Chamberlin Plc Regulatory News (CMH)

15 Jun 2006 07:04

Chamberlin & Hill PLC15 June 2006 CHAMBERLIN & HILL plc PRELIMINARY ANNOUNCEMENT OF RESULTS 2006 Chamberlin & Hill plc announces its audited results for the year ended 31 March2006: Financial highlights • Operating profit before exceptional items up 15.8% to £2.4m • Underlying earnings per share up 18.6% to 21.5p • Dividend maintained at 11.85p for the year • Dividend cover on underlying earnings increased from 1.5 to 1.8 times • Total equity strengthened by £1.6m to £13.5m • Pension deficit reduced by £2.8m to £0.5m Year to Year to 31 March 31 March 2006 2005 £000 £000 Turnover 41,435 41,970 Operating profit before exceptional items 2,398 2,071 Profit before taxation 2,368 2,192 Basic earnings per share 22.5p 20.9p Underlying earnings per share 21.5p 18.1p Dividends per share (paid and proposed) 11.85p 11.85p Chamberlin & Hill plcTom Brown, Chairman 01922 721411Barrie Williams, CEO Chairman's Statement I am pleased to report that on turnover broadly in line with the previous yearat £41.44m (2005: £41.97m) operating profit before exceptional items increased15.8% to £2.40m (2005: £2.07m), and pre-tax profit before exceptional items wasup 19.2% at £2.26m (2005: £1.90m). As at the interim, the results are presentedunder International Financial Reporting Standards ("IFRS") which have affectedboth the content and presentation of these and the comparative 2005 figures.Reconciliations to previously reported results were provided in the InterimReport for the six months to 30 September 2005. Fully diluted underlying earnings per share rose 18.6% to 21.5p (2005: 18.1p).The Board is recommending an unchanged final dividend of 8.0p per share (11.85ptotal for the year) payable on 28 July 2006 to shareholders on the register atthe close of business on 7 July 2006. Dividend cover has now been restored to1.8 times, based on underlying earnings. In the Interim Report we announced our intention to close the Bloxwich foundry.This activity was undertaken speedily and effectively, and while it wasresponsible for most of the exceptional restructuring costs reported of £0.93mthis was more than offset by an exceptional gain of £1.03m on the sale of thesite. The Interim Report also stated that we were examining ways to mitigate thedeficit in our final salary pension scheme, and following the sale of theBloxwich site the group made a payment of £1.50m into the Chamberlin & HillStaff Pension Scheme. This, together with favourable investment returns,reduced the Group's defined benefit pension scheme deficit to £0.49m (2005:£3.32m) at the year end. The Group's balance sheet remains very strong with net cash at the year end of£0.59m (2005: net debt of £0.04m) after capital expenditure of £1.44m. Theequity attributable to shareholders at 31 March 2006 rose to £13.54m (2005:£11.94m). The Group's net operating margins rose to 5.8% compared to 4.9% previously. Thesubstantial increases in the prices of ferrous metals and metallurgical cokeendured in the previous year subsided somewhat, although large increases in theprices paid for electricity and gas from last autumn again put margins underpressure until fully recovered from customers. Having completed the first part of our foundry integration programme with theclosure of Bloxwich and the relocation of its workload elsewhere in the Group,we anticipate improved margins for grey iron castings in the year ahead. Wehave now embarked on the redevelopment of our Scunthorpe foundry where we intendto relocate the business currently in Leicester by 2008, and believe that themerger of Russell Castings and Ductile Castings will provide furtheropportunities for margin enhancement. In our Engineering Division advances were made in redefining our marketopportunities, offshore sourcing and new product development, but the overallresult did not reflect the progress made in the Foundry Division. Since the yearend a reorganisation has been implemented in Fred Duncombe, aimed at betterexploiting that company's opportunities. Barrie Williams will stand down as Chief Executive following the Annual GeneralMeeting on 28 July, in preparation for his retirement in September. Barriejoined Chamberlin & Hill in 1965, becoming