2022 - GBP1,043,000) which are not depreciated.
7 Commitments and contingencies 2023 2022 GBP000 GBP000 ---------------------------------------------------- ------- ------- Capital commitments contracted for by the group but not provided for in the financial statements 1,799 1,637 ---------------------------------------------------- ------- -------
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 2023, the directors do not consider any significant liability will arise in respect of any such claims (2022 - GBPnil).
8 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 2023 was a surplus of GBP10,413,000 (2022 - GBP9.932,000). 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.
9 Preliminary statement
The financial information set out above does not constitute the company's statutory financial statements for the years ended 31 March 2023 or 2022 but is derived from those financial statements. Statutory financial statements for 2022 have been delivered to the Registrar of Companies and those for 2023 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 23 June 2023 and will be available on the company's website, www.castings.plc.uk, from 26 June 2023.
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 (e.g aluminium), trucks which are not value added opportunities key markets for the group. and also replacement However, the continued technologies for heavy-duty development of new technology trucks. does present a medium-term The group's electricity risk to the group as contracts are fully Renewable c. 30% of group revenue Energy Guarantees of arises from the supply Origin ('REGO') backed of cast iron powertrain and the gas contracts components. will be from 1 October It is important to note 2023. This provides a that such a change also platform for the group presents an opportunity to support our customers for the group to evolve Green Iron aspirations. 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. Demand has the be accommodated and rapidly in patterns of demand. potential to change rapidly responded to. Commercial vehicle sales dependent upon the significant Demand is closely reviewed are linked to technological variable factors in the by senior management factors (for example macroeconomic environment on a constant basis. emissions legislation) such as conflict in Ukraine, and economic growth. supply chain issues 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 relationships Stable We build strong relationships with key customers in The loss of, or deterioration with our customers to the commercial vehicle in, any major customer develop products to meet market which form the relationship could have their specific needs. majority of the customer a material impact on 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 Stable 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 Stable 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. In general, materials used by the the financial performance the risk of price inflation group's businesses are of the group if no mitigating of these materials resides steel scrap and various actions were taken. with the group's customers alloys. The most important Power and raw material through price adjustment alloy raw material inputs markets have become very clauses. are premium graphite, volatile because of the Historically, energy magnesium ferro-silicon, current conflict in Ukraine contracts have been locked copper, nickel and molybdenum. and other associated in for at least 12 months. supply issues. With the volatile power market, following the end of our fixed price contract on 30 September 2022, the group entered into a flexible power agreement. When markets permit, it would be the intention to revert back to a fixed contract. Management has worked with customers during the course of the year to pass these costs through in a timely manner. --------------------------------- --------------------------------- -------------------------------- 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 The working group, formed are energy-intensive It is expected that green last year, continues and whilst the group taxes on energy and the to monitor and report considers that its businesses compliance cost of meeting on developments with provide fundamental components developing reporting regards 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 Stable 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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June 14, 2023 02:00 ET (06:00 GMT)
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