Castings reports 'satisfactory' profit as revenue falls
Castings reported a fall in total revenue in its final results on Wednesday, to £138.67m, from £150.24m a year earlier.
The London-listed firm said its gross profit for the year ended 31 March was £29.48m, down from £32.11m year-on-year, while its profit before income tax slid to £12.7m from £14.1m.
Basic and diluted earnings per share came in at 23.07p, down from 25.23p in the 2019 financial year.
“Despite the problems associated with Covid-19, I am pleased to report a reasonably satisfactory profit for the year,” said chairman Brian Cooke.
“It has been a year of three parts each of varying lengths,” he explained.
“In the first half of the year we saw strong demand from our customers, generating a good level of profitability.”
Cooke said the second half of the year saw reduced levels of demand from the commercial vehicle sector, with output reduced to approximately 70% of capacity.
The company had expected reduced profit levels in that period, as previously reported.
“The final part started in the third week of March as the impact of Covid-19 started to come through.
“As a result of plant closures at the original equipment manufacturers (OEMs), our demand reduced by approximately 80% and the year end result was negatively affected by approximately £0.75m.”
Castings said its foundries had seen a decrease in output and profitability compared to the previous year, though it saw “reasonable levels” of profitability in the first half, with strong demand during that period.
“As noted above, output and profitability in the second half was impacted by declining demand, culminating in the customer plant closures in the last month of the year in response to the Covid-19 pandemic, Cooke said.
“We have been working to realise the full productivity improvements from the automation investment at the William Lee site.
“Whilst some advances were made during the year, we will only start to see the financial benefits of the wider restructuring of the process department when volumes increase.”
The firm began work on upgrading and extending one of the moulding lines at the Brownhills foundry during the year, and one complete in the second half of the current financial year, the board said it would provide greater reliability, efficiency, production flexibility and increased output capacity.
“I was pleased to have been able to report a return to profitability of CNC Speedwell in the first half of the year, largely as a result of management's continued improvements in the operational efficiency of the business,” Brian Cooke said.
“The machining business continues to become more aligned with the customer base of the foundries and was therefore equally impacted by the fall in demand set out previously.
“With the level of investment that has been made in the business over recent years, the depreciation charge has an even greater impact when operating at lower volumes. It is not surprising then that the second half of the year produced a loss for CNC Speedwell.”
Castings said it continued its programme of investment in automation in that area of the group, to ensure that further operational efficiencies are achieved.
Looking beyond the 2020 financial year, with demand having reduced “dramatically” in March and further in April, Castings said a significant proportion of its workforce was placed on furlough under the Coronavirus Job Retention Scheme.
Despite that support from the government, the “magnitude and sudden nature” of the fall in output had inevitably had a significant negative impact on the results of the group at the start of the 2021 financial year.
“It is pleasing to report that output has increased from the lows of April, and a number of employees have returned from furlough leave as we plan for the higher demand set out in our customer forward schedules,” Cooke said.
“However, production remains significantly below pre-COVID-19 levels and the continued uncertainty regarding the economic recovery post-lockdown means that it remains incredibly difficult to predict future demand and therefore whether this initial recovery in demand will be maintained through the year.”
Castings’ board still recommended a final dividend of 11.40p per share, to be paid on 17 August to shareholders on the register on 17 July.
That, together with the interim dividend, gave a total dividend for the year of 14.88p per share.
At 1105 BST, shares in Castings were up 0.07% at 391.28p.