a Director in 1976 and ChiefExecutive in 1995. During this period he has made an outstanding contribution tothe Group, and on behalf of the Board I would like to record our sincere thanksto him and to wish him a long and happy retirement. I should also like to thankhim personally for the support he has given me since I became Chairman. As we announced on 20 March 2006, I am delighted to welcome Tim Hair to theBoard as Chief Executive Designate and look forward to working with him to buildfurther on the sound business left by Barrie. Current activity levels at our Walsall Foundry are much improved and elsewheremarkets appear to be running at or around predicted levels. Current trading isin line with our expectations. If this situation is maintained we anticipateanother year of progress and will continue to seek new and relevantopportunities to further enhance earnings. Tom BrownChairman15 June 2006 Chief Executive's Review At this time last year I commented that the focus for the year ahead was toimprove our margins. It is pleasing now to report that some progress was madein the year with the return on sales improving from 4.9% to 5.8% on turnoverbroadly in line with the previous year. The scope of the improvement was heldback for two reasons. Firstly the large rise in energy costs where we wereparticularly affected by increases in gas and electricity prices. Increasedcosts always have a time lag before recovery, and affect margins accordingly.The second element was that we saw a reduction in demand during the wintermonths. This has now largely recovered, and we will be seeking to make furtherprogress with margins in the year ahead. To achieve this we continue to invest in process improvement, to increaseproductivity and energy efficiency, and in new product development andenvironmental improvement. In the year just ended capital expenditure was£1.44m. Our success in improving our efficiencies can be seen in the sales perhead ratio, which has improved by some 45% in a 10 year period. Foundries Bloxwich Foundry ceased production at the end of January, and the sale of thesite was completed in March. From 1 April 2006, the Light Castings Division isnow based in Walsall trading as Chamberlin & Hill Castings Limited, the businessand assets having been hived down from Chamberlin & Hill plc on 31 March 2006.The transfer of the grey iron parts from Bloxwich to Walsall was achievedspeedily and efficiently as was the commissioning of the 2013 Disamatic mouldingmachine. For the Light Division in the year turnover fell by 9% while thereturn on sales improved by 1.5% despite the inevitable disruption involved inthe transfer of plant and equipment. Following the rationalisation to one site we look forward to further improvementin net margins in the year ahead. Current levels of activity in the automotivesector have recovered from the dip seen earlier in the year. We continue to seegrowth opportunities in our market for turbocharger castings for diesel engines,particularly for those associated with improved emission levels. Opportunitiestaken following the recent closure of competitors have led to increased outputlevels over recent weeks. Given reasonable stability in material and energyprices we expect Walsall to continue to perform well in the year ahead. In preparation for consolidation of the Heavy Castings Division onto one site inScunthorpe, Russell Castings acquired the business and assets of DuctileCastings and its name was changed to Russell Ductile Castings Limited from 1April 2006. Turnover in 2005/06 was broadly in line with the previous year,while the return on sales improved by 1.5%. The hand-mould section wastransferred from Leicester to Scunthorpe at the year end. Activity levels,which fell back during the winter months, are slowly improving as a major salescampaign to raise turnover in the division begins to bear fruit. As in theLight Castings Division, the volatility of raw materials and energy costsremains the greatest threat to performance. During the year plans have been developed and property acquired to extend theScunthorpe site in order to complete the integration of the business fromLeicester in 2008. Foundry investment will therefore be largely