TIDMCGS
RNS Number : 1121H
Castings PLC
13 November 2018
CASTINGS P.L.C.
INTERIM MANAGEMENT REPORT
Six months ended 30 September 2018
Sales for the six months ended 30 September 2018 were GBP68.3
million (2017 - GBP61.7 million) with profit before tax of GBP5.77
million (2017 - GBP5.91 million).
Foundry operations
As previously reported, customer demand during the period
remained steady with output of 23,900 tonnes (2017 - 23,500 tonnes)
and external sales revenue up 11.2% to GBP65.0 million. The revenue
figure is enhanced by the continued shift to more machined parts
resulting in higher average selling prices and, to a lesser extent,
the impact of rising steel scrap prices during the period which
have been passed on to customers.
The profit from the foundry segment of GBP6.5 million represents
a decrease of 5.7% from the previous period. The result has been
negatively impacted by the time lag in passing on raw material and
other price increases and a degree of inefficiencies relating to
the introduction of new production processes.
Investment of GBP2.3 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 GBP3.3 million
during the period, an increase of 0.7% compared to the equivalent
period last year ("previous period"), with a reported loss of
GBP0.8 million compared to GBP1.0 million in the previous
period.
Following the finalisation of the new management team structure
in March 2018, the initial focus was to increase output to ensure
customer schedules were satisfied without the need for excessive
transport costs. This was achieved during the period along with
returning finished foundry stocks to satisfactory operational
levels, resulting in an increase to inventories of GBP2.2
million.
A number of new parts have commenced production during the
period, many of which require considerable engineering focus to
maximise productivity against a back-drop of competitive prices.
Whilst this is under way, it will take some time before all the
necessary processes have been reviewed and production efficiencies
realised. Where gains have been made this has increased available
capacity and allowed management to bring back work that had
previously been subcontracted, without the need for capital
investment.
Whilst the operating loss is disappointing, it reflects the
current status of the machining businesses in what is a period of
considerable change. The capital investment during the period has
reduced from GBP2.7 million in the previous period to GBP1.3
million. The investment made has been to support increased demand
from core business customers and for specific productivity
projects; this remains the strategy for future capital investment
appraisal.
Management is now applying a greater focus on maintaining
existing equipment to ensure the asset returns are maximised thus
removing the need for further investment in capacity. Consequently
the management of CNC has reviewed the useful economic lives of the
recently acquired items of plant and machinery and has determined
that a life of 15 years is more appropriate than the 10 years
previously used. This life is within the range recorded in the
group accounting policies and the change has resulted in a
reduction of the depreciation charge for the period of GBP0.5
million.
The closure of the Fradley site and consolidation of the
machining business at the Brownhills facility is now complete.
Outlook
Demand from our commercial vehicle customer base remains steady
and every effort is being made to ensure further productivity gains
are achieved within the foundry businesses to enhance the
return.
The ongoing changes at the machining operation are undoubtedly
going to take time before they generate any significant return. The
intention is to begin a programme of automation investment during
2019/20 which will enable the business to achieve additional
productivity gains over a number of years. The business continues
to provide vital support to the foundries in satisfying the product
requirements of the group's core customer base.
Dividend
An interim dividend of 3.38 pence per share has been declared
and will be paid on 2 January 2019 to shareholders who are on the
register at 23 November 2018.
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
2018.
The ongoing Brexit negotiations continue to cause uncertainty
regarding 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.
Director change
Andrew Eastgate was appointed non-executive director on 1
September 2018.
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
13 November 2018
Castings p.l.c.
Lichfield Road
Brownhills
West Midlands
WS8 6JZ
Consolidated Statement of Comprehensive Income
For six months ended 30 September 2018
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------------- ------------- ---------
Revenue 68,284 61,728 133,276
Cost of sales (54,710) (47,720) (103,674)
------------------------------------------------------- ------------- ------------- ---------
Gross profit 13,574 14,008 29,602
Distribution costs (1,429) (1,289) (3,818)
Administrative expenses
------------------------------------------------------- ------------- ------------- ---------
Excluding exceptional (6,444) (6,851) (13,949)
Exceptional - - 109
------------------------------------------------------- ------------- ------------- ---------
Total administrative expenses (6,444) (6,851) (13,840)
------------------------------------------------------- ------------- ------------- ---------
Profit from operations 5,701 5,868 11,944
Finance income 70 43 133
------------------------------------------------------- ------------- ------------- ---------
Profit before income tax 5,771 5,911 12,077
Income tax expense (1,094) (1,121) (2,279)
------------------------------------------------------- ------------- ------------- ---------
Profit for the period attributable to the equity
holders of the parent company 4,677 4,790 9,798
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 - - 352
------------------------------------------------------- ------------- ------------- ---------
- - 352
Items that may be reclassified subsequently to profit
and loss:
Change in fair value of available for sale financial
assets 32 (42) (72)
Tax effect of items that may be reclassified (5) 8 15
------------------------------------------------------- ------------- ------------- ---------
27 (34) (57)
------------------------------------------------------- ------------- ------------- ---------
Total other comprehensive income/(losses) for the
period (net of tax) 27 (34) 295
------------------------------------------------------- ------------- ------------- ---------
Total comprehensive income for the period attributable
to the equity holders of the parent company 4,704 4,756 10,093
------------------------------------------------------- ------------- ------------- ---------
Earnings per share attributable to the equity holders
of the parent company
Basic and diluted 10.72p 10.98p 22.46p
------------------------------------------------------- ------------- ------------- ---------
Consolidated Balance Sheet
30 September 2018
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
