Half-year Report
Updated : 07:02
CASTINGS PLC
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2019
Sales for the six months ended 30 September 2019 were £73.1 million (2018 - £68.3 million) with profit before tax of £7.34 million (2018 - £5.77 million).
Foundry operations
As previously reported, customer demand was strong during the first three months of the period followed by some softening in the second quarter. Overall the output during the period was up 5.4% at 25,200 tonnes (2018 - 23,900 tonnes) and external sales revenue increased by 7.9% to £70.1 million. The revenue figure is enhanced by the continued shift to more machined parts which results in higher average selling prices.
The profit from the foundry segment of £7.1 million represents an increase of 9.5% from the equivalent period last year ("previous period"). Whilst there has been some margin improvement compared to the previous period, further productivity gains are set to be realised during the second half of the financial year and into 2020/21.
Investment of £3.1 million has been made during the period to support automation and other productivity initiatives within the foundry businesses.
Machining operation
CNC Speedwell generated external revenue of £3.0 million during the period, a decrease of 8.1% compared to the previous period, with a reported profit of £0.1 million compared to a loss of £0.8 million in the previous period. The reduction in external revenue is to be expected as the emphasis continues to be on the group's core customer base.
The focus on engineering and productivity improvements in the machining business are now starting to be realised and have resulted in a return to profit in the period. It will continue to take time before all of the necessary processes have been reviewed and production efficiencies fully reflected in the operating performance. Where gains have been made this has increased the capacity available for future production without the need for further investment.
The capital investment during the period has again reduced from £1.3 million in the previous period to £0.6 million. The investment made has been to support automation and other productivity initiatives.
Outlook
The commercial vehicle sector has reported a decline in order intake in Europe. Accordingly, we have seen a reduction in schedules from this element of our customer base, which represents 70% of group revenue.
The focus in the foundry businesses continues to be on productivity improvements within the production processes and the completion of the automation of finishing processes. We expect to see the benefit of this during the remainder of the current financial year and into 2020/21.
The programme of automation investment commenced in the machining business following the successful development of a pilot cell during the period. This will enable the business to achieve additional productivity gains over a number of years.
Dividend
An interim dividend of 3.48 pence per share has been declared and will be paid on 2 January 2020 to shareholders who are on the register at 22 November 2019.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.
The directors consider that the principal risks and uncertainties remain substantially the same as those stated on pages 7 and 8 of the Annual Report for the year ended 31 March 2019.
The general election and uncertainty surrounding our future relationship with Europe continues to cause concern over the near-term outlook and prospects for the UK economy. It is still too early to quantify or determine with certainty the impact on the group. The board will continue to monitor developments, consider the impact on the group's businesses and take appropriate action to help mitigate any risks associated with the UK leaving the EU.
Cautionary statement
This Interim Management Report ('IMR') has been prepared solely to provide additional information to shareholders to enable them to assess the group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose. This IMR contains certain forward-looking statements. These are made by the directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
The group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
The IMR has been prepared for the group as a whole and therefore gives greater emphasis to those matters which are significant to Castings P.L.C. and its subsidiary undertakings when viewed as a whole.