concentrated atScunthorpe in the next two years. In the year to 31 March 2007 we will beinvesting in the site infrastructure and services, and the construction of a newmelting facility. Engineering Production value fell slightly in our engineering businesses to £7.8m (2005:£8.0m) and the return on sales fell back some 1.6%, the reduction beingconsistent both in our lighting business, PFP Electrical Products, and at FredDuncombe ("FD"). Price competition and lower gross margins at PFP and higherfixed costs at FD were responsible, the latter as a result of increasing oursales personnel. In both businesses we are developing off-shore sourcing ofboth parts and products in order to remain a low cost supplier to our markets.We are looking this year for increased sales from new products and improvedmargin. Our priority is to ensure that we respond quickly to changing customerneeds to maintain our market positions. The Future The past year has seen good progress with our programme of foundryrationalisation. Our aim now is to develop our foundry in Scunthorpe into amodern and efficient facility that will meet the market needs for heavy ironcastings for years to come. We also look for the benefit of the work alreadycompleted at Walsall to show through. In engineering we will seek to make more rapid progress in the reduction of ourcost base and to increase sales from our new product ranges. As always, our people remain our most important asset. We will endeavour tocontinue developing their skills, recruiting where necessary to strengthen ourexcellent team. In this regard I welcome our new Chief Executive Designate, TimHair, who will take over from me following the Annual General Meeting in July.I am quite sure that Tim will take the company forward for all its stakeholders. After 41 years with the company and 12 years as Chief Executive, I would like torecord my sincere thanks to my board colleagues and all our employees, past andpresent, who have given so much support both to Chamberlin & Hill and to mepersonally. I look forward with pleasure to seeing further progress in theyears to come. Barrie WilliamsChief Executive Consolidated Income Statementfor the year ended 31 March 2006 2006 2005 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total £000 £000 £000 £000 £000 £000 Revenue 41,435 - 41,435 41,970 - 41,970Cost of sales (33,515) - (33,515) (34,831) - (34,831)Gross profit 7,920 - 7,920 7,139 - 7,139 Other operating (5,522) 104 (5,418) (5,068) 292 (4,776)expenses Operating profit 2,398 104 2,502 2,071 292 2,363from continuingoperationsFinance revenue 1 - 1 10 - 10Finance costs (135) - (135) (181) - (181) Profit from continuing 2,264 104 2,368 1,900 292 2,192operations before tax Tax expense (679) (31) (710) (570) (88) (658)Profit for the year 1,585 73 1,658 1,330 204 1,534from continuing operations Earnings per sharebasic 22.5p 20.9p underlying 21.5p 18.1pdiluted 22.4p 20.9pdiluted 21.5p 18.1punderlying Consolidated Statement of Recognised Income and Expensefor the year ended 31 March 2006 2006 2005 £000 £000Actuarial gains/(losses) on pension assets and 1,141 (312)liabilitiesDeferred tax on actuarial gains/(losses) (342) 94Net income/(expense) recognised directly in equity 799 (218) Profit for the year 1,658 1,534 Total recognised income and expense for the yearattributable to equity holders of the parent company 2,457 1,316 Parent Company Statement of Recognised Income and Expensein the year ended 31 March 2006 2006 2005 £000 £000Actual gains/(losses) on pension assets and liabilities 1,141 (312)Deferred tax on actuarial gains/(losses) (342) 94Net income/(expense) recognised directly in equity 799 (218) Profit for the year 42 (126) Total recognised income and expense for the yearattributable to equity holders of the parent company 841 (344) Consolidated Balance Sheetat 31 March 2006 31 March 31 March 2006 2005 £000 £000Non-current assets Property, plant and equipment 8,206 8,990 Intangible assets 483 253 Deferred tax assets 497 1,047 9,186 10,290 Current assets Inventories 5,308 5,055 Trade and other receivables 7,942 9,325 Cash and cash equivalents 593 1 13,843 14,381 Total assets 23,029 24,671 Capital and reserves Called up share capital 1,840 1,840 Share premium