---------------------------------------------------- ------------- ------------- ---------
ASSETS
Non-current assets
Property, plant and equipment 75,253 75,070 75,448
Financial assets 369 366 336
Other receivables 1,135 2,269 1,135
---------------------------------------------------- ------------- ------------- ---------
76,757 77,705 76,919
---------------------------------------------------- ------------- ------------- ---------
Current assets
Inventories 18,503 14,574 16,284
Trade and other receivables 40,670 35,685 38,090
Other current interest-bearing deposits 4,900 5,000 4,900
Cash and cash equivalents 14,692 19,514 19,174
---------------------------------------------------- ------------- ------------- ---------
78,765 74,773 78,448
---------------------------------------------------- ------------- ------------- ---------
Total assets 155,522 152,478 155,367
---------------------------------------------------- ------------- ------------- ---------
LIABILITIES
Current liabilities
Trade and other payables 22,787 23,001 22,242
Current tax liabilities 1,075 1,090 1,380
---------------------------------------------------- ------------- ------------- ---------
23,862 24,091 23,622
---------------------------------------------------- ------------- ------------- ---------
Non-current liabilities
Deferred tax liabilities 3,666 4,105 3,603
---------------------------------------------------- ------------- ------------- ---------
Total liabilities 27,528 28,196 27,225
---------------------------------------------------- ------------- ------------- ---------
Net assets 127,994 124,282 128,142
---------------------------------------------------- ------------- ------------- ---------
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 122,744 119,032 122,892
---------------------------------------------------- ------------- ------------- ---------
Total equity 127,994 124,282 128,142
---------------------------------------------------- ------------- ------------- ---------
Consolidated Cash Flow Statement
For six months ended 30 September 2018
Unaudited Unaudited
Half year Half year Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ------------- ------------- ---------
Cash flows from operating activities
Profit before income tax 5,771 5,911 12,077
Adjustments for:
Depreciation 3,870 3,677 8,525
Profit on disposal of property, plant and equipment - - 9
Finance income (70) (43) (133)
Pension administrative costs - - 352
Increase in inventories (2,219) (511) (2,221)
Increase in receivables (1,841) (535) (3,568)
Increase in payables 545 3,134 2,376
-------------------------------------------------------- ------------- ------------- ---------
Cash generated from operating activities 6,056 11,633 17,417
Tax paid (1,341) (1,826) (3,190)
Interest received 57 30 111
-------------------------------------------------------- ------------- ------------- ---------
Net cash generated from operating activities 4,772 9,837 14,338
Cash flows from investing activities
Dividends received from listed investments 13 13 22
Purchase of property, plant and equipment (3,187) (6,719) (11,223)
Proceeds from disposal of property, plant and equipment - - 3
Transfer from other current interest-bearing deposits - - 100
Repayments from pension schemes - - 3,122
Advances to pension schemes (1,228) (1,227) (3,321)
-------------------------------------------------------- ------------- ------------- ---------
Net cash used in investing activities (4,402) (7,933) (11,297)
Cash flow from financing activities
Dividends paid to shareholders (4,852) (4,618) (6,095)
-------------------------------------------------------- ------------- ------------- ---------
Net cash used in financing activities (4,852) (4,618) (6,095)
Net decrease in cash and cash equivalents (4,482) (2,714) (3,054)
Cash and cash equivalents at beginning of period 19,174 22,228 22,228
-------------------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents at end of period 14,692 19,514 19,174
-------------------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents:
Short-term deposits 11,931 16,608 16,846
Cash available on demand 2,761 2,906 2,328
-------------------------------------------------------- ------------- ------------- ---------
14,692 19,514 19,174
-------------------------------------------------------- ------------- ------------- ---------
Consolidated Statement of Changes in Equity
Equity attributable to equity holders
of the parent
Share Share Retained Total
capital premium Other reserve earnings equity
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
------------------------------------- -------- -------- ------------- --------- --------
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- ------- ------- ------- -------
At 1 April 2017 4,363 874 13 118,894 124,144
Profit for the period - - - 4,790 4,790
Other comprehensive income/(losses):
Change in fair value of available
for sale assets - - - (42) (42)
Tax effect of items taken directly
to reserves - - - 8 8
------------------------------------- ------- ------- ------- ------- -------
Total comprehensive income for the
period ended 30 September 2017 - - - 4,756 4,756
Dividends - - - (4,618) (4,618)
------------------------------------- ------- ------- ------- ------- -------
At 30 September 2017 4,363 874 13 119,032 124,282
------------------------------------- ------- ------- ------- ------- -------
Audited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- ------- ------- ------- -------
At 1 April 2017 4,363 874 13 118,894 124,144
Profit for the year - - - 9,798 9,798
Other comprehensive income/(losses):
Movement in unrecognised surplus on
defined benefit pension schemes net
of actuarial loss - - - 352 352
Change in fair value of available
for sale assets - - - (72) (72)
Tax effect of items taken directly
to reserves - - - 15 15
------------------------------------- ------- ------- ------- ------- -------
Total comprehensive income for the
year ended 31 March 2018 - - - 10,093 10,093
Dividends - - - (6,095) 6,095)
------------------------------------- ------- ------- ------- ------- -------
At 31 March 2018 4,363 874 13 122,892 128,142
------------------------------------- ------- ------- ------- ------- -------
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 2018 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 2018 does
not constitute the full statutory accounts for that period. The
Annual Report and Financial Statements for the year ended 31 March
2018 have been filed with the Registrar of Companies. The
Independent Auditors' Report on the Annual Report and Financial
Statements for 2018 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. Following a review of the useful
economic lives of the recently acquired items of plant and
machinery within the machining business, the directors have
determined that a life of 15 years is more appropriate than the 10
years previously used. This revision is within the range set out in
the group accounting policies and the change has resulted in a
reduction of the depreciation charge for the period of GBP0.5
million.
