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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END
FR ZXLFFXQLLBBZ
(END) Dow Jones Newswires
June 14, 2023 02:00 ET (06:00 GMT)
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