account 743 743 Capital redemption reserve 109 109 Retained earnings 10,850 9,246Total equity 13,542 11,938 Current liabilities Financial liabilities - 43 Trade and other payables 7,501 7,550 Income taxes payable 237 638 7,738 8,231 Non current liabilities Deferred tax 1,262 1,182Defined benefit pension scheme 487 3,320deficit 1,749 4,502 Total equity and liabilities 23,029 24,671 Barrie Williams ) ) DirectorsSimon Duckworth ) The accounts were approved by the Board of Directors on 15 June 2006 Parent Company Balance Sheetat 31 March 2006 31 March 31 March 2006 2005 £000 £000Non current assetsProperty, plant and equipment 1,085 4,642Intangible assets 10 19Investments 7,159 7,159Deferred tax assets 447 997 8,701 12,817 Current assetsInventories - 1,319Trade and other receivables 5,076 5,951Cash and cash equivalents - 1 5,076 7,271 Total assets 13,777 20,088 Capital and reservesCalled up share capital 1,840 1,840Share premium account 743 743Capital redemption reserve 109 109Retained earnings 6,832 6,844Total equity 9,524 9,536 Current liabilities Financial liabilities 1,290 2,026 Trade and other payables 119 2,959 Amounts due to subsidiary companies 1,477 1,264 Income taxes payable - 1 2,886 6,250 Non-current liabilities Amounts due to subsidiary companies 66 66 Deferred tax 814 916Defined benefit pension scheme 487 3,320deficit 1,367 4,302 13,777 20,088 Barrie Williams ) ) DirectorsSimon Duckworth ) The accounts were approved by the Board of Directors on 15 June 2006 Consolidated Cash Flow Statementfor the year ended 31 March 2006 Year ended Year ended 31 March 31 March 2006 2005Operating activities £000 £000 Operating profit 2,502 2,363Adjustments for: Amortisation of software 27 31Depreciation of property, plant and 1,526 1,623equipment Recognition of negative goodwill - (617)Amortisation of Russell Castings rent - 200free periodProfit on disposal of property, plant (1,040) (1)and equipment Pension element of finance costs (71) (111) Share based payments 19 5 Special pension contribution (1,500) -Other pension contributions in excess of (192) (43)Income Statement charge Operating cash flow before movements in working capital 1,271 3,450 (Increase)/Decrease in inventories (253) (674) (Increase)/Decrease in receivables 1,383 (950) Increase/(Decrease) in payables (49) 1,117Cash generated from operations 2,352 2,943 UK Corporation Tax paid (823) (278)Net cash flow from operating activities 1,529 2,665 Investing activitiesAcquisition of business and assets of - (1,117)Russell CastingsCash acquired on acquisition of Russell - 1Castings Interest received 1 10Purchase of property, plant and (1,415) (1,211)equipment Purchase of software (28) (37) Development expenditure capitalised (229) - Disposal of plant and equipment 1,713 76Net cash flow from investing activities 42 (2,278)Financing activities Interest paid (64) (70) Equity dividends paid (872) (871) Issue of shares (including premium) - 30Net cash flow from financing activities (936) (911) Net increase/(decrease) in cash and cash equivalents 635 (524) Cash and cash equivalents at the start of the year (42) 482 Cash and cash equivalents at the end of the year 593 (42) Cash and cash equivalents comprise: Cash and cash equivalents 593 1 Financial liabilities - (43) 593 (42) Parent Company Cash Flow Statementfor the year ended 31 March 2006 Year ended Year ended 31 March 31 March 2006 2005Operating activities £000 £000 Operating profit 194 (12)Adjustments forDepreciation of property, plant and 852 801equipment Amortisation of software 11 4Profit on disposal of property, plant (1029) -and equipment Pension element of finance costs (71) (111) Share based payments 19 5 Special pension contribution (1,500) -Other pension contributions in excess (192) (43)of Income Statement chargeOperating cash flow before movements in working capital (1,716) 644 (Increase)/Decrease in inventories 333 (281) (Increase)/Decrease in receivables 2,498 (1,613) Increase/(Decrease) in payables 352 885 Cash generated from operations 1,467 (365) UK Corporation Tax paid (1) (44)Net cash flow from operating activities 1,466 (409) Investing activities Interest received 1 10Purchase of property, plant and (383) (484)equipment Purchase of software (19) (19) Development