By order of the board
BRIAN J. COOKE
Chairman
8 November 2019
Castings p.l.c.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2019
Unaudited Half year to 30 September 2019 £'000 | Unaudited Half year to 30 September 2018 £'000 | Audited Year to 31 March 2019 £'000 | |
Revenue | 73,135 | 68,284 | 150,236 |
Cost of sales | (57,349) | (54,710) | (118,129) |
Gross profit | 15,786 | 13,574 | 32,107 |
Distribution costs | (1,444) | (1,429) | (2,794) |
Excluding exceptional items | (7,109) | (6,444) | (14,116) |
Exceptional items | - | - | (1,275) |
Total administrative expenses | (7,109) | (6,444) | (15,391) |
Profit from operations | 7,233 | 5,701 | 13,922 |
Finance income | 111 | 70 | 128 |
Profit before income tax | 7,344 | 5,771 | 14,050 |
Income tax expense | (1,393) | (1,094) | (3,040) |
Profit for the period attributable to the equity holders of the parent company | 5,951 | 4,677 | 11,010 |
Other comprehensive income/(expense) for the period: | |||
Items that will not be reclassified to profit and loss: | |||
Movement in unrecognised surplus on defined benefit pension schemes net of actuarial gains and losses | - | - | 237 |
Defined benefit pension schemes GMP equalisation charge | - | - | 1,290 |
- | - | 1,527 | |
Items that may be reclassified subsequently to profit and loss: | |||
Change in fair value of available for sale financial assets | 30 | 32 | 44 |
Tax effect of items that may be reclassified | (5) | (5) | (7) |
25 | 27 | 37 | |
Total other comprehensive income/(losses) for the period (net of tax) | 25 | 27 | 1,564 |
Total comprehensive income for the period attributable to the equity holders of the parent company | 5,976 | 4,704 | 12,574 |
Earnings per share attributable to the equity holders of the parent company | |||
Basic and diluted | 13.64p | 10.72p | 25.23p |
Consolidated Balance Sheet
30 September 2019
Unaudited 30 September 2019 £'000 | Unaudited 30 September 2018 £'000 | Audited 31 March 2019 £'000 | |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 70,999 | 75,253 | 71,438 |
Financial assets | 410 | 369 | 380 |
Other receivables | - | 1,135 | - |
71,409 | 76,757 | 71,818 | |
Current assets | |||
Inventories | 19,077 | 18,503 | 19,164 |
Trade and other receivables | 36,954 | 40,670 | 41,121 |
Current tax asset | 524 | - | - |
Other current interest-bearing deposits | - | 4,900 | 5,000 |
Cash and cash equivalents | 25,835 | 14,692 | 25,771 |
82,390 | 78,765 | 91,056 | |
Assets classed as held for resale | 1,060 | - | 1,060 |
83,450 | 78,765 | 92,116 | |
Total assets | 154,859 | 155,522 | 163,934 |
LIABILITIES | |||
Current liabilities | |||
Trade and other payables | 22,453 | 22,787 | 24,222 |
Current tax liabilities | - | 1,075 | 1,842 |
22,453 | 23,862 | 26,064 | |
Non-current liabilities | |||
Deferred tax liabilities | 3,560 | 3,666 | 3,481 |
Total liabilities | 26,013 | 27,528 | 29,545 |
Net assets | 128,846 | 127,994 | 134,389 |
Equity attributable to equity holders of the parent company | |||
Share capital | 4,363 | 4,363 | 4,363 |
Share premium account | 874 | 874 | 874 |
Other reserve | 13 | 13 | 13 |
Retained earnings | 123,596 | 122,744 | 129,139 |
Total equity | 128,846 | 127,994 | 134,389 |
Consolidated Cash Flow Statement
For six months ended 30 September 2019
Unaudited Half year to 30 September 2019 £'000 | Unaudited Half year to 30 September 2018 £'000 | Audited Year to 31 March 2019 £'000 | |
Cash flows from operating activities | |||
Profit before income tax | 7,344 | 5,771 | 14,050 |
Adjustments for: | |||
Depreciation | 4,163 | 3,870 | 8,296 |
Profit on disposal of property, plant and equipment | - | - | (160) |
Finance income | (111) | (70) | (128) |
Pension administrative costs | - | - | 237 |
Pension GMP equalisation charge | - | - | 1,290 |
Decrease/(increase) in inventories | 87 | (2,219) | (2,880) |
Decrease/(increase) in receivables | 5,185 | (1,841) | (4,449) |
(Decrease)/increase in payables | (1,769) | 545 | 1,980 |
Cash generated from operating activities | 14,899 | 6,056 | 18,236 |
Tax paid | (3,685) | (1,341) | (2,707) |
Interest received | 101 | 57 | 108 |
Net cash generated from operating activities | 11,315 | 4,772 | 15,637 |
Cash flows from investing activities | |||
Dividends received from listed investments | 10 | 13 | 20 |
Purchase of property, plant and equipment | (3,724) | (3,187) | (4,858) |
Proceeds from disposal of property, plant and equipment | - | - | 160 |
Transfer from/(to) other current interest-bearing deposits | 5,000 | - | (100) |
Repayments from pension schemes | - | - | 4,455 |
Advances to pension schemes | (1,018) | (1,228) | (2,390) |
Net cash used in investing activities | 268 | (4,402) | (2,713) |
Cash flow from financing activities | |||
Dividends paid to shareholders | (11,519) | (4,852) | (6,327) |
Net cash used in financing activities | (11,519) | (4,852) | (6,327) |
Net increase/(decrease) in cash and cash equivalents | 64 | (4,482) | 6,597 |
Cash and cash equivalents at beginning of period | 25,771 | 19,174 | 19,174 |