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 2018.
Foundry
operations Machining Elimination Total
GBP'000 GBP'000 GBP'000 GBP'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 half year to 30 September 2017.
Foundry
operations Machining Elimination Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- ----------- ------------- ---------
Revenue from external customers 58,454 3,274 - 61,728
Inter-segmental revenue 8,893 8,600 - 17,493
-------------------------------- ----------- ----------- ------------- ---------
Segmental result 6,867 (999) - 5,868
-------------------------------- ----------- ----------- ------------- ---------
Unallocated income:
Finance income 43
-------------------------------- ----------- ----------- ------------- ---------
Profit before income tax 5,911
-------------------------------- ----------- ----------- ------------- ---------
Total assets 130,718 37,497 (15,737) 152,478
-------------------------------- ----------- ----------- ------------- ---------
Non-current asset additions 3,258 2,727 - 5,985
-------------------------------- ----------- ----------- ------------- ---------
Depreciation 1,751 1,926 - 3,677
-------------------------------- ----------- ----------- ------------- ---------
Total liabilities (26,951) (10,560) 9,315 (28,196)
-------------------------------- ----------- ----------- ------------- ---------
The following shows the revenues, results and total assets by
reportable segment for the year ended 31 March 2018.
Foundry
operations Machining Elimination Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------- --------- ----------- --------
Revenue from external customers 127,007 6,269 - 133,276
Inter-segmental revenue 19,024 18,571 - 37,595
--------------------------------------------- ----------- --------- ----------- --------
Segmental result 16,051 (3,950) 86 12,187
--------------------------------------------- ----------- --------- ----------- --------
Unallocated income/(costs):
Exceptional credit for recovery of Icelandic
bank deposits previously written off 109
Defined benefit pension costs (352)
Finance income 133
--------------------------------------------- ----------- --------- ----------- --------
Profit before income tax 12,077
--------------------------------------------- ----------- --------- ----------- --------
Total assets 135,669 36,258 (16,560) 155,367
--------------------------------------------- ----------- --------- ----------- --------
Non-current asset additions 4,134 7,089 - 11,223
--------------------------------------------- ----------- --------- ----------- --------
Depreciation 3,921 4,604 - 8,525
--------------------------------------------- ----------- --------- ----------- --------
Total liabilities (27,008) (11,581) 11,364 (27,225)
--------------------------------------------- ----------- --------- ----------- --------
5. Dividends
Amounts recognised as distributions to shareholders in the
period:
Half year Half year
to to
30 September 30 September
2018 2017
GBP'000 GBP'000
--------------------------------------------------------- ------------- -------------
Final dividend of 11.12p per share for the year ended 31
March 2018 (2017 - 10.59p per share) 4,852 4,618
--------------------------------------------------------- ------------- -------------
4,852 4,618
--------------------------------------------------------- ------------- -------------
The directors have declared an interim dividend in respect of
the financial year ending 31 March 2019 of 3.38p per share (2018 -
3.38p), which will be paid on 2 January 2019.
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 Unaudited
Half year Half year Audited
to to Year to
30 September 30 September 31 March
2018 2017 2017
--------------------------------------- ------------- ------------- ----------
Profit after tax (GBP'000) 4,677 4,790 9,798
--------------------------------------- ------------- ------------- ----------
Weighted average number of shares 43,632,068 43,632,068 43,632,068
--------------------------------------- ------------- ------------- ----------
Earnings per share - basic and diluted 10.72p 10.98p 22.46p
--------------------------------------- ------------- ------------- ----------
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 GBP1,228,000 (2017 - GBP1,227,000) was paid by the group
on behalf of the schemes in respect of pension payments and
administration costs. At 30 September 2018, of the outstanding
balance of GBP6,818,000 (2017 - GBP6,618,000), GBP1,135,000 (2017 -
GBP2,269,000) is classified as a non-current other receivable and
is 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
13 November 2018
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END
IR GGGMGGUPRGMP
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