expenditure capitalised (130) - Disposal of plant and equipment 1,678 49Disposal of foundry business to (942) -subsidiaryNet cash flow from investing activities 205 (444) Financing activities Interest paid (64) (70) Equity dividends paid (872) (871) Issue of shares (including premium) - 30Net cash flow from financing activities (936) (911) Net increase/(decrease) in cash and cash equivalents 735 (1,764) Cash and cash equivalents at the start of the year (2,025) (261) Cash and cash equivalents at the end of the year (1,290) (2,025) Cash and cash equivalents comprise: Cash and cash equivalents - 1 Financial liabilities (1,290) (2,026) (1,290 (2,025) NOTES TO THE PRELIMINARY ANNOUNCEMENT 1 Authorisation of financial statements and statement of compliance with IFRS The Group's and Company's financial statements of Chamberlin & Hill plc (the 'Company') for the year ended 31 March 2006 were authorised for issue by theboard of the directors on 15 June 2006 and the balance sheets were signed on theboard's behalf by Barrie Williams and Simon Duckworth. The Company is a publiclimited company incorporated and domiciled in England & Wales. The Company'sordinary shares are traded on the London Stock Exchange. The Group's financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS). The Company's financialstatements have been prepared in accordance with IFRS as adopted by the EuropeanUnion and as applied in accordance with the provisions of the Companies Act1985. As permitted, the Group has also adopted early the amendments toInternational Accounting Standard (IAS) 19 'Employee Benefits' published inDecember 2004. This is the first year in which the Group has prepared financial statementsunder IFRS and the comparatives have been restated from UK Generally AcceptedAccounting Practice (UK GAAP) to comply with IFRS. The Group published notesand reconciliations to explain the movements in the reported numbers from UKGAAP to IFRS as part of its Interim Report 2005, published in December 2005. The financial information set out in this announcement does not constitute thestatutory accounts of the Group for the years to 31 March 2006 or 31 March 2005but is derived from the 2006 Annual Report and Accounts. The Annual Report andAccounts for 2005, which were prepared under UK GAAP, have been delivered to theRegistrar of Companies and the Group Annual Report and Accounts for 2006,prepared under IFRS, will be delivered to the Registrar of Companies in duecourse. The auditors, Ernst & Young LLP, have reported on the accounts for theyear to 31 March 2006 and have given an unqualified report which does notcontain a statement under Section 237(2) or 237(3) of the Companies Act 1985.The accounts for the year ended 31 March 2005 received an unqualified auditreport from the previous auditors, Heathcote & Coleman. 2 Summary of significant accounting policies Basis of preparation The consolidated financial statements are presented in sterling and all valuesare rounded to the nearest thousand pounds (£000) except when otherwiseindicated. The Company has taken advantage of the exemption provided undersection 230 of the Companies Act 1985 not to publish its individual incomestatement and related notes. Basis of consolidation The consolidated financial statements comprise the financial statements ofChamberlin & Hill plc and its subsidiaries as at 31 March each year. Thefinancial statements of subsidiaries are prepared for the same reporting year asthe parent company, using consistent accounting policies. All inter-companybalances and transactions, including unrealised profits arising from intra-grouptransactions, have been eliminated in full. Subsidiaries are consolidated fromthe date on which control is transferred to the Group and cease to beconsolidated from the date on which control is transferred out of the Group. 