Cash and cash equivalents at end of period | 25,835 | 14,692 | 25,771 |
Cash and cash equivalents: | |||
Short-term deposits | 23,362 | 11,931 | 19,828 |
Cash available on demand | 2,473 | 2,761 | 5,943 |
25,835 | 14,692 | 25,771 |
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of the parent | |||||
Unaudited | Share capital £'000 | Share premium £'000 | Other reserve £'000 | Retained earnings £'000 | Total equity £'000 |
At 1 April 2019 | 4,363 | 874 | 13 | 129,139 | 134,389 |
Profit for the period | - | - | - | 5,951 | 5,951 |
Other comprehensive income/(losses): | |||||
Change in fair value of available for sale assets | - | - | - | 30 | 30 |
Tax effect of items taken directly to reserves | - | - | - | (5) | (5) |
Total comprehensive income for the period ended 30 September 2019 | - | - | - | 5,976 | 5,976 |
Dividends | - | - | - | (11,519) | (11,519) |
At 30 September 2019 | 4,363 | 874 | 13 | 123,596 | 128,846 |
Unaudited | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 April 2018 | 4,363 | 874 | 13 | 122,892 | 128,142 |
Profit for the period | - | - | - | 4,677 | 4,677 |
Other comprehensive income/(losses): | |||||
Change in fair value of available for sale assets | - | - | - | 32 | 32 |
Tax effect of items taken directly to reserves | - | - | - | (5) | (5) |
Total comprehensive income for the period ended 30 September 2018 | - | - | - | 4,704 | 4,704 |
Dividends | - | - | - | (4,852) | (4,852) |
At 30 September 2018 | 4,363 | 874 | 13 | 122,744 | 127,994 |
Audited | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 April 2018 | 4,363 | 874 | 13 | 122,892 | 128,142 |
Profit for the year | - | - | - | 11,010 | 11,010 |
Other comprehensive income/(losses): | |||||
Movement in unrecognised surplus on defined benefit pension schemes net of actuarial loss | - | - | - | 237 | 237 |
Defined benefit pension schemes GMP equalisation charge | - | - | - | 1,290 | 1,290 |
Change in fair value of available for sale assets | - | - | - | 44 | 44 |
Tax effect of items taken directly to reserves | - | - | - | (7) | (7) |
Total comprehensive income for the year ended 31 March 2019 | - | - | - | 12,574 | 12,574 |
Dividends | - | - | - | (6,327) | (6,327) |
At 31 March 2019 | 4,363 | 874 | 13 | 129,139 | 134,389 |
Notes
1. General information
Castings P.L.C. (the 'company') is a company domiciled in England. The condensed consolidated interim financial statements of the company for the six months ended 30 September 2019 comprise the company and its subsidiaries (together referred to as the 'group').
The principal activities of the group are the manufacture of iron castings and machining operations.
The financial information for the year ended 31 March 2019 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2019 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for 2019 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498 (2) or (3) of the Companies Act 2006.
This report has not been audited and has not been reviewed by independent auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.
2. Accounting policies
The annual financial statements of Castings P.L.C. are prepared using the recognition and measurement principles of IFRSs as endorsed by the European Union. The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.
Basis of preparation
After making enquiries, the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed consolidated interim financial statements.
The same accounting policies, presentation and methods of computation are followed in the condensed consolidated interim financial statements as applied in the group's latest annual audited financial statements.
New standards effective and adopted by the group in the period
The following new standards and IFRIC interpretations have been issued and are effective for the first time for the group's financial year beginning on 1 April 2019 and therefore have been applied by the group in these condensed consolidated interim financial statements:
• IFRS 16 Leases
• IFRIC 23 Uncertainty over Income Tax Treatments
The adoption of these new or amended standards did not have a material impact on the group's financial position or results from operations in the half-year ended 30 September 2019.
3. Seasonality of operations
The directors do not consider there to be any significant seasonality or cyclicality to the results of the group.
4. Segment information
For internal decision making purposes, the group is organised into three operating companies which are considered to represent two operating segments of the group. Castings P.L.C. and William Lee Limited are aggregated into Foundry Operations and CNC Speedwell Limited is the Machining Operation.
Inter-segment transactions are entered into under the normal commercial terms and conditions that would be available to third parties.
The following shows the revenues, results and total assets by reportable segment for the half year to 30 September 2019.