3. SEGMENTAL ANALYSIS For management purposes, the Group is organised into two operating divisions;Foundries and Engineering, which are the primary segments for reportingpurposes. The secondary segmental format is geographical. The Foundries segment is a supplier of iron castings, in raw or machined form,to a variety of industrial customers who incorporate the castings into their ownproducts or carry out further machining or assembly operations on the castingsbefore selling them on to such customers. The Engineering segment provides manufactured and imported products todistributors and end-users. The products fall into the categories of doorhardware, hazardous area lighting and control gear, cable management and generalironmongery. Transfer prices between business segments are set on an arms length basis in amanner similar to transactions with third parties. The Group's geographical segments are determined by the location of the Group'scustomers. The Group's assets and costs incurred are all located within theUnited Kingdom. (i) By business segment Foundries Engineering TotalContinuing operations 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000RevenueTotal sales 33,815 34,040 7,800 7,969 41,615 42,009Inter-segment sales (180) (39) - - (180) (39) Sales to third parties 33,635 34,001 7,800 7,969 41,435 41,970 ProfitTrading profit 2,328 1,821 552 694 2,880 2,515 Shared costs (482) (444)Exceptional items 104 292Operating profit 2,502 2,363Net finance costs (134) (171)Profit before tax 2,368 2,192Tax expense (710) (658)Profit for the year from continuing 1,658 1,534operations Net assetsSegmental assets 16,091 17,397 5,682 6,010 21,773 23,252Segmental liabilities (6,428) (5,752) (1,149) (1798) (7,577) (7,395)Segmental net assets 9,663 11,645 4,533 4,212 14,196 15,857 Unallocated net liabilities (654) (3,919)Total net assets 13,542 11,938 Movements in fixed assetsCapital additions Property, plant and equipment 1,134 1,039 281 172 1,415 1,211 Software 24 23 4 14 28 37 Development costs 130 - 99 - 229 -Depreciation andamortisationProperty, plant and (1,231) (1,311) (295) (312) (1,526) (1,623)equipment Software (17) (26) (10) (5) (27) (31) Unallocated net liabilities comprise goodwill, cash/overdraft, taxation, pensionprovisions, deferred tax balances, and head office fixed assets. (ii) By geographical segment 2006 2005Revenue by location of customer £000 £000 United Kingdom 32,730 35,052Rest of Europe 6,818 5,469Other countries 1,887 1,449 41,435 41,970 4. OTHER OPERATING EXPENSES 2006 2005 £000 £000 Distribution costs 1,430 1,290Administration and selling expenses 4,092 3,778Operating expenses before exceptional items 5,522 5,068Exceptional items (note 12) (104) (292)Operating expenses 5,418 4,776 5. STAFF NUMBERS AND COSTS 2006 2005 Number NumberThe average number of people employed by the Group during the year was: Management and administration 88 97 Production 447 476 Total employees 535 573 The aggregate employment costs of these employees including severance costs inwages and salaries of £431,000 (2005: £325,000) were as follows:- 2006 2005 £000 £000Wages and salaries 13,407 13,613Social security costs 1,261 1,260Other pension costs 444 417 15,112 15,290 Directors' emoluments summary 2006 2005 £000 £000Directors' emoluments 520 531Aggregate gains made by directors on exercise of options - -Amounts receivable under long term incentive plans - -Notional cost of options granted to directors 19 5Number of directors accruing benefits under: Defined benefit pension schemes 1 3 Defined contribution pension schemes 2 1 6. FINANCE COSTS AND FINANCE REVENUE 2006 2005 £000 £000Finance costsFinance cost of pensions (71) (111)Bank overdraft interest payable (64) (70) (135) (181)Finance revenueBank interest receivable 1 10Net finance costs (134) (171) 7. OPERATING PROFIT 2006 2005This is stated after charging/(crediting): £000 £000 Profit on disposal of fixed assets (1,040) (1) Amortisation of software 27 31 Depreciation of owned assets 1,526 1,623 Negative goodwill recognition - (617)Exceptional severance payments and related costs 925 325(note 12)Auditors' remuneration as auditors (Company £38,000 83 40(2005: £14,000)) Auditors' remuneration - other 6 61 Research and development expenditure 40 108 Rentals under operating leases: Hire of plant and equipment 116 28 Other 296 96 Of the profit on disposal of fixed assets of £1,040,000 above, £1,029,000relates to the sale of Bloxwich site following the termination of operations.The £1,029,000 profit has been disclosed as part of the net exceptional gain onthe face of the income statement.Severance payments and related costs in the year relate predominantly torestructuring of foundry operations. The Bloxwich foundry operations wereterminated during the year and severance payments, provisions against assetvalues and other costs were incurred. 8. TAX EXPENSE 2006 2005 £000 £000Current tax:UK Corporation tax at 30% (2005: 30%) based on taxable profit for the year 422 727Prior year adjustment - (4) 422 723Deferred Taxation:Movement in the year 630 (159)Less element of movement shown in the Statement of Recognised Income and Expense (342) 94 288 (65) Tax expense reported in the consolidated income statement 710 658 Reconciliation of total tax chargeProfit on ordinary activities before tax 2,368 2,192 Corporation tax at standard rate of 30% (2005: 30%) on profit before tax 710 658Adjusted by the effects of:Expenses not deductible for tax purposes 11 16Deduction in respect of special pension provision (150) -Deduction in respect of other pension contributions (57) -Deduction in respect of rollover of gain on property disposal (309) -IBA adjustment re disposal of property 140 -Other movements in temporary differences 77 (16)Current tax charge 422 658 Deferred tax charge relating to temporary differences 288 - Tax expense 710 658 9. DIVIDENDS PAID AND PROPOSED 2006 2005 £000 £000Paid equity dividends on ordinary shares 2005 final dividend of 8.00p per share 589 587 2006 interim dividend of 3.85p per share 283 284 872 871Proposed final dividend subject to shareholder approval 2006 final dividend of 8.00p per share (not recognised as a liability at 31March 2006) 589 588 10. EARNINGS PER SHARE The calculation of earnings per share is based on the profit attributable toshareholders and the weighted average number of ordinary shares in issue. Incalculating the diluted earnings per share adjustment has been made for thedilutive effect of outstanding share options. Underlying earnings per share,which excludes operating exceptionals, as analysed below, has also beendisclosed as the Directors believe this allows a better assessment of theunderlying trading performance of the Group. Operating exceptionals compriseseverance payments and related costs associated with significant operationalrestructuring. 2006 2005 £000 £000Earnings for basic earnings per share 1,658 1,534Negative goodwill recognition - (617)Taxation effect of goodwill recognition - 185Operating exceptionals (104) 325Taxation effect of operating exceptionals 31 (97)Earnings for underlying earnings per share 1,585 1,330 2006 2005 £000 £000Weighted average number of ordinary shares 7,360 7,347Adjustment to reflect shares under options 28 7Weighed average number of ordinary shares - fully diluted 7,388 7,354 11. STATEMENT OF CHANGES IN EQUITY Capital Attributable to Share redemption Share Retained equity holders capital reserve premium earnings of the parent £000 £000 £000 £000 £000GroupBalance at 1 April 2004 1,835 109 718 8,796 11,458Total recognised income and expensefor the year to 31 March 2005 - - - 1,316 1,316Dividends paid - - - (871) (871)Recognition of share based payments - - - 5 5Issue of shares 5 - 25 - 30 Balance at 1 April 2005 1,840 109 743 9,246 11,938Total recognised income and expensefor the year to 31 March 2006 - - - 2,457 2,457Dividends paid - - - (872) (872)Recognition of share based payments - - - 19 19 Balance at 31 March 2006 1,840 109 743 10,850 13,542 12. EXCEPTIONAL ITEMS 2006 2005 £000 £000 Severance costs (425) (325)Other closure costs (500) -Profit on sale of Bloxwich property 1,029 -Negative goodwill recognition - 617 104 292 Severance costs in 2006 relate predominantly to the termination of production atthe Bloxwich foundry and the resulting redundancies of employees not transferredto alternative employment within the group. Other closure costs relate to the disposal of certain stocks at below normalselling price, and the writing down of fixed assets and remaining stocks totheir net realisable values at the year end. The profit on sale of the Bloxwich site to Midland Properties (West Midlands)Limited comprised: £000 Proceeds of disposal 1,675 Net book value of property (635) Sale costs (11) 1,029 This information is provided by RNS The company news service from the London Stock Exchange