Foundry operations £'000 | Machining £'000 | Elimination £'000 | Total £'000 | |
Revenue from external customers | 70,106 | 3,029 | - | 73,135 |
Inter-segmental revenue | 9,609 | 10,325 | - | 19,934 |
Segmental result | 7,094 | 139 | - | 7,233 |
Unallocated income: Finance income | ||||
111 | ||||
Profit before income tax | 7,344 | |||
Total assets | 137,691 | 31,430 | (14,262) | 154,859 |
Non-current asset additions | 3,077 | 647 | - | 3,724 |
Depreciation | 2,048 | 2,115 | - | 4,163 |
Total liabilities | (25,890) | (7,776) | 7,653 | (26,013) |
The following shows the revenues, results and total assets by reportable segment for the half year to 30 September 2018.
Foundry operations £'000 |
Machining £'000 |
Elimination £'000 |
Total £'000 | |
Revenue from external customers | 64,988 | 3,296 | - | 68,284 |
Inter-segmental revenue | 9,433 | 9,646 | - | 19,079 |
Segmental result | 6,476 | (775) | - | 5,701 |
Unallocated income: Finance income | ||||
70 | ||||
Profit before income tax | 5,771 | |||
Total assets | 138,487 | 35,261 | (18,226) | 155,522 |
Non-current asset additions | 2,336 | 1,339 | - | 3,675 |
Depreciation | 1,972 | 1,898 | - | 3,870 |
Total liabilities | (28,132) | (11,359) | 11,963 | (27,528) |
The following shows the revenues, results and total assets by reportable segment for the year ended 31 March 2019.
Foundry operations £'000 | Machining £'000 | Elimination £'000 | Total £'000 | |
Revenue from external customers | 143,060 | 7,176 | - | 150,236 |
Inter-segmental revenue | 21,499 | 20,605 | - | 42,104 |
Segmental result | 16,832 | (1,342) | (56) | 15,434 |
Unallocated income/(costs): | ||||
Exceptional credit for recovery of Icelandic bank deposits previously written off | 15 | |||
Defined benefit pension costs | (237) | |||
Defined benefit pension GMP equalisation charge | (1,290) | |||
Finance income | 128 | |||
Profit before income tax | 14,050 | |||
Total assets | 145,747 | 33,393 | (15,206) | 163,934 |
Non-current asset additions | 3,496 | 1,850 | - | 5,346 |
Depreciation | 4,183 | 4,113 | - | 8,296 |
Total liabilities | (29,632) | (9,879) | 9,966 | (29,545) |
5. Dividends
Amounts recognised as distributions to shareholders in the period:
Half year to 30 September 2019 £'000 | Half year to 30 September 2018 £'000 | |
Final dividend of 11.40p per share for the year ended 31 March 2019 (2018 - 11.12p per share) | 4,974 | 4,852 |
Supplementary dividend of 15.00p per share for the year ended 31 March 2019 (2018 - nil) | 6,545 | - |
11,519 | 4,852 |
The directors have declared an interim dividend in respect of the financial year ending 31 March 2020 of 3.48p per share (2019 - 3.38p), which will be paid on 2 January 2020.
6. Earnings per share and diluted earnings per share
Earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. There are no share options or other potentially issuable shares; hence the diluted earnings per share is the same calculation.
Unaudited Half year to 30 September 2019 | Unaudited Half year to 30 September 2018 | Audited Year to 31 March 2019 | |
Profit after tax (£'000) | 5,951 | 4,677 | 11,010 |
Weighted average number of shares | 43,632,068 | 43,632,068 | 43,632,068 |
Earnings per share - basic and diluted | 13.64p | 10.72p | 25.23p |
7. Pension schemes
The group operates two defined benefit pension schemes which are closed to new entrants and closed to future accruals on 6 April 2009. The assets of the schemes are independent of the finances of the group and are administered by trustees.
The pension schemes are related parties of the group and during the period £1,018,000 (2018 - £1,228,000) was paid by the group on behalf of the schemes in respect of pension payments and administration costs. At 30 September 2019, the outstanding balance of £4,543,000 (2018 - £6,818,000) is repayable within one year. In the prior year, £1,135,000 of the balance was classified as a non-current other receivable being repayable on 30 November 2019.
Payments made by the company on behalf of the schemes in the current period are repayable on 30 November 2020.
8. Interim report
Copies of this interim management report will be available on the company's website, www.castings.plc.uk, and from the registered office.
Statement of Directors' Responsibilities
The directors confirm that the condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.
By order of the board
S. J. Mant FCA
Group Finance Director
8 November 2019
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